Exhibit 10.11
LOAN AND SECURITY AGREEMENT
Dated: January 26, 2001
$15,000,000
between
FLEET CAPITAL CORPORATION,
as Lender
and
▇▇▇▇▇ MEDICAL CORP.,
as Borrower
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TABLE OF CONTENTS
LOAN AND SECURITY AGREEMENT................................................................................. 1
SECTION 1. CREDIT FACILITY................................................................................. 1
1.1. Revolving Credit Loans.......................................................................... 1
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1.1.1. Loans and Reserves...................................................................... 1
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1.1.2. Use of Proceeds......................................................................... 1
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1.2. Letters of Credit; LC Guaranties................................................................ 1
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SECTION 2. INTEREST, FEES AND CHARGES...................................................................... 3
2.1. Interest........................................................................................ 3
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2.1.1. Rate of Interest........................................................................ 3
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2.1.2. Default Rate of Interest................................................................ 3
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2.1.3. Maximum Interest........................................................................ 3
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2.2. Computation of Interest and Fees................................................................ 3
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2.3. LIBOR Option.................................................................................... 3
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2.4. Closing Fee..................................................................................... 6
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2.5. Letter of Credit and LC Guaranty Fees........................................................... 6
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2.6. Unused Line Fee................................................................................. 7
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2.7. Reimbursement of Expenses....................................................................... 7
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2.7.1. Administration and Enforcement Expenses................................................. 7
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2.7.2. Collateral Protection Expenses.......................................................... 7
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2.8. Bank Charges.................................................................................... 8
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2.9. Payment of Charges.............................................................................. 8
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SECTION 3. LOAN ADMINISTRATION............................................................................. 8
3.1. Manner of Borrowing Loans....................................................................... 8
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3.1.1. Loan Requests........................................................................... 8
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3.1.2. Disbursement............................................................................ 8
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3.1.3. Authorization........................................................................... 9
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3.1.4. Letter of Credit and LC Guaranty Requests............................................... 9
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3.1.5. Method of Making Requests............................................................... 9
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3.2. Payments........................................................................................ 9
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3.2.1. Principal............................................................................... 10
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3.2.2. Interest................................................................................ 10
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3.2.3. Revolving Credit Maturity Date.......................................................... 10
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3.2.4. Costs, Fees and Charges................................................................. 10
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3.2.5. Other Obligations....................................................................... 10
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3.3. Mandatory Payments; Proceeds of Sale, Loss, Destruction or Condemnation of Collateral........... 11
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3.4. Accounts Receivable Management.................................................................. 11
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3.4.1. Account Verification.................................................................... 11
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3.4.2. Dominion of Cash........................................................................ 11
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3.4.3. Collection of Accounts Proceeds of Collateral........................................... 11
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3.5. Application of Payments and Collections......................................................... 12
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3.6. All Loans to Constitute One Obligation.......................................................... 12
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3.7. Loan Account.................................................................................... 12
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3.8. Statement of Account............................................................................ 12
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SECTION 4. TERM AND TERMINATION............................................................................ 12
4.1. Term of Agreement............................................................................... 12
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4.2. Termination..................................................................................... 13
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4.2.1. Termination by Lender................................................................... 13
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4.2.2. Termination by Borrower................................................................. 13
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4.2.3. Termination Charges..................................................................... 13
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4.2.4. Effect of Termination................................................................... 13
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SECTION 5. SECURITY INTERESTS.............................................................................. 14
5.1. Security Interest in Collateral................................................................. 14
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5.2. Lien Perfection; Further Assurances............................................................. 15
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5.3. Safekeeping of Collateral....................................................................... 15
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5.4. Intentionally Omitted........................................................................... 15
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5.5. Administration of Accounts...................................................................... 15
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5.5.1. Records, Schedules and Assignments of Accounts.......................................... 15
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5.5.2. Discounts, Allowances, Disputes......................................................... 15
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5.5.3. Taxes................................................................................... 16
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5.5.4. Account Verification.................................................................... 16
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5.6. Administration of Inventory..................................................................... 16
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5.6.1. Records and Reports of Inventory........................................................ 16
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5.6.2. Returns of Inventory.................................................................... 16
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5.7. Records and Schedules of Equipment.............................................................. 17
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SECTION 6. REPRESENTATIONS AND WARRANTIES 17
6.1. General Representations and Warranties.......................................................... 17
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6.1.1. Organization and Qualification.......................................................... 17
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6.1.2. Corporate Power and Authority........................................................... 17
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6.1.3. Legally Enforceable Agreement........................................................... 17
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6.1.4. Capital Structure....................................................................... 18
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6.1.5. Corporate Names......................................................................... 18
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6.1.6. Business Locations; Agent for Process................................................... 18
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6.1.7. Title to Properties; Priority of Liens.................................................. 18
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6.1.8. Accounts................................................................................ 19
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6.1.9. Equipment............................................................................... 20
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6.1.10. Financial Statements; Fiscal Year....................................................... 20
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6.1.11. Regulations U and X..................................................................... 20
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6.1.12. Solvent Financial Condition............................................................. 20
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6.1.13. Surety Obligations...................................................................... 21
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6.1.14. Taxes................................................................................... 21
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6.1.15. Brokers................................................................................. 21
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6.1.16. Patents, Trademarks, Copyrights and License............................................. 21
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6.1.17. Governmental Consents................................................................... 21
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6.1.18. Compliance with Laws.................................................................... 21
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6.1.19. Restrictions............................................................................ 22
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6.1.20. Litigation.............................................................................. 22
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6.1.21. No Defaults............................................................................. 22
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6.1.22. Leases.................................................................................. 22
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6.1.23. Pension Plans........................................................................... 22
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6.1.24. Trade Relations......................................................................... 22
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6.1.25. Labor Relations......................................................................... 23
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6.1.26. Certain Transactions.................................................................... 23
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6.1.27. Environmental Compliance................................................................ 23
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6.1.28. Holding Company and Investment Company Acts............................................. 24
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6.1.29. Insurance............................................................................... 24
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6.1.30. Disclosure.............................................................................. 24
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6.1.31. Business Activity....................................................................... 24
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6.2. Continuous Nature of Representations and Warranties............................................. 25
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6.3. Survival of Representations and Warranties...................................................... 25
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SECTION 7. COVENANTS AND CONTINUING AGREEMENTS............................................................. 25
7.1. Affirmative Covenants........................................................................... 25
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7.1.1. Visits and Inspections.................................................................. 25
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7.1.2. Notices................................................................................. 25
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7.1.3. Financial Statements.................................................................... 26
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7.1.4. Borrowing Base Certificates............................................................. 27
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7.1.5. Landlord and Storage Agreements......................................................... 27
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7.1.6. Projections............................................................................. 27
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7.1.7. Insurance on Collateral................................................................. 27
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7.1.8. Guarantors.............................................................................. 28
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7.1.9. Cash Management Services................................................................ 28
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7.1.10. Employee Benefit Plans.................................................................. 28
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7.1.11. Compliance with Laws, Contracts, Licenses and Permits................................... 29
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7.1.12. Use of Proceeds......................................................................... 30
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7.1.13. Regulations U and X..................................................................... 30
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7.1.14. Records and Accounts.................................................................... 30
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7.1.15. Corporate Existence; Maintenance of Properties.......................................... 30
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7.1.16. Taxes................................................................................... 31
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7.1.17. Cross Aging and Aged Credit Reports..................................................... 31
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7.1.18. Further Assurances...................................................................... 31
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7.2. Negative Covenants.............................................................................. 32
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7.2.1. Mergers; Consolidations; Acquisitions................................................... 32
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7.2.2. Loans................................................................................... 32
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7.2.3. Total Indebtedness...................................................................... 32
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7.2.4. Affiliate Transactions.................................................................. 33
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7.2.5. Limitation on Liens..................................................................... 33
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7.2.6. Distributions........................................................................... 34
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7.2.7. Capital Expenditures.................................................................... 34
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7.2.8. Disposition of Assets................................................................... 34
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7.2.9. Stock of Subsidiaries................................................................... 35
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7.2.10. Issuance of Borrower.................................................................... 35
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7.2.11. ▇▇▇▇-and-Hold Sales, Etc................................................................ 35
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7.2.12. Restricted Investment................................................................... 35
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7.2.13. Leases.................................................................................. 35
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7.2.14. Tax Consolidation....................................................................... 35
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7.2.15. Business Activities..................................................................... 35
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7.2.16. Management and Consulting Fees.......................................................... 35
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7.2.17. Subsidiary Business..................................................................... 36
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7.2.18. Subordinated Debt....................................................................... 36
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7.3. Specific Financial Covenants.................................................................... 36
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SECTION 8. CONDITIONS PRECEDENT............................................................................ 36
8.1. Documentation................................................................................... 36
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8.2. No Default...................................................................................... 38
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8.3. Other Conditions................................................................................ 38
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8.4. Availability.................................................................................... 38
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8.5. No Litigation................................................................................... 38
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8.6. Financials; Projections......................................................................... 38
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SECTION 9. EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT............................................... 39
9.1. Events of Default............................................................................... 39
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9.1.1. Payment................................................................................. 39
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9.1.2. Misrepresentations...................................................................... 39
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9.1.3. Breach of Specific Covenants............................................................ 39
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9.1.4. Breach of Other Covenants............................................................... 39
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9.1.5. Default Under Security Documents/Other Agreements....................................... 39
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9.1.6. Other Defaults.......................................................................... 39
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9.1.7. Uninsured Losses........................................................................ 40
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9.1.8. Insolvency and Related Proceedings...................................................... 40
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9.1.9. Adverse Changes......................................................................... 40
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9.1.10. Business Disruption; Condemnation....................................................... 40
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9.1.11. Change of Ownership..................................................................... 40
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9.1.12. ERISA................................................................................... 41
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9.1.13. Challenge to Agreement.................................................................. 41
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9.1.14. Criminal Forfeiture..................................................................... 41
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9.1.15. Judgments............................................................................... 41
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9.1.16. VA Liability........................................................................... 41
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9.2. Acceleration of the Obligations................................................................ 41
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9.3. Other Remedies................................................................................. 42
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9.4. Remedies Cumulative; No Waiver................................................................. 43
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9.5. Marshalling.................................................................................... 44
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SECTION 10. MISCELLANEOUS................................................................................. 44
10.1. Power of Attorney.............................................................................. 44
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10.2. Indemnity...................................................................................... 46
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10.3. Modification of Agreement; Sale of Interest.................................................... 46
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10.4. Severability................................................................................... 47
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10.5. Successors and Assigns......................................................................... 47
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10.6. Cumulative Effect; Conflict of Terms........................................................... 47
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10.7. Execution in Counterparts...................................................................... 47
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10.8. Notice......................................................................................... 47
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10.9. Lender's Consent............................................................................... 48
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10.10. Credit Inquiries............................................................................... 48
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10.11. Time of Essence................................................................................ 49
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10.12. Entire Agreement............................................................................... 49
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10.13. Setoff......................................................................................... 49
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10.14. Interest Rate.................................................................................. 49
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10.15. Loss of Revolving Credit Note, etc............................................................. 49
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10.16. Interpretation................................................................................. 50
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10.17. Further Assurances............................................................................. 50
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10.18. Concerning Revised Article 9 of the Code....................................................... 50
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10.18.1. Attachment............................................................................ 50
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10.18.2. Perfection by Filing.................................................................. 51
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10.18.3. Other Perfection, etc................................................................. 51
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10.18.4. Other Provisions...................................................................... 51
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10.18.5. Savings Clause........................................................................ 51
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10.19. Information and Confidentiality................................................................ 51
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10.20. GOVERNING LAW; CONSENT TO FORUM................................................................ 52
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10.21. WAIVERS BY BORROWER............................................................................ 53
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LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT is made this 26/th/ day of January, 2001,
by and between FLEET CAPITAL CORPORATION ("Lender"), a Rhode Island corporation
with an office at ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and
▇▇▇▇▇ MEDICAL CORP. ("Borrower"), a Delaware corporation with its chief
executive office and principal place of business at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇. Capitalized terms used in this Agreement have the
meanings assigned to them in Appendix A, General Definitions, attached hereto.
Accounting terms not otherwise specifically defined herein shall be construed in
accordance with GAAP consistently applied.
SECTION 1. CREDIT FACILITY
Subject to the terms and conditions of, and in reliance upon the
representations and warranties made in, this Agreement and the other Loan
Documents, Lender agrees to make the Maximum Revolving Loan Amount available
upon Borrower's request therefor, as follows:
1.1. Revolving Credit Loans.
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1.1.1. Loans and Reserves. Lender agrees, for so long as no Default
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or Event of Default exists, to make Revolving Credit Loans to Borrower from
time to time from the Closing Date up to but not including the Revolving
Credit Maturity Date, as requested by Borrower in the manner set forth in
Section 3.1 hereof, up to a maximum principal amount at any time
outstanding (after giving effect to all amounts requested) equal to the
Borrowing Base at such time minus (without duplication) the LC Amount and
such Reserves, if any, as may be required by Lender in addition to the
Reserve Amount. Lender shall have the right to establish, in addition to
the Reserve Amount, reserves in such amounts, and with respect to such
matters, as Lender shall reasonably deem necessary or appropriate in its
credit judgment, against the amount of Revolving Credit Loans which
Borrower may otherwise request under this subsection 1.1.1 ("Reserves"),
including, without limitation, with respect to (i) sums chargeable against
Borrower's Loan Account as Revolving Credit Loans under any section of this
Agreement; (ii) amounts owing by Borrower to any Person to the extent
secured by a Lien on, or trust over, any Collateral of Borrower which
Lender deems eligible under the definition of the term Borrowing Base; and
(iii) any liability or obligation of Borrower in respect to interest rate
protection agreements that Lender is required to guarantee.
1.1.2. Use of Proceeds. The Revolving Credit Loans shall be used
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solely (i) to fund Borrower's Permitted Acquisitions, and (ii) for
Borrower's general working capital needs and all other general corporate
purposes of the Borrower in a manner consistent with the provisions of this
Agreement and all applicable laws.
1.2. Letters of Credit; LC Guaranties.
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(A) Subject to all of the terms and conditions of this Agreement, if
requested to do so by Borrower, Lender shall issue its Letters of Credit, or
cause to be issued Bank's Letters of Credit, for the account of Borrower or
shall execute LC Guaranties by which Lender shall agree to reimburse the issuer
for the Letters of Credit for amounts drawn thereon or shall guaranty the
payment or performance by Borrower of its reimbursement obligation with respect
to Letters of Credit issued for Borrower's account by Bank or Lender; provided
that the aggregate amount available to be drawn under all Letters of Credit and
LC Guaranties outstanding at any time shall not exceed Three Million Five
Hundred Thousand
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Dollars ($3,500,000) and no Letter of Credit may have an expiration date that is
after fourteen (14) days prior to the Revolving Credit Maturity Date unless
Borrower provides Lender with cash collateral for said Letter of Credit or LC
Guaranty, in a manner and amount acceptable to Lender; provided, that the VA
Letter of Credit may have an expiration date not to exceed five (5) years beyond
the Closing Date so long as the Collateral continues to secure such Obligation
in a manner and amount acceptable to the Lender. Further, the expiration date of
any Letter of Credit (other than the VA Letter of Credit) shall not be more than
one year after the day of issuance thereof (although any such Letter of Credit
may be renewable for additional one-year periods in accordance with the terms
thereof). Each Letter of Credit so issued, extended or renewed shall be subject
to the Uniform Customs. Any amounts paid by Lender under any Letter of Credit or
LC Guaranty or in connection with any Letter of Credit (i) shall become part of
the proceeds of a Revolving Credit Loan requested pursuant to subsection 3.1.1
below, to the extent Lender is required to make Revolving Credit Loans pursuant
to the terms hereof and (ii) otherwise, shall by payable by Borrower on demand.
In no event shall Bank or Lender be required to issue or cause to be issued
Letters of Credit or LC Guaranties at any time there exists a Default or an
Event of Default.
(B) Borrower agrees, unconditionally, irrevocably and absolutely, to pay
immediately to Lender on demand the amount drawn under a Letter of Credit or
paid pursuant to a LC Guaranty, and (ii) the amount of any taxes, fees, charges
or other reasonable costs and expenses whatsoever incurred by the Lender or the
Bank in connection with any payment made by the Lender or the Bank with respect
to such Letter of Credit or the drawing thereon. If Borrower at any time fails
to make such payment in accordance with the terms of this Agreement, Borrower
shall be deemed to have elected to borrow from the Lender on such date Revolving
Credit Loans equal in aggregate amount to the amount paid by Lender under such
Letter of Credit or LC Guaranty. The Borrower's obligations under this Section
1.2 shall be absolute and unconditional under any and all circumstances and
irrespective of the occurrence of any Default or Event of Default or any
condition precedent whatsoever or any setoff, counterclaim or defense to payment
which the Borrower may have or have had against the Lender, the Bank, or any
beneficiary of a Letter of Credit. The Borrower further agrees with the Lender
that the Lender and the Bank shall be entitled to rely, and shall be fully
protected in relying upon, any Letter of Credit or any draft, writing,
resolution, notice, consent, certificate, affidavit, letter, cablegram,
telegram, telecopy, telex or teletype message, statement, order or other
document delivered in connection with any Letter of Credit believed by the
Lender or the Bank to be genuine and correct and to have been signed, sent or
made by the proper Person or Persons and in relying upon advice and statements
of legal counsel, independent accountants and other experts selected by the
Lender or the Bank. Neither the Lender nor the Bank shall be responsible for,
and the Borrower's obligations under Section 1.2 shall not be affected by, among
other things, the validity or genuineness of any documents or of any
endorsements thereon, even if such documents should in fact prove to be in any
or all respects invalid, fraudulent or forged, or any dispute between or among
the Borrower, the beneficiary of any Letter of Credit or any financing
institution or other party to which any Letter of Credit may be transferred or
any claims or defenses whatsoever of the Borrower against the beneficiary of any
Letter of Credit or any such transferee. The Lender and the Bank shall not be
liable for any error, omission, interruption or delay in transmission, dispatch
or delivery of any message or advice, however transmitted, in connection with
any Letter of Credit. The Borrower agrees that any action taken or omitted by
the Lender or the Bank under or in connection with each Letter of Credit and the
related drafts and documents, if done in good faith, shall be binding upon the
Borrower and shall not result in any liability on the part of the Lender or the
Bank to the Borrower.
SECTION 2. INTEREST, FEES AND CHARGES
2.1. Interest.
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2.1.1. Rate of Interest. Interest shall accrue on the principal
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amount of the Base Rate Portion outstanding at the end of each day at a
fluctuating rate per annum equal to the Base Rate
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plus the Applicable Margin for Base Rate Portions. Said rate of interest
shall increase or decrease by an amount equal to any increase or decrease
in the Base Rate, effective as of the opening of business on the day that
such change in the Base Rate occurs. If Borrower properly exercises its
LIBOR Option as provided in Section 2.3, interest shall accrue on the
principal amount of the LIBOR Portion outstanding at the end of each day at
the rate of the applicable LIBOR Rate for such LIBOR Portion plus the
Applicable Margin for LIBOR Loans.
2.1.2. Default Rate of Interest. Upon and after the occurrence of an
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Event of Default, and during the continuation thereof, at the option of the
Lender, the principal amount of all Loans shall bear interest at a rate per
annum equal to 2.0% plus the interest rate otherwise applicable thereto
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(the "Default Rate").
2.1.3. Maximum Interest. In no event whatsoever shall the aggregate
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of all amounts deemed interest hereunder or under the Notes and charged or
collected pursuant to the terms of this Agreement or pursuant to the Notes
exceed the highest rate permissible under any law which a court of
competent jurisdiction shall, in a final determination, deem applicable
hereto. If any provisions of this Agreement or the Notes is in
contravention of any such law, such provisions shall be deemed amended to
conform thereto.
2.2. Computation of Interest and Fees.
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Interest, Letter of Credit fees, LC Guaranty fees and Unused Line Fees
hereunder shall be calculated daily and shall be computed on the actual number
of days elapsed over a year of (i) in the case of Base Rate Portion, Letter of
Credit fees, LC Guaranty fees and Unused Line Fees hereunder, 365 days and (ii)
in the case of a LIBOR Portion, 360 days. For the purpose of computing interest
hereunder, all items of payment received by Lender shall be deemed applied by
Lender on account of the Obligations (subject to final payment of such items) on
the first Business Day after receipt by Lender of such items in Lender's account
located in Glastonbury, Connecticut.
2.3. LIBOR Option.
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(i) Upon the conditions that: (1) Lender shall have received a
LIBOR Request from Borrower no later than 11:00 a.m. (Hartford,
Connecticut time) at least 3 Business Days prior to the first day of
the LIBOR Period requested, (2) there shall have occurred no change in
applicable law which would make is unlawful for Lender to obtain
deposits of U.S. dollars in the London interbank foreign currency
deposits market, (3) as of the date of the LIBOR Request and the first
day of the LIBOR Period, there shall exist no Default or Event of
Default, (4) Lender is able to determine the LIBOR Rate in respect of
the requested LIBOR Period or Lender is able to obtain deposits of
U.S. dollars in the London interbank foreign currency deposits market
in the applicable amounts and for the requested LIBOR Period, and (5)
as of the first date of the LIBOR Period, there are no more than three
(3) outstanding LIBOR Portions including the LIBOR Portion being
requested; then interest on the LIBOR Portion requested during the
LIBOR Period requested will be based on the applicable LIBOR Rate.
(ii) Each LIBOR Request shall be irrevocable and binding on
Borrower. Borrower shall indemnify Lender for any loss, penalty or
expense incurred by Lender due to failure on the part of Borrower to
fulfill, on or before the date specified in any LIBOR Request, the
applicable conditions set forth in this Agreement or due to the
prepayment of the applicable LIBOR Portion prior to the last day of
the applicable LIBOR period or due to any default by Borrower in the
payment of the principal of or interest on any
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LIBOR Portion, including, without limitation any loss (including loss
of anticipated profits) or expense incurred by reason of the
liquidation or redeployment of deposits or other funds acquired by
Lender to fund or maintain the requested LIBOR Portion.
(iii) If any Legal Requirement shall (1) make it unlawful for
Lender to fund through the purchase of U.S. dollar deposits any LIBOR
Portion or otherwise give effect to its obligations as contemplated
under this Section 2.3, or (2) shall impose on Lender any costs based
on or measured by the excess above a specified level of the amount of
a category of deposits or other liabilities of Lender which includes
deposits by reference to which the LIBOR Rate is determined as
provided herein or a category of extensions of credit or other assets
of Lender which includes any LIBOR Portion or (3) shall impose on
Lender any restrictions not already taken into account under statutory
reserves on the amount of such a category of liabilities or assets
which Lender may hold, then, in each such case, Lender may, by notice
thereof to Borrower, terminate the LIBOR Option. Any LIBOR Portion
subject thereto shall immediately bear interest thereafter at the rate
and in the manner provided for Base Rate Portions pursuant to
subsection 2.1.1. Borrower shall indemnify Lender against any loss,
penalty or expense incurred by Lender due to liquidation or
redeployment of deposits or other funds acquired Lender to fund or
maintain any LIBOR Portion that is terminated under this paragraph.
(iv) If any present or future applicable law, which expression,
as used herein, includes statutes, rules and regulations thereunder
and interpretations thereof by any competent court or by any
governmental or other regulatory body or official charged with the
administration or the interpretation thereof and requests, directives,
instructions and notices at any time or from time to time hereafter
made upon or otherwise issued to Lender or any corporation controlling
Lender by any central bank or other fiscal, monetary or other
authority (whether or not having the force of law), shall:
(a) subject Lender or such corporation to any tax, levy,
impost, duty, charge, fee, deduction or withholding of any nature
with respect to this Agreement, the other Loan Documents, any
Letters of Credit or LC Guaranty, Lender's commitment hereunder
or the Revolving Credit Loans (other than taxes based upon or
measured by the income or profits of Lender or such corporation
and other than franchise taxes), or
(b) materially change the basis of taxation (except for
changes in taxes on income or profits) of payments to Lender or
such corporation of the principal of or the interest on any
Revolving Credit Loans or any other amounts payable to Lender
under this Agreement or any of the other Loan Documents, or
(c) impose or increase or render applicable (other than to
the extent specifically provided for elsewhere in this Agreement)
any special deposit, reserve, assessment, liquidity, capital
adequacy or other similar requirements (whether or not having the
force of law) against assets held by, or deposits in or for the
account of, or loans by, or letters of credit issued by, or
commitments of an office of Lender or such corporation, or
(d) impose on Lender or such corporation any other
conditions or requirements (other than franchise taxes) with
respect to this Agreement, the other Loan Documents, any Letters
of Credit or LC Guaranties, the Revolving Credit Loans, Lender's
commitment hereunder, or any class of loans, letters of
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credit or commitments of which any of the Revolving Credit Loans
or such commitment forms a part, and the result of any of the
foregoing is
(x) to increase the cost to Lender or such corporation of
making, funding, issuing, renewing, extending or maintaining any
of the Revolving Credit Loans or Lender's commitment hereunder or
any Letter of Credit or LC Guaranty, or
(y) to reduce the amount of principal, interest,
reimbursement obligation or other amount payable to Lender
hereunder on account of Lender's commitment hereunder, any Letter
of Credit or LC Guaranty or any of the Revolving Credit Loans, or
(z) to require Lender to make any payment or to forego any
interest or reimbursement obligation or other sum payable
hereunder, the amount of which payment or foregone interest or
reimbursement obligation or other sum is calculated by reference
to the gross amount of any sum receivable or deemed received by
Lender from Borrower hereunder,
then, and in each such case, Borrower will, upon demand made by
Lender at any time and from time to time and as often as the occasion
therefor may arise, pay to Lender such additional amounts as will be
sufficient to compensate Lender for such additional cost, reduction,
payment or foregone interest or reimbursement obligation or other sum,
as set forth in reasonable detail in a certificate executed by Lender
accompanying such demand. If the amount of any tax, levy, impost,
duty, charge, fee deduction or withholding is paid by Borrower to
Lender pursuant to this clause (iv) and is thereafter refunded to
Lender in whole or in part by the jurisdiction or agency to which such
amount was paid, Lender will promptly refund to Borrower (without
interest, except to the extent that the jurisdiction or agency pays
interest to Lender on such refund) the amount of such refund of the
amount paid by Borrower.
(v) Borrower may elect from time to time to convert any
outstanding Base Rate Portion to a LIBOR Portion, and Borrower may
elect to continue a LIBOR Portion as a LIBOR Portion, by causing
Lender to receive a LIBOR Request from Borrower, no later than 11:00
a.m. (Hartford, Connecticut time) at least 3 Business Days prior to
the first day of the LIBOR Period (or new LIBOR Period) requested, in
accordance with each of the terms and conditions set forth in clause
(i) of this Section 2.3 and except as otherwise provided in clause of
this Section 2.3. If Lender does not receive a LIBOR Request from
Borrower with respect to a LIBOR Portion on or before 11:00 a.m.
(Hartford, Connecticut time) at least 3 Business Days prior to the end
of the LIBOR Period with respect thereto, such LIBOR Portion shall
automatically convert to a Base Rate Portion on the last day of such
LIBOR Period, provided that no Base Rate Portion may be converted to a
--------
LIBOR Portion, and no LIBOR Portion may be continued as a LIBOR
Portion, when any Event of Default has occurred and is continuing or
when any Default (which is not yet an Event of Default) has occurred
and is continuing. All or any part of outstanding Base Rate Portions
may be converted into LIBOR Portions in accordance with the foregoing
provisions of this clause (v), provided that any partial conversion of
--------
a Base Rate Portion to a LIBOR Portion shall be in the aggregate
principal amount of $500,000 or an integral multiple of $100,000 in
excess thereof.
-6-
(vi) If after the date hereof Lender reasonably determines that
(i) the adoption of or change in any law, governmental rule,
regulation, policy, guideline or directive (whether or not having the
force of law) regarding capital requirements for banks or bank holding
companies, or any change in the interpretation or application thereof
by a court or governmental authority with appropriate jurisdiction or
(ii) compliance by Lender or any corporation controlling Lender with
any law, governmental rule, regulation, policy, guideline or directive
(whether or not having the force of law) of any such entity regarding
capital adequacy, has the effect of reducing the return on Lender's
commitment herein with respect to any Revolving Credit Loans or
Letters of Credit to a level below that which Lender could have
achieved but for such adoption, change or compliance (taking into
consideration Lender's (and any corporation controlling Lender's) then
existing policies with respect to capital adequacy and assuming full
utilization of Lender's or such corporation's capital) by any amount
deemed by Lender to be material, then Lender may notify Borrower of
such fact. To the extent that the amount of such reduction in the
return on capital is not reflected in the Base Rate or the LIBOR Rate,
as the case may be, Borrower agrees to pay Lender the amount of such
reduction in the return on capital as and when such reduction is
determined upon presentation by Lender of a certificate in accordance
with clause (vii) of this Section 2.3. Lender shall allocate such cost
increases among its customers in its discretion in good faith and on
an equitable basis.
(vii) A certificate setting forth in reasonable detail any
additional amounts payable pursuant to clauses (iv) and (vi) of this
Section 2.3 and the calculation of and basis on which such amounts
which are due, submitted by Lender to Borrower, shall be conclusive,
absent manifest error, that such amounts are due and owing.
2.4. Closing Fee.
-----------
Borrower shall pay to lender a closing fee of Seventy Thousand Dollars
($70,000), which shall be fully earned and nonrefundable on the Closing Date and
shall be paid concurrently with the advance of the first Revolving Credit Loan
hereunder.
2.5. Letter of Credit and LC Guaranty Fees.
-------------------------------------
Borrower shall pay to Lender for each Letter of Credit and LC Guaranty of a
Letter of Credit, a fee equal to the Applicable Margin for LIBOR Portions at the
time that the applicable Letter of Credit or LC Guaranty is issued, multiplied
by the aggregate face amount of such Letter of Credit and LC Guaranty
outstanding from time to time during the term of this Agreement, payable
quarterly in arrears, plus all normal and customary charges associated with the
----
administration of such Letter of Credit (other than issuance fees associated
with the VA Letter of Credit) and LC Guaranty, including, without limitation,
reasonable charges relating to the issuance, amendment and negotiation thereof,
which charges shall be payable upon the issuance of such Letter of Credit or LC
Guaranty or as advised by Lender or Bank. All such charges shall be deemed
fully earned and shall be due and payable upon issuance of each such Letter of
Credit or LC Guaranty and shall not be subject to rebate or proration upon the
termination of this Agreement for any reason.
2.6. Unused Line Fee.
---------------
Borrower shall pay to Lender a fee (the "Unused Line Fee") equal to the
product of (a) the average daily amount of Excess Availability, multiplied by
(b) the Applicable Margin. Although the Unused Line Fee is payable monthly and
is based upon the average daily amount of Excess Availability
-7-
during the month preceding each payment, the Applicable Margin is determined, as
set forth in the definition of Applicable Margin, based upon the average daily
amount of Excess Availability during the preceding fiscal quarter. The Unused
Line Fee shall be payable monthly in arrears on the first day of each calendar
month hereafter with a final payment on the Revolving Credit Maturity Date or
any earlier date on which the Revolving Credit Loan shall terminate.
2.7. Reimbursement of Expenses.
-------------------------
2.7.1. Administration and Enforcement Expenses.
---------------------------------------
If, at any time or times regardless of whether or not an Event of
Default then exists, Lender or any Participating Lender incurs legal or
accounting expenses or any other costs or out-of-pocket expenses in
connection with (i) the negotiation and preparation of this Agreement or
any of the other Loan Documents, any amendment of or modification of this
Agreement or any of the other Loan Documents (ii) the administration of
this Agreement or any of the other Loan Documents and the transactions
contemplated hereby and thereby; (iii) any litigation, contest, dispute,
suit, proceeding or action (whether instituted by Lender, Borrower or any
other Person) in any way relating to the Collateral, this Agreement or any
of the other Loan Documents or Borrower's affairs; (iv) any attempt to
enforce any rights of Lender or any Participating Lender against Borrower
or any other Person which may be obligated to Lender by virtue of this
Agreement or any of the other Loan Documents, including, without
limitation, the Account Debtors; or (v) any attempt to inspect, verify,
protect, preserve, restore, collect, sell, liquidate or otherwise dispose
of or realize upon the Collateral; then all such legal and accounting
expenses, other costs and out-of-pocket expenses of Lender, to the extent
reasonable, shall be charged to Borrower. All amounts chargeable to
Borrower under this Section 2.7 shall be Obligations secured by all of the
Collateral, shall be payable on demand to Lender or to such Participating
Lender as the case may be, and shall bear interest from the date such
demand is made until paid in full at the rate applicable to Base Rate
Portions from time to time. Borrower shall also reimburse Lender for
expenses incurred by Lender in its administration of the Collateral to the
extent and in the manner provided in Section 2.9 hereof.
2.7.2. Collateral Protection Expenses. All reasonable expenses of
------------------------------
protecting, storing, warehousing, insuring, handling, maintaining and
shipping the Collateral and any and all excise, property, sales, and use
taxes imposed by any state, federal, or local authority on any of the
Collateral or in respect of the sale thereof shall be borne and paid by
Borrower. If Borrower fails to promptly pay any portion thereof when due,
Lender may, at its option, but shall not be required to, pay the same and
charge Borrower therefor.
2.8. Bank Charges.
------------
Borrower shall pay to Lender, on demand, any and all fees, costs or
expenses which Lender or any Participating Lender pays to a bank or other
similar institution (including, without limitation, any fees paid by Lender to
any Participating Lender) arising out of or in connection with (i) the
forwarding to Borrower or any other Person on behalf of Borrower, by Lender or
any Participating Lender, of proceeds of loans made by Lender to Borrower
pursuant to this Agreement and (ii) the depositing for collection, by Lender or
any Participating Lender, of any check or item of payment received or delivered
to Lender or any Participating Lender on account of the Obligations.
-8-
2.9. Payment of Charges.
------------------
All amounts chargeable to or payable by Borrower under Section 2 and under
Section 7.18 hereof shall be Obligations secured by all of the Collateral, shall
be payable on demand and shall bear interest from the date such advance was made
until paid in full at the rate applicable to Base Rate Portions from time to
time.
SECTION 3. LOAN ADMINISTRATION
3.1. Manner of Borrowing Loans.
-------------------------
Borrowings under the credit facility established pursuant to Section 1
hereof shall be as follows:
3.1.1. Loan Requests. A request for a Revolving Credit Loan shall be
-------------
made, or shall be deemed to be made, in the following manner: (i) Borrower
may give Lender notice, together with an updated Borrowing Base
certificate, no later than 11:00 a.m. Hartford, Connecticut, time on the
proposed borrowing date (or in accordance with Section 2.3 hereof in the
case of a request for a LIBOR Portion), of its intention to borrow, in
which notice Borrower shall specify the amount of the proposed borrowing
(which shall be no less than $100,000 with respect to a Base Rate Portion
and $500,000 with respect to a LIBOR Portion), the proposed borrowing date,
the amount, if any, of such Revolving Credit Loan that will be used to fund
Permitted Acquisitions, and the name of the entity from which assets are
being acquired with respect to any such Permitted Acquisition, provided,
--------
however, that no such request may be made at a time when there exists a
Default or an Event of Default; and (ii) the becoming due of any amount
required to be paid under this Agreement, whether as interest or for any
other Obligation, shall be deemed irrevocably to be a request for a
Revolving Credit Loan, which shall be a Base Rate Portion, on the due date
in the amount required to pay such interest or other Obligation.
3.1.2. Disbursement. Borrower hereby irrevocably authorizes Lender to
------------
disburse the proceeds of each Revolving Credit Loan requested, or deemed to
be requested, pursuant to this subsection 3.1.2 as follows: (i) the
proceeds of each Revolving Credit Loan requested under subsection 3.1.1(i)
shall be disbursed by Lender in lawful money of the United States of
America in immediately available funds, in the case of the initial
borrowing, in accordance with the terms of the written disbursement letter
from Borrower, and in the case of each subsequent borrowing, by wire
transfer to such bank account as may be agreed upon by Borrower and Lender
from time to time or elsewhere if pursuant to a written direction from
Borrower; and (ii) the proceeds of each Revolving Credit Loan deemed to be
requested under subsection 3.1.1(ii) shall be disbursed by Lender by way of
direct payment of the relevant interest or other Obligation.
3.1.3. Authorization. Borrower hereby irrevocably authorizes Lender to
-------------
advance to Borrower in accordance with subsection 3.1.1 hereof, and to
charge to Borrower's Loan Account hereunder as a Revolving Credit Loan, a
sum sufficient to pay all interest accrued on the Obligations during the
immediately preceding month and to pay all reasonable costs, fees and
expenses at any time owed by Borrower to Lender hereunder.
3.1.4. Letter of Credit and LC Guaranty Requests. A request for a
-----------------------------------------
Letter of Credit or LC Guaranty shall be made in the following manner:
Borrower may give Lender (and Bank, if Bank is the proposed issuer) a
written notice of its request for the issuance of a Letter of Credit or LC
Guaranty, not later than 11:00 a.m. Hartford, Connecticut time, one
Business Day before the proposed issuance date thereof, in which notice
Borrower shall specify the proposed issuer and issuance date; provided,
--------
that no such request may be made at a time when there exists a Default
-9-
or Event of Default. Such request shall be accompanied by an executed
application and reimbursement agreement in form and substance satisfactory
to the proposed issuer of the Letter of Credit or LC Guaranty, as well as
any required corporate resolutions.
3.1.5. Method of Making Requests. As an accommodation to Borrower,
-------------------------
unless a Default or an Event of Default is then in existence, (i) Lender
may permit telephonic requests for Revolving Credit Loans to Lender, (ii)
Lender and Bank may, in their discretion, permit electronic transmittal of
requests for Letters of Credit and LC Guaranties to them, and (iii) Lender
may, in Lender's discretion, permit electronic transmittal of instructions,
authorizations, agreements or reports to Lender. Unless Borrower
specifically directs Lender or Bank in writing not to accept or act upon
telephonic or electronic communications from Borrower, neither Lender nor
Bank shall have any liability to Borrower for any loss or damage suffered
by Borrower as a result of Lender's or Bank's honoring of any requests,
execution of any instructions, authorizations or agreements or reliance on
any reports communicated to it telephonically or electronically and
purporting to have been sent to Lender or Bank by Borrower and neither
Lender nor Bank shall have any duty to verify the origin of any such
communication or the authority of the person sending it. Each telephonic
request for a Loan, Letter of Credit, or LC Guaranty accepted by Lender and
Bank, if applicable, hereunder shall be promptly followed by a written
confirmation of such request from Borrower to Lender and Bank, if
applicable.
3.2. Payments.
--------
All payments shall be in lawful money of the United States in immediately
available funds. All payments of the Obligations shall be made to the Lender at
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ or such other location
that the Lender may designate in writing from time to time. Except where
evidenced by notes or other instruments issued or made by Borrower to Lender and
accepted by Lender specifically containing payment provisions which are in
conflict with this Section 3.2 (in which event the conflicting provisions of
said notes or other instruments shall govern and control), the Obligations shall
be payable as follows:
3.2.1. Principal. Principal payable on account of Revolving Credit
---------
Loans shall be payable by Borrower to Lender immediately upon the earliest
of (i) the receipt by Lender or Borrower of any proceeds of any of the
Collateral, to the extent of said proceeds, except that, so long as no
Default or Event of Default exists, if, after application of the proceeds
to Base Rate Portions, any remaining Loans outstanding at the time of
receipt by Borrower of any such proceeds are LIBOR Portions, then Borrower
may at its option direct that such proceeds be held by Lender in a non-
interest bearing cash collateral account maintained by Lender to be applied
to the payment of principal on the last day of the LIBOR Period applicable
to each LIBOR Portion in the order of maturity or Borrower may place such
proceeds in an interest bearing account at a financial institution
acceptable to Lender provided that such account is pledged to Lender in a
manner satisfactory to Lender; (ii) the occurrence of an Event of Default
in consequence of which Lender elects to accelerate the maturity and
payment of the Obligations, or (iii) termination of this Agreement pursuant
to Section 4 hereof; provided, however, that if a Revolving Credit Loan
-------- -------
Overadvance shall exist at any time, Borrower shall immediately repay the
Revolving Credit Loan Overadvance on demand.
3.2.2. Interest.
--------
(i) Base Rate Portion. Interest accrued on Base Rate Portions
-----------------
shall be due and payable on the earliest of (1) the first calendar day
of each month (for the immediately preceding month), computed through
the last calendar day of the preceding
-10-
month, (2) the occurrence of an Event of Default in consequence of
which Lender elects to accelerate the maturity and payment of the
Obligations or (3) termination of this Agreement pursuant to Section 4
hereof.
(ii) LIBOR Portion. Interest accrued on each LIBOR Portion shall
-------------
be due and payable on the earliest of (1) each LIBOR Interest Payment
Date applicable to such LIBOR Portion, (2) the occurrence of an Event
of Default in consequence of which Lender elects to accelerate the
maturity and payment of the Obligations or (3) termination of this
Agreement pursuant to Section 4 hereof.
3.2.3. Revolving Credit Maturity Date. On the Revolving Credit
------------------------------
Maturity Date, all of the Revolving Credit Loans outstanding on such date,
together with any and all accrued and unpaid interest thereon and all other
amounts payable hereunder and under the other Loan Documents shall become
absolutely due and payable, and the Borrower promises to pay all such
amounts on such date.
3.2.4. Costs, Fees and Charges. Costs, fees and charges payable
-----------------------
pursuant to this Agreement shall be payable by Borrower as and when
provided in Section 2 hereof, to Lender or to any other Person designated
by Lender in writing.
3.2.5. Other Obligations. The balance of the Obligations requiring the
-----------------
payment of money, if any, shall be payable by Borrower to Lender on demand
(or, if otherwise provided in this Agreement, the Other Agreements or the
Security Documents, in accordance with such other provision).
3.3. Mandatory Payments; Proceeds of Sale, Loss, Destruction or
----------------------------------------------------------
Condemnation of Collateral. Except as provided in subsection 7.2.8 hereof,
--------------------------
if Borrower sells any of its Equipment or real Property, or if any of the
Collateral is lost or destroyed or taken by condemnation, Borrower shall pay to
Lender, unless otherwise agreed by Lender, as and when received by Borrower and
as a mandatory payment of the Obligations, as herein provided, a sum equal to
the proceeds (including insurance payments) or, in the case of real property,
net proceeds received by Borrower from such sale, loss, destruction or
condemnation. At the time of each such payment, the Maximum Revolving Loan
Amount shall thereby automatically be reduced by the amount of such payment.
3.4. Accounts Receivable Management.
------------------------------
3.4.1. Account Verification. Any of Lender's officers, employees or
--------------------
agents shall have the right, at any time or times hereafter during normal
business hours, in the name of Lender, any designee of Lender or Borrower,
to verify the validity, amount or any other matter relating to any Accounts
by mail, telephone, or otherwise. Borrower shall cooperate fully with
Lender in an effort to facilitate and promptly conclude any such
verification process. Lender will notify Borrower of the procedure or
procedures Lender intends to use in making such verification during any
period when no Default or Event of Default exists and will only use such
procedures during such periods. Lender will not be obligated to notify
Borrower of such Account verification, and Lender may use any method or
procedure for Account verification, at any time a Default of Event of
Default exists.
3.4.2. Dominion of Cash. On and anytime after Borrower requests any
----------------
Revolving Credit Loan, Letter of Credit (other than with respect to the VA
Letter of Credit) or LC Guaranty Borrower shall at all times thereafter
maintain the written arrangement with respect to the Dominion Account
entered into on or about the Closing Date, and any changes with respect
-11-
thereto shall be made with the consent of Borrower, Lender and the Bank.
Borrower shall issue, pursuant to such agreement, to the Bank an
irrevocable letter of instruction directing it to deposit all payments or
other remittances received to the Dominion Account for application on
account of the Obligations. All funds deposited in the Dominion Account
shall immediately become the property of Lender and Borrower shall obtain
the agreement by Bank in favor of Lender to waive any offset rights against
the funds so deposited. All funds in the Dominion Account shall be
transferred to the Loan Account.
3.4.3. Collection of Accounts Proceeds of Collateral. To expedite
---------------------------------------------
collection, Borrower shall endeavor in the first instance to make
collection of its Accounts for Lender. All remittances received by Borrower
on account of Accounts, together with the proceeds of any other Collateral,
shall be held as Lender's property by Borrower as trustee of an express
trust for Lender's benefit and Borrower shall immediately deposit same in
kind in the Dominion Account. Lender retains the right at all times after
the occurrence of an Event of Default to notify Account Debtors that
Accounts have been assigned to Lender and to collect Accounts directly in
its own name and to charge the collection costs and expenses, including
attorneys' fees, to Borrower.
3.5. Application of Payments and Collections.
---------------------------------------
All items of payment received by Lender by 2:00 p.m., Hartford,
Connecticut, time, on any Business Day shall be deemed received on that Business
Day. All items of payment received after 2:00 p.m., Hartford, Connecticut, time,
on any Business Day shall be deemed received on the following Business Day.
Notwithstanding the foregoing, although all items of payment will be deemed
received in accordance with the previous two sentences, for the purposes of
computations of interest, items of payment shall not be deemed to be collected
until one (1) day after they are deemed received by Lender. During any period in
which an Event of Default exists, Borrower irrevocably waives the right to
direct the application of any and all payments and collections at any time or
times hereafter received by Lender from or on behalf of Borrower, and Borrower
does hereby irrevocably agree that, subject to subsection 3.2.1(i), Lender shall
have the continuing exclusive right to apply and reapply any and all such
payments and collections received at any time or times hereafter by Lender or
its agent against the Obligations, in such manner as Lender may deem advisable,
notwithstanding any entry by Lender upon any of its books and records. If as the
result of collections of Accounts as authorized by subsection 3.4.3 hereof a
credit balance exists in the Loan Account, such credit balance shall not accrue
interest in favor of Borrower, but shall be available to Borrower and
transferred from time to time and/or at Borrower's request to Borrower's
operating account at any time or times for so long as no Default or Event of
Default exists.
3.6. All Loans to Constitute One Obligation.
--------------------------------------
The Revolving Credit Loans shall constitute one general Obligation of
Borrower, and shall be secured by Lender's Lien upon all of the Collateral.
3.7. Loan Account.
------------
Lender shall enter all Loans as debits to the Loan Account and shall also
record in the Loan Account all payments made by Borrower on any Obligations and
all proceeds of Collateral which are finally paid to Lender, and may record
therein, in accordance with customary accounting practice, other debits and
credits, including interest and all charges and expenses properly chargeable to
Borrower.
-12-
3.8. Statement of Account.
--------------------
Lender will account to Borrower monthly with a statement of Loans, charges
and payments made pursuant to this Agreement, and such account rendered by
Lender shall be deemed final, binding and conclusive upon Borrower absent
manifest error unless Lender is notified by Borrower in writing to the contrary
within 30 days of the date each accounting is mailed to Borrower in accordance
with (S)10.8. Such notice shall only be deemed an objection to those items
specifically objected to therein.
SECTION 4. TERM AND TERMINATION
4.1. Term of Agreement.
-----------------
Subject to Lender's right to cease making Loans to Borrower upon or after
the occurrence of any Default or Event of Default, Revolving Credit Loans,
Letters of Credit and LC Guaranties will be available under this Agreement, on
the terms and conditions set forth herein, from the date hereof through and
including the Revolving Credit Maturity Date (the "Term"), unless earlier
terminated as provided in Section 4.2 hereof.
4.2. Termination.
-----------
4.2.1. Termination by Lender. Lender may terminate this Agreement
---------------------
without notice upon or after the occurrence of an Event of Default.
4.2.2. Termination by Borrower. Upon at least 30 days prior written
-----------------------
notice to Lender, Borrower may, at its option, terminate this Agreement;
provided, however, no such termination shall be effective until Borrower
-------- -------
has paid all of the Obligations in immediately available funds and all
Letters of Credit and LC Guaranties have expired or have been cash
collateralized to Lender's satisfaction. Any notice of termination given by
Borrower shall be irrevocable unless Lender otherwise agrees in writing,
and Lender shall have no obligation to make any Revolving Credit Loans or
issue or procure any Letters of Credit or LC Guaranties on or after the
termination date stated in such notice. Borrower may elect to terminate
this Agreement in its entirety only. No section of this Agreement or type
of Loan available hereunder may be terminated singly.
4.2.3. Termination Charges. At the effective date of termination of
-------------------
this Agreement for any reason, Borrower shall pay to Lender (in addition to
the then outstanding principal, accrued interest, fees, charges and other
Obligations owing under the terms of this Agreement and any of the other
Loan Documents) as liquidated damages for the loss of the bargain and not
as a penalty, an amount equal to (i) one and one-half of one percent (1.5%)
of the Maximum Revolving Loan Amount if termination occurs during the first
12-month period of the Term, (ii) one percent (1%) of the Maximum Revolving
Loan Amount if termination occurs during the second 12-month period of the
Term and (iii) one-half of one percent (0.5%) of the Maximum Revolving Loan
Amount if termination occurs during the third 12-month period of the Term.
4.2.4. Effect of Termination. All of the Obligations shall be
---------------------
immediately due and payable upon the termination date stated in any notice
of termination of this Agreement. All undertakings, agreements, covenants,
warranties and representations of Borrower contained in the Loan Documents
shall survive any such termination and Lender shall retain its Liens in the
Collateral and all of its rights and remedies under the Loan Documents
notwithstanding such termination until Borrower has paid the Obligations to
Lender, in full, in immediately available funds, together with the
applicable termination charge, if any, and all Letters of Credit and LC
-13-
Guaranties have expired or have been cash collateralized to Lender's
satisfaction. Notwithstanding the payment in full of the Obligations and
the expiration or cash collateralization of all Letters of Credit and LC
Guaranties, Lender shall not be required to terminate its security
interests in the Collateral unless, with respect to any loss or damage
Lender may incur as a result of dishonored checks or other items of payment
received by Lender from Borrower or any Account Debtor and applied to the
Obligations, Lenders shall, at its option, (i) have received a written
agreement, executed by Borrower and by any Person whose loans or other
advances to Borrower are used in whole or in part to satisfy the
Obligations, indemnifying Lender from any such loss or damage; or (ii) have
retained such reasonable monetary reserves for such period of time as
Lender, in its reasonable discretion, may deem necessary to protect Lender
from any such loss or damage.
SECTION 5. SECURITY INTERESTS
5.1. Security Interest in Collateral.
-------------------------------
To secure the prompt payment and performance to Lender of the Obligations,
Borrower hereby grants to Lender a continuing Lien upon all of Borrower's
assets, including all of the following Property and interests in Property of
Borrower, whether now owned or existing or hereafter created, acquired or
arising and wheresoever located:
(i) Accounts;
(ii) Inventory;
(iii) Equipment;
(iv) General Intangibles;
(v) Fixtures;
(vi) Deposit Accounts;
(vii) Investment Property;
(viii) Chattel Paper;
(ix) Instruments;
(x) Documents;
(xi) All monies and other Property of any kind now or at any
time or times hereafter in the possession or under the control of
Lender or a bailee or Affiliate of Lender;
(xii) All books and records (including, without limitation,
customer lists, credit files, computer programs, print-outs, and other
computer materials and records) of Borrower pertaining to any of (i)
through (xi) above; and
(xiii) All accessories to, substitutions for and all
replacements, products and cash and non-cash proceeds of (i) through
(xii) above, including, without limitation, proceeds of and unearned
premiums with respect to insurance policies insuring any of the
-14-
Collateral. Notwithstanding the foregoing provisions of this (S)5.1,
such grant of security interest shall not extend to, and the term
"Collateral" shall not include any chattel paper and general
intangibles which are now or hereafter held by the Borrower as
licensee, lessee or otherwise, to the extent that (x) such chattel
paper and general intangibles are not assignable or capable of being
encumbered as a matter of law or under the terms of the license, lease
or other agreement applicable thereto (but solely to the extent that
any such restriction shall be enforceable under applicable law),
without the consent of the licensor or lessor thereof or other
applicable party thereto and (y) such consent has not been obtained;
provided, however, that the foregoing grant of security interest shall
-------- -------
extend to, and the term "Collateral" shall include, (A) any and all
proceeds of such chattel paper and general intangibles to the extent
that the assignment or encumbering of such proceeds is not so
restricted and (B) upon any such licensor, lessor or other applicable
party consent with respect to any such otherwise excluded chattel
paper or general intangibles being obtained, thereafter such chattel
paper or general intangibles as well as any and all proceeds thereof
that might have therefore have been excluded from such grant of a
security interest and the term "Collateral".
5.2. Lien Perfection; Further Assurances.
-----------------------------------
Borrower shall execute such UCC-1 financing statements as are required by
the Code and such other instruments, assignments or documents as are necessary
to perfect Lender's Lien upon any of the Collateral and shall take such other
action as may be required to perfect or to continue the perfection of Lender's
Lien upon the Collateral. Unless prohibited by applicable law, Borrower hereby
authorizes Lender to execute and file any such financing statements and other
documents on Borrower's behalf. The parties agree that a carbon, photographic
or other reproduction of this Agreement shall be sufficient as a financing
statement or as any such other document and may be filed in any appropriate
office in lieu thereof. At Lender's request, Borrower shall also promptly
execute or cause to be executed and shall deliver to Lender any and all
documents, instruments and agreements deemed necessary by Lender to give effect
to or carry out the terms or intent of the Loan Documents.
5.3. Safekeeping of Collateral.
-------------------------
Lender shall not be liable or responsible in any way for the safekeeping of
any of the Collateral or for any loss or damage thereto (except for reasonable
care in the custody thereof while any Collateral is in Lender's actual
possession) or for any diminution in the value thereof, or for any act or
default of any warehouseman, carrier, forwarding agency or other person
whomsoever, but the same shall be at Borrower's sole risk.
5.4. Intentionally Omitted.
---------------------
5.5. Administration of Accounts.
--------------------------
5.5.1. Records, Schedules and Assignments of Accounts. Borrower shall
----------------------------------------------
keep accurate and complete records of its Accounts and all payments and
collections thereon and shall submit to Lender on such periodic basis as
Lender shall request a sales and collections report for the preceding
period, in form satisfactory to Lender. Upon Lender's request, Borrower
shall deliver to Lender, in form acceptable to Lender, a detailed aged
trial balance of all Accounts existing as of the last day of the month
preceding such request, specifying the names, addresses, face value, dates
of invoices and due dates for each Account Debtor obligated on an Account
so listed, and, upon Lender's request therefor, copies of proof of
delivery, copies of invoices and the original copy of all documents,
including, without limitation, repayment histories and present status
-15-
reports relating to the Accounts so scheduled and such other matters and
information relating to the status of then existing Accounts as Lender
shall reasonably request. In addition, if Accounts in an aggregate face
amount in excess of $50,000 become ineligible because they fall within one
of the specified categories of ineligibility set forth in the definition of
Eligible Accounts or otherwise established by Lender, Borrower shall notify
Lender of such occurrence no later than the seventh calendar day following
such occurrence and the Borrowing Base shall thereupon be automatically and
immediately adjusted to reflect such occurrence.
5.5.2. Discounts, Allowances, Disputes. If Borrower grants any
-------------------------------
discounts, allowances or credits that are not shown on the face of the
invoice for the Account involved, Borrower shall report such discounts,
allowances or credits, as the case may be, to Lender as part of the next
required accounts receivable aging schedule under (S)7.1.3(v). If any
amounts due and owing in excess of $10,000 in respect of any individual
Account or $20,000 in the aggregate are in dispute between Borrower and any
Account Debtor, Borrower shall provide Lender with written notice thereof
at the time of submission of the next accounts receivable aging schedule
under (S)7.1.3(v), explaining in detail the reason for the dispute, all
claims related thereto and the amount in controversy. Upon an Event of
Default, Lender shall have the right to settle or adjust all disputes and
claims directly with the Account Debtor on any Account or with the obligor
on any General Intangible and to compromise the amount or extend the time
for payment of any Accounts or General Intangibles upon such terms and
conditions as Lender may deem advisable, and to charge the deficiencies,
reasonable costs and expenses thereof, including reasonable attorneys'
fees, to Borrower.
5.5.3. Taxes. If an Account includes a charge for any tax payable to
-----
any governmental taxing authority, and such tax is not being actively
contested in good faith and by appropriate proceedings by Borrower and
Borrower fails to maintain reasonable reserves on its books in accordance
with GAAP, Lender is authorized (without any obligation or duty on Lender's
part), in its sole discretion, after the occurrence and continuance of an
Event of Default, to pay the amount thereof to the proper taxing authority
for the account of Borrower and to charge Borrower therefor (in which event
such amount shall be payable by Borrower to Lender on demand), provided,
however that Lender shall not be liable for any taxes to any governmental
taxing authority that may be due by Borrower.
5.5.4. Account Verification. Whether or not a Default or an Event of
--------------------
Default has occurred, any of Lender's officers, employees or agents shall
have the right, at any time or times hereafter but without causing any
unreasonable disruption to Borrower's business, in the name of Lender, any
designee of Lender or the Borrower, to verify the validity, amount or any
other matter relating to any Accounts by mail, telephone, telegraph or
otherwise. Borrower shall cooperate fully with Lender in an effort to
facilitate and promptly conclude any such verification process.
5.6. Administration of Inventory.
---------------------------
5.6.1. Records and Reports of Inventory. Borrower shall keep accurate
--------------------------------
and complete records of its Inventory. Borrower shall furnish to Lender
Inventory reports in form and detail satisfactory to Lender at such times
as Lender may request, but at least once each month, not later than the
thirtieth day after the end of each month. Borrower shall conduct a
physical inventory at least once a year in accordance with its accountant's
guidelines and shall provide to Lender a report based on such physical
inventory not later than the thirtieth day of the following month, together
with such supporting information as Lender shall request.
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5.6.2. Returns of Inventory. If at any time or times hereafter, any
--------------------
Account Debtor returns any Inventory to the Borrower in an amount in excess
of $50,000 during any two (2) week period, Borrowers shall immediately
notify Lender of the same, specifying the reason for such return and the
location, condition and intended disposition of the returned Inventory.
5.7. Records and Schedules of Equipment. Borrower shall keep accurate
----------------------------------
records itemizing and describing the kind, type, quality, quantity and value of
its Equipment and all dispositions and acquisitions made in accordance with
subsection 7.2.8 hereof, and shall furnish Lender with a current schedule
containing the foregoing information on at least an annual basis and more often
if requested by Lender. Immediately on request therefor by Lender, Borrowers
shall deliver to Lender any and all evidence of ownership of the Equipment.
SECTION 6. REPRESENTATIONS AND WARRANTIES
6.1. General Representations and Warranties.
--------------------------------------
To induce Lender to enter into this Agreement and to make Revolving Credit
Loans hereunder, Borrower warrants, represents and covenants to Lender that:
6.1.1. Organization and Qualification. Each of Borrower and its
------------------------------
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization. Each of
Borrower and its Subsidiaries is duly qualified and is authorized to do
business and is in good standing in all states and jurisdictions in which
the failure of Borrower or any of its Subsidiaries to be so qualified would
have a Material Adverse Effect, which states and jurisdictions include
those listed on Schedule 6.1.1 hereto.
--------------
6.1.2. Corporate Power and Authority. Each of Borrower and its
-----------------------------
Subsidiaries is duly authorized and empowered to enter into, execute,
deliver and perform this Agreement and each of the other Loan Documents to
which it is a party. The execution, delivery and performance of this
Agreement and each of the other Loan Documents have been duly authorized by
all necessary corporate and other entity action and do not and will not (i)
require any consent or approval of the shareholders or other equity holders
of Borrower or any of its Subsidiaries; (ii) contravene Borrower's or any
of its Subsidiaries' charter or by-laws or other organizational documents;
(iii) violate, or cause Borrower or any of its Subsidiaries to be in
default under any provision of any law, rule, regulation, order, writ,
judgment, injunction, decree, determination or award in effect having
applicability to Borrower or any of its Subsidiaries; (iv) result in a
material breach of or constitute a material default under any indenture or
loan or credit agreement or any other agreement, lease or instrument to
which Borrower or any of its Subsidiaries is a party or by which it or its
Properties may be bound or affected; or (v) result in, or require, the
creation or imposition of any Lien upon or with respect to any of the
Properties now owned or hereafter acquired by Borrower or any of its
Subsidiaries.
6.1.3. Legally Enforceable Agreement. This Agreement is, and each of
-----------------------------
the other Loan Documents when delivered under this Agreement will be, a
legal, valid and binding obligation of Borrower and each of its
Subsidiaries party thereto, enforceable against it and each of them in
accordance with its and their respective terms, except to the extent
limited by bankruptcy, insolvency, or other similar laws.
6.1.4. Capital Structure. Schedule 6.1.4 hereto states (i) the correct
----------------- --------------
name of each of the Subsidiaries of Borrower, its jurisdiction of
incorporation or organization and the percentage of its Voting Stock owned
by Borrower, (ii) the name of each of Borrower's corporate or joint
-17-
venture Affiliates and the nature of the affiliation, (iii) the number,
nature and holder (except, with respect to stock of Borrower, for holders
who are Persons who are not (x) officers, directors or beneficial owners of
5% of more of the outstanding Voting Stock of Borrower or (y) Affiliates of
any of such Persons) of all outstanding Securities of Borrower and each
Subsidiary of Borrower and (iv) the number of authorized and issued shares
each class of Securities of Borrower and each Subsidiary of Borrower.
Borrower has good title to all of the shares it purports to own of the
stock of each of its Subsidiaries, free and clear in each case of any
Liens. All such shares have been duly issued and are fully paid and non-
assessable. There are no outstanding options to purchase, or any rights or
warrants to subscribe for, or any commitments or agreements to issue or
sell, or any Securities or obligations convertible into, or any power of
attorney relating to, shares of the capital stock or other equity interests
of Borrower or any of its Subsidiaries. There are no outstanding agreements
or instruments binding upon any of Borrower's shareholders relating to the
ownership of its shares of capital stock.
6.1.5. Corporate Names. Neither Borrower nor any of its Subsidiaries
---------------
has been known as or used any corporate, fictitious or trade names except
those listed on Schedule 6.1.5 hereto. Except as set forth on Schedule
-------------- --------
6.1.5, neither Borrower nor any of its Subsidiaries has been the surviving
-----
corporation of a merger or consolidation or has acquired all or
substantially all of the assets of any Person.
6.1.6. Business Locations; Agent for Process. Each of Borrower's and
-------------------------------------
its Subsidiaries' chief executive office and other places of business are
as listed on Schedule 6.1.6 hereto, as updated from time to time by
---------------------
Borrower. During the preceding one-year period, neither Borrower nor any of
its Subsidiaries has had an office, place of business or agent for service
of process other than as listed on Schedule 6.1.6. All Collateral other
---------------
than Inventory in transit and motor vehicles, is and will at all times be
kept by Borrower and its Subsidiaries at one or more of the locations set
forth in Schedule 6.1.6, as updated from time to time by Borrower, and
--------------
shall not, without the prior written approval of Lender, be moved therefrom
except, prior to any Event of Default and Lender's acceleration of the
maturity of the Obligations in consequence thereof, for sales of Inventory
in the ordinary course of business. Except as shown on Schedule 6.1.6, as
--------------
updated from time to time by Borrower, no Inventory is stored with a
bailee, warehouseman or similar party, nor is any Inventory consigned to
any Person. Any update of Schedule 6.1.6 that is delivered by Borrower to
--------------
Lender shall be effective to update the representations and warranties in
this paragraph only from the date that such update is received by Lender.
6.1.7. Title to Properties; Priority of Liens. Each of Borrower and
--------------------------------------
its Subsidiaries has good, indefeasible and marketable title to and fee
simple ownership of, or valid and subsisting leasehold interests in, all of
its real Property, and good title to all of the Collateral and all of its
other Property, in each case, free and clear of all Liens except Permitted
Liens. Borrower has paid or discharged all lawful claims which, if unpaid,
might become a Lien against any of Borrower's Properties that is not a
Permitted Lien. The Liens granted to Lender under Section 5 hereof are
first priority Liens, subject only to Permitted Liens.
6.1.8. Accounts. Lender may rely, in determining which Accounts are
--------
Eligible Accounts, on all statements and representations made by Borrower
with respect to any Account or Accounts, and, with respect to Accounts
shown on any borrowing base certificate as Eligible Accounts. Unless
otherwise indicated in writing to Lender, with respect to each Eligible
Account:
(i) It is genuine and in all respects what it purports to be, and
it is not evidenced by a judgment;
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(ii) It arises out of a completed, bona fide sale and delivery
---- ----
of goods or rendition of services by Borrower in the ordinary course
of its business and in accordance, in all material respects, with the
terms and conditions of all purchase orders, contracts or other
documents relating thereto and forming a part of the contract between
Borrower and the Account Debtor, and the Account Debtor is not an
Affiliate of Borrower;
(iii) It is for a liquidated amount maturing as stated in the
duplicate invoice covering such sale or rendition of services, a copy
of which has been furnished or is available to Lender;
(iv) To the best knowledge of the Borrower, such Account, and
Lender's Lien therein, is not, and will not (by voluntary act or
omission of Borrower) be in the future, subject to any offset, Lien,
deduction, defense, dispute, counterclaim or any other adverse
condition, and each such Account is absolutely owing to Borrower and
is not contingent in any respect or for any reason;
(v) Borrower has not made any agreement with any Account
Debtor thereunder for any extension, compromise, settlement or
modification of any such Account or any deduction therefrom, except
discounts or allowances which are granted by Borrower in the ordinary
course of its business and which are reflected in the calculation of
the net amount of each respective invoice related thereto and are
reflected in the most recent borrowing base certificates submitted to
Lender pursuant to subsection 7.1.4 hereof;
(vi) There are no facts, events or occurrences which in any way
impair the validity or enforceability of such Account or tend to
reduce the amount payable thereunder from the face amount of the
invoice and statements delivered to Lender (or represented to exist)
with respect thereto unless the full amount of such potential defect
or reduction has been reserved for;
(vii) To the best of Borrower's knowledge, the Account Debtor
thereunder (1) had the capacity to contract at the time any contract
or other document giving rise to the Account was executed and (2) such
Account Debtor is Solvent; and
(viii) To the best of Borrower's knowledge, there are no
proceedings or actions which are threatened or pending against the
Account Debtor thereunder which might result in any material adverse
change in such Account Debtor's financial condition or the
collectibility of such Account.
6.1.9. Equipment. The Equipment is in good operating condition and
---------
repair, and all necessary replacements of and repairs thereto will be made
so that the value and operating efficiency of the Equipment will be
maintained and preserved, reasonable wear and tear excepted. Borrower will
not permit any material portion of the Equipment to become affixed to any
real Property leased to Borrower so that an interest arises therein under
the real estate laws of the applicable jurisdiction unless the landlord of
such real Property has executed a landlord waiver or leasehold mortgage in
favor of and in form acceptable to Lender, and Borrower will not permit any
material portion of the Equipment to become an accession to any personal
Property other than Equipment that is subject to first priority (except for
Permitted Liens) Liens in favor of Lender.
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6.1.10. Financial Statements; Fiscal Year. The balance sheets of
---------------------------------
Borrower and its Subsidiaries as of September 30, 2000, and the related
statements of income, changes in stockholder's equity, and cash flow
statements for the periods ended on such dates, have been prepared in
accordance with GAAP, and present fairly, in all material respects, the
financial position of Borrower and its Subsidiaries at such dates and the
results of Borrower's and its Subsidiaries' operations for such periods.
Since September 30, 2000, there has been no material adverse change in the
condition, financial or otherwise, of Borrower or its Subsidiaries and no
change in the aggregate value of Equipment and real Property owned by
Borrower, except changes in the ordinary course of business, none of which
individually or in the aggregate has been materially adverse. The fiscal
year of Borrower ends on the Saturday closest to December 31.
6.1.11. Regulations U and X. No portion of any Loan is to be used, and
-------------------
no portion of any Letter of Credit is to be obtained, for the purpose of
purchasing or carrying any "margin security" or "margin stock" as such
terms are used in Regulations U and X of the Board of Governors of the
Federal Reserve System, 12 C.F.R. Parts 221 and 224.
6.1.12. Solvent Financial Condition. The Borrower and its
---------------------------
Subsidiaries, taken as a whole, are and, after giving effect to the Loans
to be made and the Letters of Credit and LC Guaranties to be issued
hereunder, at all times will be, Solvent.
6.1.13. Surety Obligations. Neither Borrower nor any of its
------------------
Subsidiaries is obligated as surety or indemnitor under any surety or
similar bond or other contract issued or entered into to assure payment,
performance or completion of performance of any undertaking or obligation
of any Person.
6.1.14. Taxes. Borrower's federal tax identification number is as set
-----
forth in the Perfection Certificate. Borrower and each of its Subsidiaries
has filed all federal, state and local tax returns and other reports it is
required by law to file, and has paid, or made provision for the payment
of, all taxes, assessments, fees, levies and other governmental charges
upon it, its income and Properties as and when such taxes, assessments,
fees, levies and charges are due and payable, unless and to the extent any
thereof are being actively contested in good faith and by appropriate
proceedings and Borrower maintains reasonable reserves on its books
therefor. The provision for taxes on the books of Borrower and its
Subsidiaries are adequate for all years not closed by applicable statutes,
and for its current fiscal year.
6.1.15. Brokers. There are no claims for brokerage commissions,
-------
finder's fees or investment banking fees in connection with the
transactions contemplated by this Agreement.
6.1.16. Patents, Trademarks, Copyrights and License. Each of Borrower
-------------------------------------------
and its Subsidiaries owns or possesses all the patents, trademarks, service
marks, tradenames, domain names, copyrights and licenses necessary for the
present and planned future conduct of its business without any known
conflict with the rights of others. All such patents, trademarks, service
marks, tradenames, domain names, copyrights, licenses and other similar
rights are listed on Schedule 6.1.16.
---------------
6.1.17. Governmental Consents. Each of Borrower and its Subsidiaries
---------------------
has, and is in good standing with respect to, all governmental consents,
approvals, licenses, authorizations, permits, certificates, inspections and
franchises necessary to continue to conduct its business as
-20-
heretofore or proposed to be conducted by it and to own or lease and
operate its Properties as now owned or leased by it.
6.1.18. Compliance with Laws. Each of Borrower and its Subsidiaries
--------------------
has duly complied in all material respects with, and its Properties,
business operations and leaseholds are in compliance in all material
respects with, the provisions of all federal, state and local laws, rules
and regulations applicable to Borrower or such Subsidiary, as applicable,
its Properties or the conduct of its business and there have been no
citations, notices or orders of noncompliance issued to Borrower or any of
its Subsidiaries under any such law, rule or regulation. Each of Borrower
and its Subsidiaries has established and maintains an adequate monitoring
system to insure that it remains in compliance with all federal, state and
local laws rules and regulations applicable to it. No Inventory has been
produced in violation of the Fair Labor Standards Act (29 U.S.C. (S) 201 et
--
seq.), as amended.
---
6.1.19. Restrictions. Neither Borrower nor any of its Subsidiaries is
------------
a party or subject to any contract, agreement, or charter or other
corporate restriction, which materially and adversely affects its business
or the use or ownership of any of its Properties. Neither Borrower nor any
of its Subsidiaries is a party or subject to any contract or agreement
which restricts its right or ability to incur Indebtedness, other than as
set forth on Schedule 6.1.19 hereto, none of which prohibit the execution
---------------
of or compliance with this Agreement or the other Loan Documents by
Borrower or any of its Subsidiaries, as applicable.
6.1.20. Litigation. Except as set forth on Schedule 6.1.20 hereto,
---------- ---------------
there are no actions, suits, proceedings or investigations pending, or to
the knowledge of Borrower, threatened, against or affecting Borrower or any
of its Subsidiaries, or the business, operations, Properties, prospects,
profits or condition of Borrower or any of its Subsidiaries that, if
adversely determined, might, either in any case or in the aggregate, have a
Material Adverse Effect. Neither Borrower nor any of its Subsidiaries is in
default with respect to any order, writ, injunction, judgment, decree or
rule of any court, governmental authority or arbitration board or tribunal.
6.1.21. No Defaults. No event has occurred and no condition exists
-----------
which would, upon or after the execution and delivery of this Agreement or
Borrower's performance hereunder, constitute a Default or an Event of
Default. Neither Borrower nor any of its Subsidiaries is in default, and no
event has occurred and no condition exists which constitutes, or which with
the passage of time or the giving of notice or both would constitute, a
default, with respect to any Indebtedness of the Borrower or any of its
Subsidiaries for Money Borrowed.
6.1.22. Leases. Schedule 6.1.22(a) hereto is a complete listing of all
------ ------------------
capitalized leases of Borrower and its Subsidiaries and Schedule 6.1.22(b)
------------------
hereto is a complete listing of all operating leases of Borrower and its
Subsidiaries. Each of Borrower and its Subsidiaries is in full compliance
with all of the terms of each of its respective capitalized and operating
leases.
6.1.23. Pension Plans. Except as disclosed on Schedule 6.1.23 hereto,
------------- ---------------
neither Borrower nor any of its Subsidiaries has any Plan. Borrower and
each of its Subsidiaries is in compliance with the requirements of ERISA
and the regulations promulgated thereunder with respect to each Plan. No
fact or situation that could result in a material adverse change in the
financial condition of Borrower and its Subsidiaries exists in connection
with any Plan. Neither Borrower nor any of its Subsidiaries has any
withdrawal liability in connection with a Multiemployer Plan.
6.1.24. Trade Relations. There exists no actual or threatened
---------------
termination, cancellation or limitation of, or any modification or change
in, the business relationship between Borrower or
-21-
any of its Subsidiaries and any customer or any group of customers whose
purchases individually or in the aggregate are material to the business of
Borrower and its Subsidiaries, taken as a whole, or with any material
supplier, and there exists no present condition or state of facts or
circumstances which would materially affect adversely Borrower or any of
its Subsidiaries or prevent Borrower or any of its Subsidiaries from
conducting such business after the consummation of the transaction
contemplated by this Agreement in substantially the same manner in which it
has heretofore been conducted.
6.1.25. Labor Relations. Except as described on Schedule 6.1.25
--------------- ---------------
hereto, neither Borrower nor any of its Subsidiaries is a party to any
collective bargaining agreement. There are no material grievances, disputes
or controversies with any union or any other organization of Borrower's or
any of its Subsidiaries' employees, or threats of strikes, work stoppages
or any asserted pending demands for collective bargaining by any union or
organization.
6.1.26. Certain Transactions. Except for the Permitted Officer
--------------------
Indebtedness, none of the officers, directors, or employees of the Borrower
or any of its Subsidiaries is presently a party to any transaction with the
Borrower or any of its Subsidiaries (other than for services as employees,
officers and directors), including any contract, agreement or other
arrangement providing for the furnishing of services to or by, providing
for rental of real or personal property to or from, or otherwise requiring
payments to or from any officer, director or such employee or, to the
knowledge of the Borrower, any corporation, partnership, limited liability
company, trust or other entity in which any officer, director, or any such
employee has an equity interest or is an officer, director, trustee, member
or partner.
6.1.27. Environmental Compliance. The Borrower has taken all necessary
------------------------
steps to investigate the past and present condition and usage of the real
Properties of Borrower and its Subsidiaries and the operations conducted
thereon and, based upon such diligent investigation, has determined that
except as to any matter that has been previously disclosed in writing by
Borrower to Lender:
(i) Borrower and the Subsidiaries have obtained all permits,
licenses and other authorization permits that are required under all
Environmental Laws, except to the extent failure to have any such
permit, license or authorization would not have a Material Adverse
Effect;
(ii) Borrower and the Subsidiaries are in compliance in all
material respects with the terms and conditions of all such permits,
licenses and authorizations, and are also in compliance in all
material respects with all other provisions of any applicable
Environmental Law or any order, judgment, injunction, notice or demand
letter issued or entered thereunder, except to the extent failure to
comply would not have a Material Adverse Effect; and
(iii) neither the Borrower nor any of its Subsidiaries has
received notice from any third party including, without limitation,
any federal, state or local governmental authority, (A) that any one
of them has been identified by the United States Environmental
Protection Agency ("EPA") as a potentially responsible party under
CERCLA with respect to a site listed on the National Priorities List,
40 C.F.R. Part ▇▇▇ ▇▇▇▇▇▇▇▇ ▇; (B) that any hazardous waste, as
defined by 42 U.S.C. (S)6903(5), any hazardous substances as defined
by 42 U.S.C. (S)9601(14), any pollutant or contaminant as defined by
42 U.S.C. (S)9601(33) and any toxic substances, oil or hazardous
materials or other chemicals or substances regulated by any
Environmental Laws ("Hazardous
-22-
Substances") which any one of them has generated, transported or
disposed of has been found at any site at which a federal, state or
local agency or other third party has conducted or has ordered that
the Borrower or any of its Subsidiaries conduct a remedial
investigation, removal or other response action pursuant to any
Environmental Law; or (C) that it is or shall be a named party to any
claim, action, cause of action, complaint, or legal or administrative
proceeding (in each case, contingent or otherwise) arising out of any
third party's incurrence of costs, expenses, losses or damages of any
kind whatsoever in connection with the release of Hazardous
Substances.
6.1.28. Holding Company and Investment Company Acts. Neither the
-------------------------------------------
Borrower nor any of its Subsidiaries is a "holding company", or a
"subsidiary company" of a "holding company", or an affiliate" of a "holding
company", as such terms are defined in the Public Utility Holding Company
Act of 1935; nor is it an "investment company", or an "affiliated company"
or a "principal underwriter" of an "investment company, as such terms are
defined in the Investment Company Act of 1940.
6.1.29. Insurance. Each of Borrower and its Subsidiaries maintains
---------
with financially sound and reputable insurers insurance with respect to its
Properties and businesses against such casualties and contingencies, and in
amounts, containing such terms, in such forms and for such periods, as may
be reasonable and prudent and in accordance with the terms of the Security
Documents or as may otherwise be reasonably required from time to time by
the Lender.
6.1.30. Disclosure. The financial statements referred to in subsection
----------
6.1.10 hereof and in the Settlement Agreement do not, nor do this Agreement
or any other Loan Documents or any other written statement of Borrower to
Lender, contain any untrue statement of a material fact or omit a material
fact necessary to make the statements contained therein or herein not
misleading. There is no fact which Borrower has failed to disclose to
Lender in writing which is reasonably likely to have a Material Adverse
Effect.
6.1.31. Business Activity. Neither ▇▇▇▇▇ nor WW Supply owns any assets
-----------------
or conducts any business whatsoever other than maintaining its corporate
organization.
6.2. Continuous Nature of Representations and Warranties.
---------------------------------------------------
Each representation and warranty contained in this Agreement and the other
Loan Documents shall be continuous in nature and shall remain in effect at all
times during the term of this Agreement, and each Loan Request pursuant to
subsection 3.1.1 hereof shall constitute a representation, warranty and
certification by Borrower that each representation and warranty contained in
this Agreement and/or in any other Loan Documents remains accurate, complete and
not misleading at the time of such Loan Request.
6.3. Survival of Representations and Warranties.
------------------------------------------
All representations and warranties of Borrower contained in this Agreement
or any of the other Loan Documents shall survive the execution, delivery and
acceptance thereof by Lender and the parties thereto and the closing of the
transactions described therein or related thereto.
SECTION 7. COVENANTS AND CONTINUING AGREEMENTS
7.1. Affirmative Covenants.
---------------------
-23-
During the term of this Agreement, and thereafter for so long as there are
any Obligations outstanding, Borrower covenants that, unless otherwise consented
to by Lender in writing, it shall:
7.1.1. Visits and Inspections. Permit representatives of Lender, from
----------------------
time to time, as often as may be reasonably requested, but only upon prior
notice and during normal business hours if no Event of Default then exists,
to visit and inspect the Properties of Borrower and each of its
Subsidiaries, inspect, audit and make extracts from its books and records,
and discuss with its officers, its employees and its independent
accountants, Borrower's and each of its Subsidiaries' business assets,
liabilities, financial condition, business prospects and results of
operations.
7.1.2. Notices. Borrower shall immediately notify the Lender in
-------
writing of the occurrence of (i) any Default or Event of Default; (ii)
Borrower's receipt of any notice of (or Borrower's becoming aware of any
Person's taking any other action in respect of) a claimed default (whether
or not constituting an Event of Default) under any note, evidence of
indebtedness, indenture or other obligation or agreement to which or with
respect to which Borrower or any of its Subsidiaries is a party or obligor,
whether as principal, surety or otherwise; (iii) (A) any violation of any
Environmental Law that the Borrower or any of its Subsidiaries reports in
writing or that is reportable by such Person in writing and of which such
Person has or should have knowledge (or for which any written report
supplemental to any oral report is made) to any federal, state or local
environmental agency, and (B) upon becoming aware thereof, any inquiry,
proceeding, investigation, or other action, including a notice from any
agency of potential environmental liability, of any federal, state or local
environmental agency or board, in each case that has the likelihood to have
a Material Adverse Effect or materially and adversely affect the Lender's
Liens pursuant to the Security Documents; (iv) immediately upon becoming
aware thereof, any setoff, claim (including, with respect to any real
Property, environmental claims), withholdings or other defenses to which
any of the Collateral, or the Lender's rights with respect to the
Collateral, are subject; (v) the commencement of, or the receipt of a
written threat to commence, any litigation or proceedings affecting the
Borrower or any of its Subsidiaries or to which the Borrower or any of its
Subsidiaries is or becomes a party involving an uninsured claim against the
Borrower or any of its Subsidiaries that could have a Material Adverse
Effect or which questions the validity of this Agreement or any of the
other Loan Documents or the Liens granted therein, and stating the nature
and status of such litigation or proceedings; (vi) immediately upon
Borrower's becoming aware thereof (and in any event within five (5)
Business Days of Borrower's becoming aware thereof), any change or event
that could have a Material Adverse Effect.
7.1.3. Financial Statements. Keep, and cause each Subsidiary to keep,
--------------------
adequate records and books of account with respect to its business
activities in which proper entries are made in accordance with GAAP
reflecting all its financial transactions; and cause to be prepared and
furnished to Lender the following (all to be prepared in accordance with
GAAP applied on a consistent basis):
(i) not later than 90 days after the close of each fiscal
year of Borrower, unqualified audited financial statements of Borrower
and its Subsidiaries as of the end of such year, on a Consolidated and
consolidating basis certified by a firm of independent certified
public accountants of recognized standing selected by Borrower and
acceptable to Lender (it being understood that Borrower's existing
accountants in their existing capacities are acceptable to the
Lender), together with a copy of any management letter issued in
connection therewith;
-24-
(ii) not later than 45 days after the end of each fiscal
quarter of Borrower, including the last fiscal quarter of Borrower's
fiscal year, unaudited interim financial statements of Borrower and
its Subsidiaries as of the end of such fiscal quarter and of the
portion of Borrower's fiscal year then elapsed, on a Consolidated and
consolidating basis, certified by the chief financial officer of
Borrower as prepared in accordance with GAAP and fairly presenting, in
all material respects, the Consolidated financial position and results
of operations of Borrower and its Subsidiaries for such quarter and
period subject only to changes from audit and year-end adjustments and
except that such statements need not contain notes;
(iii) together with each delivery of financial statements
pursuant to clauses (i) and (ii) of this subsection 7.1.3, a
management report (a) describing the operation and financial condition
of Borrower and its Subsidiaries as of the end of the fiscal quarter
then ended and for the portion of the current fiscal year then elapsed
(or for the fiscal year then ended in the case of year-end
financials), (b) setting forth in comparative form the corresponding
figures for the corresponding periods of the previous fiscal year and
the corresponding figures from the most recent Projections for the
current fiscal year delivered to Lender pursuant to subsection 7.1.6
and (c) discussing the reasons for any significant variations. The
information above shall be presented in reasonable detail and shall be
certified by the chief financial officer of Borrower to the effect
that such information fairly presents the results of operation and
financial condition of Borrower and its Subsidiaries as at the dates
and for the periods indicated;
(iv) promptly after the sending or filing thereof, as the
case may be, copies of any proxy statements, financial statements or
reports which Borrower has made available to its shareholders and
copies of any regular, periodic and special reports or registration
statements which Borrower files with the Securities and Exchange
Commission or any governmental authority which may be substituted
therefor, or any national securities exchange;
(v) not later than 30 days after the end of each month,
accounts receivable aging schedule, accounts payable aging schedule,
detailed inventory report and updated collateral certificates, all in
form and detail satisfactory to the Lender;
(vi) not later than 60 days after the end of each fiscal
year of the Borrower, an updated copy of the Borrower's customer list
(in hardcopy or on disk in a format acceptable to the Lender) as of
the end of such fiscal year;
(vii) upon request by Lender, copies of any annual report to
be filed pursuant to the requirements of ERISA in connection with each
Plan; and
(viii) such other data and information (financial and
otherwise) as Lender, from time to time, may reasonably request,
bearing upon or related to the Collateral or Borrower's and each of
its Subsidiaries' financial condition or results of operations.
Concurrently with the delivery of the financial statements described in
clauses (i) and (ii) of this subsection 7.1.3, or more frequently if requested
by Lender, Borrower shall cause to be prepared and furnished to Lender a
Compliance Certificate in the form of Exhibit B hereto executed by the chief
---------
financial officer of Borrower (a "Compliance Certificate").
-25-
7.1.4. Borrowing Base Certificates. On the date of any request for a
---------------------------
Revolving Credit Loan by the Borrower, Borrower shall deliver to Lender, in
form acceptable to Lender, a Borrowing Base certificate, certified by the
chief financial officer of the Borrower, relating to Eligible Accounts and
Eligible Inventory as of the last day of the immediately preceding month,
with such supporting materials as Lender shall reasonably request, all in
form and detail satisfactory to the Lender.
7.1.5. Landlord and Storage Agreements. Provide Lender with copies of
-------------------------------
all material written agreements between Borrower or any of its Subsidiaries
and any landlord or warehouseman which owns any premises at which any
Inventory may, from time to time, be kept, as well as waivers, in form and
substance acceptable to Lender, from landlords and warehousemen for any
locations where Collateral is located as Lender reasonably may require. It
is understood that Lender may establish reserves, and thereby reduce the
amount of Revolving Credit Loans available hereunder, to cover some or all
of the Inventory or Equipment located at any premises not owned by Borrower
for which a landlord's or warehousemen's waiver has not been obtained.
7.1.6. Projections. No later than 60 days after the beginning of each
-----------
fiscal year of Borrower, deliver to Lender Projections of Borrower for such
fiscal year, month by month, in form and detail acceptable to Lender.
7.1.7. Insurance on Collateral. Borrower shall maintain and pay for
-----------------------
insurance upon all Collateral wherever located and with respect to
Borrower's business, covering casualty, hazard, public liability and such
other risks in such amounts and with such insurance companies as are
reasonably satisfactory to Lender. Borrower shall deliver certified copies
of such policies to Lender with lender's loss payable endorsements
reasonably satisfactory to Lender, naming Lender as loss payee, mortgagee,
assignee or additional insured, as appropriate. Each policy of insurance or
endorsement shall contain a clause requiring the insurer to give not less
than 30 days prior written notice to Lender in the event of cancellation of
the policy for any reason whatsoever and a clause specifying that the
interest of Lender shall not be impaired or invalidated by any act or
neglect of Borrower or the owner of the Property or by the occupation of
the premises for purposes more hazardous than are permitted by said policy.
If Borrower fails to provide and pay for such insurance, Lender may, at its
option, but shall not be required to, procure the same and charge Borrower
therefor. Borrower agrees to deliver to Lender, promptly as rendered, true
copies of all reports made in any reporting forms to insurance companies.
All proceeds of Borrower's business interruption insurance (if any) shall
be remitted to Lender for application to the outstanding balance of the
Revolving Credit Loans; provided that, unless (i) an Event of Default is
then in existence or (ii) the amount of such proceeds exceeds $100,000,
Borrower may settle or adjust any claim with respect to such insurance and
Lender shall remit such proceeds to Borrower for use in the ordinary course
of its business.
7.1.8. Guarantors. The Borrower will cause each Subsidiary of the
----------
Borrower and its Subsidiaries which is existing on the Closing Date (other
than Podiatry Online) to become a Guarantor on the Closing Date. The
Borrower will also (i) cause each Wholly-Owned Subsidiary of the Borrower
or its Subsidiaries which is created or acquired (or which becomes a
Wholly-Owned Subsidiary) after the Closing Date to become a Guarantor at or
before the time that it becomes a Wholly-Owned Subsidiary, and (ii) use its
best reasonable efforts to have any other Subsidiary of the Borrower or its
Subsidiaries which is created or acquired after the Closing Date to become
a Guarantor promptly upon becoming a Subsidiary of the Borrower or any of
its Subsidiaries, and Borrower will cause each such current or future
Subsidiary which becomes a Guarantor to execute and deliver to the Lender
such Security Documents and other instruments
-26-
and documents as the Lender may reasonably require in order to grant to the
Lender a first priority perfected lien on and security interest in all of
such Subsidiary's assets, together with legal opinions in form and
substance reasonably satisfactory to the Lender to be delivered to the
Lender opining as to the authorization, validity and enforceability of such
Subsidiary's Guaranty and Security Documents and (as to the applicable
Security Documents) the perfection of such liens and security interests.
7.1.9. Cash Management Services. Borrower will maintain its primary
------------------------
depository and disbursement accounts at the Bank and will use the Bank as
its primary source of its cash management services.
7.1.10. Employee Benefit Plans. Borrower will (i) promptly upon filing
----------------------
the same with the Department of Labor or Internal Revenue Service furnish
to the Lender a copy of the most recent actuarial statement required to be
submitted under (S)103(d) of ERISA and Annual Report, Form 5500, with all
required attachments, in respect of each Guaranteed Pension Plan and (ii)
promptly upon receipt or dispatch, furnish to the Lender any notice, report
or demand sent or received in respect of a Guaranteed Pension Plan under
(S)(S)302, 4041, 4042, 4043, 4063, 4065, 4066 and 4068 of ERISA, or in
respect of a Multiemployer Plan, under (S)(S)4041A, 4202, 4219, 4242, or
4245 of ERISA.
7.1.11. Compliance with Laws, Contracts, Licenses and Permits. The
-----------------------------------------------------
Borrower will, and will cause each of its Subsidiaries to, comply in all
material respects with (i) the applicable laws and regulations wherever its
business is conducted, including ERISA and all Environmental Laws, (ii) the
provisions of its charter documents and by-laws, (iii) all agreements and
instruments by which it or any of its Properties may be bound, and (iv) all
applicable decrees, orders, and judgments. If any authorization, consent,
approval, permit or license from any officer, agency or instrumentality of
any government shall become necessary or required in order that the
Borrower or any of its Subsidiaries may fulfill any of its obligations
hereunder or any of the other Loan Documents to which the Borrower or such
Subsidiary is a party, the Borrower will, or (as the case may be) will
cause such Subsidiary to, immediately take or cause to be taken all
reasonable steps within the power of the Borrower or such Subsidiary to
obtain such authorization, consent, approval, permit or license and furnish
the Lender with evidence thereof.
7.1.12. Use of Proceeds. The Revolving Credit Loans shall be used, and
---------------
the Letters of Credit shall be obtained, solely (i) to fund Borrower's
Permitted Acquisitions, and (ii) for Borrower's general working capital
needs and other general corporate purposes of the Borrower in a manner
consistent with the provisions of this Agreement and all applicable laws.
7.1.13. Regulations U and X. No portion of any Revolving Credit Loan
-------------------
shall be used, and no portion of any Letter of Credit shall be obtained,
for the purpose of purchasing or carrying any "margin security" or "margin
stock" as such terms are used in Regulations U and X of the Board of
Governors of the Federal Reserve System, 12 C.F.R. Parts 221 and 224.
7.1.14. Records and Accounts. Borrower will (i) keep, and cause each
--------------------
of its Subsidiaries to keep, true and accurate records and books of account
in which full, true and correct entries will be made in accordance with
GAAP, (ii) maintain adequate accounts and reserves for all Taxes (including
income taxes), depreciation, depletion, obsolescence and amortization of
its Properties and the Properties of its Subsidiaries, contingencies, and
other reserves and (iii) at all times, engage such independent certified
public accountants as shall be reasonably satisfactory to the Lender (it
being understood that any of the present so-called "Big 5" accounting firms
shall be acceptable to the Lender), as their independent certified public
accountants and will not permit
-27-
more than thirty (30) days to elapse between the cessation of any such
firm's engagement as the independent certified public accountants of the
Borrower and the appointment to such capacity of a successor firm that is
satisfactory to the Agent.
7.1.15. Corporate Existence; Maintenance of Properties. Borrower will
----------------------------------------------
do or cause to be done all things necessary to preserve and keep in full
force and effect its corporate existence and material rights and franchises
and those of its Subsidiaries, and Borrower will not, and will not cause or
permit any of its Subsidiaries to, convert to a limited liability company
or partnership. Borrower (i) will cause all of its Properties and those of
its Subsidiaries used or useful in the conduct of its business or the
business of its Subsidiaries to be maintained and kept in good condition,
repair and working order and supplied with all necessary equipment, (ii)
will cause to be made all necessary repairs, renewals, replacements,
betterments and improvements thereof, all as in the judgment of the
Borrower may be necessary so that the business carried on in connection
therewith may be properly and advantageously conducted at all times, and
(iii) will, and except as otherwise expressly permitted herein, and will
cause each of its Subsidiaries to, continue to engage primarily in the
businesses now conducted by them and in related businesses; provided that
--------
nothing in this subsection 7.1.15 shall prevent the Borrower from
discontinuing the operation and maintenance of any of its properties or any
of those of its Subsidiaries or from dissolving any Subsidiary of the
Borrower if such discontinuance or dissolution is, in the judgment of the
Borrower, desirable in the conduct of its or their business and would not
have a Material Adverse Effect (other than with respect to such dissolved
Subsidiary).
7.1.16. Taxes. Borrower will, and will cause each of its Subsidiaries
-----
to, duly pay and discharge, or cause to be paid and discharged, before the
same shall become overdue, all taxes, assessments, governmental charges,
levies and claims upon it and its Properties, sales and activities, or any
part thereof, or upon the income or profits therefrom, as well as all
claims for labor, materials, or supplies that if unpaid might by law become
a Lien or charge upon any of its Property; provided that any such tax,
--------
assessment, charge, levy or claim need not be paid if the validity or
amount thereof shall currently be contested in good faith by appropriate
proceedings and if the Borrower or such Subsidiary shall have set aside on
its books adequate reserves with respect thereto (or if the Borrower has
reasonably determined that such tax, assessment, levy or charge is not
payable by the Borrower or such Subsidiary); and provided further that the
-------- -------
Borrower and each of its Subsidiaries will pay all such taxes, assessments,
charges, levies or claims forthwith upon the commencement of proceedings to
foreclose any Lien that may have attached as security therefor.
7.1.17. Cross Aging and Aged Credit Reports. Borrower will use
-----------------------------------
commercially reasonable efforts to develop the capacity to deliver to the
Lender cross-aging and aged credit reports in form and substance reasonably
satisfactory to the Lender and will use commercially reasonable efforts to
deliver such reports to the Lender within twelve months after the Closing
Date. On the sixth month anniversary of the Closing Date, Borrower will
provide to the Lender an update regarding Borrower's capacity to deliver
such reports. After developing the capacity to deliver such reports,
Borrower shall deliver such reports to the Lender as and when, and with
such frequency, as reasonably requested by the Lender.
7.1.18. Further Assurances. Borrower will, and will cause each of its
------------------
Subsidiaries to, cooperate with the Lender and execute such further
instruments and documents as the Lender may reasonably request to carry out
to its satisfaction the transactions contemplated by this Agreement and the
other Loan Documents. Without limiting the generality of the foregoing, (a)
on or before the date that the Borrower or any Guarantor locates any assets
in a state or country in
-28-
which no material amount of assets of the Borrower are located on the date
hereof, the Borrower will give notice thereof to the Lender, (b) on or
before the date that the Borrower or any Guarantor locates any assets in a
state or country in which there are not of record Code filings sufficient
to perfect the security interest of the Lender therein, the Borrower will
execute and deliver (or cause such Guarantor to execute and deliver) to the
Lender Code filings sufficient to perfect the security interest of the
Lender with respect to such assets, and (c) on or before the date that the
Borrower or any Guarantor acquires any assets as to which action other than
the filing of Code financing statements is required in order to perfect the
security interest of the Lender therein, Borrower will execute and deliver
(or cause such Guarantor to execute and deliver) to the Lender such
documents as the Lender may reasonably deem to be necessary to perfect the
security interest of the Lender in such assets.
7.2. Negative Covenants.
------------------
During the term of this Agreement, and thereafter for so long as there are
any Obligations outstanding, Borrower covenants that, unless Lender has first
consented thereto in writing, it will not:
7.2.1. Mergers; Consolidations; Acquisitions. Merge or consolidate,
-------------------------------------
or permit any Subsidiary of Borrower to merge or consolidate, with any
Person; or acquire, or permit any of its Subsidiaries to acquire, all or
any substantial part of the Voting Stock or other equity interests or
Properties of any Person or any business entity or division of a business
entity except for Permitted Acquisitions.
7.2.2. Loans. Except as otherwise permitted by Section 7.2.12 and
-----
other than Permitted Officer Indebtedness, make, or permit any Subsidiary
of Borrower to make, any loans or other advances of money (other than for
salary, travel advances, advances against commissions and other similar
advances in the ordinary course of business) to any Person, except for
loans or other advances of money consisting of loans and advances to
employees for moving, entertainment, travel and other similar expenses in
the ordinary course of business not to exceed $100,000 in the aggregate at
any time outstanding.
7.2.3. Total Indebtedness. Create, incur, assume, or suffer to exist,
------------------
or permit any Subsidiary of Borrower to create, incur or suffer to exist,
any Indebtedness, except:
(i) Obligations owing to Lender,
(ii) accounts payable to trade creditors and current
operating expenses (including taxes but excluding Money Borrowed)
which are not aged more than 60 days from billing date or more than 30
days from the due date, in each case incurred in the ordinary course
of business and paid within such time period, unless the same are
being actively contested in good faith and by appropriate and lawful
proceedings; and Borrower or such Subsidiary shall have set aside such
reserves, if any, with respect thereto as are required by GAAP and
deemed adequate by Borrower or such Subsidiary and its interdependent
accountants;
(iii) Obligations to pay Rentals permitted by subsection
7.2.12;
(iv) Permitted Purchase Money Indebtedness and Capitalized
Lease Obligations, provided that the aggregate total thereof does not
exceed the limitation set forth for Permitted Purchase Money
Indebtedness in the definition of Permitted Purchase Money
Indebtedness;
-29-
(v) contingent liabilities arising out of endorsements of
checks and other negotiable instruments for deposit or collection in
the ordinary course of business;
(vi) the VA Debt;
(vii) unsecured Indebtedness of any wholly-owned Subsidiary
of Borrower that is a Guarantor;
(viii) the Podiatry Online Subordinated Debt;
(ix) Subordinated Debt (other than the Podiatry Online
Subordinated Debt) in an aggregate amount not to exceed $5,000,000 at
any time;
(x) Rebates payable in the ordinary course of business to
account debtors of Borrower based upon the volume of purchases by such
account debtors, which rebates are based upon percentages and/or
formulas no more favorable to such account debtors than the
percentages and/or formulas in effect on the Closing Date;
(xi) the Merginet Debt; and
(xii) Indebtedness existing on the date hereof and listed and
described on Schedule 7.2.3 hereto.
--------------
7.2.4. Affiliate Transactions. Except for transactions otherwise
----------------------
expressly permitted hereunder, enter into, or be a party to, or permit any
Subsidiary of Borrower to enter into or be a party to, any transaction with
any Subsidiary, Affiliate or stockholder of Borrower, except in the
ordinary course of and pursuant to the reasonable requirements of
Borrower's or such Subsidiary's business and upon fair and reasonable terms
which are fully disclosed to Lender and are no less favorable to Borrower
or such Subsidiary than would obtain in a comparable arm's length
transaction with a Person not a Subsidiary, Affiliate or stockholder of
Borrower or such Subsidiary.
7.2.5. Limitation on Liens. Create or suffer to exist, or permit any
-------------------
Subsidiary of Borrower to create or suffer to exist, any Lien upon any of
its Property, income or profits, whether now owned or hereafter acquired,
or enter into or permit to exist any arrangement or agreement, which
directly or indirectly (a) prohibits the Borrower or any of its
Subsidiaries from creating or incurring any lien, encumbrance, mortgage,
pledge, charge, restriction or other security interest or (b) prohibits a
Subsidiary from transferring funds or other assets to Borrower or limits
the amount that may be transferred, except that Borrower or a Subsidiary
may create or suffer to exist the following:
(i) Liens at any time granted in favor of Lender;
(ii) Liens for taxes, assessments or governmental charges
(excluding any Lien imposed pursuant to any of the provisions of
ERISA) not yet due, or being contested in the manner described in
subsection 6.1.14 hereto, but only if in Lender's judgment such Lien
does not adversely affect Lender's rights or the priority of Lender's
Lien in the Collateral;
(iii) Liens arising in the ordinary course of Borrower's
business by operation of law or regulation, but only if the payment in
respect of any such Lien is not at the time
-30-
required and such Liens do not, in the aggregate, materially detract
from the value of the Property of Borrower or materially impair the
use thereof in the operation of Borrower's business;
(iv) Purchase Money Liens securing Permitted Purchase Money
Indebtedness;
(v) Liens incurred or deposits made in the ordinary course
of business pursuant to worker's compensation, social security, and
unemployment insurance laws;
(vi) Liens arising in connection with Capitalized Lease
Obligations permitted hereunder; provided, that no such Lien shall
--------
extend to or cover any assets other than the assets subject to such
Capitalized Lease Obligations;
(vii) Such existing Liens as are listed on Schedule 7.2.5
--------------
hereto; and
(viii) Such other Liens as Lender may hereafter approve in
writing.
7.2.6. Distributions. Declare or make, or permit any Subsidiary of
-------------
Borrower to declare or make, any Distributions, except (i) Distributions by
a Subsidiary to the Borrower or (ii) repurchases by the Borrower of its
capital stock in excess of $3,000,000 in the aggregate so long as (i) no
Default or Event of Default has occurred (or would result therefrom); (ii)
after giving effect to such repurchase, there is not less than $4,000,000
of Availability (after taking into account any anticipated use of Revolving
Credit Loans and/or Letters of Credit in connection with all pending
acquisitions evidenced by a letter of intent, purchase and sale agreement
or similar agreement) and (iii) no more than $1,500,000 of such repurchases
occur during any twelve (12) consecutive calendar month period.
7.2.7. Capital Expenditures. Make Capital Expenditures (including,
--------------------
without limitation, by way of capitalized leases) which, in the aggregate,
as to Borrower and its Subsidiaries, exceed $6,500,000 during any twelve
month period, as tested at the end of each fiscal quarter of Borrower on a
rolling twelve month basis.
7.2.8. Disposition of Assets. Sell, lease or otherwise dispose of, or
---------------------
permit any Subsidiary of Borrower to sell, lease or otherwise dispose of,
any of its Properties, including any disposition of Property as part of a
sale and leaseback transaction, to or in favor of any Person, except (i)
sales of Inventory in the ordinary course of business for so long as no
Event of Default exists hereunder, (ii) dispositions of Property which are
expressly permitted by this Agreement or which are consented to in writing
by Lender, and (iii) transfers to Borrower by any Subsidiary.
7.2.9. Stock of Subsidiaries. Permit any of its Subsidiaries to issue
---------------------
any additional shares of its capital stock except director's qualifying
shares.
7.2.10. Issuance of Borrower. Issue any interests in or shares of its
--------------------
capital stock, except for common stock.
7.2.11. ▇▇▇▇-and-Hold Sales, Etc. Make a sale to any customer on a
------------------------
▇▇▇▇-and-hold, guaranteed sale, sale and return, sale on approval or
consignment basis, or any sale on a repurchase or return basis.
-31-
7.2.12. Restricted Investment. Make or have, or permit any Subsidiary
---------------------
of Borrower to make or have, any Restricted Investment.
7.2.13. Leases. Become, or permit any of its Subsidiaries to become, a
------
lessee under any operating lease (other than a lease under which Borrower
or any of its Subsidiaries is lessor) of Property, including, without
limitation, real estate operating leases, if the aggregate Rentals payable
during any current or future period of 12 consecutive months under the
lease in question and all other leases under which Borrower or any of its
Subsidiaries is then lessee would exceed reasonable market value for such
region. The term "Rentals", means as of the date of determination, all
payments which the lessee is required to make by the terms of any lease.
7.2.14. Tax Consolidation. File or consent to the filing of any
-----------------
consolidated income tax return with any Person other than a Subsidiary of
Borrower.
7.2.15. Business Activities. Engage directly or indirectly, and will
-------------------
not permit any of its Subsidiaries to, engage directly or indirectly
(whether through Subsidiaries or otherwise) in any type of business other
than the businesses conducted by them on the Closing Date and in related or
complimentary businesses.
7.2.16. Management and Consulting Fees. Make or permit any of its
------------------------------
Subsidiaries to make, any payments in respect of management and/or
consulting fees associated with any acquisitions, joint ventures and joint
marketing arrangements in excess of $500,000 in the aggregate during any
twelve month period (exclusive of existing consulting arrangements with
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ Consulting, Inc. each as in effect
on the Closing Date and with ▇▇▇▇▇▇ ▇▇▇▇▇ as in effect from time to time,
with total payments under such arrangements not to exceed $100,000 each
during each twelve month period with respect to ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇
and ▇▇▇▇▇▇ Consulting, Inc. and $175,000 with respect to ▇▇▇▇▇▇ ▇▇▇▇▇).
7.2.17. Subsidiary Business. Permit ▇▇▇▇▇ or WW Supply to own any
-------------------
assets or engage in any business whatsoever other than maintaining its
corporate organization.
7.2.18. Subordinated Debt. Amend, supplement or otherwise modify the
-----------------
terms of any of the Subordinated Debt and/or the VA Debt or prepay, redeem
or repurchase any of the Subordinated Debt.
7.3. Specific Financial Covenants.
----------------------------
During the term of this Agreement, and thereafter for so long as there are
any Obligations to Lender, Borrower covenants that it will be in full compliance
with each of the financial covenants set forth on Schedule 7.3 hereto. If GAAP
------------
changes from the basis used in preparing the audited financial statements
delivered to Lender by Borrower on or before the Closing Date, Borrower will
provide Lender with certificates demonstrating compliance with such financial
covenants and will include with each delivery of financial statements to Lender
hereunder, upon the request of Lender, calculations setting forth the
adjustments necessary to demonstrate that Borrower is in compliance with such
financial covenants based upon GAAP as in effect on the Closing Date.
SECTION 8. CONDITIONS PRECEDENT
Notwithstanding any other provision of this Agreement or any of the other
Loan Documents, and without affecting in any manner the rights of Lender under
the other sections of this Agreement, Lender
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shall not be required to make any Revolving Credit Loan or issue or procure any
Letter of Credit or LC Guaranty under this Agreement unless and until each of
the following conditions has been and continues to be satisfied:
8.1. Documentation.
-------------
Lender shall have received, in form and substance satisfactory to Lender
and its counsel, a duly executed copy of this Agreement and the other Loan
Documents, together with such additional documents, instruments and certificates
as Lender and its counsel shall require in connection therewith from time to
time, all in form and substance satisfactory to Lender and its counsel,
including, without limitation, the following:
(A) Copies of Borrower's casualty insurance policies, together with
loss payable endorsements on Lender's standard form of Lender Loss Payee
Endorsement naming Lender as lender loss payee and copies of Borrower's
liability insurance policies, together with endorsements naming Lender as
additional insured;
(B) Landlords' waivers with respect to all locations leased by
Borrower or any of its Subsidiaries, and warehousemen's waivers for
locations at which any Property of Borrower or any Subsidiary of Borrower
is warehoused, to the extent reasonably required by Lender;
(C) Certified copies of (i) resolutions of the Board of Directors of
Borrower and each of its Subsidiaries authorizing the execution and
delivery of the Loan Documents to which each such entity is a party and the
performance of all transactions contemplated thereby, (ii) the by-laws of
Borrower and each of its Subsidiaries, and any amendments thereto, and
(iii) an incumbency certificate with respect to Borrower and each of its
Subsidiaries;
(D) Good standing certificates for Borrower and each of its
Subsidiaries issued by the Secretary of State or other appropriate official
of Borrower's and each Subsidiary's jurisdiction of incorporation, and of
each jurisdiction where the conduct of Borrower's or any Subsidiary's
business activities or the ownership of its Properties necessitate
qualification, and a certified copy of the Articles or Certificate of
Incorporation for Borrower and each of its Subsidiaries, and any amendments
thereto, certified by the Secretary of State or other appropriate official
of its jurisdiction of incorporation;
(E) A closing certificate signed by the chief executive officer or
chief operating officer of Borrower, dated as of the date hereof, stating
that (i) the representations and warranties set forth in Section 6 hereof
are true and correct on and as of such date, (ii) Borrower is on such date
in compliance with all the terms and provisions set forth in this Agreement
and (iii) on such date no Default or Event of Default has occurred and is
continuing;
(F) The Security Documents, duly executed, accepted and acknowledged
by or on behalf of each of the signatories thereto;
(G) The Other Agreements, duly executed, accepted and acknowledged by
or on behalf of each of the signatories thereto;
(H) The favorable written opinion of Borrower's counsel, as to the
transactions contemplated by this Agreement and any of the other Loan
Documents, including without limitation the due consummation of the
transactions, the legality, validity and enforceability of all Loan
Documents, the perfection of all Liens, and the absence of any violation of
any law or
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regulation applicable to the Borrower or any of its Subsidiaries, and such
other opinions as Lender may reasonably require;
(I) Written instruction from Borrower directing the application of
proceeds of the initial Revolving Credit Loans made pursuant to this
Agreement, and an initial borrowing base certificate from Borrower;
(J) UCC, state and federal tax lien and judgment searches;
(K) Payment of all fees and expenses owing hereunder;
(L) Evidence that all conditions set forth in Lender's commitment
letter of November 14, 2000 issued to Borrower have been satisfied or
fulfilled (unless waived or amended in writing by Lender in its sole
discretion), including without limitation (i) receipt by the Lender of
information regarding the Borrower's Veterans Administration liabilities,
and determination by the Lender in its discretion that such liabilities
will not have a Material Adverse Effect; (ii) absence of any material
adverse change in the condition (financial or otherwise) of the operations,
assets, income and/or prospects of the Borrower or its Subsidiaries since
the dates as of which information was provided to the Lender prior to the
execution of such commitment letter; (iii) absence of any default under any
material contract or agreement of the Borrower or any of its subsidiaries
(iv) Lender's receipt of evidence satisfactory to it as to the perfection
and priority of all Liens granted to the Lender pursuant to the Loan
Documents, (v) receipt by all parties to the Loan Documents of all
necessary regulatory, creditor and other third party consents to the
execution, delivery and performance of such Loan Documents, and (vi)
completion of testing by Lender of all due date aging and the results of
such testing being satisfactory to the Lender in all respects in its sole
discretion;
(M) Certified copies of the Settlement Agreement and all other
documents, agreements and/or instruments evidencing the Borrower's
settlement of the dispute described therein, on terms and conditions and
pursuant to documentation satisfactory to Lender; and
(N) Such other documents, instruments and agreements as Lender shall
reasonably request in connection with the foregoing matters.
8.2. No Default.
----------
No Default or Event of Default shall have occurred and be continuing.
8.3. Other Conditions.
----------------
Each of the conditions precedent set forth in the Loan Documents shall have
been satisfied.
8.4. Availability.
------------
On the Closing Date, Lender shall have determined that Availability shall
not be less than Ten Million Dollars ($10,000,000).
8.5. No Litigation.
-------------
No action, proceeding, investigation, regulation or legislation shall have
been instituted, threatened or proposed before any court, governmental agency or
legislative body to enjoin, restrain or
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prohibit, or to obtain damages in respect of, or which is related to or arises
out of, this Agreement or the consummation of the transactions contemplated
hereby.
8.6. Financials; Projections.
-----------------------
Lender shall have received, in form and detail satisfactory to Lender, the
consolidated balance sheets of Borrower and its Subsidiaries as of September 30,
2000 and the related statements of income, changes in stockholder's equity, and
cash flow statements for the periods ended on such dates, prepared in accordance
with GAAP, and presenting fairly, in all material respects, the financial
position of Borrower at such dates and the results of Borrower's operations for
such periods.
Notwithstanding any other provision of this Agreement or any of the other
Loan Documents, and without affecting in any manner the rights of Lender under
the other sections of this Agreement, Lender shall not be required to make any
Revolving Credit Loan or issue or procure any Letter of Credit or LC Guaranty
under this Agreement after the initial Revolving Credit Loan unless, at the time
of each such subsequent Revolving Credit Loan, (i) the representations and
warranties herein and each other Loan Document shall be correct in all material
respects on and as of the date of such Revolving Credit Loan, Letter of Credit
or LC Guaranty, both before and after giving effect thereto and to the
application of the proceeds therefrom;, (ii) no event shall have occurred and be
continuing, or would result from such Revolving Credit Loan, Letter of Credit or
LC Guaranty or from the application of the proceeds therefrom, that constitutes
a Default or Event of Default;, and (iii) there shall have occurred no material
adverse change in the business condition or prospects (financial or otherwise),
operations, performance or properties of the Borrower or any of its
Subsidiaries.
SECTION 9. EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT
9.1. Events of Default.
-----------------
The occurrence of one or more of the following events shall constitute an
"Event of Default":
9.1.1. Payment. Borrower shall fail to pay any of the Obligations on
-------
the due date thereof (whether due at stated maturity, on demand, upon
acceleration or otherwise), whether as mandatory prepayments, as payments
necessary to eliminate a Revolving Credit Loan Overadvance, or otherwise.
9.1.2. Misrepresentations. Any representation, warranty or other
------------------
statement made or furnished to Lender by or on behalf of Borrower or any
Subsidiary of Borrower in this Agreement, any of the other Loan Documents
or any instrument, certificate or financial statement furnished in
compliance with or in reference thereto is determined by Lender to have
been false or misleading in any material respect when made or furnished or
when deemed to be remade pursuant to Section 6.2 hereof.
9.1.3. Breach of Specific Covenants. Borrower shall fail or neglect
----------------------------
to perform, keep or observe any covenant contained in (i) Sections 3.4,
5.2, 7.1, 7.2 or 7.3 hereof on the date that Borrower is required to
perform, keep or observe such covenant or (ii) Sections 5.5 or 5.6 hereof
within 10 days of the date that Borrower is required to perform, keep or
observe such covenant.
9.1.4. Breach of Other Covenants. Borrower shall fail or neglect to
-------------------------
perform, keep or observe any covenant contained in this Agreement (other
than a covenant which is dealt with specifically elsewhere in Section 9.1
hereof) and the breach of such other covenant is not cured to Lender's
satisfaction within 20 days after the sooner to occur of Borrower's receipt
of notice of
-35-
such breach from Lender or the date on which such failure or neglect first
becomes known to any officer of Borrower.
9.1.5. Default Under Security Documents/Other Agreements. Any event
-------------------------------------------------
of default shall occur under, or Borrower or any Subsidiary of Borrower
shall default in the performance or observance of any material term,
covenant, condition or agreement contained in, any of the Security
Documents or the Other Agreements and such default shall continue beyond
any applicable grace period.
9.1.6. Other Defaults. There shall occur any default or event of
--------------
default on the part of Borrower, any Guarantor or any Material Subsidiary
under any agreement, document or instrument to which such Person is a party
or by which such Person or any of its Property is bound, creating or
relating to any Indebtedness in a principal amount in excess of $250,000
(other than the Obligations) if the holder of such Indebtedness would be
entitled to payment or to accelerate such Indebtedness as a consequence of
such default or event of default.
9.1.7. Uninsured Losses. There shall occur any loss, theft, damage or
----------------
destruction of any portion of the Collateral having a fair market value of
$250,000, in the aggregate, if not fully covered (subject to such
deductibles as Lender shall have permitted) by insurance.
9.1.8. Insolvency and Related Proceedings. Borrower, any Guarantor or
----------------------------------
any Material Subsidiary shall cease to be Solvent or shall suffer the
appointment of a receiver, trustee, custodian or similar fiduciary, or
shall make an assignment for the benefit of creditors, or any petition for
an order for relief shall be filed by or against Borrower, any Guarantor or
any Material Subsidiary under the federal bankruptcy laws (if against the
Borrower, any Guarantor or any Material Subsidiary, the continuation of
such proceeding for more than 60 days), or Borrower, any Guarantor or any
Material Subsidiary shall make any offer of settlement, extension or
composition to their respective unsecured creditors generally.
9.1.9. Adverse Changes. There shall occur any material adverse change
---------------
in the financial condition or business prospects of Borrower or the
Borrower and its Subsidiaries taken as a whole.
9.1.10. Business Disruption; Condemnation. There shall occur a
---------------------------------
cessation of a substantial part of the business of Borrower, any Guarantor
or any Material Subsidiary for a period which significantly affects
Borrower's capacity to continue its business on a profitable basis; or
Borrower, any Guarantor or any Material Subsidiary shall suffer the loss or
revocation of any material license or permit now held or hereafter acquired
by such Person which is necessary to the continued or lawful operation of
its business; or Borrower, any Guarantor or any Material Subsidiary shall
be enjoined, restrained or in any way prevented by court, governmental or
administrative order from conducting all or any material part of its
business affairs; or any material lease or agreement pursuant to which such
Person leases, uses or occupies any Property shall be canceled or
terminated prior to the expiration of its stated term; or any material
portion of the Collateral shall be taken through condemnation or the value
of such Property shall be impaired through condemnation.
9.1.11. Change of Ownership. Any person or group of persons (within
-------------------
the meaning of Section 13 or 14 of the Securities Exchange Act of 1934, as
amended) shall have acquired beneficial ownership (within the meaning of
Rule 13d-3 promulgated by the Securities and Exchange Commission under said
Act) of 25% or more of the outstanding shares of common stock of the
Borrower; or, during any period of twenty-four consecutive calendar months
ending
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after the date hereof, individuals who were directors of the Borrower on
the first day of such period and other Approved Directors shall cease to
constitute a majority of the board of directors of the Borrower, or any
Person other than Borrower shall beneficially own (or have any option,
warrant or other right to beneficially own) any of the equity interests of
any of the Guarantors. For the purposes of this subsection 9.1.11,
"Approved Directors" means directors who were nominated or appointed by
individuals a majority of whom were directors of the Borrower on the first
day of the applicable twenty-four month period.
9.1.12. ERISA. A Reportable Event shall occur which Lender, in its
-----
sole discretion, shall determine in good faith constitutes grounds for the
termination by the Pension Benefit Guaranty Corporation of any Plan or for
the appointment by the appropriate United States district court of a
trustee for any Plan, or if any Plan shall be terminated or any such
trustee shall be requested or appointed, or if Borrower, any Guarantor or
any Material Subsidiary is in "default" (as defined in Section 4219(c)(5)
of ERISA) with respect to payments to a Multiemployer Plan resulting from
Borrower's or such Subsidiary's complete or partial withdrawal from such
Plan and any such event would be reasonably likely to have a Material
Adverse Effect.
9.1.13. Challenge to Agreement. Borrower, any Guarantor or any
----------------------
Material Subsidiary or any Affiliate of any of them shall challenge or
contest in any action, suit or proceeding the validity or enforceability of
this Agreement or any of the other Loan Documents, the legality or
enforceability of any of the Obligations or the perfection or priority of
any Lien granted to Lender.
9.1.14. Criminal Forfeiture. Borrower, any Guarantor or any Material
-------------------
Subsidiary shall be criminally indicted or convicted under any law that
could lead to a forfeiture of any Property of Borrower, any Guarantor or
any Material Subsidiary or that could have a Material Adverse Effect.
9.1.15. Judgments. One or more money judgments, writs of attachment or
---------
similar processes are issued or rendered against Borrower, any Guarantor or
any Material Subsidiary or any Material Subsidiary or any of their
respective Property in an amount of $250,000 or more for any single
judgment, attachment or process or $500,000 or more for all such judgments,
attachments or processes in the aggregate, in each case in excess of any
applicable insurance with respect to which the insurer has admitted
liability and which judgments, attachments or processes are not stayed,
released or discharged within 30 days.
9.1.16. VA Liability. Either judgement is entered, arbitration
------------
settlement is awarded or a settlement is entered into with respect to the
Borrower's Veteran's Affairs liabilities in excess of the amounts
(including, without limitation, principal and interest) and/or containing
terms materially different than the terms set forth in the Settlement
Agreement or (ii) the Borrower is unable to enter into a settlement
regarding its Veterans Affairs liabilities on or before that date which is
six (6) months after the Closing Date.
9.2. Acceleration of the Obligations.
-------------------------------
Without in any way limiting the right of Lender to demand payment of any
portion of the Obligations payable on demand in accordance with Section 3.2
hereof, upon or at any time after the occurrence and during the continuance of
an Event of Default, all or any portion of the Obligations shall, at the option
of Lender and without presentment, demand, protest or further notice by Lender,
become at once due and payable and Borrower shall forthwith pay to Lender the
full amount of such Obligations, provided, that upon the occurrence of an Event
--------
of Default specified in Section 9.1.8 hereof, all of the
-37-
Obligations shall become automatically due and payable without declaration,
notice or demand by Lender.
9.3. Other Remedies.
--------------
Upon the occurrence and during the continuance of an Event of Default,
Lender shall have and may exercise from time to time the following rights and
remedies:
9.3.1 All of the rights and remedies of a secured party under the
Code or under other applicable law, and all other legal and equitable
rights to which Lender may be entitled, all of which rights and remedies
shall be cumulative and shall be in addition to any other rights or
remedies contained in this Agreement or any of the other Loan Documents,
and none of which shall be exclusive.
9.3.2 The right to take immediate possession of the Collateral,
and to (i) require Borrower to assemble the Collateral, at Borrower's
expense, and make it available to Lender at a place designated by Lender
which is reasonably convenient to both parties, and (ii) enter any premises
where any of the Collateral shall be located and to keep and store the
Collateral on said premises until sold (and if said premises be the
Property of Borrower or any Subsidiary of Borrower, Borrower agrees not to
charge, and to cause such Subsidiary not to charge, Lender for storage
thereof).
9.3.3 Without limiting the generality of the foregoing, at the
request of the Lender, the Borrower shall notify account debtors on
accounts, chattel paper and general intangibles of the Borrower and
obligors on instruments for which the Borrower is an obligee of the
security interest of the Lender in any account, chattel paper, general
intangible or instrument and that payment thereof is to be made directly to
the Lender or to any financial institution designated by the Lender as the
Lender's agent therefor, and the Lender may itself, if an Event of Default
shall have occurred and be continuing, without notice to or demand upon the
Borrower, so notify account debtors and obligors. After the making of such
a request or the giving of any such notification, the Borrower shall hold
any proceeds of collection of accounts, chattel paper, general intangibles
and instruments received by the Borrower as trustee for the Lender without
commingling the same with other funds of the Borrower and shall turn the
same over to the Lender in the identical form received, together with any
necessary endorsements or assignments. The Lender shall apply the proceeds
of collection of accounts, chattel paper, general intangibles and
instruments received by the Lender to the Obligations, such proceeds to be
immediately entered after final payment in cash or solvent credits of the
items giving rise to them.
9.3.4 The right to sell or otherwise dispose of all or any Collateral
in its then condition, or after any further manufacturing or processing
thereof, at public or private sale or sales, with such notice as may be
required by law, in lots or in bulk, for cash or on credit, all as Lender,
in its sole discretion, may deem advisable. Borrower agrees that 10 days
written notice to Borrower of any public sale other disposition of
Collateral, or of the time after which there may be a private sale of other
disposition of Collateral, shall be reasonable notice thereof, and any such
public sale shall be at such locations as Lender may designate in said
notice. Lender shall have the right to conduct such sales on Borrower's
premises or on the premises of any Subsidiary of Borrower, without charge
therefor, and such sales may be adjourned from to time in accordance with
applicable law. Lender shall have the right to sell, lease or otherwise
dispose of the Collateral, or any part thereof, for cash, credit or any
combination thereof, and Lender may purchase all or any part of the
Collateral at public or, if permitted by law, private sale and, in lieu of
actual payment of such purchase price, may set off the amount of such price
against the Obligations. The
-38-
proceeds realized from the sale of any Collateral may be applied, after
allowing 2 Business Days for collection, first to the costs, expenses and
attorneys' fees incurred by Lender in collecting the Obligations, in
enforcing the rights of Lender under the Loan Documents and in collecting,
taking, completing, protecting, removing, storing, advertising for sale,
selling and delivering any Collateral, second to the interest and fees due
upon any of the Obligations; and third, to the principal of the
Obligations. If there shall be any deficiency, Borrower and all Guarantors
shall remain liable to Lender therefor.
9.3.5 Lender is hereby granted a license and other right to use,
without charge, Borrower's labels, patents, copyrights, rights of use of
any name, trade secrets, tradenames, trademarks, domain names and
advertising matter, and any Property of a similar nature, as it pertains to
the Collateral, in advertising for sale and selling any Collateral and
Borrower's rights under all licenses and all franchise agreements shall
inure to Lender's benefit.
9.3.6 Lender may, at its option, require Borrower to deposit with
Lender funds equal to the LC Amount plus fifty percent (50%) of the face
amount of all outstanding Letters of Credit and LC Guaranties of Letters of
Credit and, if Borrower fails to promptly make such deposit, Lender may
advance such amount as a Revolving Credit Loan (whether or not a Revolving
Credit Loan Overadvance is created thereby). Each such Revolving Credit
Loan shall be secured by all of the Collateral and shall bear interest and
be payable at the same rate and in the same manner as Base Rate Portions.
Any such deposit or advance shall be held by Lender in a non-interest
bearing account as a reserve to fund future payments on such LC Guaranties
and future drawings against such Letters of Credit. At such time as all LC
Guaranties have been paid or terminated and all Letters of Credit have been
drawn upon or expired, any amounts remaining in such reserve shall be
applied against any outstanding Obligations, or, if all Obligations have
been indefeasibly paid in full, returned to Borrower.
9.4. Remedies Cumulative; No Waiver.
------------------------------
All covenants, conditions, provisions, warranties, guaranties, indemnities,
and other undertakings of Borrower contained in this Agreement and the other
Loan Documents, or in any document referred to herein or contained in any
agreement supplementary hereto or in any schedule or in any guaranty given to
Lender or contained in any other agreement between Lender and Borrower,
heretofore, concurrently, or hereafter entered into, shall be deemed cumulative
to and not in derogation or substitution of any of the terms, covenants,
conditions, or agreements of Borrower herein contained. The failure or delay of
Lender to require strict performance by Borrower of any provision of this
Agreement or to exercise or enforce any rights, Liens, powers, or remedies
hereunder or under any of the aforesaid agreements or other documents or
security or Collateral shall not operate as a waiver of such performance, Liens,
rights, powers and remedies, but all such requirements, Liens, rights, powers,
and remedies shall continue in full force and effect until all Loans and all
other Obligations owing or to become owing from Borrower to Lender shall have
been fully and indefeasibly satisfied. None of the undertakings, agreements,
warranties, covenants and representations of Borrower contained in this
Agreement or any of the other Loan Documents and no Event of Default by Borrower
under this Agreement or any other Loan Documents shall be deemed to have been
suspended or waived by Lender, unless such suspension or waiver is by an
instrument in writing specifying such suspension or waiver and is signed by a
duly authorized representative of Lender and directed to Borrower.
9.5. Marshalling.
-----------
The Lender shall not be required to marshal any present or future
collateral security (including but not limited to this Agreement and the
Collateral) for, or other assurances of payment of, the
-39-
Obligations or any of them or to resort to such collateral security or other
assurances of payment in any particular order, and all of its rights hereunder
and in respect of such collateral security and other assurances of payment shall
be cumulative and in addition to all other rights, however existing or arising.
To the extent that it lawfully may, the Borrower hereby agrees that it will not
invoke any law relating to the marshalling of collateral which might cause delay
in or impede the enforcement of the Lender's rights under this Agreement or
under any other instrument creating or evidencing any of the Obligations or
under which any of the Obligations is outstanding or by which any of the
Obligations is secured or payment thereof is otherwise assured, and, to the
extent that it lawfully may, the Borrower hereby irrevocably waives the benefits
of all such laws.
SECTION 10. MISCELLANEOUS
10.1. Power of Attorney.
-----------------
Borrower hereby irrevocably designates, makes, constitutes and appoints
Lender (and all Persons designated by Lender) as Borrower's true and lawful
attorney (and agent-in-fact) and Lender, or Lender's agent, may, without notice
to Borrower and in either Borrower's or Lender's name, but at the cost and
expense of Borrower:
10.1.1 At such time or times after the occurrence and during the
continuance of an Event of Default as Lender or said agent, in its sole
discretion, may determine, endorse Borrower's name on any checks, notes,
acceptances, drafts, money orders or any other evidence of payment or
proceeds of the Collateral which come into the possession of Lender or
under Lender's control.
10.1.2 Upon the occurrence and during the continuance of an Event
of Default, generally to sell, transfer, pledge, make any agreement with
respect to or otherwise deal with any of the Collateral in such manner as
is consistent with the Code and as fully and completely as though the
Lender were the absolute owner thereof for all purposes, and to do at the
Borrower's expense, at any time, or from time to time, all acts and things
which the Lender deems necessary to protect, preserve or realize upon the
Collateral and the Lender's security interest therein, in order to effect
the intent of this Agreement, all as fully and effectively as the Company
might do, including, without limitation, (i) the filing and prosecuting of
registration and transfer applications with the appropriate federal or
local agencies or authorities with respect to trademarks, copyrights and
patentable inventions and processes, (ii) upon written notice to the
Company, the exercise of voting rights with respect to voting securities,
which rights may be exercised, if the Lender so elects, with a view to
causing the liquidation in a commercially reasonable manner of assets of
the issuer of any such securities and (iii) the execution, delivery and
recording, in connection with any sale or other disposition of any
Collateral, of the endorsements, assignments or other instruments of
conveyance or transfer with respect to such Collateral.
10.1.3 Without limiting the generality of the foregoing, at such
time or times upon or after the occurrence and during the continuance of an
Event of Default as Lender or its agent in its sole discretion may
determine: (i) demand payment of the Accounts from the Account Debtors,
enforce payment of the Accounts by legal proceedings or otherwise, and
generally exercise all of Borrower's rights and remedies with respect to
the collection of the Accounts; (ii) settle, adjust, compromise, discharge
or release any of the Accounts or other Collateral or any legal proceedings
brought to collect any of the Accounts or other Collateral, each in a
commercially reasonable manner under the circumstances; (iii) sell or
assign any of the Accounts and other Collateral upon such terms, for such
amounts and at such time or times as Lender
-40-
deems advisable; (iv) take control, in any manner, of any item of payment
or proceeds relating to any Collateral; (v) prepare, file and sign
Borrower's name to a proof of claim in bankruptcy or similar document
against any Account Debtor or to any notice of lien, assignment or
satisfaction of lien or similar document in connection with any of the
Collateral; (vi) receive, open and dispose of all mail addressed to
Borrower and notify postal authorities to change the address for delivery
thereof to such address as Lender may designate; (vii) endorse the name of
Borrower upon any of the items of payment or proceeds relating to any
Collateral and deposit the same to the account of Lender on account of the
Obligations; (viii) endorse the name of Borrower upon any chattel paper,
document, instrument, invoice, freight ▇▇▇▇, ▇▇▇▇ of lading or similar
document or agreement relating to the Accounts, Inventory and any other
Collateral; (ix) use Borrower's stationery and sign the name of Borrower to
verifications of the Accounts and notices thereof to Account Debtors; (x)
use the information recorded on or contained in any data processing
equipment and computer hardware and software relating to the Accounts,
Inventory, Equipment and any other Collateral; (xi) make and adjust claims
under policies of insurance; and (xii) do all other acts and things
necessary, in Lender's determination, to fulfill Borrower's obligations
under this Agreement.
The power of attorney granted hereby shall constitute a power coupled with
an interest and shall be irrevocable.
10.2. Indemnity.
---------
Borrower hereby agrees to indemnify Lender and hold Lender harmless from
and against any liability, loss, damage, suit, action or proceeding ever
suffered or incurred by Lender (including reasonable attorneys fees and legal
expenses) as the result of Borrower's failure to observe, perform or discharge
Borrower's duties hereunder. In addition, Borrower shall defend Lender against
and save it harmless from all claims of any Person with respect to the
Collateral (except those resulting from the gross negligence or intentional
misconduct of Lender). Without limiting the generality of the foregoing, these
indemnities shall extend to any claims asserted against Lender by any Person
under any Environmental Laws or similar laws by reason of Borrower's or any
other Person's failure to comply with laws applicable to solid or hazardous
waste materials or other toxic substances. Notwithstanding any contrary
provision in this Agreement, the obligations of Borrower under this Section 10.2
shall survive the payment in full of the Obligations and the termination of this
Agreement.
10.3. Modification of Agreement; Sale of Interest.
-------------------------------------------
This Agreement may not be modified, altered or amended, except by an
agreement in writing signed by Borrower and Lender. Borrower may not sell,
assign or transfer any interest in this Agreement, any of the other Loan
Documents, or any of the Obligations, or any portion thereof, including, without
limitation, Borrower's rights, title, interests, remedies, powers, and duties
hereunder or thereunder. Lender may participate, sell, assign, transfer or
effectuate any other disposition of Lender's rights, title, interests, remedies,
powers and duties hereunder or under any of the Loan Documents or any portion
hereof or thereof at any time or times hereafter with the consent of the
Borrower, such consent not to be unreasonably withheld or delayed; provided that
after the occurrence of a Default or Event of Default, no such consent of the
Borrower shall be required. In the case of an assignment, the assignee shall
have, to the extent of such assignment, the same rights, benefits and
obligations as it would if it were "Lender" hereunder and Lender shall be
relieved of all obligations hereunder upon any such assignments. Borrower
agrees that it will use its best efforts to assist and cooperate with Lender in
any manner reasonably requested by Lender to effect the sale of participations
in or assignments of any of the Loan Documents or any portion thereof or
interest therein, including, without limitation, assisting in the preparation of
appropriate disclosure documents. Borrower further agrees that Lender may
disclose credit
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information regarding Borrower and its Subsidiaries to any potential participant
or assignee. Lender may also at any time pledge all or any portion of its rights
under the Loan Documents including any portion of the Revolving Credit Note to
any of the twelve (12) Federal Reserve Banks organized under Section 4 of the
Federal Reserve Act, 12 U.S.C. Section 341. No such pledge or enforcement
thereof shall release Lender from its obligations under any of the Loan
Documents.
10.4. Severability.
------------
Wherever possible, each provision of this Agreement shall be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of this Agreement shall be prohibited by or invalid under applicable
law, such provision shall be ineffective only to the extent of such prohibition
or invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Agreement.
10.5. Successors and Assigns.
----------------------
This Agreement, the Other Agreements and the Security Documents shall be
binding upon and inure to the benefit of the successors and assigns of Borrower
and Lender permitted under Section 10.3 hereof.
10.6. Cumulative Effect; Conflict of Terms.
------------------------------------
The provisions of the Other Agreements and the Security Documents are
hereby made cumulative with the provisions of this Agreement. Except as
otherwise provided in Section 3.2 hereof and except as otherwise provided in any
of the other Loan Documents by specific reference to the applicable provision of
this Agreement, if any provision contained in this Agreement is in direct
conflict with, or inconsistent with, any provision in any of the other Loan
Documents, the provision contained in this Agreement shall govern and control.
10.7. Execution in Counterparts.
-------------------------
This Agreement may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed to be an original and all of which
counterparts taken together shall constitute but one and the same instrument. A
facsimile of an executed counterpart of this Agreement or of any other Loan
Document shall have the same effect as the original executed counterpart
thereof.
10.8. Notice.
------
Except as otherwise provided herein, all notices, requests and demands to
or upon a party hereto, to be effective, shall be in writing and shall be sent
by certified or registered mail, return receipt requested, by personal delivery
against receipt, by overnight courier or by facsimile and, unless otherwise
expressly provided herein, shall be deemed to have been validly served, given or
delivered immediately when delivered against receipt; three Business Days after
deposit of certified mail or registered mail in the mail, postage prepaid; one
Business Day after delivery to an overnight courier; or, in the case of notice
sent by confirmed facsimile, when sent notice back received (or, if sent on a
day that is not a Business Day or after 3:00 on a Business Day, on the next
Business Day), addressed as follows:
If to Lender: Fleet Capital Corporation
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
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Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇▇▇ ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to Borrower: ▇▇▇▇▇ Medical Corp.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇'▇▇▇▇▇,
Vice President
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, Esq.
▇▇▇ ▇▇▇▇ ▇▇/▇▇/ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address as each party may designate for itself by notice given
in accordance with this Section 10.8; provided, however, that any notice,
-------- -------
request or demand to or upon Lender pursuant to subsection 3.1.1 or 4.2.2 hereof
shall not be effective until received by Lender.
10.9. Lender's Consent.
----------------
Whenever Lender's consent, satisfaction or acceptance is required to be
obtained under this Agreement, any of the Other Agreements or any of the
Security Documents as a condition to any action, inaction, condition or event
(unless such agreement or document otherwise expressly provides), and whenever
any matter is to be determined in Lender's discretion or judgment under this
Agreement, any of the Other Agreements or any of the Security Documents, Lender
shall be authorized to give or withhold such consent and determine such
satisfaction and acceptance and exercise such discretion or judgment in Lender's
sole and absolute discretion and to condition its consent, satisfaction or
acceptance, or the exercise of such discretion, upon the giving of additional
collateral security for the Obligations, the payment of money or any other
matter.
10.10. Credit Inquiries.
----------------
Borrower hereby authorizes and permits Lender to respond to usual and
customary credit inquiries from third parties concerning Borrower or any of its
Subsidiaries.
10.11. Time of Essence.
---------------
TIME IS OF THE ESSENCE as to all provisions of this Agreement, the Other
Agreements and the Security Documents.
10.12. Entire Agreement.
----------------
This Agreement and the other Loan Documents, together with all other
instruments, agreements and certificates executed by the parties in connection
therewith or with reference thereto, embody the
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entire understanding and agreement between the parties hereto and thereto
with respect to the subject matter hereof and thereof and supersede all prior
agreements, understandings and inducements, whether express or implied, oral or
written.
10.13. Setoff.
------
Borrower and any guarantor hereby grant to Lender a lien, security interest
and right of setoff as security for all liabilities and obligations to Lender,
whether now existing or hereafter arising, upon and against all deposits,
credits, collateral and property, now or hereafter in the possession, custody,
safekeeping or control of Lender or any entity under the control of FleetBoston
Corporation or in transit to any of them. At any time, without demand or
notice, after a Default or Event of Default Lender may set off the same or any
part thereof and apply the same to any liability or obligation of Borrower and
any guarantor even though unmatured and regardless of the adequacy of any other
collateral securing the Revolving Credit Loans. ANY AND ALL RIGHTS TO REQUIRE
LENDER TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL
WHICH SECURES THE REVOLVING CREDIT LOANS, PRIOR TO EXERCISING ITS RIGHT OF
SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF THE BORROWER
OR ANY GUARANTOR, ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.
10.14. Interest Rate.
-------------
All agreements between Borrower and Lender are hereby expressly limited so
that in no contingency or event whatsoever, whether by reason of acceleration of
maturity of the indebtedness evidenced hereby or otherwise, shall the amount
paid or agreed to be paid to Bank for the use or the forbearance of the
indebtedness evidenced hereby exceed the maximum permissible under applicable
law. As used herein, the term "applicable law" shall mean the law in effect as
of the date hereof provided, however that in the event there is a change in the
law which results in a higher permissible rate of interest, then this Agreement
shall be governed by such new law as of its effective date. In this regard, it
is expressly agreed that it is the intent of Borrower and Bank in the execution,
delivery and acceptance of this Agreement to contract in strict compliance with
the laws of the State of Connecticut from time to time in effect. If, under or
from any circumstances whatsoever, fulfillment of any provision hereof or of any
of the Loan Documents or the Security Documents at the time of performance of
such provision shall be due, shall involve transcending the limit of such
validity prescribed by applicable law, then the obligation to be fulfilled shall
automatically be reduced to the limits of such validity, and if under or from
circumstances whatsoever Bank should ever receive as interest an amount which
would exceed the highest lawful rate, such amount which would be excessive
interest shall be applied to the reduction of the principal balance evidenced
hereby and not to the payment of interest. This provision shall control every
other provision of all agreements between Borrower and Lender.
10.15. Loss of Revolving Credit Note, etc.
----------------------------------
Upon receipt of an affidavit of an officer of Lender as to the loss, theft,
destruction or mutilation of the Revolving Credit Note or any other security
document which is not of public record, and in the case of any such loss, theft,
destruction or mutilation, upon surrender and cancellation of such Revolving
Credit Note or other security document, Borrower will issue, in lieu thereof, a
replacement Revolving Credit Note or other security document in the same
principal amount thereof and otherwise of like tenor.
10.16. Interpretation.
--------------
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No provision of this Agreement or any of the other Loan Documents shall be
construed against or interpreted to the disadvantage of any party hereto by any
court or other governmental or judicial authority by reason of such party having
or being deemed to have structured, drafted or dictated such provision.
10.17. Further Assurances.
------------------
The Borrower, at its own expense, shall do, make, execute and deliver all
such additional and further acts, things, deeds, assurances and instruments as
the Lender may require more completely to vest in and assure to the Lender its
rights hereunder or in any of the Collateral, including, without limitation, (i)
executing, delivering and, where appropriate, filing financing statements and
continuation statements under the Code, (ii) obtaining governmental and other
third party consents and approvals, including without limitation any consent of
any licensor, lessor or other applicable party, (iii) obtaining waivers from
mortgagees and landlords and (iv) taking all actions required by Sections 8-313
and 8-321 of the Code (1990) or Sections 8-106 and 9-115 of the Code (1994), as
applicable in each relevant jurisdiction, with respect to certificated and
uncertificated securities.
10.18. Concerning Revised Article 9 of the Code.
----------------------------------------
The parties acknowledge and agree to the following provisions of this
Agreement in anticipation of the possible application, in one or more
jurisdictions to the transactions contemplated hereby, of the revised Article 9
of the Code in the form or substantially in the form approved in 1998 by the
American Law Institute and the National Conference of Commissioners on Uniform
State Law ("Revised Article 9").
10.18.1. Attachment. In applying the law of any jurisdiction in
----------
which Revised Article 9 is in effect, the Collateral is all assets of the
Borrower, whether or not within the scope of Revised Article 9. The
Collateral shall include, without limitation, the following categories of
assets as defined in Revised Article 9: goods (including inventory,
equipment and any accessions thereto), instruments (including promissory
notes), documents, accounts (including health-care-insurance receivables),
chattel paper (whether tangible or electronic), deposit accounts,
letter-of-credit rights (whether or not the letter of credit is evidenced
by a writing), commercial tort claims, securities and all other investment
property, general intangibles (including payment intangibles and software),
supporting obligations and any and all proceeds of any thereof, wherever
located, whether now owned and hereafter acquired. If the Borrower shall at
any time, whether or not Revised Article 9 is in effect in any particular
jurisdiction, acquire a commercial tort claim, as defined in Revised
Article 9, the Borrower shall immediately notify the Lender in a writing
signed by the Borrower of the brief details thereof and grant to the Lender
in such writing a security interest therein and in the proceeds thereof,
all upon the terms of this Agreement, with such writing to be in form and
substance satisfactory to the Lender.
10.18.2. Perfection by Filing. The Lender may at any time and from
--------------------
time to time, pursuant to the provisions of (S)10.1, file financing
statements, continuation statements and amendments thereto that describe
the Collateral as all assets of the Borrower or words of similar effect and
which contain any other information required by Part 5 of Revised Article 9
for the sufficiency or filing office acceptance of any financing statement,
continuation statement or amendment, including whether the Borrower is an
organization, the type of organization and any organization identification
number issued to the Borrower. The Borrower agrees to furnish any such
information to the Lender promptly upon request. Any such financing
statements, continuation statements or amendments may be signed by the
Lender on behalf of the Borrower,
-45-
as provided in (S)10.1, and may be filed at any time in any jurisdiction
whether or not Revised Article 9 is then in effect in that jurisdiction.
10.18.3. Other Perfection, etc. The Borrower shall at any time and
----------------------
from time to time, whether or not Revised Article 9 is in effect in any
particular jurisdiction, take such steps as the Lender may reasonably
request for the Lender (a) to obtain an acknowledgement, in form and
substance satisfactory to the Lender, of any bailee having possession of
any of the Collateral that the bailee holds such Collateral for the Lender,
(b) to obtain "control" of any investment property, deposit accounts,
letter-of-credit rights or electronic chattel paper (as such terms are
defined in Revised Article 9 with corresponding provisions in
Rev. (S)(S) 9-104, 9-105, 9-106 and 9-107 relating to what constitutes
"control" for such items of Collateral), with any agreements establishing
control to be in form and substance satisfactory to the Lender, and (c)
otherwise to insure the continued perfection and priority of the Lender's
security interest in any of the Collateral and of the preservation of its
rights therein, whether in anticipation and following the effectiveness of
Revised Article 9 in any jurisdiction.
10.18.4. Other Provisions. In applying the law of any jurisdiction
----------------
in which Revised Article 9 is in effect, the following references to
sections in this Agreement to existing Article 9 of that jurisdiction shall
be to the Revised Article 9 Section of that jurisdiction indicated below:
--------------------------------------------------------------------------------
Agreement Section Existing Article 9 Revised Article 9
--------------------------------------------------------------------------------
3 (S) 9-103(3) Rev. (S) 9-102(a)(34)
--------------------------------------------------------------------------------
9.2 (S) ▇-▇▇▇ ▇▇▇. (▇)▇-▇▇▇
--------------------------------------------------------------------------------
12 (S)(S) 8-106 and 9-115 (1994) Rev. (S)(S) 8-106 and 9-106
--------------------------------------------------------------------------------
17 (S) 9-504(1)(c) Rev. (S)(S) 9-608(a)(1)(C)
and 9-615(a)(3)
--------------------------------------------------------------------------------
10.18.5. Savings Clause. Nothing contained in this (S)10.18 shall
--------------
be construed to narrow the scope of the Lender's security interest in any
of the Collateral or the perfection or priority thereof or to impair or
otherwise limit any of the rights, powers, privileges or remedies of the
Lender hereunder except (and then only to the extent) mandated by Revised
Article 9 to the extent then applicable.
10.19. Information and Confidentiality.
-------------------------------
Lender agrees to keep confidential any information furnished or made
available to it by Borrower pursuant to this Agreement that is marked
confidential; provided that nothing herein shall prevent Lender from disclosing
--------
such information (i) to any Affiliate of Lender, or any officer, director,
employee, attorney, agent, or advisor of Lender or any Affiliate of Lender,
provided that any such Person shall agree to be bound by the same requirements
to keep information confidential as are contained in this Section, (ii) to any
other Person if reasonably incidental to the administration of the credit
facilities provided herein, provided that any such Person shall agree to be
bound by the same requirements to keep information confidential as are contained
in this Section, (iii) as required by any law, rule, or regulation, (iv) upon
the order of any court or administrative agency, (v) upon the request or demand
of any regulatory agency or authority, (vi) that is or becomes available to the
public or that is or becomes available to Lender or any of its Affiliates other
than as a result of a disclosure by Lender or any of its Affiliates prohibited
by this Agreement, (vii) in connection with any litigation to which Lender or
any of its Affiliates may be a party, (viii) to the extent necessary in
connection with the exercise of any remedy under this Agreement or any other
Loan Document, (ix) subject to provisions substantially similar to those
contained in this Section 10.14, to any actual or proposed participant or
assignee, and (x) to Gold
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Sheets and other bank trade publications, such information to consist of deal
terms and other information customarily found in such publications.
10.20. GOVERNING LAW; CONSENT TO FORUM.
-------------------------------
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF CONNECTICUT PROVIDED, HOWEVER, THAT IF ANY OF THE
-------- -------
COLLATERAL SHALL BE LOCATED IN ANY JURISDICTION OTHER THAN CONNECTICUT, THE LAWS
OF SUCH JURISDICTION SHALL GOVERN THE METHOD, MANNER AND PROCEDURE FOR
FORECLOSURE OF LENDER'S LIEN UPON SUCH COLLATERAL AND THE ENFORCEMENT OF
LENDER'S OTHER REMEDIES IN RESPECT OF SUCH COLLATERAL TO THE EXTENT THAT THE
LAWS OF SUCH JURISDICTION ARE DIFFERENT FROM OR INCONSISTENT WITH THE LAWS OF
CONNECTICUT. AS PART OF THE CONSIDERATION FOR NEW VALUE RECEIVED, AND
REGARDLESS OF ANY PRESENT OR FUTURE DOMICILE OR PRINCIPAL PLACE OF BUSINESS OF
BORROWER OR LENDER, BORROWER HEREBY CONSENTS AND AGREES THAT THE SUPERIOR COURT
OF CONNECTICUT, LOCATED IN HARTFORD, CONNECTICUT, OR, AT LENDER'S OPTION, THE
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF CONNECTICUT, SHALL HAVE
JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN BORROWER AND
LENDER PERTAINING TO THIS AGREEMENT OR TO ANY MATTER ARISING OUT OF OR RELATED
TO THIS AGREEMENT. BORROWER EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH
JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND BORROWER
HEREBY WAIVES ANY OBJECTION WHICH BORROWER MAY HAVE BASED UPON LACK OF PERSONAL
JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY CONSENTS TO THE
--------------------
GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH
COURT. BORROWER HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND
OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH
SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL
ADDRESSED TO BORROWER AT THE ADDRESS SET FORTH IN THIS AGREEMENT AND THAT
SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF BORROWER'S ACTUAL
RECEIPT THEREOF OR 3 DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE
PREPAID. NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO AFFECT THE
RIGHT OF LENDER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW, OR
TO PRECLUDE THE COMMENCEMENT OF SUIT OR OTHER ACTION BY LENDER IN ANY OTHER
APPROPRIATE FORUM OR JURISDICTION OR ENFORCEMENT BY LENDER OF ANY JUDGMENT OR
ORDER OBTAINED IN SUCH FORUM OR THE TAKING OF ANY ACTION UNDER THIS AGREEMENT TO
ENFORCE SAME IN ANY OTHER APPROPRIATE FORUM OR JURISDICTION.
10.21. WAIVERS BY BORROWER.
-------------------
A. BORROWER WAIVES (i) THE RIGHT TO TRIAL BY JURY (WHICH LENDER HEREBY
ALSO WAIVES) IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM OF ANY KIND ARISING
OUT OF OR RELATED TO ANY OF THE LOAN DOCUMENTS, THE OBLIGATIONS OR THE
COLLATERAL; (ii) PRESENTMENT, DEMAND AND PROTEST AND NOTICE OF PRESENTMENT,
PROTEST, DEFAULT, NON PAYMENT, MATURITY, RELEASE, COMPROMISE, SETTLEMENT,
EXTENSION OR RENEWAL OF ANY OR ALL
-47-
NOTES, ACCOUNTS, CONTRACT RIGHTS, DOCUMENTS, INSTRUMENTS, CHATTEL PAPER AND
GUARANTIES AT ANY TIME HELD BY LENDER ON WHICH BORROWER MAY IN ANY WAY BE LIABLE
AND HEREBY RATIFIES AND CONFIRMS WHATEVER LENDER MAY DO IN THIS REGARD; (iii)
NOTICE PRIOR TO LENDER'S TAKING POSSESSION OR CONTROL OF THE COLLATERAL AND
WAIVES ANY BOND OR SECURITY WHICH MIGHT BE REQUIRED BY ANY COURT PRIOR TO
ALLOWING LENDER TO EXERCISE ANY OF LENDER'S REMEDIES; (iv) THE BENEFIT OF ALL
VALUATION, APPRAISEMENT AND EXEMPTION LAWS; AND (v) NOTICE OF ACCEPTANCE HEREOF.
BORROWER ACKNOWLEDGES THAT THE FOREGOING WAIVERS ARE A MATERIAL INDUCEMENT TO
LENDER'S ENTERING INTO THIS AGREEMENT AND THAT LENDER IS RELYING UPON THE
FOREGOING WAIVERS IN ITS FUTURE DEALINGS WITH BORROWER. BORROWER WARRANTS AND
REPRESENTS THAT IT HAS REVIEWED THE FOREGOING WAIVERS WITH ITS LEGAL COUNSEL AND
HAS KNOWINGLY AND VOLUNTARILY WAIVED ITS JURY TRIAL RIGHTS AND THE OTHER MATTERS
WAIVED HEREIN FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF
LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE
COURT.
B. BORROWER REPRESENTS, WARRANTS AND ACKNOWLEDGES THAT THE TRANSACTION OF
WHICH THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS ARE A PART IS A "COMMERCIAL
TRANSACTION" WITHIN THE MEANING OF CHAPTER 903A OF CONNECTICUT GENERAL STATUTES,
AS AMENDED. BORROWER HEREBY WAIVES ITS RIGHT TO NOTICE AND PRIOR COURT HEARING
OR COURT ORDER UNDER CONNECTICUT GENERAL STATUTES SECTIONS 52-278a ET. SEQ. AS
AMENDED OR UNDER ANY OTHER STATE OR FEDERAL LAW WITH RESPECT TO ANY AND ALL
PREJUDGMENT REMEDIES THE LENDER MAY EMPLOY TO ENFORCE ITS RIGHTS AND REMEDIES
HEREUNDER AND UNDER THE OTHER LOAN DOCUMENTS. MORE SPECIFICALLY, BORROWER
ACKNOWLEDGES THAT THE LENDER'S ATTORNEY MAY, PURSUANT TO CONN. GEN. STAT. (S)52-
278f, ISSUE A WRIT FOR A PREJUDGMENT REMEDY WITHOUT SECURING A COURT ORDER.
BORROWER ACKNOWLEDGES AND RESERVES ITS RIGHT TO NOTICE AND A HEARING SUBSEQUENT
TO THE ISSUANCE OF A WRIT FOR PREJUDGMENT REMEDY AS AFORESAID AND THE LENDER
ACKNOWLEDGES BORROWER'S RIGHT TO SAID HEARING SUBSEQUENT TO THE ISSUANCE OF SAID
WRIT. BORROWER FURTHER WAIVES ITS RIGHTS TO REQUEST THAT LENDER POST A BOND,
WITH OR WITHOUT SURETY, TO PROTECT BORROWER AGAINST DAMAGES THAT MAY BE CAUSED
BY ANY PREJUDGMENT REMEDY SOUGHT OR OBTAINED BY LENDER
-48-
IN WITNESS WHEREOF, this Agreement has been duly executed on the day and
year specified at the beginning of this Agreement.
▇▇▇▇▇ MEDICAL CORP.
("Borrower")
By /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
Name: ▇▇▇▇▇ ▇▇▇▇▇▇
Title: President and Chief Executive Officer
FLEET CAPITAL CORPORATION
("Lender")
By /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Vice President