EXHIBIT 10.35
REVOLVING CREDIT AGREEMENT
Dated as of March 31, 1998
among
TIER TECHNOLOGIES, INC.
and
TIER TECHNOLOGIES (UNITED KINGDOM) INC.
(collectively, the "Borrowers")
and
BANKBOSTON, N.A.
as Bank and
Letter of Credit Issuer
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TABLE OF CONTENTS
SECTION I Page
DEFINITIONS 1
1.1 Definitions................................................. 1
1.2 Accounting Terms............................................ 12
SECTION II
DESCRIPTION OF CREDIT...................................................... 12
2.1 The Loans................................................... 12
2.2 Notice and Manner of Borrowing or Conversion of Loans....... 13
2.3 (a) Commitment Fee.......................................... 13
(b) Closing Fee............................................. 14
2.4 Reduction of Commitment Amount.............................. 14
2.5 The Note.................................................... 14
2.6 Duration of Interest Periods................................ 14
2.7 Interest Rates and Payments of Interest..................... 15
2.8 Changed Circumstances....................................... 15
2.9 Overdraft Facility.......................................... 17
2.10 Capital Requirements........................................ 18
2.11 Prepayments of the Loans.................................... 19
2.12 Method of Payment........................................... 19
2.13 Default Rate Interest, Etc.................................. 19
2.14 Indemnity................................................... 19
2.15 Computation of Interest and Fees............................ 20
2.16 The Letters of Credit....................................... 20
2.17 Letter of Credit Fees....................................... 21
SECTION III
CONDITIONS OF LOANS........................................................ 21
3.1 Conditions Precedent to Initial Revolving Loan,
and Letter of Credit....................................... 21
3.2 Conditions Precedent to all Loans and Letters of Credit..... 24
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SECTION IV
REPRESENTATIONS AND WARRANTIES............................................ 25
4.1 Organization and Qualification............................. 25
4.2 Corporate Authority........................................ 25
4.3 Valid Obligations.......................................... 25
4.4 Consents or Approvals...................................... 25
4.5 Title to Properties: Absence of Encumbrances............... 26
4.6 Financial Statements....................................... 26
4.7 Changes.................................................... 26
4.8 Defaults................................................... 26
4.9 Taxes...................................................... 26
4.10 Litigation................................................. 27
4.11 Use of Proceeds............................................ 27
4.12 Subsidiaries............................................... 27
4.13 Holding Company and Investment Company..................... 27
4.14 Compliance with ERISA...................................... 27
4.15 Environmental Matters...................................... 27
SECTION V
AFFIRMATIVE COVENANTS..................................................... 29
5.1 Financial Statements and other Reporting Requirements...... 29
5.2 Conduct of Business........................................ 31
5.3 Maintenance and Insurance.................................. 32
5.4 Taxes...................................................... 32
5.5 Inspection by the Bank..................................... 32
5.6 Maintenance of Books and Records........................... 33
5.7 Current Ratio.............................................. 33
5.8 Minimum Quarterly Net Income............................... 33
5.9 Consolidated Total Liabilities to EBITDA Ratio............. 33
5.10 EBIT/Interest Expense Ratio................................ 33
5.11 Further Assurances......................................... 34
SECTION VI
NEGATIVE COVENANTS........................................................ 34
6.1 Indebtedness............................................... 34
6.2 Contingent Liabilities..................................... 34
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6.3 Leases..................................................... 35
6.4 Sale and Leaseback......................................... 35
6.5 Encumbrances............................................... 35
6.6 Merger: Consolidation: Sale or Lease of Assets;
Other Acquisitions........................................ 36
6.7 Additional Stock Issuance.................................. 36
6.8 Equity Distributions....................................... 36
6.9 Capital Expenditures....................................... 37
6.10 Investments................................................ 37
6.11 ERISA...................................................... 37
6.12 Transactions with Affiliates............................... 37
6.13 No Amendments to Certain Documents......................... 37
SECTION VII
DEFAULTS.................................................................. 38
7.1 Events of Default.......................................... 38
7.2 Remedies................................................... 40
SECTION VIII
SECURITY.................................................................. 41
SECTION IX
MISCELLANEOUS ............................................................41
9.1 Notices.................................................... 41
9.2 Expenses................................................... 42
9.3 Set-Off.................................................... 42
9.4 Term of Agreement.......................................... 42
9.5 No Waivers................................................. 43
9.6 Governing Law.............................................. 43
9.7 Amendments................................................. 43
9.8 Binding Effect of Agreement................................ 43
9.9 Successors and Assigns..................................... 43
9.10 Counterparts............................................... 45
9.11 Partial Invalidity......................................... 45
9.12 Captions................................................... 45
9.13 WAIVER OF JURY TRIAL....................................... 45
9.14 Entire Agreement........................................... 45
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EXHIBITS
EXHIBIT A - Form of Promissory Note
EXHIBIT B - Form of Notice of Borrowing or Conversion
EXHIBIT C - Indebtedness; Encumbrances
EXHIBIT D - Litigation
EXHIBIT E - Subsidiaries
EXHIBIT F - Form of Report of Borrowing Base Certificate
EXHIBIT G - Form of Report of Chief Financial Officer
EXHIBIT H - Form of Opinion of Counsel to the Company
EXHIBIT I - Trademarks
REVOLVING CREDIT AGREEMENT
Dated as of March 31, 1998
THIS REVOLVING CREDIT AGREEMENT is made as of March 31, 1998, by and among
TIER TECHNOLOGIES, INC., a California corporation (the "Company"), TIER
TECHNOLOGIES (UNITED KINGDOM) INC., a Delaware corporation ("Tier UK"), and
BANKBOSTON, N.A. (the "Bank"), a national banking association.
SECTION I
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DEFINITIONS
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1.1 Definitions.
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All capitalized terms used in this Agreement or in the Note or in any
certificate, report or other document made or delivered pursuant to this
Agreement (unless otherwise defined therein) shall have the meanings assigned to
them below:
Adjusted LIBOR Rate. Applicable to any Interest Period, shall mean, for
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any LIBOR Loan, a rate per annum equal to (x) the rate quoted by the Bank at
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11:00 a.m. London time (or as soon thereafter as practical) at which deposits in
dollars are offered by prime commercial banks to prime commercial banks in the
London interbank Eurodollar market two Business Days before the first day of
such Interest Period for a period equal to such Interest Period and in an amount
equal to such LIBOR Loan, divided by (y) one (1) minus the Reserve Requirement,
if any, for each such LIBOR Loan for such Interest Period.
Affected Loans. See Section 2.8(a).
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Agreement. This Agreement, as the same may be supplemented or amended from
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time to time.
AIU Insurance Policy. The Insolvency Risk Insurance Policy issued to the
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Company by AIU North America Inc. with a policy limit of liability of
$4,500,000.
Alternate Base Rate. The greater of (i) the rate of interest announced
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from time to time by the Bank at its head office as its Base Rate, and (ii) the
Federal Funds Effective Rate plus 1/2 of 1% per annum (rounded upwards, if
necessary, to the next 1/8 of 1%).
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Alternate Base Rate Loan. Any Revolving Loan bearing interest determined
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with reference to the Alternate Base Rate.
Bank. See Preamble.
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Borrower. The Company or any Borrowing Subsidiary, and Borrowers shall
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mean the Company and each Borrowing Subsidiary.
Borrowing Base. As of the date of any determination, the lesser of (i) the
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Commitment Amount or (ii) 85% of the amount of aggregate Eligible Receivables;
provided that without the Bank's consent, at no time may greater than 10%
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(except as set forth below) of the Borrowing Base consist of Eligible
Receivables that are owed by a single customer, and provided further that at no
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time may greater than 30% of the Borrowing Base consist of Foreign Receivables.
Notwithstanding the first proviso set forth in the preceding sentence, but
subject to the second proviso set forth in such sentence, with respect to (i)
each of the following entities or any wholly-owned subsidiary of such entity and
(ii) any future customers as may be determined by the Bank in its sole
discretion, up to 25% of the Borrowing Base may consist of Eligible Receivables
that are owed by such entity or wholly-owned subsidiary: Kaiser, Humana, Inc.,
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, BDM, Inc., or Equifax, Inc., provided that such customer (or
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in the event such customer does not have a separate credit rating, such
customer's parent corporation) maintains at least a BBB rating or its equivalent
with respect to its debt obligations, as rated by Standard & Poor's Rating
Services, ▇▇▇▇▇'▇ Investors Service, Inc. or Duff & ▇▇▇▇▇▇ Credit Rating Co.
(the "Approved Credit Rating"). In addition, up to 25% of the Borrowing Base
may consist of Eligible Receivables that are owed by the State of Missouri or
any department, agency or authority of such State, provided that the State of
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Missouri, or if the applicable customer is a department, agency or authority of
such State which has a separate credit rating, such department, agency or
authority, maintains the Approved Credit Rating.
Borrowing Base Certificate. See Section 3.1(n).
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Borrowing Subsidiary. Tier Technologies (United Kingdom) Inc., a Delaware
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corporation.
Business Day. (i) For all purposes other than as covered by clause (ii)
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below, any day other than a Saturday, Sunday or legal holiday on which banks in
Boston, Massachusetts or New York, New York are open for the conduct of a
substantial part of their commercial banking business; and (ii) with respect to
all notices and determinations in connection with, and payments of principal and
interest on, LIBOR Loans, any day that is a Business Day
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described in clause (i) and that is also a day for trading by and between banks
in U.S. Dollar deposits in the London interbank market.
Capital Expenditures. To the extent capitalized in accordance with GAAP,
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any expenditure for fixed assets, including assets being constructed (whether or
not completed), leasehold improvements, capital leases under GAAP, installment
purchases of machinery and equipment, acquisitions of real estate and other
similar expenditures including (a) in the case of a purchase, the entire
purchase price, whether or not paid during the fiscal period in question, (b) in
the case of a capital lease, the capitalized amount thereof (determined in
accordance with GAAP), and (c) without duplication, expenditures in or from any
construction-in-progress account, but excluding expenditures made with the
proceeds of insurance to replace a damaged or destroyed asset and expenditures
made with the proceeds of the sale of an asset, up to an amount not greater than
the then-book value of such sold asset, to replace such asset.
Closing Date. March 31, 1998.
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Code. The Internal Revenue Code of 1986 and the rules and regulations
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thereunder, collectively, as the same may from time to time be supplemented or
amended and remain in effect.
Collateral means all real and personal property of any Borrower pledged as
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collateral under the Pledge Agreements, the Security Agreement, or under any
other instrument or agreement now or hereafter in effect between or among the
Bank, and the Borrowers or any other Person, or any of them, which provides
collateral security for the payment and performance of all or any portion of the
Obligations.
Collateral Instruments. Letters of credit, guarantees, indemnities and
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performance bonds in form and substance satisfactory to the Overdraft Bank
issued or to be issued by the Overdraft Bank to or for the account of Tier
Technologies (United Kingdom) Inc. pursuant to Section 2.9.
Commitment Amount. $10,000,000 or any lesser amount, including zero,
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resulting from a termination or reduction of such amount in accordance with
Section 2.4 or Section 7.2.
Company. See Preamble.
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Consolidated Current Assets. As at any date as of which the amount thereof
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shall be determined, all amounts that should, in accordance with GAAP, be
included as current assets on the consolidated balance sheet of the Company and
its Subsidiaries as at such date.
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Consolidated Current Liabilities. At any date as of which the amount
--------------------------------
thereof shall be determined, all amounts that should, in accordance with GAAP,
be included as current liabilities on the consolidated balance sheet of the
Company and its Subsidiaries as at such date, plus, to the extent not already
included therein, all Loans and all Indebtedness that is payable upon demand or
within one year from the date of determination thereof unless such Indebtedness
is renewable or extendable at the option of the Company or any Subsidiary to a
date more than one year from the date of determination.
Consolidated Net Income. The consolidated net income of the Company and
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its Subsidiaries, after deduction of all expenses, taxes and other proper
charges, determined in accordance with GAAP.
Consolidated Total Liabilities. At any date as of which the amount
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thereof shall be determined, all obligations that should, in accordance with
GAAP, be classified as liabilities on the consolidated balance sheet of the
Company and its Subsidiaries, including in any event all Indebtedness.
Controlled Group. All trades or businesses (whether or not incorporated)
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under common control that, together with the Company, are treated as a single
employer under Section 414(b) or 414(c) of the Code or Section 4001 of ERISA.
Counter Indemnities. Any indemnity or counter indemnity from Tier
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Technologies (United Kingdom) Inc., in favor of the Overdraft Bank with respect
to any Collateral Instrument issued to or for the account of Tier Technologies
(United Kingdom) Inc., in the standard form of indemnity or counter indemnity
used by the Overdraft Bank or in such other form and substance as may be
satisfactory to the Overdraft Bank and including (without limitation) any letter
of credit application incorporating indemnification language satisfactory to the
Overdraft Bank.
Default. An Event of Default or event or condition that, but for the
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requirement that time elapse or notice be given, or both, would constitute an
Event of Default.
EBIT. In relation to the Company and its Subsidiaries for any period, an
----
amount equal to the Consolidated Net Income determined in accordance with GAAP
for such period, plus the following to the extent deducted in computing such
----
Consolidated Net Income for such period: (a) Interest Expense for such period,
and (b) taxes on income for such period, but minus (i) any income that is
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generated from any source other than the Company's ordinary operations and (ii)
any capitalized software costs.
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EBITDA. In relation to the Company and its Subsidiaries for any period, an
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amount equal to the Consolidated Net Income determined in accordance with GAAP
for such period, plus the following to the extent deducted in computing such
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Consolidated Net Income for such period: (a) Interest Expense for such period,
(b) taxes on income for such period, (c) depreciation for such period, (d)
amortization for such period, and (e) one-time non-recurring charges which are
related to acquisitions and actually deducted in calculating EBITDA in such
period, but minus (x) all gains (or plus all losses) attributable to the sale or
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other disposition of assets in such period other than in the ordinary course of
business, (y) any income that is generated from any source other than the
Company's ordinary operations and (z) any capitalized software costs. It is
understood and agreed that the EBITDA for the period in question of any Person
acquired (whether by merger, sale of substantially all assets, or otherwise) by
the Company during such period, calculated in accordance with this definition,
shall be included in the EBITDA of the Company for such period.
Eligible Receivables. Such Receivables which from time to time shall not
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be deemed unacceptable to the Bank in its sole discretion in all respects. A
Receivable shall, however, in no event be deemed to be eligible (i) unless, if
it is not a Foreign Receivable of Tier Technologies (Australia) Pty, Ltd., it is
subject to a first priority perfected security interest in favor of the Bank;
(ii) unless such Receivable continues to be in full conformity with the
warranties and covenants made by any of the Borrowers with respect thereto
contained herein and in the Security Agreement; (iii) unless no more than ninety
(90) days shall have elapsed from the invoice date; (iv) to the extent that such
Receivable is not subject to set off, counterclaim, allowance, adjustment or
dispute and there have been no allowances or adjustments other than as shown on
the invoice; (v) if the Receivable is an obligation of an Affiliate of the
Company, or if it is due from the United States Government or any agency thereof
unless a first lien in favor of the Bank is perfected on such Receivable, or if
it is due from a debtor believed to be bankrupt, insolvent or generally unable
to pay its debts as they become due; (vi) unless such Receivable arose in the
ordinary course of business; (vii) unless such Receivable arose from the
performance of services by any Borrower which have been fully and satisfactorily
performed; and (viii) unless such Receivable is not subject to any prior or
subsequent assignment, claim, lien or security interest other than (a) that in
favor of the Bank or (b) Permitted Encumbrances. A Foreign Receivable shall in
no event be deemed eligible unless it is covered by the AIU Insurance Policy or
secured by a letter of credit acceptable to the Bank.
Encumbrances. See Section 6.5.
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ERISA. The Employee Retirement Income Security Act of 1974 and the rules
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and regulations thereunder, collectively, as the same may from time to time be
supplemented or amended and remain in effect.
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Environmental Laws. Any and all applicable foreign, federal, state and
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local environmental, health or safety statutes, laws, regulations, rules,
ordinances, policies and rules or common law (whether now existing or hereafter
enacted or promulgated), of all governmental agencies, bureaus or departments
which may now or hereafter have jurisdiction over the Company or any of its
Subsidiaries and all applicable judicial and administrative and regulatory
decrees, judgments and orders, including common law rulings and determinations,
relating to injury to, or the protection of, real or personal property or human
health or the environment, including, without limitation, all requirements
pertaining to reporting, licensing, permitting, investigation, remediation and
removal of emissions, discharges, releases or threatened releases of Hazardous
Materials, chemical substances, pollutants or contaminants whether solid, liquid
or gaseous in nature, into the environment or relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of such Hazardous Materials, chemical substances, pollutants or
contaminants.
Event of Default. Any event described in Section 7.1.
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Federal Funds Effective Rate. For any day, a fluctuating interest rate per
----------------------------
annum equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers, as published for such day (or, if such day is not a Business Day,
for the next preceding Business Day) by the Federal Reserve Bank of New York,
or, if such rate is not so published for any day that is a Business Day, the
average of the quotations for such day on such transactions received by the Bank
from three Federal funds brokers of recognized standing selected by the Bank.
Foreign Receivables. A Receivable payable by an entity that is located in
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neither the United States nor Canada.
GAAP. Generally accepted accounting principles in the United States of
----
America as in effect from time to time, applied on a consistent basis.
Guarantees. As applied to the Company and its Subsidiaries, all
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guarantees, endorsements or other contingent, or surety obligations with respect
to obligations of others whether or not reflected on the consolidated balance
sheet of the Company and its Subsidiaries, including any obligation to furnish
funds, directly or indirectly (whether by virtue of partnership arrangements, by
agreement to keep-well or otherwise), through the purchase of goods, supplies or
services, or by way of stock purchase, capital contribution, advance or loan, or
to enter into a contract for any of the foregoing, for the purpose of payment of
obligations of any other person or entity.
Guarantors. Each Subsidiary of the Company, acting as guarantor under the
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Guaranty.
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Guaranty. That certain Guaranty dated as of March 31, 1998 from each
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Guarantor in favor of the Bank in form and substance satisfactory to the Bank.
Hazardous Material. Any substance (i) the presence of which requires or
------------------
may hereafter require notification, investigation or remediation under any
Environmental Law; (ii) which is or becomes defined as a "hazardous waste",
"hazardous material" or "hazardous substance" or "controlled industrial waste"
or "pollutant" or "contaminant" under any present or future Environmental Law or
amendments thereto including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act (42 U.S.C. Section 9601
et seq.) and any applicable local statutes and the regulations promulgated
thereunder; (iii) which is toxic, explosive, corrosive, flammable, infectious,
radioactive, carcinogenic, mutagenic or otherwise hazardous and is or becomes
regulated by any governmental authority, agency, department, commission, board,
agency or instrumentality of any foreign country, the United States, any state
of the United States, or any political subdivision thereof to the extent any of
the foregoing has or had jurisdiction over the Company; or (iv) without
limitation, which contains gasoline, diesel fuel or other petroleum products,
asbestos or polychlorinated biphenyls ("PCB's").
Indebtedness. As applied to the Company and its Subsidiaries, (i) all
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obligations for borrowed money or other extensions of credit whether or not
secured or unsecured, absolute or contingent, including, without limitation,
unmatured reimbursement obligations with respect to letters of credit or
guarantees issued for the account of or on behalf of the Company and its
Subsidiaries and all obligations representing the deferred purchase price of
property, other than accounts payable arising in the ordinary course of
business, (ii) all obligations evidenced by bonds, notes, debentures or other
similar instruments, (iii) all obligations secured by any mortgage, pledge,
security interest or other lien on property owned or acquired by the Company or
any of its Subsidiaries whether or not the obligations secured thereby shall
have been assumed, (iv) that portion of all obligations arising under capital
leases that is required to be capitalized on the consolidated balance sheet of
the Company and its Subsidiaries, and (v) all Guarantees.
Interest Expense. For any specified period, the aggregate interest and
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other financing expenses that shall have become due and payable on Indebtedness
to any Person (including the Bank), including fees with respect to such
Indebtedness and interest under capitalized leases, all determined in accordance
with GAAP.
Interest Period. With respect to each LIBOR Loan, the period commencing on
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the date of the making or continuation of or conversion to such LIBOR Loan and
ending one, two, three or six months thereafter, as the Company may elect in the
applicable Notice of Borrowing or Conversion;
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provided that:
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(i) any Interest Period (other than an Interest Period determined
pursuant to clause (iii) below) that would otherwise end on a day that is
not a Business Day shall be extended to the next succeeding Business Day
unless, in the case of LIBOR Loans, such Business Day falls in the next
calendar month, in which case such Interest Period shall end on the
immediately preceding Business Day;
(ii) any Interest Period applicable to a LIBOR Loan that begins on the
last Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period) shall, subject to clause (iii) below, end on the last
Business Day of a calendar month;
(iii) any Interest Period that would otherwise end after the Revolving
Credit Termination Date shall end on the Revolving Credit Termination Date;
and
(v) notwithstanding clauses (iii) and (iv) above, no Interest Period
applicable to a LIBOR Loan shall have a duration of less than one month;
and if any Interest Period applicable to such Loans would be for a shorter
period, such Interest Period shall not be available hereunder.
Investment. As applied to the Company and its Subsidiaries, the purchase
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or acquisition of any share of capital stock, partnership or limited liability
company interest, evidence of indebtedness or other equity security of any other
person or entity, any loan, advance or extension of credit to, or contribution
to the capital of, any other person or entity, any real estate held for sale or
investment, any commodities futures contracts held other than in connection with
bona fide hedging transactions, any other investment in any other person or
entity, and the making of any commitment or acquisition of any option to make an
Investment.
Kaiser. Collectively, ▇▇▇▇▇▇ Foundation Health Plan, Inc. and its
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subsidiaries.
Letter of Credit. Letters of credit in the form customarily issued by the
----------------
Bank as standby, documentary or commercial letters of credit, issued by the
Bank, at the request and for the account of a Borrower.
Letter of Credit Obligations. At any time, the aggregate Stated Amount of
----------------------------
Letters of Credit outstanding at such time, plus the aggregate amount of any
unreimbursed draws under outstanding Letters of Credit.
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LIBOR Loan. Any Revolving Loan bearing interest at a rate determined with
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reference to the Adjusted LIBOR Rate.
Loan. A loan made to a Borrower by the Bank pursuant to Section II of this
----
Agreement, and "Loans" means all of such loans, collectively.
Loan Documents. Collectively, this Agreement, the Note, the Guaranties,
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the Security Agreements, the Pledge Agreement, and the Letters of Credit (and
related documentation and agreements), together with all agreements and other
instruments contemplated thereby and all schedules, exhibits and annexes
thereto, as the same may from time to time be amended and in effect.
Maximum Overdraft Amount. The Sterling equivalent of $500,000, as the
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same may be reduced from time to time in accordance with Section 2.9, or if the
Overdraft Facility is terminated pursuant to the provisions hereof, zero.
Net Worth. As of any date of determination, the Consolidated stockholders'
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equity of the Company and its Subsidiaries.
Note. A promissory note of a Borrower, substantially in the forms of
----
Exhibit A-1 and A-2 hereto, as applicable, evidencing the obligation of such
-------------------
Borrower to the Bank to repay the Loans.
Notice of Borrowing or Conversion. See Section 2.2.
---------------------------------
Obligations. Any and all obligations of the Borrowers to the Bank
-----------
hereunder of every kind and description, direct or indirect, absolute or
contingent, primary or secondary, due or to become due, now existing or
hereafter arising, regardless of how they arise or by what agreement or
instrument, if any, and including obligations to perform acts and refrain from
taking action as well as obligations to pay money.
Overdraft Bank. The Bank, acting through its London branch.
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Overdraft Facility. See Section 2.9.
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PBGC. The Pension Benefit Guaranty Corporation or any entity succeeding to
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any or all of its functions under ERISA.
Permitted Encumbrances. See Section 6.5.
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Person. An individual, partnership, corporation, limited liability company
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or partnership, business trust, joint stock company, trust, unincorporated
association, joint venture, governmental authority or other entity of whatever
nature.
Plan. At any time, an employee pension or other benefit plan that is
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subject to Title IV of ERISA or subject to the minimum funding standards under
Section 412 of the Code and is either (i) maintained by the Company or any
member of the Controlled Group for employees of the Company or any member of the
Controlled Group or (ii) if such Plan is established, maintained pursuant to a
collective bargaining agreement or any other arrangement under which more than
one employer makes contributions and to which the Company or any member of the
Controlled Group is then making or accruing an obligation to make contributions
or has within the preceding five Plan years made contributions.
Pledge Agreement. The Pledge Agreement dated as of the date hereof
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executed and delivered by the Company to the Bank.
Qualified Investments. As applied to the Company and its Subsidiaries,
---------------------
investments in (i) notes, bonds or other obligations of the United States of
America or any agency thereof that as to principal and interest constitute
direct obligations of or are guaranteed by the United States of America; (ii)
certificates of deposit or other deposit instruments or accounts of banks or
trust companies organized under the laws of the United States or any state
thereof that have capital and surplus of at least $100,000,000, (iii) commercial
paper that is rated not less than prime-one or A-1 or their equivalents by
▇▇▇▇▇'▇ Investors Service, Inc. or Standard & Poor's Corporation, respectively,
or their successors, and (iv) any repurchase agreement secured by any one or
more of the foregoing.
Receivables. All rights of the Company or any of its Subsidiaries to
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payment for goods sold, leased or otherwise marketed in the ordinary course of
business and all rights of the Company or any of its Subsidiaries to payment for
services rendered in the ordinary course of business and all sums of money or
other proceeds due thereon pursuant to transactions with account debtors, except
for that portion of the sum of money or other proceeds due thereon that relate
to sales, use or property taxes in conjunction with such transactions, recorded
on books of account in accordance with GAAP.
Regulatory Change. Any change after the date of this Agreement in United
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States federal, state or foreign laws or regulations (including Regulation D) or
the adoption or making after such date of any orders, rulings, interpretations,
directives, guidelines or requests applying to a class of banks including the
Bank, of or under any United States federal, state, or foreign laws or
regulations (whether or not having the force of law) by any court or
governmental or monetary authority charged with the interpretation or
administration thereof.
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Reimbursement Obligations. The aggregate non-contingent reimbursement or
-------------------------
repayment obligations of the Company with respect to amounts drawn under the
Letter of Credit.
Reserve Requirement. For any LIBOR Loans for any Interest Period (or, as
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the case may be, shorter period), the average maximum rate at which reserves
(including marginal, supplemental or emergency reserves, if any) are required to
be maintained during such period under Regulation D by member banks of the
Federal Reserve System in Boston, Massachusetts with deposits exceeding one
billion dollars against "Eurocurrency liabilities" (as such term is used in
Regulation D). Without limiting the effect of the foregoing, the Reserve
Requirement shall reflect any other reserves required to be maintained by such
member banks by reason of any Regulatory Change against: (i) any category of
liabilities which includes deposits by references to which the Adjusted LIBOR
Rate is to be determined as provided in the definition of "Adjusted LIBOR Rate",
as applicable, in this Section 1, or (ii) any category of extensions of credit
or other assets which include LIBOR Loans.
Revolving Loans. The Loans made to the Company pursuant to Section 2.1(a)
---------------
of this Agreement and advances made on the Overdraft Facility pursuant to
Section 2.9 of this Agreement.
Revolving Credit Termination Date. The date that is 3 years from the date
---------------------------------
of this Agreement.
Security Agreement. The Security Agreement dated as of the date hereof and
------------------
executed and delivered by the Borrowers to the Bank.
Security Documents. Collectively, (a) the Loan Documents and (b) all other
------------------
agreements, instruments, or contracts by which any of the Obligations shall be
evidenced or under or in respect of which the Bank or any of the nominees,
agents, or representatives of the Bank shall have, any rights or interest as
security for the payment or performance of all or any part of the Obligations.
Solvent. With respect to the Company and its Subsidiaries on a particular
-------
date, measured on a consolidated basis, that on such date (i) the fair value of
the property (tangible or intangible) of the Company and its Subsidiaries is
greater than the total amount of liabilities, including, without limitation,
contingent liabilities, of the Company and its Subsidiaries, (ii) the amount
that will be required to pay the probable liabilities of the Company and its
Subsidiaries on their debts as they become absolute and matured will not be
greater than the fair salable value of the assets of the Company and its
Subsidiaries at such time, (iii) the Company and its Subsidiaries are able to
realize upon their assets and pay their debts and other liabilities,
-12-
contingent obligations and other commitments as they mature in the normal course
of business, (iv) the Company and its Subsidiaries do not intend to, and do not
believe that they will, incur debts or liabilities beyond the Company's and its
Subsidiaries' ability to pay as such debts and liabilities mature, and (v) the
Company and its Subsidiaries are not engaged in business or a transaction, and
are not about to engage in business or a transaction, for which the Company's
and its Subsidiaries' properties would constitute unreasonably small capital
after giving due consideration to prevailing practices in the industry in which
the Company and its Subsidiaries are engaged. In computing the amount of any
contingent liability at any time, it is intended that such liability will be
compounded at the amount which, in light of all the facts and circumstances
existing at such time, represents the amount that might reasonably be expected
to become an actual or matured liability.
Stated Amount. With respect to each Letter of Credit outstanding at any
-------------
given time, the maximum amount then available to be drawn thereunder (without
regard to whether any conditions to drawing could then be met).
Sterling or (Pounds). Pounds Sterling in lawful currency of the United
--------------------
Kingdom.
Sterling Base Rate. The annual rate of interest announced from time to
------------------
time by the Bank's London branch as its "base rate" for loans denominated in
Sterling.
Subsidiary. Any corporation, association, joint stock company, business
----------
trust or other similar organization of which 50% or more of the ordinary voting
power for the election of a majority of the members of the board of directors or
other governing body of such entity is held or controlled by the Company or a
Subsidiary of the Company; or any other such organization the management of
which is directly or indirectly controlled by the Company or a Subsidiary of the
Company through the exercise of voting power or otherwise; or any joint venture,
whether incorporated or not, in which the Company has a 50% ownership interest.
Tier UK. See Preamble.
-------
Total Overdraft Usage. See Section 2.9.
---------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇. Collectively, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ and its subsidiaries
------------------
1.2 Accounting Terms. All terms of an accounting character shall have the
----------------
meanings assigned thereto by GAAP, modified to the extent, but only to the
extent, that such meanings are specifically modified herein.
-13-
SECTION II
----------
DESCRIPTION OF CREDIT
---------------------
2.1 The Loans. (a) Subject to the terms and conditions hereof, the Bank
---------
agrees to make Revolving Loans to the Company, and the Company may borrow, repay
and reborrow from time to time between the Closing Date and the Revolving Credit
Termination Date, such amounts as the Company may request, provided that the
--------
aggregate principal amount of all Loans at any one time outstanding hereunder
(after giving effect to all amounts requested) plus the Letter of Credit
----
Obligations plus the Total Overdraft Usage shall not exceed the Borrowing Base
----
and provided, further, that at the time the Company requests a Revolving Loan
-------- -------
and after giving effect to the making thereof, no Default or Event of Default
has occurred and is continuing. Any Revolving Loan not repaid by the Revolving
Credit Termination Date shall be due and payable on the Revolving Credit
Termination Date.
(b) Provided that no Default shall have occurred and be continuing, the
Company may convert all or any part (in integral multiples of $500,000) of any
outstanding Loan into a Loan of any other type provided for in this Agreement in
the same aggregate principal amount, on any Business Day (which, in the case of
a conversion of a LIBOR Loan, shall be the last day of the Interest Period
applicable to such LIBOR Loan). The Company shall give the Bank prior notice of
each such conversion (which notice shall be effective upon receipt) in
accordance with Section 2.2.
(c) The Company may, prior to the Revolving Credit Termination Date, prepay
the principal balance of the Revolving Loans in accordance with Section 2.11.
Any amounts so prepaid may, subject to the terms and conditions of this
Agreement, be reborrowed by the Company prior to the Revolving Credit
Termination Date.
2.2 Notice and Manner of Borrowing or Conversion of Loans. (a) Whenever
-----------------------------------------------------
the Company desires to obtain or continue a Loan hereunder or convert an
outstanding Loan into a Loan of another type provided for in this Agreement, the
Company shall notify the Bank (which notice shall be irrevocable) by telephone
or facsimile received no later than 10:00 a.m. Boston time on the date one
Business Day before the day on which the requested Loan is to be made or
continued as or converted to an Alternate Base Rate Loan, and received no later
than 10:00 a.m. Boston time on the date three Business Days before the day on
which the requested Loan is to be made or continued as or converted to a LIBOR
Loan. Such notice shall specify (i) the effective date and amount of each Loan
or portion thereof to be continued or converted, subject to the limitations set
forth in Section 2.1, (ii) the interest rate option to be applicable thereto,
and (iii) the duration of the applicable Interest Period, if any (subject to the
provisions of the definition of Interest Period and Section 2.6). Each such
notification (a "Notice of
-14-
Borrowing or Conversion") shall be immediately followed by a written
confirmation thereof by the Company in substantially the form of Exhibit B
---------
hereto, provided that if such written confirmation differs in any material
--------
respect from the action taken by the Bank, the records of the Bank shall control
absent manifest error.
(b) Subject to the terms and conditions hereof, the Bank shall make each
Loan on the effective date specified therefor by crediting the amount of such
Loan to the Company's demand deposit account with the Bank or if no such account
exists, by disbursing such funds as directed by the Company.
2.3 (a) Commitment Fee. The Company shall pay to the Bank a commitment
--------------
fee computed at the rate of three tenths of one percent (.30%) per annum on the
average daily amount of the unborrowed portion of the Commitment Amount during
each quarter or portion thereof. Commitment fees shall be payable quarterly in
arrears, on the last day of each calendar quarter of each year beginning on the
first such date following the date hereof, and on the Revolving Credit
Termination Date.
(b) Closing Fee. The Company shall pay to the Bank a closing fee of
-----------
$11,000, payable on the Closing Date.
2.4 Reduction of Commitment Amount. The Company may from time to time by
------------------------------
written notice delivered to the Bank at least three Business Days prior to the
date of the requested reduction, reduce by $100,000 or integral multiples
thereof any unborrowed portion of the Commitment Amount. No reduction of the
Commitment Amount shall be subject to reinstatement.
2.5 The Note. (a) The Loans shall be evidenced by the Note in the form of
--------
Exhibit A-1 attached hereto, payable to the order of the Bank and having a final
-----------
maturity of March 31, 2001. The Note shall be dated on or before the date of the
first Loan and shall have the blanks therein appropriately completed.
(b) The Bank shall, and is hereby irrevocably authorized by the Borrowers
to, enter on the schedule forming a part of the Note or otherwise in its records
appropriate notations evidencing the date and the amount of each Loan, the
interest rate applicable thereto and the date and amount of each payment of
principal made by the Borrower with respect thereto; and in the absence of
manifest error, such notations shall constitute conclusive evidence thereof. The
Bank is hereby irrevocably authorized by the Borrowers to attach to and make a
part of the Note a continuation of any such schedule as and when required. No
failure on the part of the Bank to make any notation as provided in this
subsection (b) shall in any way affect any Loan or the rights or obligations of
the Bank or the Borrowers with respect thereto.
-15-
2.6 Duration of Interest Periods. (a) Subject to the provisions of the
----------------------------
definition of Interest Period, the duration of each Interest Period applicable
to a Loan shall be as specified in the applicable Notice of Borrowing or
Conversion. The Company shall have the option to elect a subsequent Interest
Period to be applicable to such Loan by giving notice of such election to the
Bank received no later than 10:00 a.m. Boston time on the date one Business Day
before the end of the then applicable Interest Period if such Loan is to be
continued as or converted to an Alternate Base Rate Loan and three Business Days
before the end of the then applicable Interest Period is such Loan is to be
continued as or converted to a LIBOR Loan.
(b) If the Bank does not receive a notice of election of duration of an
Interest Period for a LIBOR Loan pursuant to subsection (a) above within the
applicable time limits specified therein, or if, when such notice must be given,
a Default exists, the Company shall be deemed to have elected to convert such
Loan in whole into an Alternate Base Rate Loan on the last day of the then
current Interest Period with respect thereto.
(c) Notwithstanding the foregoing, the Company may not select an Interest
Period that would end, but for the provisions of the definition of Interest
Period, after the Revolving Credit Termination Date.
2.7 Interest Rates and Payments of Interest. (a) Each Base Rate Loan
---------------------------------------
shall bear interest on the outstanding principal amount thereof at a rate per
annum equal to the Alternate Base Rate plus one half of one percent (.50%),
which rate shall change contemporaneously with any change in the Alternate Base
Rate. Such interest shall be payable in arrears on the last day of each month
commencing April 30, 1998, and when such Loan is due (whether at maturity, by
reason of acceleration, prepayment or otherwise).
(b) Each LIBOR Loan shall bear interest on the outstanding principal amount
thereof, for each Interest Period applicable thereto, at a rate per annum equal
to the Adjusted LIBOR Rate plus two and one half percent (2.5%). Such interest
shall be payable in arrears for such Interest Period on the last day thereof and
when such LIBOR Loan is due (whether at maturity, by reason of acceleration,
prepayment or otherwise) and, if such Interest Period is longer than three
months, at intervals of every three months after the first day thereof.
2.8 Changed Circumstances.
---------------------
(a) in the event that:
(i) on any date on which the Adjusted LIBOR Rate would otherwise be
set the Bank shall have determined in good faith (which determination shall
be final and
-16-
conclusive) that adequate and fair means do not exist for ascertaining
the Adjusted LIBOR Rate, or
(ii) at any time the Bank shall have determined in good faith (which
determination shall be final and conclusive) that:
(A) the making or continuation of or conversion of any Loan to a LIBOR
Loan has been made impracticable or unlawful by (1) the occurrence of a
contingency that materially and adversely affects the London interbank
market or (2) compliance by the Bank in good faith with any applicable law
or governmental regulation, guideline or order or interpretation or change
thereof by any governmental authority charged with the interpretation or
administration thereof or with any request or directive of any such
governmental authority (whether or not having the force of law); or
(B) the Adjusted LIBOR Rate shall no longer represent the effective
cost to the Bank for U.S. dollar deposits in the interbank market for
deposits in which it regularly participates;
then, and in any such event, the Bank shall forthwith so notify the Company
thereof. Until the Bank notifies the Company that the circumstances giving rise
to such notice no longer apply, the obligation of the Bank to allow selection by
the Company of the type of Loan affected by the contingencies described in this
Section 2.8(a) (herein called "Affected Loans") shall be suspended. If at the
---------------
time the Bank so notifies the Company, the Company has previously given the Bank
a Notice of Borrowing or Conversion with respect to one or more Affected Loans
but such Loans have not yet gone into effect, such notification shall be deemed
to be void and the Company may borrow Loans of a non-affected type by giving a
substitute Notice of Borrowing or Conversion pursuant to Section 2.2 hereof.
Upon such date as shall be specified in such notice (which shall not be
earlier than the date such notice is given) the Company shall, with respect to
the outstanding Affected Loans,
prepay the same, together with interest thereon and any amounts required to be
paid pursuant to Section 2.13, and may borrow a Loan of another type in
accordance with Section 2.1 hereof by giving a Notice of Borrowing or Conversion
pursuant to Section 2.2 hereof.
(b) in case any law, regulation, treaty or official directive or the
interpretation or application thereof by any court or by any governmental
authority charged with the administration thereof or the compliance with any
guideline or request of any central bank or other governmental authority
(whether or not having the force of law):
-17-
(i) subjects the Bank to any tax with respect to payments of principal
or interest or any other amounts payable hereunder by the Company or
otherwise with respect to the transactions contemplated hereby (except for
taxes on the overall net income of the Bank imposed by the United States of
America or any political subdivision thereof, or
(ii) imposes, modifies or deems applicable any deposit insurance,
reserve, special deposit or similar requirement against assets held by, or
deposits in or for the account of, or loans by, the Bank (other than such
requirements as are already included in the determination of the Adjusted
LIBOR Rate), or
(iii) imposes upon the Bank any other condition with respect to its
performance under this Agreement,
and the result of any of the foregoing is to increase the cost to the Bank,
reduce the income receivable by the Bank or impose any expense upon the Bank
with respect to any Loans, the Bank shall notify the Company thereof. The
Company agrees to pay to the Bank the amount of such increase in cost, reduction
in income or additional expense as and when such cost, reduction or expense is
incurred or determined, upon presentation by the Bank of a statement in the
amount and setting forth the Bank's calculation thereof, which statement shall
be deemed true and correct absent manifest error.
2.9 Overdraft Facility.
------------------
(a) Subject to the terms and conditions of this Agreement, including,
without limitation, the conditions of this Section 2.9, Tier UK may from time to
time between the date hereof and the Revolving Credit Termination Date (i)
utilize an overdraft facility on a Sterling-denominated current account with the
Overdraft Bank in the name of Tier UK (the "Overdraft Facility") by causing
checks or other items denominated in Sterling to be presented for payment
against such current account in amounts greater than the then available balance
in such current account and (ii) request that the Overdraft Bank agree to issue
Collateral Instruments to or for the account of Tier UK upon receipt by it of a
duly-completed and executed Counter Indemnity from Tier UK in respect of each
such Collateral Instrument, in form and substance satisfactory to the Overdraft
Bank provided that the aggregate amount of all liabilities of Tier UK in respect
of the Overdraft Facility and all such Counter Indemnities (whether contingent
or otherwise) (the "Total Overdraft Usage") shall not exceed the Maximum
Overdraft Amount. As to the Overdraft Facility, each such presentation shall be
deemed to be a request by Tier UK for a utilization of the Overdraft Facility in
an amount equal to the excess of such check or other item over such available
balance, and shall be irrevocable. Notwithstanding the foregoing, at no time
shall the Total Overdraft Usage exceed
-18-
the Maximum Overdraft Amount. After the occurrence of an Event of Default, the
Overdraft Bank may terminate the Overdraft Facility in its entirety and reduce
the Maximum Overdraft Amount to zero with immediate effect at its sole
discretion by written notice to the Company and Tier UK, and the entire
principal amount of the debit balance in the Overdraft Facility, together with
all interest accrued thereon, shall become immediately due and payable. The
entire principal amount of the debit balance in the Overdraft Facility, together
with all interest accrued thereon, shall be due and payable on the Revolving
Credit Termination Date.
(b) If at any time the outstanding amount of the debit balance in the
Overdraft Facility plus the aggregate amount of all liabilities in respect of
all Counter Indemnities shall exceed the Maximum Overdraft Amount (due to
currency fluctuations or otherwise), the Borrowers hereby jointly and severally,
absolutely and unconditionally promise to immediately repay the amount of such
excess to the Bank for the account of the Overdraft Bank.
(c) Any amounts borrowed under the Overdraft Facility shall be deemed to be
Revolving Loans hereunder and shall be evidenced by the Note in the form of
Exhibit A-2 attached hereto.
-----------
(d) Interest on the Overdraft Facility shall be payable on the day to day
cleared debit balance in Tier UK's current account maintained with the Overdraft
Bank. Except as provided in Section 2.13 hereto, interest on the Overdraft
Facility shall be payable at the annual percentage rate of interest determined
by the Bank to be the sum of (i) the Sterling Base Rate, plus (ii) two and one
----
half percent (2.5%). The rate of interest on the Overdraft Facility shall be
adjusted from time to time to reflect changes in the Sterling Base Rate. Any
such change in such rate of interest shall become effective on the date of the
change in the Sterling Base Rate. The Borrowers jointly and severally promise to
pay interest on the Overdraft Facility (i) monthly in arrears on the last day of
each calendar month, commencing on the first such date following the Closing
Date and (ii) the date on which the Overdraft Facility is repaid in full.
(e) Interest due with respect to the Overdraft Facility shall be paid to
the Bank for the account of the Overdraft Bank.
(f) Tier UK shall, on the date of issuance or any extension or renewal of
any Collateral Instrument and at such other time or times as such charges are
customarily made by the Overdraft Bank, pay a fee (in each case, a "Collateral
Instrument Fee") to the Overdraft Bank in respect of each Collateral Instrument
equal to the rate of two and one half percent (2.5%) plus the Overdraft Bank's
----
customary issuance fee, such fee to be for the account of the Overdraft Bank.
-19-
(g) The Company hereby absolutely and unconditionally promises to pay to
the Bank any amounts borrowed by Tier UK under the Overdraft Facility and
guarantees to the Bank that Tier UK will duly and punctually pay and perform all
of its Obligations to the Bank under the Overdraft Facility and otherwise under
this Agreement.
2.10 Capital Requirements. If after the date hereof the Bank determines
--------------------
that (i) the adoption of or change in any law, rule, regulation or guideline
regarding capital requirements for banks or bank holding companies, or any
change in the interpretation or application thereof by any governmental
authority charged with the administration thereof, or (ii) compliance by the
Bank or its parent bank holding company with any guideline, request or directive
of any such entity regarding capital adequacy (whether or not having, the force
of law), has the effect of reducing the return on the Bank's or such holding
company s capital as a consequence of the Bank s commitment to make Loans
hereunder to a level below that which the Bank or such holding company could
have achieved but for such adoption, change or compliance (taking into
consideration the Bank's or such holding company's then existing policies with
respect to capital adequacy and assuming the full utilization of such entity's
capital) by any amount deemed by the Bank to be material, then the Bank shall
notify the Company thereof. The Company agrees to pay to the Bank the amount of
such reduction in the return on capital as and when such reduction is
determined, upon presentation by the Bank of a statement in the amount and
setting forth the Bank's calculation thereof, which statement shall be deemed
true and correct absent manifest error. In determining such amount, the Bank may
use any reasonable averaging and attribution methods.
2.11 Prepayments of the Loans. (a) Voluntary Prepayments. Revolving Loans
------------------------
that are LIBOR Loans may be prepaid at any time, without premium or penalty, on
the last day of any interest Period applicable thereto, upon three Business
Days' notice. Revolving Loans that are Alternate Base Rate Loans may be prepaid
at any time, without premium or penalty, upon one Business Day's notice. Any
interest accrued on the amounts so prepaid to the date of such payment must be
paid at the time of any such payment. No prepayment of the Revolving Loans shall
affect the Commitment Amount or impair the Company's right to borrow as set
forth in Section 2.1.
(b) Mandatory Prepayments. If at any time the sum of the aggregate
outstanding amount of the Revolving Loans plus the Total Overdraft Usage plus
---- ----
the Letter of Credit Obligations exceeds the Borrowing Base, as reflected in the
Borrowing Base Certificate then most recently delivered to the Bank pursuant to
Section 5.1, the Borrowers immediately shall make a prepayment of the Revolving
Loans in an amount not less than such excess.
2.12 Method of Payment. The Bank shall, and the Borrowers hereby
-----------------
authorize the Bank to, debit the amount of any payments and prepayments of
principal and all payments of
-20-
interest, fees and other amounts payable hereunder to the demand deposit account
of the Borrowers with the Bank.
2.13 Default Rate Interest, Etc. Each overdue amount under this Agreement
--------------------------
or under any of the other Loan Documents (including, without limitation, all
principal, interest and fees outstanding) shall bear interest from and including
the due date thereof until paid, compounded daily and payable on demand, at a
rate per annum (the "Default Rate") equal to (x) if such due date occurs prior
to the end of an Interest Period, 2% above the interest rate applicable to such
Loan for such Interest Period until the expiration of such Interest Period, and
thereafter, 2% above the rate then applicable to Alternate Base Rate Loans; and
(y) in all other cases, 2% above the rate then applicable to Alternate Base Rate
Loans.
2.14 Indemnity. Each of the Borrowers agrees to indemnify the Bank and to
---------
hold the Bank harmless from and against any loss, cost or expense (including
loss of anticipated profits) that the Bank may sustain or incur as a consequence
of (a) a default by any Borrower in payment of the principal amount of or any
interest or any LIBOR Loans as and when due and payable, including any such loss
or expense arising from interest or fees payable by the Bank to lenders of funds
obtained by it in order to maintain its LIBOR Loans, (b) a default by any
Borrower in making a borrowing or conversion after such Borrower has given (or
is deemed to have given) a Notice of Borrowing or Conversion relating thereto in
accordance with Section 2.2 or (c) the making of any payment of a LIBOR Loan or
the making of any conversion of any such LIBOR Loan to an Alternate Base Rate
Loan on a day that is not the last day of the applicable Interest Period with
respect thereto, including interest or fees payable by the Bank to lenders of
funds obtained by it in order to make any such LIBOR Loans.
2.15 Computation of Interest and Fees. Interest and all fees payable
--------------------------------
hereunder shall be computed daily on the basis of a year of 360 days and paid
for the actual number of days for which due. If the due date for any payment of
principal is extended by operation of law, interest shall be payable for such
extended time. If any payment required by this Agreement becomes due on a day
that is not a Business Day such payment may be made on the next succeeding
Business Day (subject to clause (i) of the definition of Interest Period), and
such extension shall be included in computing interest in connection with such
payment.
2.16 The Letters of Credit. (a) Upon the terms and subject to the
---------------------
conditions of this Agreement, and in reliance upon the representations,
warranties and covenants of the Company made herein, the Bank agrees to issue,
to the extent permitted by law and the Uniform Customs and Practice for
Documentary Credits, International Chamber of Commerce Publication No. 500 (or
any successor thereto), one or more Letters of Credit on the application and for
the account of the Company, during the period from the date hereof to the
Revolving Credit Termination Date, provided that the Stated Amount of Letters of
--------
Credit outstanding at any time, plus the
----
-21-
aggregate amount of all unreimbursed draws under such outstanding Letters of
Credit, shall not at any time be the lesser of (i) $5,000,000 or (ii) when added
to the outstanding amount of Revolving Loans at such time, exceed the Borrowing
Base; and provided further that at the time the Company requests the issuance of
-------- -------
a Letter of Credit and after giving effect to the issuance thereof, there has
not occurred and is not continuing a Default or an Event of Default. It is
understood and agreed by the parties hereto that amounts drawn under such
Letters of Credit shall become immediately due and payable by the Company to the
Bank, for the account of the Bank, and shall bear interest at the rate then
applicable to Revolving Loans that are LIBOR Loans, and, if not paid forthwith
shall, to the extent there is availability under the Borrowing Base, be added to
the Revolving Loans and shall be immediately due and payable upon the maturity
of the Revolving Loans. The issuance of any such Letter of Credit shall result
in a reduction of availability under the Borrowing Base in accordance with
Section 2.1. In addition, all Letters of Credit shall have a stated expiration
date not to exceed 365 days. A Letter of Credit may, subject to the terms and
conditions of this Agreement, be renewed for an additional period not to exceed
365 days. Each Letter of Credit shall, in any event, expire not later than five
Business Days prior to the Revolving Credit Termination Date.
(b) In order to evidence such Letters of Credit, the Borrower shall enter
into, with the Bank, such agreements and execute such instruments and documents
as the Bank requires, including, but not limited to, a letter of credit
application and agreement.
2.17 Letter of Credit Fees. A Letter of Credit fee shall be payable
---------------------
quarterly in arrears on the last Business Day of each calendar quarter and on
the Revolving Credit Termination Date to the Bank, on each Letter of Credit
issued at a rate per annum equal to two and one half percent (2.5%) multiplied
by the face amount of such Letter of Credit.
SECTION III
-----------
CONDITIONS OF LOANS
-------------------
3.1 Conditions Precedent to Initial Revolving Loan, and Letter of Credit.
--------------------------------------------------------------------
The obligation of the Bank to make the initial Revolving Loan and to issue the
initial Letter of Credit is subject to the fulfillment on the date hereof of
each of the following conditions precedent:
(a) Loan Documents, Etc.
--------------------
(i) Each of the Loan Documents shall have been duly and properly
authorized, executed and delivered by the respective parties thereto and shall
be in full force and effect on and as of the Closing Date.
-22-
(ii) Executed original counterparts of each of the Loan Documents, as
executed and delivered by the respective parties thereto, shall have been
delivered to the Bank.
(b) Legality of Transactions. No change in applicable law or regulation
------------------------
shall have occurred as a consequence of which it shall have become and continue
to be unlawful (a) for the Bank to perform any of its agreements or obligations
under any of the Loan Documents to which it is a party on the Closing Date, or
(b) for the Company or any of its Subsidiaries to perform any of their
respective agreements or obligations under any of the Loan Documents to which
they are a party on the Closing Date.
(c) Representations and Warranties. Each of the representations and
------------------------------
warranties made by or on behalf of the Company or any of its Subsidiaries to the
Bank in this Agreement or the other Loan Documents shall be true and correct in
all material respects when made, and shall, for all purposes of this Agreement,
be deemed to be repeated on and as of the Closing Date, and shall be true and
correct in all material respects on and as of such date.
(d) Performance, Etc. The Company and each of its Subsidiaries shall have
----------------
duly and properly performed, complied with and observed each of its respective
covenants, agreements and obligations contained in any of the Loan Documents to
which it is a party or by which it is bound which are required to be performed
on or prior to the Closing Date. No event shall have occurred on or prior to the
Closing Date and be continuing on such Closing Date, and no condition shall
exist on such Closing Date, which constitutes a Default or an Event of Default.
(e) Certified Copies of Charter Documents. The Bank shall have received
-------------------------------------
from the Company and each of its Subsidiaries, respectively, a copy, certified
by a duly authorized officer of each such entity, to be true and complete on the
Closing Date, of (i) its respective charter or other incorporation documents, as
in effect on such date of certification, certified by the Secretary of State of
the jurisdiction of its incorporation, and (ii) its by-laws as in effect on such
date.
(f) Proof of Corporate Action. The Bank shall have received from the
-------------------------
Company and each of its Subsidiaries, respectively, a copy, certified by a duly
authorized officer of each such entity, to be true and complete on the Closing
Date, of records of all corporate action taken by the Company and each of its
Subsidiaries to authorize (a) its execution and delivery of the Loan Documents
to which it is or is to become a party, (b) its performance of all of its
agreements and obligation under each of such documents, and (c) with respect to
the Borrowers, any borrowings and other transactions contemplated by this
Agreement.
-23-
(g) Incumbency Certificate. The Bank shall have received from the Company
----------------------
and each of its Subsidiaries, respectively, an incumbency certificate, dated the
Closing Date and signed by a duly authorized officer of each such entity, and
giving the name and bearing a specimen signature of each individual who shall be
authorized: (a) to sign, in the name and on behalf of the Company and each of
its Subsidiaries, respectively, each of the Loan Documents and to which it is or
is to become a party; (b) with respect to the Borrowers, to make application for
the Loans or conversion thereof; and (c) to give notices to take other action on
its behalf under the Loan Documents.
(h) Proceedings and Documents. All corporate, governmental and other
-------------------------
proceedings in connection with the transactions contemplated by the Loan
Documents and all instruments and documents incidental thereto, shall be in form
and substance reasonably satisfactory to the Bank and the Bank shall have
received all such counterpart originals or certified or other copies of all such
installments and documents as the Bank shall have reasonably requested.
(i) Good Standing Etc. The Bank shall have received a certificate from the
-----------------
Secretary of State of their respective jurisdictions of incorporation as to the
Company's and each of its Subsidiaries' legal existence and good standing in
such state and listing all documents on file for each such entity in the office
of said Secretary of State. The Bank shall also have received certificates of
qualification to do business from any jurisdictions in which the Company and
each of its Subsidiaries, respectively, is required to be qualified.
(j) Facility Fee. The Company shall have complied with its obligation
------------
under Section 2.3 to pay the closing fee.
(k) Legal Opinion. The Bank shall have received a written legal opinion,
-------------
addressed to the Bank, dated the Closing Date, from Paul, Hastings, ▇▇▇▇▇▇▇▇ &
▇▇▇▇▇▇ LLP, counsel to the Company and its Subsidiaries, in form and substance
satisfactory to the Bank.
(l) Financial Condition. The Bank shall be satisfied that the financial
-------------------
statements referred to in Section 4.6 fairly present the financial condition of
the Company and its Subsidiaries as at the close of business on the date thereof
and the results of operations for the periods then ended, and that there has
been no material adverse change in the assets, business, operations or financial
condition the Company and such Subsidiaries, taken as a whole, since the most
recent financial statements referred to therein.
(m) Security Documents; U.C.C. Search Reports, Insurance. The Security
----------------------------------------------------
Documents and the appropriate financing statements (in the name of the Company)
and other documents in respect thereto and necessary to enable the Bank to
perfect a legal, valid and enforceable first-priority security interest
thereunder shall have been duly executed by the
-24-
Company and duly filed or recorded, as applicable, in all appropriate filing
offices or other locations necessary for the perfection of such first-priority
interests, and all other actions necessary for the perfection of such interests
shall have been completed. The Bank shall have received reports concerning the
results of searches of the Uniform Commercial Code filing offices for the
Company in each jurisdiction where Collateral is located made no more than 7
days prior to the Closing Date. The Bank shall have received satisfactory
evidence that such insurance as is required by the Security Documents to be in
effect in respect of all property and fixtures of the Company and each of its
Subsidiaries is in effect and the interest of the Bank as loss payee and
additional insured has been duly endorsed upon all instruments of insurance
issued in respect of such property. Without limitation of the foregoing
sentence, the Bank shall also have received satisfactory evidence that the
Company maintains adequate liability insurance (including insurance relating to
product liability matters) and the interest of the Bank as additional insured
has been duly endorsed on all such instruments of insurance. All such insurance
shall provide for 30 days' advance written notice to the Bank of any
cancellation thereof.
(n) Borrowing Base Certificate. The Company shall have delivered to the
--------------------------
Bank a certificate in the form of Exhibit F (a "Borrowing Base Certificate"),
---------
dated as of the Closing Date.
3.2 Conditions Precedent to all Loans and Letters of Credit. The
-------------------------------------------------------
obligation of the Bank to make each Loan and issue each Letter of Credit,
including the initial Revolving Loan and initial Letter of Credit, or continue
or convert Loans to Loans of the other type, is further subject to the following
conditions:
(a) timely receipt by the Bank of the Notice of Borrowing or Conversion as
provided in Section 2.2;
(b) the representations and warranties contained in Section IV shall be
true and accurate in all material respects on and as of the date of such Notice
of Borrowing or Conversion and on the effective date of the making, continuation
or conversion of each Loan or issuance of each Letter of Credit as though made
at and as of each such date (except to the extent that such representations and
warranties expressly relate to an earlier date), and no Default or Event of
Default shall have occurred and be continuing, or would result from such Loan;
further, the Bank may without waiving this condition consider it fulfilled, and
a representation by the Company to such effect made, if no written notice to the
contrary, dated the date of such Loan or Letter of Credit is received from the
Company, and in the event that the Company submits such a written notice, the
conditions set forth in this Section 3.2(b) will be considered fulfilled if such
notice specifies in detail the exceptions to the representations and warranties
as of the date of
-25-
such Loan or Letter of Credit, the exceptions as stated in such notice are
satisfactory to the Bank in its sole discretion, and the Bank so notifies the
Company;
(c) the resolutions referred to in Section 3.1.(f) shall remain in full
force and effect;
(d) the Bank shall have received a Borrowing Base Certificate that is
satisfactory to the Bank; and
(e) no change shall have occurred in any law or regulation or
interpretation thereof that, in the opinion of counsel for the Bank, would make
it illegal or against the policy of any governmental agency or authority for the
Bank to make Loans or issue Letters of Credit hereunder.
The making of each Loan and issuance of each Letter of Credit shall be
deemed to be a representation and warranty by the Company on the date of the
making, continuation or conversion of such Loan or issuance of such Letter of
Credit as to the accuracy of the facts referred to in subsection (b) of this
Section 3.2, except to the extent that such representation and warranty shall be
modified to reflect the effect of any action or inaction on the part of the
Borrower which is expressly permitted hereunder.
SECTION IV
--------
REPRESENTATIONS AND WARRANTIES
------------------------------
In order to induce the Bank to enter into this Agreement and to make Loans
hereunder, the Company represents and warrants to the Bank that:
4.1 Organization and Qualification. Each of the Company and its
------------------------------
Subsidiaries (a) is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation, (b) has all
requisite corporate power to own its property and conduct its business as now
conducted and as presently contemplated and (c) is duly qualified and in good
standing as a foreign corporation and is duly authorized to do business in each
jurisdiction where the nature of its properties or business requires such
qualification. Since its inception, the Borrower has not transacted business
under any other name or trade name other than Tier Technologies, Inc., Tier
Corporation, TSource and The Information Engineering Resource Corporation. The
Company maintains its principal place of business at its offices located in
Walnut Creek, California; Tier UK maintains its principal place of business at
its offices located in the United Kingdom.
-26-
4.2 Corporate Authority. The execution, delivery and performance of this
-------------------
Agreement, the Note and the other Loan Documents and the transactions
contemplated hereby are within the corporate power and authority of such Person
and have been authorized by all necessary corporate proceedings, and do not and
will not (a) require any consent or approval of the stockholders of the Company
or such Subsidiary, (b) contravene any provision of the charter documents or by-
laws of the Company or any of its Subsidiaries or any law, rule or regulation
applicable to the Company or any of its Subsidiaries, (c) contravene any
provision of, or constitute an event of default or event that, but for the
requirement that time elapse or notice be given, or both, would constitute an
event of default under, any other agreement, instrument, order or undertaking
binding on the Company or any of its Subsidiaries, or (d) result in or require
the imposition of any Encumbrance on any of the properties, assets or rights of
the Company or any of its Subsidiaries.
4.3 Valid Obligations. This Agreement, the Note and the other Loan
-----------------
Documents and all of their respective terms and provisions are the legal, valid
and binding obligations of the Company and its Subsidiaries, enforceable in
accordance with their respective terms except as limited by bankruptcy,
insolvency, reorganization, moratorium or other laws affecting the enforcement
of creditors' rights generally, and except as the remedy of specific performance
or of injunctive relief is subject to the discretion of the court before which
any proceeding therefor may be brought.
4.4 Consents or Approvals. The execution, delivery and performance of this
---------------------
Agreement, the Note and the other Loan Documents and the transactions
contemplated herein do not require any approval or consent of, or filing or
registration with, any governmental or other agency or authority, or any other
party.
4.5 Title to Properties: Absence of Encumbrances. Each of the Company and
--------------------------------------------
its Subsidiaries has good and marketable title to all of the properties, assets
and rights of every name and nature now purported to be owned by it, including,
without limitation, such properties, assets and rights as are reflected in the
financial statements referred to in Section 4.6 (except such properties, assets
or rights as have been disposed of in the ordinary course of business since the
date thereof), free from all Encumbrances except Permitted Encumbrances or those
Encumbrances disclosed in Exhibit C hereto, and, except as so disclosed, free
---------
from all defects of title that might materially adversely affect such
properties, assets or rights, taken as a whole.
4.6 Financial Statements. The Company has furnished the Bank its
--------------------
consolidated balance sheet as of September 30, 1997 and its consolidated
statements of income, changes in stockholders' equity and cash flow for the
fiscal year then ended, and related footnotes, audited and certified by Ernst &
Young LLP. The Company has also furnished the Bank its
-27-
consolidated balance sheet as of December 31, 1997 and its consolidated
statements of income, changes in stockholders' equity and cash flow for the
fiscal quarter then ended, certified by the principal financial officer of the
Company but subject, however, to normal, recurring year-end adjustments that
shall not in the aggregate be material in amount. All such financial statements
were prepared in accordance with GAAP throughout the periods specified and
present fairly the financial position of the Company and its Subsidiaries as of
such dates and the results of the operations of the Company and its Subsidiaries
for such periods. There are no liabilities, contingent or otherwise, not
disclosed in such financial statements that involve a material amount.
4.7 Changes. Since the date of the most recent financial statements
-------
referred to in Section 4.6, there have been no changes in the assets,
liabilities, financial condition, business or prospects of the Company or any of
its Subsidiaries other than changes in the ordinary course of business, the
effect of which has not, in the aggregate, been materially adverse.
4.8 Defaults. As of the date of this Agreement, no Default exists.
--------
4.9 Taxes. The Company and each Subsidiary have filed all federal, state
-----
and other tax returns required to be filed, and all taxes, assessments and other
governmental charges due from the Company and each Subsidiary have been fully
paid. The Company and each Subsidiary have established on their books reserves
adequate for the payment of all federal, state and other tax liabilities.
4.10 Litigation. Except as set forth on Exhibit D hereto, there is no
---------- ---------
litigation, arbitration, proceeding or investigation pending, or, to the
knowledge of the Company's or any Subsidiary's officers, threatened, against the
Company or any Subsidiary that, if adversely determined, could result in a
material judgment not fully covered by insurance, could result in a forfeiture
of all or any substantial part of the property of the Company or its
Subsidiaries, or could otherwise have a material adverse effect on the assets,
business or prospects of the Company or any Subsidiary.
4.11 Use of Proceeds. No portion of any Loan is to be used for the
---------------
"purpose of purchasing or carrying" any "margin stock" as such terms are used in
Regulations G,T,U and X of the Board of Governors of the Federal Reserve System;
and the Company is not engaged in the business of extending credit to others for
such purpose.
4.12 Subsidiaries. As of the date of this Agreement, all the Subsidiaries
------------
of the Company are listed on Exhibit E hereto. The Company or a Subsidiary of
---------
the Company is the owner, free and clear of all liens and encumbrances, of all
of the issued and outstanding stock of each Subsidiary. All shares of such stock
have been validly issued and are fully paid and
-28-
nonassessable, and no rights to subscribe to any additional shares have been
granted, and no options, warrants or similar rights are outstanding.
4.13 Holding Company and Investment Company. Neither the Company nor any
--------------------------------------
of its Subsidiaries is subject to regulation under the Public Utility Holding
Company Act of 1935 or the Investment Company Act of 1940, as amended.
4.14 Compliance with ERISA. The Company and each member of the Controlled
---------------------
Group have fulfilled their obligations under the minimum funding standards of
ERISA and the Code with respect to each Plan and are in compliance in all
material respects with the applicable provisions of ERISA and the Code, and have
not incurred any liability to the PBGC (other than liability for premiums which
have been paid when due) or a Plan under Title IV of ERISA; and no "prohibited
transaction" or "reportable event" (as such terms are defined in ERISA) has
occurred with respect to any Plan.
4.15 Environmental Matters.
---------------------
(a) The Company and each of its Subsidiaries have obtained all permits,
licenses and other authorizations which 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 on the business,
financial condition or operations of the Company and its Subsidiaries. The
Company and each of its Subsidiaries are in compliance with the terms and
conditions of all such permits, licenses and authorizations, and are also in
compliance with all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and timetables contained in
any applicable Environmental Law or in any regulation, code, plan, order,
decree, judgment, injunction, notice or demand letter issued, entered,
promulgated or approved thereunder, except to the extent failure to comply would
not have a material adverse effect on the business, financial condition or
operations of the Company and its Subsidiaries.
(b) No notice, notification, demand, request for information, citation,
summons or order has been issued, no complaint has been filed, no penalty has
been assessed and no investigation or review is pending or threatened by any
governmental or other entity with respect to any alleged failure by the Company
or any of its Subsidiaries to have any permit, license or authorization required
in connection with the conduct of its business or with respect to any
Environmental Laws, including, without limitation, Environmental Laws relating
to the generation, treatment, storage, recycling, transportation, disposal or
release of any Hazardous Materials.
-29-
(c) To the best of the Company's knowledge no material, oral or written
notification of a release of a Hazardous Material has been filed by or on behalf
of the Company or any of its Subsidiaries and no property now or previously
owned, leased or used by the Company or any of its Subsidiaries is listed or
proposed for listing on the National Priorities List under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, or
on any similar state list of sites requiring investigation or clean-up.
(d) There are no liens or encumbrances arising under or pursuant to any
Environmental Laws on any of the real property or properties owned, leased or
used by the Company or any of its Subsidiaries and no governmental actions have
been taken or are in process which could subject any of such properties to such
liens or encumbrances or, as a result of which the Company or any of its
Subsidiaries would be required to place any notice or restriction relating to
the presence of Hazardous Materials at any property owned by it in any deed to
such property.
(e) Neither the Company nor any of its Subsidiaries nor, to the best
knowledge of the Company, any previous owner, tenant, occupant or user of any
property owned, leased or used by the Company or any of its Subsidiaries has (i)
engaged in or permitted any operations or activities upon or any use or
occupancy of such property, or any portion thereof, for the purpose of or in any
way involving the handling, manufacture, treatment, storage, use, generation,
release, discharge, refining, dumping or disposal (whether legal or illegal,
accidental or intentional) of any Hazardous Materials on, under, in or about
such property, except to the extent commonly used in day-to-day operations of
such property and in such case only in compliance with all Environmental Laws,
or (ii) transported any Hazardous Materials to, from or across such property
except to the extent commonly used in day-to-day operations of such property
and, in such case, in compliance with, all Environmental Laws; nor to the best
knowledge of the Company have any Hazardous Materials migrated from other
properties upon, about or beneath such property, nor, to the best knowledge of
the Company, are any Hazardous Materials presently constructed, deposited,
stored or otherwise located on, under, in or about such property except to the
extent commonly used in day-to-day operations of such property and, in such
case, in compliance with, all Environmental Laws.
4.16 Collateral. All of the Obligations under or in respect of the Loan
----------
Documents will, at all times from and after the execution and delivery of each
of the Security Documents, be entitled to the benefits of and be secured by each
of such Security Documents to the extent provided therein.
4.17 Trademarks, Etc. Borrower is duly licensed or otherwise entitled to
---------------
use all trademarks, service marks and trade names which are used in the
operation of its business as
-30-
presently conducted and as shown on Exhibit I hereto. No claim is pending or, as
---------
far as the Borrower can reasonably foresee, threatened against Borrower
contesting the use of any such trademarks, service marks and trade names nor
does the Borrower know of any valid basis for any such claims.
4.18 Solvency. The Company and its Subsidiaries are, and after giving
--------
effect to the transactions contemplated hereby, will be, Solvent.
SECTION V
---------
AFFIRMATIVE COVENANTS
---------------------
So long as the Bank has any commitment to lend hereunder or any Loan or
other Obligation hereunder remains outstanding, the Company covenants as
follows:
5.1 Financial Statements and other Reporting Requirements. The Company
-----------------------------------------------------
shall furnish to the Bank:
(a) as soon as available to the Company, but in any event within 90 days
after the end of each of its fiscal years, a consolidated and consolidating
balance sheet as of the end of, and a related consolidated and consolidating
statement of income, changes in stockholders' equity and cash flow for, such
year, audited and certified by Ernst & Young LLP (or other independent certified
public accountants acceptable to the Bank) in the case of such consolidated
statements, and certified by the chief financial officer in the case of such
consolidating statements; and, concurrently with such financial statements, a
copy of said certified public accountants' management report and a written
statement by such accountants that, in the making of the audit necessary for
their report and opinion upon such financial statements they have obtained no
knowledge of any Default or, if in the opinion of such accountants any such
Default exists, they shall disclose in such written statement the nature and
status thereof;
(b) as soon as available to the Company, but in any event within 45 days
after the end of each of its fiscal quarters, a consolidated and consolidating
balance sheet as of the end of, and a related consolidated and consolidating
statement of income and cash flow for, the period then ended, certified by the
principal financial officer of the Company but subject, however, to normal,
recurring year-end adjustments that shall not in the aggregate be material in
amount, along with the original projections for such period and the same
financial statements for the same period of the prior year;
-31-
(c) concurrently with the delivery of each financial statement pursuant to
subsections (a) and (b) of this Section 5.1, a report in substantially the
form of Exhibit G hereto signed on behalf of the Company by its chief
---------
financial officer;
(d) within 30 days after the end of (i) each month in which any Loan or
Letter of Credit is outstanding and (ii) each fiscal quarter in which no Loan or
Letter of Credit is outstanding, a Borrowing Base Certificate provided that
--------
the Company shall be required to furnish to the Bank a Borrowing Base
Certificate prior to requesting its first Loan or Letter of Credit hereunder;
(e) promptly after the receipt thereof by the Company, copies of any
reports submitted to the Company by independent public accountants in connection
with any interim review of the accounts of the Company made by such accountants;
(f) promptly after the same are available, copies of all proxy statements,
financial statements and reports as the Company shall send to its stockholders
or as the Company may file with the Securities and Exchange Commission or any
governmental authority at any time having jurisdiction over the Company or its
Subsidiaries;
(g) if and when the Company gives or is required to give notice to the PBGC
of any "Reportable Event" (as defined in Section 4043 of ERISA) with respect to
any Plan that might constitute grounds for a termination of such Plan under
Title IV of ERISA, or knows that any member of the Controlled Group or the plan
administrator of any Plan has given or is required to give notice of any such
Reportable Event, a copy of the notice of such Reportable Event given or
required to be given to the PBGC;
(h) immediately upon becoming aware of the existence of any condition or
event that constitutes a Default, written notice thereof specifying the nature
and duration thereof and the action being or proposed to be taken with respect
thereto;
(i) promptly upon becoming aware of any litigation or of any investigative
proceedings by a governmental agency or authority commenced or threatened
against the Company or any of its Subsidiaries of which it has notice, the
outcome of which would or might have a materially adverse effect on the assets,
business or prospects of the Company or the Company and its Subsidiaries on a
consolidated basis, written notice thereof and the action being or proposed to
be taken with respect thereto;
(j) promptly upon becoming aware of any investigative proceedings by a
governmental agency or authority commenced or threatened against the Company or
any of its Subsidiaries regarding any potential violation of Environmental Laws
or any spill, release,
-32-
discharge or disposal of any Hazardous Material, written notice thereof and the
action being or proposed to be taken with respect thereto;
(k) on each anniversary of the date hereof, for so long as Receivables from
such entities or their wholly-owned subsidiaries comprise part of the Borrowing
Base, the then-current rating of the debt obligations of each of Kaiser, State
of Missouri and/or its departments, agencies or authorities, as applicable,
Humana, Inc., ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, BDM, Inc., Equifax, Inc. (or in the event any
such customer does not have a separate credit rating, the rating of such
customer's parent corporation)and any other customer, the Eligible Receivables
from which comprise greater than 10% of the Borrowing Base, as rated by Standard
& Poor's Rating Services, ▇▇▇▇▇'▇ Investors Service, Inc. or Duff & ▇▇▇▇▇▇
Credit Rating Co.;
(l) at the end of each six-month period after the date hereof, a "pipeline"
report describing the status of all outstanding and future projects with
customers;
(m) on or before September 30 of each year, a projected consolidated
balance sheet and projected consolidated statements of income, changes in
stockholders' equity and cash flow for the next succeeding year, together with
supporting assumptions;
(n) within 30 days after the end of each fiscal quarter, a Receivables
aging report; and
(o) from time to time, such other financial data and information about the
Company or its Subsidiaries as the Bank may reasonably request.
5.2 Conduct of Business. Each of the Company and its Subsidiaries shall:
-------------------
(a) duly observe and comply in all material respects with all applicable
laws and valid requirements of any governmental authorities relative to its
corporate existence, rights and franchises, to the conduct of its business and
to its property and assets (including without limitation all Environmental Laws
and ERISA), and shall maintain and keep in full force and effect all licenses
and permits necessary in any material respect to the proper conduct of its
business;
(b) maintain its corporate existence; and
(c) remain engaged substantially in the business of information technology
consulting.
-33-
5.3 Maintenance and Insurance . Each of the Company and its Subsidiaries
-------------------------
shall maintain its properties in good repair, working order and condition as
required for the normal conduct of its business. Each of the Company and its
Subsidiaries shall at all times maintain liability and casualty insurance with
financially sound and reputable insurers in such amounts as the officers of the
Company in the exercise of their reasonable judgment deem to be adequate, and
shall also maintain the AIU Insurance Policy or such replacement policy as may
be approved by the Bank, in such manner. The Bank shall be named as loss payee
and additional insured under, and shall be given 30 days' prior written notice
of any cancellation of; all such insurance. If the Company or any of its
Subsidiaries fails to provide such insurance, the Bank, in its sole and complete
discretion, may provide such insurance and charge the cost thereof to the
Company's deposit account with the Agent. Any payment not recovered from the
Company or its Subsidiaries shall bear interest at the Alternate Base Rate then
in effect. The Bank shall not, by the fact of approving, disapproving,
accepting, obtaining or failing to obtain any such insurance, incur liability
for the form or legal sufficiency of insurance contracts, solvency of insurance
companies or payment of lawsuits, and the Borrowers hereby expressly assumes
full responsibility therefor and liability, if any, thereunder. The Company
shall furnish to the Bank certificates or other evidence satisfactory to the
Bank of compliance with the foregoing insurance provisions.
5.4 Taxes. The Company shall pay or cause to be paid all taxes,
-----
assessments or governmental charges on or against it or any of its Subsidiaries
or its or their properties on or prior to the time when they become due, except
for taxes, assessments or governmental charges which are being contested in good
faith by the Company and for which the Company has established and maintains
adequate reserves for payment.
5.5 Inspection by the Bank. The Company shall permit the Bank or its
----------------------
designees, at any reasonable time and at reasonable intervals of time, and upon
reasonable notice (or if a Default shall have occurred and is continuing, at any
time and without prior notice), to (i) visit and inspect the properties of the
Company and its Subsidiaries, (ii) examine and make copies of and take abstracts
from the books and records of the Company and its Subsidiaries, and (iii)
discuss the affairs, finances and accounts of the Company and its Subsidiaries
with their appropriate officers, employees and accountants. In handling such
information the Bank shall exercise the same degree of care that it exercises
with respect to its own proprietary information of the same types to maintain
the confidentiality of any non-public information thereby received or received
pursuant to subsections 5. 1(a), (b), or (c) except that disclosure of such
information may be made (i) to the subsidiaries or affiliates of the Bank in
connection with their present or prospective business relations with the
Company, (ii) to prospective transferees or purchasers of an interest in the
Loans, (iii) as required by law, regulation, rule or order, subpoena, judicial
order or similar order and (iv) as may be required in connection with the
examination, audit or similar investigation of the Bank.
-34-
5.6 Maintenance of Books and Records. Each of the Company and its
--------------------------------
Subsidiaries shall keep adequate books and records of account, in which true and
complete entries will be made reflecting all of its business and financial
transactions, and such entries will be made in accordance with GAAP and
applicable law.
5.7 Current Ratio. The Company shall at all times maintain a ratio of
-------------
Consolidated Current Assets to Consolidated Current Liabilities of at least 2.0
to 1.
5.8 Minimum Quarterly Net Income. The Company shall earn Consolidated Net
----------------------------
Income of at least $1.00 in every fiscal quarter, plus at least $1,000,000 in
each fiscal year.
5.9 Consolidated Total Liabilities to EBITDA Ratio. The Company shall at
----------------------------------------------
all times maintain a ratio of Consolidated Total Liabilities to EBITDA,
calculated on a rolling four quarter basis, as follows:
Quarter ending June 30, 1998: less than 4.0
Quarter ending September 30, 1998: less than 3.5
Quarter ending December 31, 1998: less than 3.0
Quarter ending March 31, 1999: less than 2.5
Quarter ending June 30, 1999: less than 2.0
Quarter ending September 30, 1999: less than 2.0
Quarter ending December 31, 1999 and
at the end of each quarter thereafter: less than 1.75
5.10 EBIT/Interest Expense Ratio The Company shall at all times maintain a
---------------------------
ratio of EBIT to Interest Expense of not less than 3.0 to 1.
5.11 Further Assurances. At any time and from time to time the Company
------------------
shall, and shall cause each of its Subsidiaries to, execute and deliver such
further instruments and take such further action as may reasonably be requested
by the Bank to effect the purposes of this Agreement, the Note and the other
Loan Documents.
SECTION IV
----------
NEGATIVE COVENANTS
------------------
So long as the Bank has any commitment to lend hereunder or any Loan or
other Obligation hereunder remains outstanding, the Company covenants as
follows:
-35-
6.1 Indebtedness. Neither the Company nor any of its Subsidiaries shall
------------
create, incur, assume, guarantee or be or remain liable with respect to any
Indebtedness other than the following:
(a) Indebtedness of the Company or any of its Subsidiaries to the Bank or
any of its affiliates;
(b) Indebtedness of any Subsidiary to the Company which involves terms no
less favorable to the Company or such Subsidiary than would the terms of a
similar agreement or transaction with any person other than an affiliate.
(c) Indebtedness existing as of the date of this Agreement and disclosed
on Exhibit C hereto or in the financial statements referred to in Section 4.6;
---------
and
(d) Indebtedness secured by Permitted Encumbrances.
(e) Indebtedness which, when combined with all other Indebtedness included
in (c) and (d) above, does not exceed ten percent (10%) of EBITDA for the twelve
month period immediately preceding the incurring of such Indebtedness.
6.2 Contingent Liabilities. Neither the Company nor any of its
----------------------
Subsidiaries shall create, incur, assume, guarantee or remain liable with
respect to any Guarantees other than the following:
(a) Guarantees in favor of the Bank or any of its affiliates;
(b) Guarantees existing on the date of this Agreement and disclosed on
Exhibit C hereto or in the financial statements referred to in Section 4.6;
------- -
(c) Guarantees resulting from the endorsement of negotiable instruments
for collection in the ordinary course of business; and
(d) Guarantees of normal trade debt relating to the acquisition of goods
and supplies.
6.3 Leases. Neither the Company nor any of its Subsidiaries shall during
------
any fiscal year enter into any leases of real or personal property as lessee,
except for capital leases or leases providing for payments in any one fiscal
year (whether or not such payments are termed rent) in the aggregate of less
than $1,000,000.
-36-
6.4 Sale and Leaseback. Neither the Company nor any of its Subsidiaries
------------------
shall enter into any arrangement, directly or indirectly, whereby it shall sell
or transfer any property owned by it in order to lease such property or lease
other property that the Company or any such Subsidiary intends to use for
substantially the same purpose as the property being sold or transferred.
6.5 Encumbrances. Neither the Company nor any of its Subsidiaries shall
------------
create, incur, assume or suffer to exist any mortgage, pledge, security
interest, lien or other charge or encumbrance, including the lien or retained
security title of a conditional vendor upon or with respect to any of its
property or assets ("Encumbrances"), or assign or otherwise convey any right to
receive income, including the sale or discount of accounts receivable with or
without recourse, except the following ("Permitted Encumbrances"):
----------------------
(a) Encumbrances in favor of the Bank or any of its affiliates;
(b) liens for taxes, fees, assessments and other governmental charges to
the extent that payment of the same may be postponed or is not required in
accordance with the provisions of Section 5.4;
(c) landlords' and lessors' liens in respect of rent not in default or
liens in respect of pledges or deposits under workmen's compensation,
unemployment insurance, social security laws, or similar legislation (other than
ERISA) or in connection with appeal and similar bonds incidental to litigation;
mechanics', laborers' and materialmen' s and similar liens, if the obligations
secured by such liens are not then delinquent; liens securing the performance of
bids, tenders, contracts (other than for the payment of money); and statutory
obligations incidental to the conduct of its business and that do not in the
aggregate materially detract from the value of its property or materially impair
the use thereof in the operation of its business;
(d) judgment liens that shall not have been in existence for a period
longer than 30 days after the creation thereof or, if a stay of execution shall
have been obtained, for a period longer than 30 days after the expiration of
such stay;
(e) rights of lessors under capital leases; and
(f) easements, rights of way, restrictions and other similar charges or
Encumbrances relating to real property and not interfering in a material way
with the ordinary conduct of its business.
-37-
6.6 Merger: Consolidation: Sale or Lease of Assets; Other Acquisitions.
------------------------------------------------------------------
Neither the Company nor any of its Subsidiaries shall sell, lease or otherwise
dispose of assets or properties in excess of $100,000 during any fiscal year
(valued at the lower of cost or market), other than sales of inventory in the
ordinary course of business in any fiscal year; or liquidate, merge or
consolidate into or with any other person or entity, or otherwise acquire any
other entity, provided that any Subsidiary of the Company may merge or
--------
consolidate into or with (i) the Company if no Default would result from such
merger and if the Company is the surviving company, or (ii) any other wholly-
owned Subsidiary of the Company and provided further that the Company or any
----------------
Subsidiary of the Company may enter into a merger in which it is the surviving
entity or otherwise acquire another entity if the aggregate cash portion of the
consideration paid by the Company or any Subsidiary does not exceed twenty
percent (20%) of Net Worth, in which case the Company shall provide the Bank a
certificate showing pro forma compliance with all covenants hereunder, and no
Event of Default as a result of such transaction.
6.7 Additional Stock Issuance. The Company shall not permit any of its
-------------------------
Subsidiaries to issue any additional shares of its capital stock or other equity
securities, any options therefor or any securities convertible thereto other
than to the Company. Neither the Company nor any of its Subsidiaries shall sell,
transfer or otherwise dispose of any of the capital stock or other equity
securities of a Subsidiary, except (i) to the Company or any of its wholly-owned
Subsidiaries, or (ii) in connection with a transaction permitted by Section 6.6.
6.8 Equity Distributions. The Company shall not pay any dividends on any
--------------------
class of its capital stock or make any other distribution or payment on account
of or in redemption, retirement or purchase of such capital stock; provided that
--------
this Section shall not apply to (i) the issuance, delivery or distribution by
the Company of shares of its common stock pro rata to its existing shareholders
and (ii) the purchase or redemption by the Company of its capital stock with the
proceeds of the issuance of additional shares of capital stock.
6.9 Capital Expenditures. Neither the Company nor any of its Subsidiaries
--------------------
shall make Capital Expenditures in excess of the following amounts in each year
specified below, exclusive of Capital Expenditures incurred in connection with
the acquisition of any Person:
Fiscal Year Maximum Capital Expenditure
------------------- ---------------------------
1998 $1,500,000
1999 $3,000,000
2000 $6,000,000
and thereafter
-38-
6.10 Investments. Except as permitted in Section 6.6, neither the Company
-----------
nor any of its Subsidiaries shall make or maintain any Investments other than
(i) existing Investments in Subsidiaries and additional Investments in such
Subsidiaries in the ordinary course of its business, (ii) Qualified Investments,
and (iii) up to $2,000,000 aggregate amount of loans to employees of the Company
and any Subsidiaries who are shareholders of the Company.
6.11 ERISA. Neither the Company nor any member of the Controlled Group
-----
shall permit any Plan maintained by it to (i) engage in any "prohibited
transaction" (as defined in Section 4975 of the Code, (ii) incur any
"accumulated funding deficiency" (as defined in Section 302 of ERISA) whether or
not waived, or (iii) terminate any Plan in a manner that could result in the
imposition of a lien or encumbrance on the assets of the Company or any of its
Subsidiaries pursuant to Section 4068 of ERISA.
6.12 Transactions with Affiliates. None of the Company nor any of its
----------------------------
Subsidiaries will enter into or participate in any agreements or transactions of
any kind with any affiliate, except: agreements or transactions (in each case)
in the ordinary course of business and on an arms-length basis which (i) do not
violate or otherwise conflict with any of the terms of any of the Security
Documents, (ii) require the payment of no fees, charges or commissions by the
Company or such Subsidiaries to any affiliate except those which are reasonable
and disclosed to the Bank, (iii) are disclosed on the books, accounts and
records of the Company or such Subsidiaries, and (iv) involve terms no less
favorable to the Company or such Subsidiaries than would be the terms of a
similar agreement or transaction with any person other than an affiliate.
6.13 No Amendments to Certain Documents. The Company will not at any time
----------------------------------
cause or permit any of the charter or other incorporation documents or by-laws
of the Company or any of its Subsidiaries to be modified, amended or
supplemented in any respect whatever, except for such modification or amendment
as would not effect any change adverse to the Bank, or have a material adverse
effect on the business, property, assets, operations or condition (financial or
otherwise) of the Company or any of its Subsidiaries, without the express prior
written agreement, consent or approval of the Bank.
SECTION VII
-----------
DEFAULTS
--------
7.1 Events of Default. There shall be an Event of Default hereunder if any
-----------------
of the following events occurs:
-39-
(a) the Company shall fail to pay when due (i) any amount of principal of
any Loans, or (ii) any amount of interest thereon or any fees or expenses
payable hereunder or under the Note within five days of the due date therefor;
or
(b) The Company shall fail to perform any term, covenant or agreement
contained in Sections 5.1(h), 5.5, 5.7 through 5.10 or Section VI; or
(c) the Company shall fail to perform any covenant contained in Sections
5.1(g), 5.1(i) or 5.2, and such failure shall continue for 30 days; or
(d) the Company shall fail to perform any term, covenant or agreement
(other than in respect of subsections 7.1(a) through (c) hereof) contained in
this Agreement and such default shall continue for 30 days after notice thereof
has been sent to the Company by the Bank; or
(e) any representation or warranty of the Company made in this Agreement
or in the Note or any other Loan Document or any other documents or agreements
executed in connection with the transactions contemplated by this Agreement or
in any certificate delivered hereunder shall prove to have been false in any
material respect upon the date when made or deemed to have been made; or
(f) there shall occur any material adverse change in the assets,
liabilities, financial condition, business or prospects of the Company or the
Company and its Subsidiaries, taken as a whole, as determined by the Bank acting
in good faith; or
(g) the Company or any of its Subsidiaries shall fail to pay at maturity,
or within any applicable period of grace, any obligations for borrowed monies or
advances, or for the use of real or personal property, or fail to observe or
perform any term, covenant or agreement evidencing or securing such obligations
for borrowed monies or advances, or relating to such use of real or personal
property, the result of which failure is to permit the holder or holders of such
Indebtedness to cause such Indebtedness to become due prior to its stated
maturity upon delivery of required notice, if any; or
(h) the Company or any of its Subsidiaries shall (i) apply for or consent
to the appointment of, or the taking of possession by, a receiver, custodian,
trustee, liquidator or similar official of itself or of all or a substantial
part of its property, (ii) be generally not paying its debts as such debts
become due, (iii) make a general assignment for the benefit of its creditors,
(iv) commence a voluntary case under the Federal Bankruptcy Code (as now or
hereafter in effect), (v) take any action or commence any case or proceeding
under any law
-40-
relating to bankruptcy, insolvency, reorganization, winding-up or composition or
adjustment of debts, or any other law providing for the relief of debtors, (vi)
fail to contest in a timely or appropriate manner, or acquiesce in writing to,
any petition filed against it in an involuntary case under the Federal
Bankruptcy Code or other law, (vii) take any action under the laws of its
jurisdiction of incorporation or organization similar to any of the foregoing,
or (viii) take any corporate action for the purpose of effecting any of the
foregoing; or
(i) a proceeding or case shall be commenced, without the application or
consent of the Company or any of its Subsidiaries in any court of competent
jurisdiction, seeking (i) the liquidation, reorganization, dissolution, winding
up, or composition or readjustment of its debts, (ii) the appointment of a
trustee, receiver, custodian, liquidator or the like of it or of all or any
substantial part of its assets, or (iii) similar relief in respect of it, under
any law relating to bankruptcy, insolvency, reorganization, winding-up or
composition or adjustment of debts or any other law providing for the relief of
debtors, and such proceeding or case shall continue undismissed, or unstayed and
in effect, for a period of 30 days; or an order for relief shall be entered in
an involuntary case under the Federal Bankruptcy Code, against the Company or
such Subsidiary; or action under the laws of the jurisdiction of incorporation
or organization of the Company or any of its Subsidiaries similar to any of the
foregoing shall be taken with respect to the Company or such Subsidiary and
shall continue unstayed and in effect for any period of 30 days; or
(j) a judgment or order for the payment of money shall be entered against
the Company or any of its Subsidiaries by any court, or a warrant of attachment
or execution or similar process shall be issued or levied against property of
the Company or such Subsidiary, that in the aggregate exceeds $500,000 in value
and such judgment, order, warrant or process shall continue undischarged or
unstayed for 45 days, unless the same shall be covered by insurance in a manner
satisfactory to the Bank; or
(k) the Company or any member of the Controlled Group shall fail to pay
when due an amount or amounts aggregating in excess of $500,000 that it shall
have become liable to pay to the PBGC or to a Plan under Title IV of ERISA; or
notice of intent to terminate a Plan or Plans shall be filed under Title IV of
ERISA by the Company, any member of the Controlled Group, any plan administrator
or any combination of the foregoing; or the PBGC shall institute proceedings
under Title IV of ERISA to terminate or to cause a trustee to be appointed to
administer any such Plan or Plans or a proceeding shall be instituted by a
fiduciary of any such Plan or Plans against the Company and such proceedings
shall not have been dismissed within 45 days thereafter; or a condition shall
exist by reason of which the PBGC would be entitled to obtain a decree
adjudicating that any such Plan or Plans must be terminated; or
-41-
(l) there shall occur a Default or Event of Default under any of the Loan
Documents or under any of the documents with respect to any equipment lease
line to be entered into between the Bank and the Company.
7.2 Remedies. Upon the occurrence of an Event of Default described in
--------
subsections 7.1(h) and (i), immediately and automatically, and upon the
occurrence of any other Event of Default, at any time thereafter while such
Event of Default is continuing, at the Bank's option and upon the Bank's
declaration:
(a) the Bank's commitment to make any further Loans hereunder shall
terminate;
(b) the unpaid principal amount of the Loans together with accrued interest
and all other Obligations hereunder shall become immediately due and payable
without presentment, demand, protest or further notice of any kind, all of which
are hereby expressly waived;
(c) the Bank may exercise any and all rights it has under this Agreement,
the Note or any other documents or agreements executed in connection herewith,
or at law or in equity, and proceed to protect and enforce the Bank's rights by
any action at law, in equity or other appropriate proceeding; and
(d) upon termination of the commitment or acceleration of the Loans, as
provided for above, the Borrowers shall, as specified in written notice by the
Bank, either (i) immediately deliver to the Bank, in immediately available
funds, to be held pursuant to a cash collateral agreement in substantially the
form that at the time is customarily being used by the Bank in similar
situations, an amount equal to the Letter of Credit Obligations (the "Letter of
Credit Amount"), or (ii) with the consent of the beneficiary or beneficiaries
thereof, cause any Letter of Credit to be canceled in a manner satisfactory to
the Bank. In connection with the delivery of the Letter of Credit Amount, the
Borrowers shall provide the Bank with such documentation as the Bank may from
time to time request to perfect its rights in the Letter of Credit Amount,
including, without limitation, pledge agreements and financing statements in
form and substance satisfactory to the Bank. The Bank shall hold the Letter of
Credit Amount in its own name for the exclusive purpose of applying such Letter
of Credit Amount toward the immediate payment of amounts which are thereafter
drawn under any Letter of Credit, and, to the extent of such payment,
Reimbursement Obligations shall be deemed to be satisfied. Upon the expiry date
of all Letters of Credit, any Letter of Credit Amount remaining after
satisfaction of the Reimbursement Obligations shall be available to the Bank for
application to any Obligations that are then due and payable. The Borrowers
shall remain liable for any deficiency.
SECTION VIII
------------
-42-
SECURITY
--------
The Obligations shall be secured by (a) a blanket lien on all of the assets
and rights of the Company and each Subsidiary, including accounts receivable,
contract rights, inventory, chattel paper, documents and instruments, general
intangibles, plant and equipment, goods and consumer goods pursuant to the terms
of the Security Agreement, and (b) the Pledge Agreement, pursuant to which the
Company shall pledge to the Bank all of the issued and outstanding capital stock
of each Subsidiary.
SECTION IX
----------
MISCELLANEOUS
-------------
9.1 Notices. Unless otherwise specified herein, all notices hereunder to
-------
any party hereto shall be in writing and shall be deemed to have been given when
delivered by hand, when properly deposited in the mails postage prepaid, when
sent by telex, answer back received, or electronic facsimile transmission, or
when delivered to the telegraph company or overnight courier, addressed to such
party at its address indicated below:
If to the Company or Tier UK, at
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
If to the Bank, at
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
High Technology Division
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. Head, Jr.
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
-43-
or at any other address specified by such party in writing.
9.2 Expenses. The Company will pay on demand all expenses of the Bank in
--------
connection with the preparation, waiver or amendment of this Agreement, the
Note, the other Loan Agreements and all other documents executed in connection
therewith, or the administration, default or collection of the Loans or other
Obligations or administration, default, collection in connection with the Bank's
exercise, preservation or enforcement of any of its rights, remedies or options
thereunder, including, without limitation, fees of outside legal counsel or the
allocated costs of in-house legal counsel, accounting, consulting, brokerage or
other similar professional fees or expenses, and any fees or expenses associated
with any travel or other costs relating to any appraisals or examinations
conducted in connection with the Obligations or any collateral therefor, and the
amount of all such expenses shall, until paid, bear interest at the rate
applicable to principal hereunder (including any default rate).
9.3 Set-Off. Regardless of the adequacy of any collateral or other means
-------
of obtaining repayment of the Obligations, any deposits, balances or other sums
credited by or due from the head office of the Bank or any of its branch offices
to the Company may, at any time and from time to time after the occurrence of an
Event of Default hereunder, without notice to the Company or compliance with any
other condition precedent now or hereafter imposed by statute, rule of law, or
otherwise (all of which are hereby expressly waived) be set off, appropriated,
and applied by the Bank against any and all obligations of the Company to the
Bank or any of its affiliates in such manner as the bead office of the Bank or
any of its branch offices in their sole discretion may determine, and the
Company hereby grants the Bank a continuing security interest in such deposits,
balances or other sums for the payment and performance of all such obligations.
9.4 Term of Agreement. This Agreement shall continue in full force and
-----------------
effect so long as the Bank has any commitment to make Loans hereunder or any
Loan or any Obligation hereunder shall be outstanding.
9.5 No Waivers. No failure or delay by the Bank in exercising any right,
----------
power or privilege hereunder or under the Note or under any other documents or
agreements executed in connection herewith shall operate as a waiver thereof;
nor shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. The
rights and remedies herein and in the Note provided are cumulative and not
exclusive of any rights or remedies otherwise provided by agreement or law.
9.6 Governing Law. This Agreement and the Note shall be deemed to be
-------------
contracts made under seal and shall be construed in accordance with and governed
by the laws of the
-44-
Commonwealth of Massachusetts (without giving effect to any conflicts of laws
provisions contained therein).
9.7 Amendments. Neither this Agreement nor the Note nor any provision
----------
hereof or thereof may be amended, waived, discharged or terminated except by a
written instrument signed by the Bank and, in the case of amendments, by the
Company.
9.8 Binding Effect of Agreement. This Agreement shall be binding upon and
---------------------------
inure to the benefit of the Company and the Bank and their respective successors
and assigns; provided that the Company may not assign or transfer its rights or
obligations hereunder. The Bank may sell, transfer or grant participation in the
Note without the prior written consent of the Company, and the Company agrees
that any transferee or participant shall be entitled to the benefits of Sections
2.8, 2.10, 2.14, 5.5 and 9.3 to the same extent as if such transferee or
participant were the Bank hereunder; provided that notwithstanding any such
transfer or participation, the Company may, for all purposes of this Agreement,
treat the Bank as the person entitled to exercise all rights hereunder and under
the Note and to receive all payments with respect thereto. The Bank shall
provide to the Company not less than ten (10) days prior written notice of any
transfer of or participation in the Note.
9.9 Successors and Assigns.
----------------------
(a) The Bank may at any time grant to one or more banks or other financial
institutions (each, a "Participant") participating interests in its commitment
to make Loans hereunder or in any or all of its Loans on such terms as the Bank
may think fit. In the event of any such grant by the Bank of a participating
interest to a Participant, whether or not upon notice to the Company, the Bank
shall remain responsible for the performance of its obligations hereunder, and
the Company shall continue to deal solely and directly with the Bank in
connection with the Bank's rights and obligations under this Agreement. Any
agreement pursuant to which the Bank may grant such a participating interest
shall provide that the Bank shall retain the sole right and responsibility to
enforce the obligations of the Borrowers hereunder including, without
limitation, the right to approve any amendment, modification or waiver of any
provision of this Agreement, provided that such participation agreement may
--------
provide that the Bank will not agree, without the consent of the Participant, to
any modification, amendment or waiver of this Agreement requiring the consent,
agreement or approval of the Bank. The Borrowers agree that each Participant
shall be entitled to the benefits of Sections 2.8 (other than benefits that
otherwise would be available due to the foreign status of such Participant) and
2.10 with respect to its participating interest, to the extent such Bank would
be entitled to such benefits if the participation had not been entered into or
sold. An assignment or other transfer which is not permitted by paragraph (ii)
below
-45-
shall be given effect for purposes of this Agreement only to the extent of a
participating interest granted in accordance with this paragraph (a).
(b) The Bank may at any time assign to one or more banks or other financial
institutions (each, an "Assignee") all, or a part of all, of its rights,
interests and obligations under this Agreement and the Notes (or any one of its
Notes) on such terms, as between the Bank and each of its Assignees, as the Bank
may think fit (it being understood that any such assignments do not have to be
made pro rata among the facilities), and such Assignee shall assume such rights,
--- ----
interests and obligations, pursuant to an instrument executed by such Assignee
and the Bank, provided, that (i) prior to assigning any interest to any Assignee
--------
hereunder, the Bank will (A) notify the Company in writing identifying the
proposed Assignee and stating the aggregate principal amount of the proposed
interest to be assigned, and (B) prior to the occurrence of an Event of Default,
receive the prior written consent of the Company which consent may not be
unreasonably withheld or delayed, and (ii) the Bank will not assign to any
Assignee less than an aggregate amount equal to $2,000,000 of its commitments to
issue Loans hereunder and interest in the Notes (as such interest may be reduced
pursuant to the terms hereof) or the remaining amount of its commitments to
issue Loans hereunder. It is understood and agreed that the proviso contained in
the immediately preceding sentence shall not be applicable in the case of, and
this paragraph (b) shall not restrict, (i) an assignment or other transfer by
the Bank to an Affiliate or (ii) a collateral assignment or other similar
transfer to a Federal Reserve Bank. Upon execution and delivery of such an
instrument and payment by such Assignee to the Bank of an amount equal to the
purchase price agreed between the Bank and such Assignee, such Assignee shall be
a Bank party to this Agreement and shall have all the rights, interests and
obligations of a Bank with the commitment to issue Loans hereunder as set forth
in such instrument of assumption, and the transferor Bank shall be released from
its obligations hereunder to a corresponding extent, and no further consent or
action by any party shall be required. Upon the consummation of any assignment
pursuant to this paragraph (b), the transferor Bank and the Company shall make
appropriate arrangements so that, if required, new Notes are issued to the
Assignee.
(c) No Assignee or Participant shall be entitled to receive any greater
payment under Sections 2.8 and 2.10 than the Bank would have been entitled to
receive with respect to the rights transferred, unless such transfer is made at
a time when the circumstances giving rise to such greater payment did not exist.
9.10 Counterparts. This Agreement may be signed in any number of
------------
counterparts with the same effect as if the signatures hereto and thereto were
upon the same instrument.
-46-
9.11 Partial Invalidity. The invalidity or unenforceability of any, one
------------------
or more phrases, clauses or sections of this Agreement shall not affect the
validity or enforceability of the remaining portions of it.
9.12 Captions. The captions and headings of the various sections and
--------
subsections of this Agreement are provided for convenience only and shall not be
construed to modify the meaning of such sections or subsections.
9.13 WAIVER OF JURY TRIAL. THE BANK AND THE COMPANY AGREE THAT NEITHER OF
--------------------
THEM NOR ANY ASSIGNEE OR SUCCESSOR SHALL (A) SEEK A JURY TRIAL IN ANY LAWSUIT,
PROCEEDING, COUNTERCLAIM OR ANY OTHER ACTION BASED UPON, OR ARISING OUT OF, THIS
AGREEMENT, ANY RELATED INSTRUMENTS, ANY COLLATERAL OR THE DEALINGS OR THE
RELATIONSHIP BETWEEN OR AMONG ANY OF THEM, OR (B) SEEK TO CONSOLIDATE ANY SUCH
ACTION WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN
WAIVED. THE PROVISIONS OF THIS PARAGRAPH HAVE BEEN FULLY DISCUSSED BY THE BANK
AND THE COMPANY, AND THESE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS. NEITHER
THE BANK NOR THE COMPANY HAS AGREED WITH OR REPRESENTED TO THE OTHER THAT THE
PROVISIONS OF THIS PARAGRAPH WILL NOT BE FULLY ENFORCED IN ALL INSTANCES.
9.14 Entire Agreement. This Agreement, the Note, the other Loan Documents
----------------
and the documents and agreements executed in connection herewith constitute the
final agreement of the parties hereto and supersede any prior agreement or
understanding, written or oral, with respect to the matters contained herein and
therein.
-47-
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized officers as of the day and year first above written.
TIER TECHNOLOGIES, INC.
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
---------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: CFO/Senior Vice President
TIER TECHNOLOGIES
(UNITED KINGDOM) INC.
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
---------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: CFO/Secretary/Treasurer
BANKBOSTON, N.A.
By /s/ ▇▇▇▇▇▇ ▇. Head, Jr.
---------------------------
Name:
Title: