LOAN AND SECURITY AGREEMENT
Dated: June 30, 1997
by and between
FIRST UNION NATIONAL BANK
and
ALPHANET SOLUTIONS, INC.
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I DEFINITIONS....................................................... 1
1.1 "AAA................................................... 1
1.2 "ACCOUNT" or "ACCOUNTS RECEIVABLE...................... 1
1.3 "ACCOUNT DEBTOR........................................ 1
1.4 "ACQUISITION ADVANCE................................... 1
1.5 "ADJUSTED LIBO RATE.................................... 1
1.6 "ADJUSTED LIBO RATE ADVANCES........................... 1
1.7 "ADVANCE(S)............................................ 1
1.8 "AFFILIATE............................................. 2
1.9 "AGREEMENT............................................. 2
1.10 "ARBITRATION RULES..................................... 2
1.11 "BANK.................................................. 2
1.12 "BASE RATE............................................. 2
1.13 "BASE RATE ADVANCES.................................... 2
1.14 "BORROWER.............................................. 2
1.15 "BORROWING BASE........................................ 2
1.16 "BORROWING BASE CERTIFICATE............................ 2
1.17 "BORROWING DATE........................................ 2
1.18 "BUSINESS DAY.......................................... 2
1.19 "CHATTEL PAPER......................................... 2
1.20 "CLOSING DATE.......................................... 3
1.21 "COLLATERAL............................................ 3
1.24 "CONTINGENT OBLIGATION(S)"............................. 3
1.25 "CONTRACTUAL OBLIGATIONS............................... 3
1.26 "DEFAULT............................................... 3
1.27 "DISPUTES.............................................. 4
1.28 "DOCUMENT(S)........................................... 4
1.29 "ELIGIBLE ACCOUNT...................................... 4
1.30 "ELIGIBLE LOAN VALUE OF ELIGIBLE ACCOUNTS.............. 4
1.31 "ENVIRONMENTAL LAWS.................................... 4
1.32 "ERISA................................................. 4
1.33 "EURODOLLAR RATE....................................... 4
1.34 "EURODOLLAR RESERVE.................................... 4
1.35 "EVENT OF DEFAULT...................................... 5
1.36 "FIXED CHARGE COVERAGE RATIO........................... 5
1.37 "GAAP.................................................. 5
1.38 "GENERAL INTANGIBLES................................... 5
1.39 "GOODS................................................. 5
1.40 "GOVERNMENTAL BODY..................................... 5
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1.41 "GUARANTOR(S)........................................... 5
1.42 "GUARANTY............................................... 5
1.43 "INDEBTEDNESS........................................... 5
1.44 "INDEMNIFIED PARTIES.................................... 6
1.45 "INELIGIBLE ACCOUNTS.................................... 6
1.46 "INSTRUMENT............................................. 7
1.47 "INTERCREDITOR AGREEMENTS............................... 8
1.48 "INTEREST PERIOD........................................ 8
1.49 "INVENTORY.............................................. 8
1.50 "INVESTMENT OBLIGATIONS................................. 8
1.51 "LETTER(S) OF CREDIT.................................... 8
1.52 "LETTER OF CREDIT AGREEMENT............................. 9
1.53 "LETTER OF CREDIT OBLIGATIONS........................... 9
1.54 "LIEN................................................... 9
1.55 "LOAN................................................... 9
1.56 "LOAN DOCUMENTS......................................... 9
1.57 "MARKETABLE SECURITIES INVESTMENT PERCENTAGE............ 9
1.58 "MATERIAL ADVERSE CHANGE................................ 9
1.59 "MATERIAL ADVERSE EFFECT................................ 9
1.60 "MATURITY DATE.......................................... 9
1.61 "OBLIGATION" or "OBLIGATIONS............................ 9
1.62 "OBLIGOR................................................ 10
1.63 "PBGC................................................... 10
1.64 "PERMITTED ACQUISITION.................................. 10
1.65 "PERMITTED ENCUMBRANCES................................. 10
1.66 "PERMITTED INDEBTEDNESS"................................ 10
1.67 "PERMITTED LEASES"...................................... 10
1.68 "PERSON................................................. 11
1.69 "PLAN................................................... 11
1.70 "REPAYMENT INDEMNITY"................................... 11
1.71 "REPORTABLE EVENT....................................... 11
1.72 "REVOLVING NOTE......................................... 12
1.73 "SUBSIDIARY............................................. 12
1.74 "TANGIBLE NET WORTH..................................... 12
1.75 "TELERATE PAGE 3750..................................... 12
1.76 "TOTAL ASSETS........................................... 12
1.77 "TOTAL LIABILITIES...................................... 12
1.78 "UNIFORM COMMERCIAL CODE................................ 12
1.79 "WORKING DAY............................................ 12
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1.80 "INTERPRETATION AND CONSTRUCTION........................ 13
II LOANS.............................................................. 14
2.1 REVOLVING LOAN AND LETTERS OF CREDIT.................... 14
2.2 INTEREST................................................ 14
2.3 REPAYMENT OF ADVANCES................................... 16
2.4 FEES.................................................... 17
2.5 PREPAYMENT.............................................. 17
2.6 PROCEDURES FOR ADVANCES................................. 18
2.7 PROCEDURES FOR LETTERS OF CREDIT........................ 18
2.8 USE OF PROCEEDS......................................... 20
2.9 CONDITIONS TO INITIAL ADVANCE........................... 20
2.10 CONDITIONS TO ALL ADVANCES.............................. 22
2.11 REGULATORY CAPITAL REQUIREMENTS......................... 23
2.12 EXCESS ADVANCES......................................... 24
III COLLATERAL.......................................................... 26
3.1 CROSS COLLATERAL........................................ 26
3.2 ACCOUNTS RECEIVABLE..................................... 26
3.3 INVENTORY............................................... 26
3.4 GENERAL INTANGIBLES..................................... 26
3.5 DEPOSIT ACCOUNTS........................................ 26
3.6 CHATTEL PAPER........................................... 26
3.7 INSTRUMENTS............................................. 26
3.8 DOCUMENTS............................................... 26
3.9 PROCEEDS AND RECORDS.................................... 27
3.10 CONTINUING PERFECTION................................... 27
IV PROCEEDS OF COLLATERAL.............................................. 28
4.2 APPLICATION OF PAYMENTS/PAYMENTS ON
COLLATERAL............................................. 28
V REPRESENTATIONS AND WARRANTIES...................................... 29
5.1 GOOD STANDING........................................... 29
5.2 CORPORATE AUTHORITY..................................... 29
5.3 COMPLIANCE WITH LAW..................................... 29
5.4 NO LITIGATION........................................... 30
5.5 NO FINANCIAL CHANGE..................................... 30
5.6 TAX COMPLIANCE.......................................... 30
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5.7 GOOD TITLE AND ABSENCE OF LIENS......................... 30
5.8 PLACE OF RECORDS, CHIEF EXECUTIVE OFFICE,
INVENTORY AND OTHER COLLATERAL......................... 30
5.9 WARRANTIES AS TO ACCOUNTS............................... 31
5.10 ERISA................................................... 31
5.11 LICENSES AND PERMITS AND LAWS........................... 31
5.12 ENVIRONMENTAL STATUS.................................... 32
5.13 REAFFIRMATION........................................... 32
5.14 PROCEEDS OF LOAN........................................ 32
5.15 BORROWER AND OBLIGOR.................................... 33
5.16 SOLVENCY................................................ 33
5.17 NO DEFAULT.............................................. 33
5.18 FULL DISCLOSURE......................................... 33
5.19 DOCUMENTARY/STAMP TAXES................................. 33
5.20 SHAREHOLDERS' AGREEMENTS................................ 34
5.21 PERFECTION OF SECURITY INTERESTS........................ 34
VI AFFIRMATIVE COVENANTS OF OBLIGORS................................... 35
6.1 AUDIT AND OTHER REPORTS................................. 35
6.2 INSURANCE............................................... 36
6.3 PAYMENT OF EXPENSES..................................... 37
6.4 GUARANTY................................................ 37
6.5 LANDLORD'S WAIVER....................................... 37
6.6 GOOD WORKING CONDITION.................................. 37
6.7 OBSERVANCE OF LEGAL REQUIREMENT, LICENSES
AND PERMITS AND PROTECTION OF COLLATERAL .............. 37
6.8 INSPECTION.............................................. 38
6.9 COLLATERAL REQUIREMENTS................................. 38
6.10 CONTROL OF ACCOUNTS..................................... 39
6.11 CHANGE OF LOCATIONS..................................... 39
6.12 PRIMARY DEMAND DEPOSIT ACCOUNTS......................... 39
VII NEGATIVE COVENANTS OF OBLIGORS ..................................... 41
7.1 LOANS AND ADVANCES AND INVESTMENTS...................... 41
7.2 FINANCIAL COVENANTS..................................... 41
7.3 LIENS................................................... 41
7.4 LIMITATION ON INDEBTEDNESS.............................. 41
7.5 TRANSACTIONS AMONG AFFILIATES........................... 41
7.6 SPECIAL COVENANTS AS TO ASSETS.......................... 41
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7.7 PREPAYMENTS OF INDEBTEDNESS............................. 42
7.8 FISCAL YEAR............................................. 42
7.9 CHANGE IN CONTROL....................................... 42
7.10 CHANGE IN ACCOUNTING PRINCIPLES......................... 43
7.11 SALE AND LEASEBACK...................................... 43
7.12 MAINTAIN CORPORATE EXISTENCE AND NATURE OF
BUSINESS............................................... 43
7.13 DIVIDENDS; REDEMPTIONS.................................. 43
7.14 DISCHARGE OF HAZARDOUS WASTE............................ 44
7.15 LEASES.................................................. 44
VIII EVENTS OF DEFAULT................................................... 45
8.1 NON-PAYMENT............................................. 45
8.2 NON-PERFORMANCE......................................... 45
8.3 MISREPRESENTATION....................................... 45
8.4 OTHER LIEN.............................................. 45
8.5 INSOLVENCY.............................................. 45
8.6 JUDGMENT OR LIEN........................................ 46
8.7 NON-COMPLIANCE WITH LEASES OR LAWS...................... 46
8.8 ORGANIZATIONAL CHANGE................................... 46
8.9 IMPAIRMENT OF RESPONSIBILITY............................ 46
8.10 ADVERSE CHANGE.......................................... 46
8.11 MISREPRESENTATION OF FACT............................... 46
8.12 ERISA................................................... 46
8.13 DEFAULT IN OBLIGATIONS TO THIRD PARTIES................. 46
8.14 LICENSES................................................ 47
IX CONSEQUENCE OF EVENT OF DEFAULT..................................... 48
9.1 ACCELERATION............................................ 48
9.2 POSSESSION.............................................. 48
9.3 METHODS OF SALE......................................... 48
9.4 RETENTION OF COLLATERAL................................. 49
9.5 SET-OFF................................................. 49
9.6 ATTORNEYS' FEES AND EXPENSES............................ 49
9.7 INCREASE IN INTEREST/LATE CHARGE........................ 49
9.8 BANK'S PERFORMANCE OF OBLIGORS' OBLIGATION.............. 49
9.9 OTHER REMEDIES.......................................... 49
X MISCELLANEOUS....................................................... 50
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10.1 NO WAIVER............................................... 50
10.2 MODIFICATION OR AMENDMENT............................... 50
10.3 WAIVER OF NOTICE........................................ 50
10.4 ONE INSTRUMENT.......................................... 50
10.5 LAW OF NEW JERSEY....................................... 50
10.6 JURISDICTION............................................ 50
10.7 SUCCESSORS OR ASSIGNS................................... 50
10.8 RIGHTS CUMULATIVE....................................... 50
10.9 LIMITATION OF LIABILITY................................. 51
10.10 NOTIFICATION OF DISPOSITION OF COLLATERAL............... 51
10.11 ADDRESSES OF NOTICES.................................... 51
10.12 TITLES.................................................. 52
10.13 DISCLOSURE.............................................. 52
10.14 TERM.................................................... 52
10.15 INTEREST LIMITATION..................................... 53
10.16 INDEMNIFICATION......................................... 53
10.17 WAIVER OF TRIAL BY JURY................................. 54
10.18 ARBITRATION............................................. 54
10.19 PRESERVATION AND LIMITATION OF REMEDIES................. 54
vi
LOAN AND SECURITY AGREEMENT, dated June 30, 1997, by and between FIRST
UNION NATIONAL BANK, a national banking institution, with a place of business at
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, hereinafter called "Bank", and
ALPHANET SOLUTIONS, INC., a New Jersey corporation, with its chief executive
office at ▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, hereinafter called
"Borrower."
This Agreement specifies the terms of a revolving loan of up to FIFTEEN
MILLION AND 00/100 DOLLARS ($15,000,000.00), and further specifies the terms by
which all Obligations, as defined herein, of Borrower and the other Obligors, as
defined herein, to Bank are to be secured by certain personal property and
assets, tangible and intangible, of Borrower and the other Obligors.
NOW, THEREFORE, in consideration of these premises and other good and
valuable consideration, the parties hereto agree as follows:
I
DEFINITIONS
-----------
1.1 "AAA" has the meaning set forth in Section 10.18(B) hereof.
1.2 "ACCOUNT" or "ACCOUNTS RECEIVABLE" means, in addition to the definition
of account as contained in the Uniform Commercial Code, the right of any Obligor
to receive payment for goods sold or leased or for services rendered which are
not evidenced by an instrument or chattel paper, whether or not it has been
earned by performance.
1.3 "ACCOUNT DEBTOR" means, in addition to the definition of account debtor
as contained in the Uniform Commercial Code, the person or persons obligated to
an Obligor on an Account, or who is represented by an Obligor to be so
obligated.
1.4 "ACQUISITION ADVANCE" means an Advance to be used in connection with a
Permitted Acquisition.
1.5 "ADJUSTED LIBO RATE" means, for each Interest Period, an interest rate
per annum equal to the product of (a) the Eurodollar Rate in effect for such
Interest Period and (b) Eurodollar Reserves, if any, imposed upon Bank.
1.6 "ADJUSTED LIBO RATE ADVANCES" means all Advances which bear interest
based upon the Adjusted LIBO Rate and any relevant margin.
1.7 "ADVANCE(S)" means an amount loaned by Bank to Borrower under the Loan.
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1.8 "AFFILIATE" means as to any Person, any other Person (excluding any
Subsidiary) which directly or indirectly, is in control of, is controlled by, or
is under common control with such Person. For purposes of this definition, a
Person shall be deemed to be "controlled by" a Person if such Person possesses,
directly or indirectly, power either (a) to vote ten percent (10%) or more of
the securities having ordinary voting power for the election of directors of
such Person or (b) to direct or cause the direction of the management and
policies of such Person whether by contract or otherwise. ▇▇▇▇ Gang is hereby
expressly excluded from the definition of "Affiliate".
1.9 "AGREEMENT" means this Loan and Security Agreement, as amended,
supplemented or modified from time to time in accordance with its terms.
1.10 "ARBITRATION RULES" has the meaning set forth in Section 10.18(B)
hereof.
1.11 "BANK" means the party identified on the first page hereof as Bank.
1.12 "BASE RATE" means the rate of interest established by Bank from time
to time as its reference "prime" rate in making loans but which does not reflect
the rate of interest charged to any particular class of borrower, such rate to
change automatically and immediately as of the date Bank changes its Base Rate
without notice to Borrower. The Base Rate is not tied to any external rate of
interest or index.
1.13 "BASE RATE ADVANCES" means all Advances which bear interest based upon
the Base Rate and any relevant margin.
1.14 "BORROWER" means the party identified on the first page hereof as
Borrower.
1.15 "BORROWING BASE" means the lesser of (A) Fifteen Million and 00/100
Dollars ($15,000,000.00), or (B) the Eligible Loan Value of Eligible Accounts.
1.16 "BORROWING BASE CERTIFICATE" means the certificate, substantially in
the form of Exhibit A, executed from time to time by Borrower.
1.17 "BORROWING DATE" means the Business Day or Working Day on which an
Advance is to be made or Letter of Credit is to be issued.
1.18 "BUSINESS DAY" means a day other than a Saturday or Sunday or other
day on which Bank is authorized or required to close under the laws of the State
of New Jersey or applicable Federal Law.
1.19 "CHATTEL PAPER" means, in addition to the definition of chattel paper
as contained in the Uniform Commercial Code, a writing or writings which
evidence both a
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money obligation and a security interest in, or a lease of, specific Goods. When
a transaction is evidenced both by such a security agreement or a lease and by
an Instrument or series of Instruments, the group of writings taken together
constitutes Chattel Paper.
1.20 "CLOSING DATE" means the date of this Agreement.
1.21 "COLLATERAL" means all of those present or future personal property
assets of each of the Obligors in which a security interest in or lien on is
granted to Bank hereunder or contemplated hereby or in any other Loan Document,
or under any other prior, present or future agreement by any of the Obligors in
favor of Bank.
1.22 "COMMITMENT" means Bank's commitment to make the Loan to Borrower.
1.23 "COMMITMENT FEE" means the fee payable by Borrower to Bank on the
average daily unused portion of the Commitment.
1.24 "CONTINGENT OBLIGATION(S)" means, as to any Person, any obligation of
such Person guaranteeing or in effect guaranteeing any Indebtedness, leases,
dividends or other obligations ("primary obligations") of any other Person (the
"primary obligor") in any manner, whether directly or indirectly, including,
without limitation, any obligation of such Person, whether or not contingent,
(A) to purchase any such primary obligation or any property constituting direct
or indirect security therefor, (B) to advance or supply funds (i) for the
purchase or payment of any such primary obligation or (ii) to maintain working
capital or equity capital of the primary obligor or otherwise to maintain the
net worth or solvency of the primary obligor, (C) to purchase property,
securities or services primarily for the purpose of assuring the beneficiary of
any such primary obligation of the ability of the primary obligor to make
payment of such primary obligation, (D) for the obligations of a partnership in
which such Person is a general partner, or (E) otherwise to assure or hold
harmless the beneficiary of such primary obligation against loss in respect
thereof; provided, however, that the term Contingent Obligations shall not
include the endorsement of instruments for deposit or collection in the ordinary
course of business. The amount of any Contingent Obligation shall be deemed to
be an amount equal to the stated or determinable amount of the primary
obligation in respect of which such Contingent Obligation is made or, if not
stated or determinable, the maximum reasonably anticipated liability in respect
thereof as determined by Bank in good faith.
1.25 "CONTRACTUAL OBLIGATIONS" means, as to any Person, any provision of
any security issued by such Person or of any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its assets
are bound.
1.26 "DEFAULT" means an event of the nature specified in Article VIII
hereof and which, with the giving of notice or passage of time, or both, would
become an Event of Default.
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1.27 "DISPUTES" has the meaning set forth in Section 10.18(A) hereof.
1.28 "DOCUMENT(S)" shall have the meaning set forth in the Uniform
Commercial Code for such term.
1.29 "ELIGIBLE ACCOUNT" means an Account of an Obligor which has been due
for less than ninety (90) days from the date of issuance of the invoice, is
subject to a first priority perfected Lien in favor of Bank, excluding any
Ineligible Account.
1.30 "ELIGIBLE LOAN VALUE OF ELIGIBLE ACCOUNTS" means up to eighty-five
percent (85%) of the face amount of Eligible Accounts, less returns and
discounts, offsets, contra balances, credits or allowances of any nature, at any
time issued, owing, granted or outstanding.
1.31 "ENVIRONMENTAL LAWS" means (A) the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. 9601 et
seq. ("CERCLA"), as amended by the Superfund Amendment and Reauthorization Act
of 1986; (B) the Resource Conservation and Recovery Act of 1976, as amended, 42
U.S.C. 6901 et seq.; (C) the New Jersey Spill Compensation and Control Act, as
amended, N.J.S.A. 58:10-23.11b et seq.; (D) the New Jersey Industrial Site
Recovery Act, formerly known as the Environmental Cleanup Responsibility Act, as
amended, N.J.S.A. 13:1K-6 et seq.; (E) the New Jersey Underground Storage of
Hazardous Substances Act, N.J.S.A. 58:10A-21 et seq.; (F) the New Jersey Solid
Waste Management Act, as amended, N.J.S.A. 13:1E-1 et seq.; (G) the New Jersey
Water Pollution Control Act, as amended, N.J.S.A. 58:10A-1 et seq.; and (H) any
and all laws, regulations and executive orders, federal, state and local,
pertaining to environmental matters, as same may be amended or supplemented from
time to time.
1.32 "ERISA" means the Employee Retirement Income Security Act of 1974 as
amended from time to time.
1.33 "EURODOLLAR RATE" means with respect to any Advance or outstanding
portion of the Loan (should Borrower choose the Adjusted LIBO Rate option
thereto), the rate of interest (rounded to the next higher 1/100 of one percent
(.01%)) for deposits in U.S. Dollars for a maturity equal to the Interest Period
therefor which appears on Telerate Page 3750 as of 11:00 a.m., London time, on
the day that is two (2) Working Days prior to the commencement of such Interest
Period. If such rate does not appear on the Telerate Page 3750, the rate
utilized shall be the rate as determined by Bank from another recognized source
or interbank quotation.
1.34 "EURODOLLAR RESERVE" means a fraction (expressed as a decimal), the
numerator of which is the number one and the denominator of which is the number
one minus the applicable statutory reserve requirements (rounded to the next
higher 1/100 of one percent (.01%) and expressed as a decimal) for Bank (without
duplication, but including, without limitation, basic, supplemental, marginal
and emergency reserves), from time to time in effect
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under Regulation D of the Board of Governors of the Federal Reserve System (or
any successor) with respect to eurocurrency funding currently referred to as
"Eurocurrency liabilities" in such Regulation D.
1.35 "EVENT OF DEFAULT" means an event of the nature specified in Article
VIII hereof.
1.36 "FIXED CHARGE COVERAGE RATIO" means (A) the sum of net profit,
interest, taxes, depreciation and amortization plus lease and rent expense for
the measured period, divided by (B) the sum of the current portion of long term
debt and capital leases plus lease and rent expense for the same period and the
total interest expense.
1.37 "GAAP" means generally accepted accounting principles in the United
States of America consistently applied.
1.38 "GENERAL INTANGIBLES" means, in addition to the definition of general
intangibles as contained in the Uniform Commercial Code, all rights of the
Obligors to property, choses in action and other rights of the Obligors not
otherwise specifically included elsewhere in this Agreement, further including
but not limited to all present and future trademarks, goodwill symbolized by any
trademarks, trade names, service marks, copyrights and patents, and all rights
under license agreements for the use of same, and all rights of the Obligors
under any and all leases of property, both real and personal.
1.39 "GOODS" means, in addition to the definition of goods as contained in
the Uniform Commercial Code, all articles of tangible personal property, sold,
supplied, leased or otherwise disposed of, represented by an Account.
1.40 "GOVERNMENTAL BODY" means any nation or government, any state or other
political subdivision thereof, any entity exercising executive, legislative,
judicial, regulatory or administrative functions of, or pertaining to government
or any court or arbitrator.
1.41 "GUARANTOR(S)" means all now existing and hereafter formed
Subsidiaries of Borrower, including without limitation, those Subsidiaries
listed on Schedule 5.1 hereof.
1.42 "GUARANTY" means the joint and several, unconditional, irrevocable
guaranty of payment of the Obligations hereunder and under the other Loan
Documents by the Guarantors, pursuant to the Guaranty and Suretyship Agreement
from Guarantors to Bank dated the date hereof, together with any other guaranty
agreements hereafter executed by any parties hereafter becoming a Guarantor.
1.43 "INDEBTEDNESS" means, as to any Person, at a particular time, all
items which, in accordance with GAAP, would be classified as liabilities on a
balance sheet of such Person as at such time and which constitute, without
duplication, (A) indebtedness for
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borrowed money or the deferred purchase price of property (other than credit
extended to such Person for the purchase of goods in the ordinary course of
business to the extent the same would otherwise constitute Indebtedness), (B)
indebtedness evidenced by notes, bonds, debentures or similar instruments, (C)
obligations under leases which, in accordance with GAAP, are required to be
capitalized on a balance sheet, (D) obligations under conditional sales or other
title retention agreements, (E) indebtedness arising under letters of credit
(both documentary and standby) and acceptance facilities and the face amount of
all letters of credit issued for the account of such Person and, without
duplication, all drafts drawn thereunder to the extent such Person shall not
have reimbursed the issuer in respect of the issuer's payment of such drafts,
(F) all liabilities secured by any Lien on any property owned by such Person
even though such Person has not assumed or otherwise become liable for the
payment thereof (other than carriers', warehousemen's, mechanics', repairmen's
or other like nonconsensual liens arising in the ordinary course of business to
the extent such liens are Permitted Encumbrances) and liens for taxes,
assessments or similar charges incurred in the ordinary course of business to
the extent such liens are Permitted Encumbrances, (G) mandatory obligations of
such Person to redeem or purchase stock or to purchase or repay Indebtedness,
and (H) Contingent Obligations of such Person in respect of any of the
foregoing.
1.44 "INDEMNIFIED PARTIES" has the meaning set forth in Section 10.16
hereof.
1.45 "INELIGIBLE ACCOUNTS" means those Accounts as to which any of the
following has occurred:
(A) a portion of the Goods or services giving rise to the Account are
returned, rejected, repossessed, lost or damaged, such portion of which Account
shall be deemed ineligible;
(B) the Account Debtor disputes said Account;
(C) the termination of existence, insolvency, business failure or
suspension of business or appointment of a custodian, receiver or trustee of any
part of the property of, the making of an assignment for the benefit of
creditors of, calling of a meeting of the creditors of, or the commencement of
any bankruptcy, liquidation, reorganization or similar proceeding under state or
federal law against the Account Debtor;
(D) more than twenty-five percent (25%) of the aggregate Accounts due from
the Account Debtor remains unpaid past the applicable eligibility periods set
forth in the definition of Eligible Account;
(E) the Account is due from an employee, stockholder, Affiliate or
Subsidiary of an Obligor or ▇▇▇▇ Gang;
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(F) any of the representations set forth in Section 5.9 are untrue with
respect to said Account;
(G) the Obligors have failed with respect to said Account to comply with
the requirements of Section 6.10 hereof;
(H) the Account arises out of a contract with any Governmental Body unless,
solely with respect to an Account due from the New York MTA, all filings have
been made under the Federal Assignment of Claims Act or comparable state or
other statute;
(I) the Goods giving rise to said Account are subject to any "▇▇▇▇ and
hold" or similar arrangements, have been sold on approval or consignment or sale
or return basis, or under a repurchase or similar agreement;
(J) the Account Debtor does not meet credit standards acceptable to Bank;
(K) the Account is not payable in United States Dollars or the Account
Debtor is located outside the United States;
(L) the Account Debtor is located in Minnesota or New Jersey or other
jurisdiction which requires a Notice of Business Activities Report or similar
report to be filed by an Obligor, and such Obligor has not filed for the then
current year the required report or is not otherwise authorized to transact
business in said jurisdiction;
(M) because of the nature of an Obligor's ownership of assets or conduct of
business, such Obligor is required by applicable law to be authorized to do
business in the jurisdiction where the Account Debtor is located and such
Obligor is not so authorized;
(N) the Account is subject to any offset, counterclaim or other claim or
defense on the part of the Account Debtor;
(O) the Account is subject to a Lien in favor of any Person other than
Bank, excluding any Liens described in and permitted under the Intercreditor
Agreements;
(P) the Account is not a good and valid Account, representing an undisputed
bona fide indebtedness incurred by the Account Debtor therein named, for a fixed
sum as set forth in the invoice relating thereto with respect to an absolute
sale and delivery, upon the stated terms, of Goods sold and delivered, or
services actually rendered, by an Obligor; or
(Q) the Account arises out of a contract or purchase order for which a
surety bond was issued on behalf of an Obligor.
1.46 "INSTRUMENT" means, in addition to the definition of instrument as
contained in the Uniform Commercial Code, a negotiable instrument or a security,
or any other
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writing which evidences a right to the payment of money and is not itself a
security agreement or lease and is of the type which is, in the ordinary course
of business, transferred by delivery with any necessary endorsement or
assignment.
1.47 "INTERCREDITOR AGREEMENTS" means (i) that certain intercreditor
agreement between Bank and Finova Capital Corporation dated December 20, 1996
and (ii) that certain intercreditor agreement between Bank and IBM Credit Corp.,
each of which shall be substantially similar to the other.
1.48 "INTEREST PERIOD" means, as to all Adjusted LIBO Rate Advances, the
period commencing on the Borrowing Date and ending on the numerically
corresponding day (or if there is no numerically corresponding day, the last
day) in the calendar month that is one (1), three (3) or six (6) months
thereafter, as selected by Borrower in its notice of borrowing, and thereafter,
the period commencing on the last day of the first preceding Interest Period and
ending on the numerically corresponding day (or if there is no numerically
corresponding day, the last day) in the calendar month that is one (1), three
(3) or six (6) months thereafter, as selected by Borrower in its notice of
continuance of or conversion to an Adjusted LIBO Rate Advance; provided,
--------
however, that if any Interest Period would end on a day which shall not be a
-------
Working Day, such Interest Period shall be extended to the next succeeding
Working Day unless such Working Day would fall in the next succeeding calendar
month in which case the Interest Period shall end on the first preceding Working
Day and provided, further, that notwithstanding anything to the contrary, (i) no
-------- -------
Interest Period shall extend beyond the Maturity Date and (ii) in all cases, no
Interest Period shall extend beyond any date on which principal is to be paid
for that portion of principal being paid on such date.
1.49 "INVENTORY" means, in addition to the definition of inventory as
contained in the Uniform Commercial Code, all Goods held by the Obligors for
resale or lease or furnished or to be furnished under contracts of service, and
shall include raw materials, goods and work in process and finished goods, and
all goods returned by or reclaimed from customers.
1.50 "INVESTMENT OBLIGATIONS" means any of the following: (A) obligations
of or guaranteed by the United States of America; (B) obligations issued or
guaranteed by any instrumentality or agency of the United States of America; (C)
obligations issued or guaranteed by any State of the United States or the
District of Columbia; (D) repurchase agreements fully secured by obligations of
a kind specified in subsections (A), (B) or (C) above; (E) interest bearing
accounts, certificates of deposit, bankers' acceptances or commercial paper of
Bank; and (F) commercial paper other than as specified in subsection (E) above
and which is rated at least "P1" by ▇▇▇▇▇'▇ Investors Services or at least "A1"
by Standard and Poor's Corporation.
1.51 "LETTER(S) OF CREDIT" means the one or more standby letters of credit
issued from time to time by Bank at the request and for the account of Borrower
in accordance with the terms hereof.
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1.52 "LETTER OF CREDIT AGREEMENT" means Bank's standard form of Application
and Agreement for Irrevocable Standby Letter of Credit, as the same may change
from time to time, the current form of which is annexed hereto as Exhibit B.
1.53 "LETTER OF CREDIT OBLIGATIONS" means the total amount of all Letters
of Credit as outstanding at any time and all obligations of Borrower to
reimburse Bank for any payments by Bank under any Letters of Credit.
1.54 "LIEN" means any mortgage, deed of trust, pledge, security interest,
hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or
other), or preference, priority, or other security agreement, or preferential
arrangement, charge, or encumbrance of any kind or nature whatsoever (including,
without limitation, any conditional sale or other title retention agreement, any
financing lease having substantially the same economic effect as any of the
foregoing) and the filing of any financing statement under the Uniform
Commercial Code (or comparable law) of any jurisdiction to evidence any of the
foregoing.
1.55 "LOAN" means the revolving loan and Letters of Credit in the maximum
principal amount of up to FIFTEEN MILLION DOLLARS ($15,000,000.00) made
available by Bank pursuant to Section 2.1 hereof.
1.56 "LOAN DOCUMENTS" means this Agreement, the Revolving Note, the
Guaranty, the Intercreditor Agreements, any Letter of Credit Agreement, all
notes or other documents executed and delivered by Borrower or any other Obligor
hereunder, and any amendments, renewals, modifications or supplements thereto,
or substitutions therefor.
1.57 "MARKETABLE SECURITIES INVESTMENT PERCENTAGE" has the meaning set
forth in Section 2.4(A) hereof.
1.58 "MATERIAL ADVERSE CHANGE" means, as to a Person, a material adverse
change in the financial condition, operations, business or property of such
Person.
1.59 "MATERIAL ADVERSE EFFECT" means, as to a Person, a material adverse
effect on the financial condition, operations, business or property of such
Person.
1.60 "MATURITY DATE" means June 30, 1998.
1.61 "OBLIGATION" or "OBLIGATIONS" means any and all loans, advances and
other financial accommodations made by Bank prior to, on and after the date of
this Agreement to, or on the account of Borrower including without limitation,
the Loan, and any and all interest, commissions, obligations, liabilities,
indebtedness, charges and expenses direct or indirect, primary, secondary,
contingent, joint or several which are due or to become due or that may
hereafter be contracted or acquired of Borrower or the other Obligors to Bank,
no matter how or when arising and whether under any present or future agreement
or instrument
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between Borrower or the other Obligors (including without limitation, under the
Guaranty) and Bank, or otherwise, and the amount due or to become due upon any
notes, reimbursement agreement, swap agreement or other obligations given to, or
received by, Bank or on account of any of the foregoing and the performance and
fulfillment by Borrower or the other Obligors of all the terms, conditions,
promises, covenants and provisions contained in the Loan Documents, or in any
future agreement or instrument between Borrower or the other Obligors and Bank.
1.62 "OBLIGOR" means Borrower hereunder, Guarantors, all other sureties and
guarantors and, if any debt due to Bank hereunder is evidenced by a note or
other instrument, the makers and endorsers thereof.
1.63 "PBGC" means the Pension Benefit Guaranty Corporation.
1.64 "PERMITTED ACQUISITION" means a merger or consolidation by Borrower
where Borrower remains the surviving entity, or an acquisition by Borrower of
all or substantially all of the assets, stock or other equity interests of
another entity; provided that in any such merger, consolidation or acquisition,
(i) any acquired entity becomes a Guarantor hereunder and (ii) Bank receives a
valid and perfected lien on any acquired assets.
1.65 "PERMITTED ENCUMBRANCES" means (A) Liens for taxes, assessments or
governmental charges or levies on property of an Obligor if the same shall not
at the time be delinquent or thereafter can be paid without penalty, or are
being diligently contested in good faith and by appropriate proceedings and
against which such Obligor has established adequate reserves, (B) Liens imposed
by law, such as carriers, warehousemen and mechanics Liens, and Liens incurred
in connection with construction or other similar Liens arising in the ordinary
course of business provided same are not at the time due and payable, (C) Liens
arising out of pledge or deposits under workmen's compensation law, unemployment
insurances, old age pension or other social security or retirement benefit or
similar legislation, (D) Liens arising from judgments or awards with respect to
which such Obligor shall be diligently and in good faith prosecuting an appeal
or proceedings for review and shall have secured a stay of execution pending
such appeal or review, (E) Liens in favor of Bank, (F) Liens described in and
permitted under the Intercreditor Agreements, (G) Liens associated with
permitted purchase money indebtedness described in Section 1.66(ii) and (H)
Liens set forth on Schedule 1.65 annexed hereto.
1.66 "PERMITTED INDEBTEDNESS" means (i) Indebtedness to Bank, (ii) purchase
money indebtedness with respect to the purchase by Borrower of new equipment
and/or machinery to be used in connection with its business, up to an aggregate
amount of $250,000 per year and (iii) indebtedness as described in and permitted
under the Intercreditor Agreements.
1.67 "PERMITTED LEASES" means, provided no Default or Event of Default
exists hereunder, those real property leases entered into in the ordinary course
of business consistent with past practice for which Bank has received (A) ten
(10) Business Days advance
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notice and (B) landlords' waivers and any other documents deemed necessary or
desirable by Bank.
1.68 "PERSON" means any individual, sole proprietorship, partnership,
limited liability company, joint venture, trust, unincorporated organization,
association, corporation, institution, entity, party or government (whether
national, federal, state, county, city, municipal or otherwise, including,
without limitation, any instrumentality, division, agency, body or department
thereof). Without limitation, the term "Person" shall include Borrower and
Guarantors.
1.69 "PLAN" means an employee benefit plan or other plan maintained for
employees of an Obligor and covered by Title IV of ERISA.
1.70 "REPAYMENT INDEMNITY" means any amounts required to compensate Bank
for any losses which it incurs as calculated below as a result of repayments of
Advances (including repayments on account of illegality as set forth in Section
2.2(E) upon acceleration or otherwise) other than on, with respect to the
Adjusted LIBO Rate Advances, the last day of an Interest Period. The amount of
such loss shall be calculated by multiplying the principal amount of the
repayment or prepayment by the per annum rate (expressed as a decimal and based
on a 360-day year and actual days elapsed) (the "Indemnity Rate"), determined by
subtracting (A) the highest asked yield most recently published in the Wall
----
Street Journal as of the date of repayment or prepayment for U.S. Treasury
---------------
securities having a term approximating the weighted average of the terms of each
Advance or portion thereof being repaid or prepaid (the "Average Term", said
average to be determined by reference to the period, for each Advance,
commencing on the date of the repayment or prepayment and ending on, with
respect to the Adjusted LIBO Rate Advances, the end of the then current Interest
Period) from (B) the rate of interest applicable to the principal amount being
repaid or prepaid, said Repayment Indemnity to accrue for a period from and
including the date of the repayment or prepayment to, but excluding, the date of
expiration of the Average Term, as if such term commenced on the date of
repayment or prepayment; provided that no Repayment Indemnity shall be payable
unless the foregoing calculation of the Indemnity Rate produces a positive
number. Borrower agrees that the Repayment Indemnity has been freely bargained
between the parties to provide Bank with compensation for the costs of
reinvesting the Loan proceeds and the loss of the contracted-for return on the
Loan and such Repayment Indemnity is reasonable and constitutes a means of
providing Bank with a substitute or alternate source of cash flow if any Advance
is repaid or prepaid as set forth above. Bank's determination of the Repayment
Indemnity shall be conclusive and binding in the absence of manifest error. The
amount payable as determined above shall be in addition to any amounts payable
under any other Section or Paragraph of this Agreement.
1.71 "REPORTABLE EVENT" has the meaning assigned to such term in Title IV
of ERISA, or regulations issued thereunder other than a Reportable Event not
subject to the provision for a thirty (30) day notice to the PBGC under such
regulations.
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1.72 "REVOLVING NOTE" means that certain Revolving Note dated the date
hereof issued by Borrower evidencing the Loan and any revolving note replacing
such note.
1.73 "SUBSIDIARY" means any entity of which more than fifty percent (50%)
of the outstanding capital stock or other ownership interest having ordinary
voting power to elect a majority of the board of directors or other governing
body of such entity (irrespective of whether, at the time, stock or other
ownership interest of any other class or classes of such entity shall have or
might have voting power by reason of the happening of any contingency) is at the
time, directly or indirectly, owned by Borrower or any other Obligor or one or
more Subsidiaries.
1.74 "TANGIBLE NET WORTH" means Total Assets, less (without limitation and
without duplication of deductions) the aggregate of the liabilities and
Indebtedness (including tax and other proper accruals) of a Person and any
reserves established by a Person for anticipated losses or expenses.
1.75 "TELERATE PAGE 3750" means the display designated as "Page 3750" on
the Dow ▇▇▇▇▇ Telerate Service (or such other page as may replace that page on
that service for the purpose of displaying London interbank offered rates of
major banks).
1.76 "TOTAL ASSETS" means, at any date, the amount shown on the books and
records of a Person, determined in accordance with GAAP, of all property, both
real and personal, of a Person, after deducting capitalized research and
development costs, capitalized interest, debt discounts and expense, marketing
expenses and customer and/or mailing lists, goodwill (including any amounts,
however designated on the balance sheet, representing the cost of acquisition of
business and investments in excess of underlying tangible assets), patents,
trademarks, trade name rights, copyrights, franchises, licenses, amounts owing
from employees, officers, directors, shareholders, principals, partners,
Subsidiaries or Affiliates of the Person and any investments in any entities
owned or controlled by any of the foregoing Persons (including without
limitation, any Affiliates and Subsidiaries) and such other assets as are
properly classified as "intangible assets".
1.77 "TOTAL LIABILITIES" means, at any date, the amount of all liabilities
which, in accordance with GAAP should be included in determining total
liabilities as shown on a liability side of a balance sheet of a Person at such
date, other than capital stock, capital surplus, retained earnings, property
interests, deferred credit and contingency reserves under GAAP.
1.78 "UNIFORM COMMERCIAL CODE" means the Uniform Commercial Code as adopted
and in effect under the laws of the State of New Jersey.
1.79 "WORKING DAY" means any day other than a Saturday, Sunday, public
holiday, bank holiday or other day on which currencies are not traded in the
London interbank market.
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1.80 "INTERPRETATION AND CONSTRUCTION"
(A) The terms "hereby," "hereof," "hereto," "herein," "hereunder" and any
similar terms, as used in this Agreement, refer to this Agreement in its
entirety and not any particular Article or paragraph, and the term "hereafter"
means after, and the term "heretofore" means before, the date of delivery of
this Agreement;
(B) Words importing a particular gender mean and include every other
gender, and words importing the singular number mean and include the plural
number and vice versa.
(C) References to "the Obligors", "each Obligor", "any Obligor", "an
Obligor" and the like shall be deemed to refer in each such case to all or any
one Obligor.
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II
LOANS
-----
2.1 REVOLVING LOAN AND LETTERS OF CREDIT Within the collateral limits of
the Borrowing Base, subject to the terms and conditions hereinafter set forth,
and provided that no Default or Event of Default shall have occurred and be
continuing or would result from the making of any Advance or issuance of any
Letter of Credit, from time to time hereafter, through the Maturity Date, Bank
shall extend credit to Borrower by (i) making Advances and (ii) the issuance of
Letters of Credit; provided, however that at no time shall (x) the total amount
-------- -------
of Letter of Credit Obligations exceed Two Million Five Hundred Thousand Dollars
($2,500,000), (y) the total principal amount of Acquisition Advances exceed Five
Million Dollars ($5,000,000) and (z) the total amount of Letter of Credit
Obligations plus the total principal amount of Advances then outstanding exceed
----
the Borrowing Base. Borrower shall have the right, upon thirty (30) days prior
written notice to Bank, to terminate all or part of the unused portion of the
Loan, without premium or penalty.
2.2 INTEREST
(A) On all Base Rate Advances, Borrower shall pay to Bank monthly interest
on the first day of each month until all such Advances are paid in full, and on
all Adjusted LIBO Rate Advances, Borrower shall pay to Bank interest on the last
day of the Interest Period but in no event less often than quarterly (in which
case such payments shall be made on the last Working Day of such calendar
quarter), until all such Advances are paid in full, which interest shall be
computed on the basis of a 360 day year, for the actual number of days elapsed,
on the daily unpaid balance of such Advances, at the rate selected by Borrower
by written notice to Bank equal to the following:
(i) Working Capital Advances. For Advances to be used for working
capital, (x) one-half of one percent (.5%) per annum below the Base Rate,
or (y) the Adjusted LIBO Rate for such Interest Period plus 1.25 percent
----
(1.25%); or
(ii) Acquisition Advances. For Acquisition Advances, (x) one-quarter
of one percent (.25%) per annum below the Base Rate or (y) the Adjusted
LIBO Rate for such Interest Period plus 1.50 percent (1.50%).
----
Borrower's notice to Bank of the applicable interest rate shall be provided, as
to Adjusted LIBO Rate Advances which are to be continued as such for the next
Interest Period or as to Base Rate Advances which are to be converted to
Adjusted LIBO Rate Advances, not less than three (3) days, which are both
Working Days and Business Days, prior to the end of the then pending Interest
Period, such notice to include a requested Interest Period, and, as to Adjusted
LIBO Rate Advances which are to be converted to Base Rate Advances, one (1)
Business Day prior to the end of the then pending Interest Period to Bank.
Conversions of Adjusted LIBO Rate
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Advances shall only be made (a) on the last day of the Interest Period
applicable thereto, (b) on a Working Day and (c) if no Default or Event of
Default has occurred and is continuing. If no notice is provided by Borrower as
to any Adjusted LIBO Rate Advance prior to the end of the then pending Interest
Period, such Advance shall, at the end of the Interest Period, automatically
become a Base Rate Advance.
(B) Subject to Section 2.5, if, at any time, the outstanding Advances
exceed the Borrowing Base, Borrower shall pay to Bank monthly interest computed
on the basis of a 360 day year for the actual number of days elapsed, on that
portion of the daily unpaid balance of such Advances which is in excess of the
Borrowing Base, at the default rate set forth in Section 9.7.
(C) In the event there should be a change in the Base Rate which would
result in a change in the rate of interest on Base Rate Advances, then, in that
event, the rate of interest on such Base Rate Advances shall be changed
accordingly as of the date of the change in the Base Rate, without notice to
Borrower.
(D) Each month Bank will render to Borrower a statement of the status of
the Advances provided for herein, which Borrower hereby agrees shall be deemed
to be an account stated and correct and acceptable to and binding on Borrower
unless Bank shall receive a corrected statement of exceptions from Borrower
within thirty (30) days after the monthly statements have been rendered to
Borrower.
(E) Notwithstanding any other provision of this Agreement, if the
introduction of or any change in or in the interpretation of any law or
regulation by any central bank or other governmental authority charged with the
administration or interpretation thereof shall make it unlawful, or any central
bank or other governmental authority shall assert that it is unlawful, for Bank
to perform its obligations hereunder (i) to make Adjusted LIBO Rate Advances or
(ii) to continue to fund or maintain Adjusted LIBO Rate Advances hereunder,
then, on notice thereof and demand therefor by Bank to Borrower, the obligation
of Bank to make any such Adjusted LIBO Rate Advances shall terminate and, if the
foregoing clause (ii) is applicable, Borrower shall, upon prior notice to Bank,
either (A) forthwith repay in full any such Adjusted LIBO Rate Advances then
outstanding, together with interest accrued thereon and the Repayment Indemnity
or (B) forthwith convert any such Adjusted LIBO Rate Advances then outstanding
into Base Rate Advances and pay to Bank the Repayment Indemnity. If no such
notice is received by Bank within three (3) Working Days of the prior written
demand by Bank (which demand shall include Bank's calculation of the Repayment
Indemnity), Borrower will be deemed to have made the election to convert any
such Adjusted LIBO Rate Advances then outstanding into Base Rate Advances as of
the fourth day following such demand.
(F) If, with respect to any Interest Period, Bank determines that (i)
extraordinary circumstances affecting the relevant market make it impracticable
to ascertain the interest rate applicable for such Interest Period or (ii) the
Adjusted LIBO Rate for such Interest Period will not adequately and fairly
reflect the cost to Bank of making or maintaining the Loan
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during such Interest Period, Bank shall promptly notify Borrower of such
determination and no additional Adjusted LIBO Rate Advances shall be made nor
shall there be any conversions thereto until such notice is withdrawn. If any
Adjusted LIBO Rate Advance is outstanding on the date of such notice and such
notice has not been withdrawn on the last day of the then current Interest
Period applicable thereto, Borrower may on the last day of such Interest Period
either convert such Adjusted LIBO Rate Advance to a Base Rate Advance or prepay
the outstanding principal balance thereof and accrued interest thereon in full.
If no such notice is received by Bank at least one (1) Business Day prior to the
last day of such Interest Period, Borrower will be deemed to have made the
election to convert any such Adjusted LIBO Rate Advances then outstanding into
Base Rate Advances.
2.3 REPAYMENT OF ADVANCES
(A) Borrower may repay an Adjusted LIBO Rate Advance or portion thereof on
the last day of the relevant Interest Period, provided, that (i) Borrower shall
provide Bank with one (1) Working Day's prior written notice of its intent to so
repay, (ii) Borrower shall pay to Bank the amount repaid together with accrued
interest to the date of such payment on the amount repaid, (iii) each partial
repayment shall be in a principal amount of not less than $100,000.00 or any
multiple thereof. In the event Borrower for any reason repays any Adjusted LIBO
Rate Advance on the day which is not the end of an Interest Period, Borrower
shall, upon written demand by Bank, pay to Bank the Repayment Indemnity with
respect to such repayment.
(B) As to any Base Rate Advances, Borrower may, upon not less than one (1)
Business Day's prior written notice, repay such Base Rate Advances, without
premium or penalty, in whole or in part with accrued interest to the date of
such repayment; provided, that each partial repayment shall be in a principal
amount of not less than $100,000.00 or any multiple thereof.
(C) Provided no prior Event of Default occurs hereunder, all Advances shall
be payable upon the Maturity Date.
(D) Whenever any payment to be made hereunder or under any note issued
hereunder shall be stated to be due on other than a Business Day or, as to
Adjusted LIBO Rate Advances, a Working Day, such payment may be made on the next
succeeding Business Day or Working Day, as applicable, unless such Business Day
or Working Day, as applicable, falls in the next succeeding month, in which
case, such payment shall be made on the next preceding Business Day or Working
Day, as applicable. Any such alteration of time shall, in such case, be included
in the computation of payment of interest. All payments (including prepayments)
made by Borrower on account of principal of or interest on the Advances
hereunder shall be made without set-off or counterclaim and shall be made prior
to 3:00 p.m. (New York City time) on the date such payment is due, to Bank, in
each case in lawful money of the United States of America and in immediately
available funds. The failure of Borrower to make any such payment by 3:00 p.m.
(New York City time) on such due date shall not constitute a Default or Event of
Default hereunder, provided that such payment is made on such due date, but any
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such payment received by Bank on any Business Day after 3:00 p.m. (New York City
time) shall be deemed to have been received on the immediately succeeding
Business Day or Working Day, as applicable, for the purpose of calculating any
interest payable in respect thereof.
(E) Bank shall have the right in its discretion to charge any principal
and/or interest or other sum due by Borrower or any other Obligor to Bank, to
any checking, other deposit or loan account of Borrower or any other Obligor
with Bank or to apply any proceeds received by it against payment of same. In
the event that the amount so charged shall create an overdraft, the Obligors
hereby agree to pay to Bank the fees associated with overdraft until the
overdraft is satisfied in full. During any time in which an overdraft is created
and outstanding, the Loan shall be deemed to be in default (and shall bear
interest at the default rate set forth in Section 9.7) and Bank shall not be
required to honor any checks drawn on or transfers from such deposit account nor
shall it be required to notify any Obligor of the existence of any overdraft
before dishonoring any such checks or transfers, and to the extent permitted by
law, the Obligors waive any rights and claims they may have against Bank for
wrongful dishonor, interference with contract, wrongful interruption of the
Obligors' businesses or similar claim, counterclaim or causes of action arising
due to Bank's failure to honor such checks. The creation of any overdrafts shall
not be deemed to be a payment hereunder or under any note evidencing the
Obligations or a waiver by Bank of any Event of Default hereunder and nothing
herein shall obligate Bank to create any such overdraft.
2.4 FEES
(A) Borrower agrees to pay to Bank on a quarterly basis the Commitment Fee
on the average daily unused portion of the Commitment from the Closing Date
until the Maturity Date, at the rate equal to (i) prior to the event described
in subsection 2.4(A)(ii) below, one-sixteenth percent (.0625%) per annum or (ii)
from and after the consummation of a secondary offering of securities of
Borrower resulting in the availability of investible proceeds, one-eighth
percent (.125%) per annum multiplied by the Marketable Securities Investment
Percentage, such payments commencing on June 30, 1997, and continuing quarterly
thereafter on the last day of September, December, March and June, with such
payments terminating on the Maturity Date. As used in this Section 2.4(A),
"Marketable Securities Investment Percentage" shall be defined as one (1) minus
a fraction, the numerator of which is Borrower's average total marketable
securities invested with Bank and the denominator of which is Borrower's average
total marketable securities.
(B) If from time to time Bank, in accordance with its right hereunder,
examines or inspects the books and records of Borrower or any other Obligor
and/or Collateral, the Obligors shall upon the demand of Bank pay to Bank any
reasonable out-of-pocket expenses incurred by Bank in connection with such
audit, including but not limited to travel expenses incurred by Bank in
connection therewith.
2.5 PREPAYMENT If on any day the sum of the aggregate outstanding principal
balance of the Advances under Section 2.1 plus the Letter of Credit Obligations
hereof
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shall exceed the then Borrowing Base on such day or the other limitations set
forth in Section 2.1, Borrower shall, on such day, prepay such Advances by an
amount equal to such excess together with the Repayment Indemnity, if any. The
failure to make any such payment shall be an Event of Default.
2.6 PROCEDURES FOR ADVANCES Borrower shall provide Bank with at least one
(1) Business Day's oral notice of any requested Base Rate Advance and three (3)
Working Day's oral notice of any requested Adjusted LIBO Rate Advance,
specifying (A) the Borrowing Date and amount, (B) whether the Advance is to be
an Adjusted LIBO Rate Advance or a Base Rate Advance, and, if an Adjusted LIBO
Rate Advance, the Interest Period, and (C) whether the Advance is to be for
working capital or an Acquisition Advance, which oral notice shall be promptly
confirmed in writing by Borrower (provided, however, Bank may rely and act upon
telephonic notice whether or not such written confirmation is ultimately
received). The notice to Bank requesting an Advance shall also include evidence
that based upon the most recent Borrowing Base Certificate, there exists
sufficient availability of funds for such Advance. In the event that the only
interest rate available to Borrower shall be the Base Rate (as provided in
Section 2.2(E) above), Borrower need only give Bank one (1) Business Day's
notice to request Advances. Bank shall, on or after 1:00 P.M. (New Jersey time)
of the Borrowing Date, make the amount of the requested Advance available to
Borrower, provided all conditions precedent to such Advance have been met or
satisfied. Each requested Adjusted LIBO Rate Advance hereunder for less than the
full amount available under the Borrowing Base, shall be in the minimum amount
of $100,000.00 or any multiple thereof. Not more than three (3) Advances based
upon the Adjusted LIBO Rate may be outstanding at any one time.
2.7 PROCEDURES FOR LETTERS OF CREDIT
(A) Issuance of Letters of Credit. Within the collateral limits of the
Borrowing Base, until the Maturity Date, and provided that no Default or Event
of Default shall have occurred and be continuing or would result from the
issuance of a Letter of Credit and subject to the limitations of Section 2.1,
Bank may issue Letters of Credit for the account of Borrower on the terms
hereinafter set forth. No Letter of Credit shall have a term beyond 180 days and
in any event no Letter of Credit shall extend beyond the Maturity Date. Each of
the Letters of Credit shall be issued in a form satisfactory to Bank and
pursuant to a Letter of Credit Agreement duly executed by Borrower. The terms
and conditions of the Letter of Credit Agreement(s) are hereby incorporated
herein by reference as if fully set forth at length. Borrower shall pay to Bank
any and all fees imposed by Bank in connection with the issuance of Letters of
Credit.
(B) Payments under Letters of Credit and Reimbursement by Borrower. In the
event of a drawing under any Letter of Credit and payment by Bank, Borrower
shall immediately reimburse Bank therefore by a charge against Borrower's
account(s) maintained at Bank. In the event that Borrower shall not so reimburse
Bank as provided above, such failure shall be an Event of Default and Borrower
shall pay to Bank interest on the amount of such payment from the date of such
payment by Bank or the failure of Borrower to so reimburse
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Bank, as applicable, through and including the date of such reimbursement by
Borrower at the default rate (described in Section 9.7) computed on the basis of
the actual number of days elapsed over a year of 360 days.
(C) Letter of Credit Obligations Absolute. Unless otherwise required by the
order of a court of competent jurisdiction, Borrower's obligations to make
payments to Bank in order to reimburse payments by Bank on Letters of Credit as
provided in Subsection 2.7(B) above shall be absolute, unconditional and
irrevocable, and shall be performed strictly in accordance with the terms of
this Agreement and the Letter of Credit Agreement(s), under any and all
circumstances whatsoever, and irrespective of:
(i) any lack of validity or enforceability of any Letter of Credit or
any Loan Document, or any term or provision therein;
(ii) any amendment or waiver of or any consent to departure from all
or any of the provisions of any Letter of Credit or any Loan Document to
which Bank is not a party;
(iii) the existence of any claim, setoff, defense or other right that
Borrower or any other Obligor, any other party guaranteeing, or otherwise
obligated with, Borrower, any Subsidiary or other Affiliate thereof or ▇▇▇▇
Gang or any other person may at any time have against the beneficiary under
any Letter of Credit, Bank or any other Person, whether in connection with
this Agreement, any other Loan Document or any other related or unrelated
agreement or transaction;
(iv) any draft or other document presented under a Letter of Credit
proving to be forged, fraudulent, invalid or insufficient in any respect or
any statement therein being untrue or inaccurate in any respect;
(v) payment by Bank under a Letter of Credit against presentation of a
draft or other document that does not comply with the terms of such Letter
of Credit; and
(vi) any other act or omission to act or delay of any kind of Bank, or
any other person or any other event or circumstance whatsoever, whether or
not similar to any of the foregoing, that might, but for the provisions of
this section, constitute a legal or equitable discharge of Borrower's
obligations hereunder.
Notwithstanding the foregoing, it is expressly understood and agreed
that Borrower has not waived any rights it may have or be entitled to
assert in the event of Bank's gross negligence or wilful misconduct (other
than any claim seeking consequential damages, claims in respect of which
are hereby
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waived by Borrower). It is understood that Bank may accept documents that
appear on their face to be in order, without responsibility for further
investigation, regardless of any notices or information to the contrary
and, in making any payment under any Letter of Credit (i) Bank's exclusive
reliance on the documents presented to it under such Letter of Credit as to
any and all matters set forth therein, including reliance on the amount of
any drafts presented under such Letter of Credit, whether or not the amount
due to the beneficiary thereunder equals (but does not exceed) the amount
of such draft and whether or not any document presented pursuant to such
Letter of Credit proves to be forged or invalid or any statement therein
proves to be inaccurate or untrue in any respect whatsoever and (ii) any
noncompliance in any immaterial respect of the documents presented under
such Letter of Credit with the terms thereof shall, in each case, be deemed
not to constitute wilful misconduct or gross negligence of Bank.
(D) Outstanding Letter of Credit Obligations. Upon an Event of Default and
subject to the limitations set forth in Section 2.1 hereof, the full amount of
all Letter of Credit Obligations shall be deemed to increase the principal
amount deemed outstanding under the Loan (and any unpaid interest thereon and on
unpaid letter of credit fees shall be deemed principal on such Loan, provided
that no interest shall be charged on the amount of the Letters of Credit unless
and until such Letters of Credit are drawn upon) for purposes of (x)
distribution of payments hereunder and (y) application of proceeds; provided,
however, if any such Letter of Credit thereafter expires without being drawn
upon, the amount thereof shall reduce the principal amount deemed outstanding
under the Loan (as previously increased pursuant to this subsection (D)) and the
distributions of payments and proceeds to Bank shall be adjusted accordingly.
2.8 USE OF PROCEEDS The proceeds of the Loan shall be used by Borrower (i)
for short term working capital and (ii) for Permitted Acquisitions subject to
the terms and conditions hereof.
2.9 CONDITIONS TO INITIAL ADVANCE The obligation of Bank to execute this
Agreement and to make the initial Advance or other financial accommodations
hereunder is subject to the satisfaction of the following conditions precedent:
(A) Documents. Bank shall have received the duly executed Revolving Note,
not less than four (4) copies of this Agreement, the Guaranty and all other Loan
Documents, each executed on behalf of Borrower and the other Obligors and/or by
their duly authorized officers.
(B) Deliveries by Borrower. Borrower shall have delivered or caused to be
delivered to Bank or Bank shall have received, the following items, which shall
be in form and substance reasonably satisfactory to Bank and its counsel:
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(i) Legal Opinion of Counsel to the Obligors. Opinion of ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, counsel to the Obligors, dated the date hereof and addressed to
Bank, substantially in the form of Exhibit C hereto.
(ii) Corporate Proceedings. Resolutions of the Board of Directors of
Borrower and all other corporate Obligors certified on the date hereof by
the Secretary or an Assistant Secretary of Borrower and such other Obligors
authorizing (a) the execution, delivery and performance of this Agreement,
and all of the other Loan Documents to which it is a party; (b) the
consummation of the transactions contemplated hereby and thereby; and (c)
the borrowings and other matters contemplated in the Loan Documents. Such
certificate shall state that the resolutions set forth therein have not
been amended, modified, revoked or rescinded as of the date of such
certificate and are in full force and effect as of the Closing Date.
(iii) Incumbency Certificate. A certificate of the Secretary or an
Assistant Secretary of Borrower and all other corporate Obligors, dated the
date hereof, as to the incumbency and signature of the officers executing
each of the Loan Documents and any other document to be delivered pursuant
to any of such documents, together with evidence of the incumbency of such
Secretary or Assistant Secretary.
(iv) Officer's Certificate. A certificate of Borrower and the other
corporate Obligors signed by its president or chief financial officer
stating that to the best of his knowledge after diligent investigation: (a)
as of the date hereof and after giving effect to any loan hereunder no
Default or Event of Default exists hereunder; and (b) all of Borrower's and
each other Obligor's representations and warranties contained in this
Agreement and the other Loan Documents are presently true and correct in
all material respects.
(v) Consents, Licenses, Approvals, etc. Copies of all consents,
licenses and approvals required in connection with the execution, delivery,
performance, validity and enforceability of this Agreement, the Revolving
Note and the other Loan Documents, and such consents, licenses and
approvals shall be in full force and effect and be reasonably satisfactory
in form and substance to Bank and its counsel.
(vi) Searches. Copies, in form and substance reasonably satisfactory
to Bank, of written or other advice relating to such corporate status,
financing statement, tax lien and judgment searches as Bank may reasonably
require.
(vii) Intercreditor Agreements. The Intercreditor Agreements,
substantially in the form of Exhibit D annexed hereto.
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(viii) Landlords' Waivers. Landlords' waivers in the form of Exhibit E
annexed hereto, for each location where any of the Collateral is located.
(ix) Borrowing Base Certificate. A completed Borrowing Base
Certificate.
(x) Other Documents. All other documents provided for herein or which
Bank may request or require.
(xi) Additional Information. Such additional information and materials
which Bank shall have reasonably requested.
(xii) Supporting Documents. On or before the date hereof, (a) a copy
of the Certificate of Incorporation of Borrower and any other corporate
Obligors, certified by the Secretary of State of New Jersey; (b) a
certificate of such Secretary of State, dated as of a recent date, as to
the good standing of Borrower and any other corporate Obligor and attaching
the charter documents of Borrower and any other corporate Obligor on file
in the office of such Secretary of State; and (c) a certificate of the
Secretary or an Assistant Secretary of Borrower and any other corporate
Obligor dated the Closing Date and certifying with respect to Borrower and
any other corporate Obligor (i) that attached thereto is a true and
complete copy of the By-laws of Borrower and any other corporate Obligor,
as in effect on the date of such certification, and (ii) that the
Certificate of Incorporation of Borrower and any other corporate Obligor
has not been amended since the date of the last amendment thereto indicated
on the certificate of the Secretary of State furnished pursuant to clause
(A) above.
(xiii) Fees/Costs/Taxes. Borrower shall have paid (i) all of the
reasonable fees and expenses of Bank's counsel which are occasioned in
connection with the preparation of this Agreement and all other Loan
Documents and the closing of the transactions contemplated hereby and
thereby and (ii) all filing and recording fees and taxes.
(xiv) Insurance. Evidence of the insurance required to be in effect as
set forth in this Agreement.
2.10 CONDITIONS TO ALL ADVANCES The obligation of Bank to make any Advance
or issue a Letter of Credit is subject to fulfillment of the following
additional conditions precedent, to the reasonable satisfaction of Bank and
counsel to Bank:
(A) Representations and Warranties. The representations and warranties made
by the Obligors herein or in any other of the Loan Documents or which are
contained in any certificate, document or financial or other statement furnished
at any time under or in connection
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herewith shall be correct in all material respects on and as of the date of each
Advance or issuance of Letters of Credit, after giving effect to such Advance or
issuance of Letters of Credit, as if made on and as of such date.
(B) No Default. No Event of Default has occurred, and no Default has arisen
and is continuing on the date the Advance is to be made or Letter of Credit is
to be issued, after giving effect to such Advance or Letter of Credit.
(C) Litigation. No suit, action, investigation, inquiry or other proceeding
by any governmental authority or other Person or any other legal or
administrative proceeding shall be pending or threatened which (i) questions the
validity or legality of the transactions contemplated by this Agreement, or (ii)
seeks damages in connection therewith and which, in the reasonable judgment of
Bank, (x) involves a significant risk of a preliminary or permanent injunction
or other order by a state or federal court which would prevent, or require
rescission of, the transactions contemplated by this Agreement, or (y) in the
case of any action or proceeding which seeks monetary damages involves a
significant risk of resulting in substantial financial liability to any Obligor
and/or Bank.
(D) Material Adverse Change. No event shall have occurred since the date of
the most recent financial statements of Borrower and/or any other Obligor
furnished to Bank which resulted in a Material Adverse Change of Borrower or any
other Obligor or had a Material Adverse Effect on Borrower or any other Obligor.
(E) Legal Matters. All legal matters incident to the making of the Loan
shall be satisfactory to counsel to Bank, in the reasonable exercise of its
judgment.
2.11 REGULATORY CAPITAL REQUIREMENTS If any existing or future law or
regulation or the interpretation thereof by any court or administrative or
governmental authority charged with the administration thereof, or compliance by
Bank with any request or directive (whether or not having the force of law) of
any such authority, results in any increases after the date hereof in any
capital maintenance, capital ratio or similar requirement against loan
commitments made by Bank and the result thereof is to impose upon Bank or
increase any capital requirement applicable to Bank as a result of the making or
maintenance of the credit facilities available hereunder (which imposition of or
increase in capital requirement may be determined by Bank's reasonable
allocation of the aggregate of such capital impositions or increases) then, upon
demand by Bank, Borrower shall immediately pay to Bank from time to time as
specified by Bank a fee which shall be sufficient to compensate Bank for such
imposition of or increase in capital requirements together with interest on each
such amount from the date demanded until payment in full thereof at the rate
provided in this Agreement with respect to fees and charges not paid when due. A
certificate setting forth in reasonable detail the amount necessary to
compensate Bank as a result of an imposition of or increase in capital
requirements submitted by Bank to Borrower shall be conclusive, absent manifest
error or bad faith, as to the amount thereof. For purposes of this Section 2.11
in calculating the amount necessary to compensate for any imposition of or
increase in capital requirements, Bank shall be deemed to
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be entitled to a rate of return on capital (after federal, state and local
taxes) of fifteen percent per annum.
2.12 EXCESS ADVANCES In the event Bank shall advance an amount or issue a
Letter of Credit in excess of the aggregate amount of all credit facilities set
forth in this Agreement or if Borrower should directly or indirectly become
indebted to Bank in an amount which, together with all Advances and Letters of
Credit made pursuant to this Agreement, is in excess of the aggregate amount set
forth in this Agreement, such Advances or such Letters of Credit shall
nevertheless be covered by the terms of this Agreement.
2.13 REQUIREMENTS OF LAW If, after the date hereof, the adoption of any
law, regulation, treaty, or directive or any change therein or in the
interpretation or application thereof or compliance by Bank with any request or
directive (whether or not having the force of law) from any central bank or
other governmental authority, agency or instrumentality:
(A) does or shall subject Bank to any tax of any kind whatsoever with
respect to this Agreement, any Advances or the Letters of Credit, or change the
basis of taxation of payments to Bank of principal, commitment fee, interest or
any other amount payable hereunder (except for changes in the rate of any tax
presently imposed on Bank);
(B) does or shall impose, modify, or hold applicable any reserve, special
deposit, compulsory loan or similar requirement against assets held by, or
deposits or other liabilities in or for the account of, advances or loans by, or
other credit extended by, or any other acquisition of funds by, any office of
Bank which are not otherwise included in the determination of the Adjusted LIBO
Rate or any fixed rate hereunder;
(C) has or would have the effect of reducing the rate of return on Bank's
capital as a consequence of its obligations hereunder to a level below that
which Bank could have achieved but for such adoption, change or compliance
(taking into consideration Bank's policies with respect to capital adequacy); or
(D) does or shall impose on Bank any other condition;
and the result of any of the foregoing is to increase the cost to Bank of
making, renewing or maintaining advances or extensions of credit to Borrower or
to reduce any amount receivable from Borrower thereunder or to reduce the rate
of return on Bank's capital, then, in any such case, Borrower shall promptly pay
to Bank, upon its demand, any additional amounts necessary to compensate Bank
for such additional cost or reduced amount receivable or reduced rate of return
which Bank deems to be material, as determined by Bank, with respect to this
Agreement, any Advances or the Letters of Credit. If Bank becomes entitled to
claim any additional amounts pursuant to this Section 2.13, it shall promptly
notify Borrower of the event by reason of which it has become so entitled. A
certificate setting forth calculations as to any additional
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amounts payable pursuant to the foregoing sentence submitted by Bank to Borrower
shall be conclusive in the absence of manifest error or bad faith.
2.14 PARTICIPATIONS Bank may from time to time grant participations in some
or all of the Loan Documents and/or the obligations evidenced thereby. The
holder of any such participation, if the applicable agreement between Bank and
such holder so provides, (i) shall be entitled to all of the rights, obligations
and benefits of Bank, and (ii) shall be deemed to hold and may exercise the
rights of setoff or banker's lien with respect to any and all obligations of
such holder to Borrower, in each case as fully as though Borrower were directly
indebted to such holder. Bank shall give notice to Borrower of such
participation; however, the failure to give such notice shall not affect any of
Bank's or such holder's rights hereunder nor result in any liability to the Bank
or such holder nor otherwise affect this Agreement or the other Loan Documents.
The Obligors authorize Bank to provide information concerning the Obligors to
any prospective participant. The information provided may include, but is not
limited to, amounts, terms, balances, payment history, return item history and
any financial or other information about the Obligors. The Obligors agree to
indemnify, defend, release Bank, and hold Bank harmless, at the Obligors' cost
and expense, from and against any and all lawsuits, claims, actions,
proceedings, or suits against Bank or against any Obligor and Bank, arising out
of or relating to Bank's reporting or disclosure of such information, provided
that such information was furnished by an Obligor in connection with the Loan,
this Agreement or the other Loan Documents. Regardless of the foregoing, upon an
Event of Default or any form of merger, consolidation or acquisition by the
Bank, the Bank may, in addition to the granting of participations as described
above, sell or assign, in whole or in part, some or all of the Loan Documents
and/or the obligations evidenced thereby and have such other rights and
indemnifications with respect thereto as described in this Section 2.14. Nothing
herein shall prohibit Bank from pledging or assigning the Revolving Note to any
Federal Reserve Bank in accordance with applicable law.
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III
COLLATERAL
----------
3.1 CROSS COLLATERAL All of the Collateral heretofore, herein or hereafter
given or assigned to Bank hereunder or in any other Loan Document shall secure
payment of (A) all Obligations of Borrower and Guarantor to Bank and (B) all
Indebtedness and any and all other obligations of any of the other Obligors to
Bank.
3.2 ACCOUNTS RECEIVABLE Each Obligor hereby creates in favor of Bank and
hereby grants to Bank a security interest in all Accounts, as defined herein,
presently owned by such Obligor or hereafter acquired.
3.3 INVENTORY Each Obligor hereby creates in favor of Bank and hereby
grants to Bank a security interest in all of such Obligor's Inventory, as
defined herein, whether presently owned by such Obligor or hereafter acquired
and wherever located.
3.4 GENERAL INTANGIBLES Each Obligor hereby creates in favor of Bank and
hereby grants to Bank a security interest in all of such Obligor's General
Intangibles, as herein defined, whether presently owned by such Obligor or
hereafter acquired. In no event shall the foregoing grant of a security interest
in General Intangibles be construed as an outright assignment of any
intent-to-use trademark or service ▇▇▇▇ applications.
3.5 DEPOSIT ACCOUNTS Each Obligor hereby creates in favor of Bank, hereby
assigns to Bank and hereby grants to Bank a security interest in the balance of
every deposit account, now or hereafter existing, of such Obligor with Bank or
any other institution, and all money, Instruments, securities, documents,
Chattel Paper, credits, claims, and other property of such Obligor now or
hereafter in the possession or custody of Bank or any of its agents or any other
institution.
3.6 CHATTEL PAPER Each Obligor hereby creates in favor of Bank and hereby
grants to Bank a security interest in all of such Obligor's Chattel Paper, as
defined herein, whether presently owned by such Obligor or hereafter acquired,
including but not limited to all such Chattel Paper now or hereafter left in the
possession of Bank for any purpose, including but not limited to for collection.
3.7 INSTRUMENTS Each Obligor hereby creates in favor of Bank and hereby
grants to Bank a security interest in all of such Obligor's Instruments, as
defined herein, whether presently owned by such Obligor or hereafter acquired,
including but not limited to all such Instruments now or hereafter left in the
possession of Bank for any purpose, including but not limited to for collection.
3.8 DOCUMENTS Each Obligor hereby creates in favor of Bank and hereby
grants to Bank a security interest in all of such Obligor's Documents, as
defined herein, whether
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presently owned by such Obligor or hereafter acquired, including but not limited
to all such Documents now or hereafter left in the possession of Bank for any
purpose.
3.9 PROCEEDS AND RECORDS Each Obligor hereby creates in favor of Bank and
hereby grants to Bank a security interest in (A) all books and records,
including, without limitation, customer lists, credit files, computer programs,
print-outs and other computer materials and records of such Obligor pertaining
to all of the Collateral; and (B) all of the products and proceeds of all of the
foregoing Collateral (including all proceeds of insurance policies covering the
Collateral); as well as all accessions, additions, substitutions, replacements
and increments as to the assets in (A) and (B).
3.10 CONTINUING PERFECTION Each Obligor will perform any and all steps
requested by Bank to create and maintain in Bank's favor a first and exclusive
(subject only to any Permitted Encumbrances) and valid lien on or security
interest in the Collateral or pledges of Collateral, including, without
limitation, the execution, delivery, filing and recording of financing
statements and continuation statements, supplemental security agreements, notes
and any other documents necessary, in the opinion of Bank, to protect its
interest in the Collateral. Bank and its designated officer are hereby
irrevocably appointed each Obligor's attorney-in-fact to do all acts and things
which Bank may deem necessary to perfect and continue perfected the security
interests and Liens provided for in this Agreement and the other Loan Documents,
including, but not limited to, executing financing statements on behalf of each
Obligor.
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IV
PROCEEDS OF COLLATERAL
----------------------
4.1 LOCKBOX Each Obligor agrees to establish and maintain with Bank a
lockbox, in accordance with Bank's standard lockbox agreement in effect from
time to time, and to direct all Account Debtors to make remittances on all
Accounts to said lockbox. Any and all remittances received in said lockbox may
be applied as Borrower shall direct, subject to Section 4.2 below.
4.2 APPLICATION OF PAYMENTS/PAYMENTS ON COLLATERAL Upon an Event of
Default, any remittances received in the lockbox described in Section 4.1 above
shall be applied to the Obligations of Borrower and the other Obligors to Bank
in accordance with subsection 4.2(A) below.
(A) Application of Payments. All proceeds of any Account(s) and Inventory
and other Collateral which are delivered to or otherwise received by Bank for
application to the Advances provided for herein shall be deemed received as of
the date of actual receipt by Bank, and shall be applied by Bank on account of
the Obligations upon Bank's receipt of same, first to Base Rate Advances and
then, to Adjusted LIBO Rate Advances; provided, however, that no checks, drafts,
or other Instruments received by Bank shall constitute payment to Bank unless
and until such item of payment has actually been collected by Bank. For the sole
purpose of calculation of interest due to Bank from Borrower, all such proceeds
and other payments on account of the Advances provided for in this Agreement,
irrespective of the type or form of payment thereof shall not be considered
applied on account of the Obligations until three (3) Business Days after Bank's
application of same to the Obligations. In the event any proceeds are applied
against Adjusted LIBO Rate Advances prior to the last day of the Interest
Period, Borrower shall pay the Repayment Indemnity, if any.
(B) Payments on Collateral. Upon the occurrence and continuation of an
Event of Default, if, notwithstanding the notices to Account Debtors to remit
payments on Accounts to the lockbox referred to above, an Obligor receives any
payments on Accounts or other Collateral, each Obligor agrees to receive any and
all payments and remittances on Accounts and Inventory and other Collateral,
including cash, checks, drafts, notes, acceptances or other forms of payment in
trust for Bank and to deliver such payments in the identical form in which they
were received, together with collection reports in form satisfactory to Bank.
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V
REPRESENTATIONS AND WARRANTIES
------------------------------
To induce Bank to enter into this Agreement and to make Advances and other
financial accommodations hereunder, each Obligor represents and warrants to Bank
that:
5.1 GOOD STANDING Schedule 5.1 sets forth
(A) the jurisdiction of incorporation of each Obligor and in which it is in
good standing;
(B) all other jurisdictions in which each Obligor is authorized to transact
business and all of which it is in good standing;
(C) any prior changes in the structure of any Obligor, such as mergers,
consolidations and the like;
(D) any prior name changes of any Obligor;
(E) all trade names or trade styles under which any Obligor conducts
business or issue invoices; and
(F) all Subsidiaries and Affiliates of any Obligor and the percentage of
stock or other ownership interest thereof owned by such Obligor.
5.2 CORPORATE AUTHORITY The Obligors have the requisite power and authority
to own their property and to carry on their businesses as now conducted, and are
in good standing and authorized to do business in each jurisdiction in which the
failure so to do would have a Material Adverse Effect on any Obligor. Each
corporate Obligor has the corporate power to execute, deliver and carry out this
Agreement and all other Loan Documents to which they are a party and their Board
of Directors have duly authorized and approved the terms of the loan described
herein and the taking of any and all action contemplated herein and therein, and
this Agreement and all other Loan Documents to which any Obligor is a party
constitutes the valid and binding obligations of them, enforceable in accordance
with their terms. No consent or approval of, or exemption by, shareholders, any
Governmental Body or any other Person is required to authorize, or is otherwise
required in connection with the execution, delivery and performance of, the Loan
Documents to which any Obligor is a party, or is required as a condition to the
validity or enforceability of the Loan Documents to which any Obligor is a
party.
5.3 COMPLIANCE WITH LAW (A) The Obligors are in compliance with all laws,
rules and regulations to which they are subject and have all licenses,
certificates, permits and franchises and other governmental authorization
necessary to own their properties
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and to conduct their businesses. (B) The execution of this Agreement, and each
other Loan Document and the performance by the Obligors of their obligations
hereunder and thereunder, do not violate any existing law or regulation or any
writ or decree of any court or Governmental Body or the charter or by-laws of
any corporate Obligor or any agreement or undertaking to which any Obligor is a
party or by which they are bound.
5.4 NO LITIGATION There are no judgments against any Obligor as of the date
of this Agreement and, except as set forth on Schedule 5.4, no material
litigation or administrative proceeding before any Governmental Body is
presently pending, or to the knowledge of the Obligors, threatened, against any
Obligor or any of their property.
5.5 NO FINANCIAL CHANGE There has been no Material Adverse Change in the
condition of the Obligors since their last financial statements and reports
furnished to Bank and the information contained in said statements and reports
is true and correctly reflects the financial condition of the Obligors as of the
dates of the statements and reports, and such statements and reports have been
prepared in accordance with GAAP and do not contain any material misstatement of
fact or omit to state any facts necessary to make the statements contained
therein not misleading.
5.6 TAX COMPLIANCE Each Obligor has filed, or caused to be filed, all tax
returns required to be filed and has paid all taxes shown to be due and payable
on said return or on any assessment made against it.
5.7 GOOD TITLE AND ABSENCE OF LIENS On the date of this Agreement, each
Obligor has good and marketable title to all of its properties and assets, real,
personal and mixed, and none of said properties or assets is subject to any
Lien, except for Permitted Encumbrances.
5.8 PLACE OF RECORDS, CHIEF EXECUTIVE OFFICE, INVENTORY AND OTHER
COLLATERAL (A) The Obligors' chief executive offices, and the offices where the
Obligors keep their records concerning any Accounts, and all locations of their
Inventory, and all other business locations of the Obligors are presently at the
locations set forth on Schedule 5.8. (B) Except as set forth on Schedule 5.8,
within four (4) months of the date of this Agreement, none of the Obligors'
assets have been moved from any jurisdiction or other locations than the present
locations of assets set forth on Schedule 5.8 under item (A)(v) except for
Inventory purchased by an Obligor in the ordinary course of business from
persons or entities customarily selling such Inventory. (C) That as of the date
hereof no Inventory is now, except as set forth on Schedule 5.8, stored with a
bailee, warehouseman or similar party. (D) As of the date of this Agreement, the
Obligors do not hold any Goods belonging to third parties or in which other
parties have an interest, including any Goods sold on a ▇▇▇▇ and hold basis,
except as set forth on Schedule 5.8. (E) The Obligors do not presently purchase
or otherwise hold Goods on a consignment basis except as set forth on Schedule
5.8. (F) Except as set forth on Schedule 5.8 none of the Obligors' Inventory is
of a nature that contains any labels, trademarks, trade names, or other
identifying characteristics which are the properties of third
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parties, and the use of which by any Obligor is in violation of the rights of
such third parties or under license, royalty or similar agreements with any
third parties. (G) Except as set forth on Schedule 5.8 no persons hold any Goods
of the Obligors. (H) Except as set forth on Schedule 5.8, the Obligors have not
purchased any Inventory except in the ordinary course of business for value and
from persons customarily in the business of selling such Inventory. (I) Except
as set forth on Schedule 5.8, the Obligors do not hold any Instrument or Chattel
Paper connected with any Account. (J) Except as set forth on Schedule 5.8, the
Obligors do not own any trademarks, trade names, patents or copyrights. (K) No
surety bonds have been issued on behalf of the Obligors with respect to any
contracts or purchase orders out of which Accounts Receivable have arisen or are
expected to arise.
5.9 WARRANTIES AS TO ACCOUNTS Except as otherwise provided in the
assignment of Accounts, if any, given to Bank, or invoice or other writing, each
Obligor warrants that as to all Accounts reported to Bank; (A) each Account is a
valid subsisting Account as defined herein; (B) each Account represents a bona
fide performed transaction; (C) the amount shown on such Obligor's books and on
any invoice or statement delivered to Bank is owing to such Obligor; (D) no
partial payment has been made which in the aggregate as to all Accounts exceeds
the sum of $250,000; (E) no set-off or counterclaim exists as to any such
Account and no agreement has been made under which any deductions or discount
may be claimed except regular discounts in the usual course of business, but
only if disclosed on the face of the invoice; (F) the Account Debtor has not
disputed the Account or otherwise asserted any defense, set-off or counterclaim;
(G) that to the extent required by law the Obligors are authorized to do
business and in good standing in any state in which any such Account must be
enforced; (H) each Eligible Account is a valid subsisting Eligible Account as
defined herein; (I) all agings of Accounts submitted to Bank are true and
accurate; and (J) except as set forth on Schedule 5.9, no surety bond was
required or given on behalf of any Obligor in connection with any contracts or
purchase orders under which the Account arose.
5.10 ERISA (A) No Reportable Event or unfunded deficiencies or failure of
compliance with ERISA or the Internal Revenue Code of 1986, as amended, has
occurred and is continuing with respect to any Plan; and (B) Each Obligor has
complied with the provisions of ERISA and the Internal Revenue Code of 1986, as
amended, with respect to each Plan.
5.11 LICENSES AND PERMITS AND LAWS The Obligors hold all necessary licenses
and permits for the operation of their businesses, including all permits
required under Environmental Laws and the Obligors have complied with all laws,
rules and regulations applicable to their businesses, including but not limited
to the Fair Labor Standards Act, 29 U.S.C. Section 215(a)(1). All such licenses
and permits are in good standing and are not under any outstanding citation
issued by any governmental authority, and no litigation has been instituted nor
(to the best knowledge of the Obligors) have any claims been made by any third
parties relating to the licenses and permits issued by any Governmental Body for
the operation of their businesses, and no such citation, litigation or claim, to
the best knowledge of the Obligors, is contemplated by any Governmental Body or
any third persons nor, to the best
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knowledge of the Obligors, does there exist any basis for any such citation,
litigation or claim by any of the authorities or any Person.
5.12 ENVIRONMENTAL STATUS As to all properties owned, leased or operated by
the Obligors and to all operations of the Obligors' businesses:
(A) there is no pending or threatened proceeding affecting any Obligor with
respect to any Environmental Law;
(B) no Obligor has been identified as a responsible or potentially
responsible party under CERCLA or any other Environmental Laws nor received
notification that any hazardous substance or contaminant has been found at any
site;
(C) none of such properties are listed or proposed for listing on the
National Properties List under CERCLA;
(D) no Hazardous Substance or Hazardous Waste (as such term is defined in
any Environmental Laws) have been disposed of or otherwise released or
discharged on such properties;
(E) no underground storage tanks exist on the properties and any removal of
any such tanks from the properties was undertaken in compliance with the
Underground Storage Tank Act; and
(F) no friable asbestos, or any substance containing asbestos or PCB's have
been installed in or exists on such properties.
5.13 REAFFIRMATION Each and every request for an Advance or the issuance of
a Letter of Credit hereunder shall be deemed as an affirmation by each Obligor
that no Default nor Event of Default exists hereunder and that the
representations and warranties contained in this Article V are true and accurate
as of the date of each such request (notwithstanding that some of the terms
hereof speak as of the date of this Agreement) and that each Obligor is in
compliance with all applicable laws, rules and regulations.
5.14 PROCEEDS OF LOAN The Obligors are not engaged principally, or as one
of their important activities, in the business of extending credit for the
purpose of purchasing or carrying any margin stock within the meaning of
Regulation U of the Board of Governors of the Federal Reserve System, as
amended. No part of the proceeds of the Loan will be used, directly or
indirectly, for a purpose which violates any law, rule or regulation of any
Governmental Body, including without limitation the provisions of Regulations G,
T, U or X of the Board of Governors of the Federal Reserve System, as amended.
Each Obligor represents that the proceeds of the loan(s) provided for herein
shall be used in the manner set forth in Section 2.8 hereof. No proceeds of any
loan or other financial accommodations hereunder shall be used to purchase or
carry any margin stock (within the meaning of Regulation U issued by
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the Board of Governors of the Federal Reserve System) or to extend credit to
others for the purpose of purchasing or carrying any margin stock.
5.15 BORROWER AND OBLIGOR The Obligors are operated as part of one
consolidated business entity and are directly dependent upon each other for and
in connection with their respective business activities and their respective
financial resources. Each Obligor will receive a direct economic and financial
benefit from the Obligations incurred under this Agreement by Borrower, and the
assumption of such Obligations is in the best interests of Borrower and each
other Obligor.
5.16 SOLVENCY The fair value of the business and assets of Borrower and the
other Obligors will be in excess of the amount that will be required to pay its
liabilities (including, without limitation, contingent, subordinated, unmatured
and unliquidated liabilities on existing debts, as such liabilities may become
absolute and matured), in each case after giving effect to the transactions
contemplated by this Agreement and the use of proceeds therefrom. Neither
Borrower nor any other Obligor, after giving effect to the transactions
contemplated by this Agreement and the use of proceeds therefrom, will be
engaged in any business or transaction, or about to engage in any business or
transaction, for which such Person has an unreasonably small capital (within the
meaning of the Uniform Fraudulent Transfer Act, as adopted in the State of New
Jersey and Section 548 of the Federal Bankruptcy Code), and neither Borrower nor
any other Obligor has any intent to (A) hinder, delay or defraud any entity to
which it is, or will become, on or after the date hereof, indebted, or (B) to
incur debts that would be beyond its ability to pay as they mature.
5.17 NO DEFAULT The Obligors are not in default under or with respect to
any of their Contractual Obligations in any respect which could have a Material
Adverse Effect. No Default or Event of Default has occurred and is continuing.
5.18 FULL DISCLOSURE Neither this Agreement nor any other Loan Document or
certificate, written statement or other document furnished to Bank, or to any
appraiser or engineer employed or engaged by any of them, by or, to the
knowledge of the Obligors, on behalf of any Obligor in connection with the
transactions contemplated by this Agreement and the other Loan Documents,
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained herein or therein not
misleading under the circumstances in which they were made. There is no fact or
circumstance known to the Obligors which the Obligors have not disclosed in
writing to Bank which materially adversely affects or, so far as the Obligors
can now reasonably foresee, will materially adversely affect the assets,
business, prospects or financial or other condition of the Obligors or the
ability of the Obligors to operate their businesses and to perform their
obligations hereunder.
5.19 DOCUMENTARY/STAMP TAXES The filing and recording of any and all
documents required to perfect Bank's security interests granted herein will not
result in any documentary or stamp taxes.
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5.20 SHAREHOLDERS' AGREEMENTS Except as set forth on Schedule 5.20, there
are no agreements or contracts among any of the Obligors including but not
limited to shareholder/repurchase agreements.
5.21 PERFECTION OF SECURITY INTERESTS Upon the filing of UCC-1 Financing
Statements in (i) the office of the New Jersey Secretary of State, (ii) the
office of the Secretary of the Commonwealth of Pennsylvania and (iii) the office
of the New York Secretary of State, Bank will have a duly perfected first
priority security interest in all Collateral described in this Agreement,
subject only to any Permitted Encumbrances.
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VI
AFFIRMATIVE COVENANTS OF OBLIGORS
---------------------------------
6.1 AUDIT AND OTHER REPORTS (A) The Obligors agree that within one hundred
twenty (120) days of the close of each fiscal year, they will furnish Bank with
a detailed report of audit, including a balance sheet, statements of financial
condition, profit and loss statement, income and cash flow statement,
reconciliation of net worth, notes to financial statements, certified on an
unqualified basis, by an independent certified public accountant satisfactory to
Bank along with a copy of Borrower's 10K report together with any other
information which may assist Bank in assessing the Obligors' financial
condition; (B) The Obligors will also furnish within sixty (60) days of the
close of each fiscal quarter, a management prepared quarterly similar statement
on a compilation basis, all prepared in a format acceptable to Bank, together
with all other information described in subsection (A) above, including without
limitation, Borrower's 10Q report; (C) Simultaneous with the submission of the
statements required under subsections (A) and (B) above, and for each quarter of
each year, each Obligor shall cause to be submitted to Bank a certificate of the
chief financial officer of each such Obligor in the form of Exhibit F annexed
hereto (i) certifying the financial information as true, correct and complete,
(ii) certifying that all representations and warranties set forth in the Loan
Documents are true and correct, (iii) setting forth the calculations of the
financial tests described in Section 7.2 hereof and attesting that none of the
covenants set forth in this Agreement have been breached and (iv) certifying
that no event has occurred which, with the passage of time and/or giving of
notice, would constitute a Default or Event of Default; (D) In the event any
Advances or Letters of Credit are outstanding at a month's end or if no Advances
or Letters of Credit are so outstanding then at the end of each calendar
quarter, not later than the 15th day after the end of such month or calendar
quarter as applicable, an accounts receivable aging and corresponding Borrowing
Base Certificate; (E) Promptly after the furnishing thereof to third parties,
the Obligors shall furnish to Bank copies of any statements, reports, proxy
material, registration statement and prospectus furnished to any holder of any
securities of any of the Obligors or filed with any regulatory agency or
agencies; (F) Promptly, but no later than ten (10) days after a responsible
officer of an Obligor shall become aware of (i) a Reportable Event or
"prohibited transaction" as such term is defined in ERISA, (ii) the occurrence
of an event which, with the passage of time and/or giving of notice, would
constitute a Default or Event of Default, (iii) the commencement of any
proceeding or litigation which, if adversely determined, would adversely affect
an Obligor's financial condition or its ability to conduct business, (iv)
changes in the executive management of any Obligor, (v) the termination or
threatened termination of or claim of breach by any Obligor of any material
contract, agreement or obligation, or of any claim of patent infringement, (vi)
the formation of any Subsidiary of an Obligor, together with duly executed
originals of the resolutions, Guaranty and security agreement required
hereunder, (vii) modifications to the certificate or articles of incorporation,
bylaws or other organizational documents of any Obligor and (viii) Borrower's
intention to consummate a Permitted Acquisition, together with copies of all
documents to be executed in connection with such contemplated Permitted
Acquisition; in each case described in clauses (i)-(viii), the Obligors shall
provide notice specifying the existence of the event and as to the matters
described in clauses (i)-(v), the action such Obligor is taking or proposes to
take
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with respect thereto; (G) The Obligors will furnish to Bank prompt written
notice if: (i) any Indebtedness of any Obligor is declared or shall become due
and payable prior to its stated maturity, or called and not paid when due or
(ii) a default shall have occurred under any note or the holder of any such
note, or other evidence of Indebtedness, certificate of security evidencing any
such Indebtedness or any obligee with respect to any other Indebtedness of any
Obligor has the right to declare any such Indebtedness due and payable prior to
its stated maturity as a result of such default; (H) The Obligors agree to
furnish to Bank with reasonable promptness such other data and information
concerning Borrower and any other Obligor as from time to time may be reasonably
requested by Bank; and (I) The Obligors agree to furnish Bank within one hundred
fifty (150) days after the close of each fiscal year a management letter by an
independent accounting firm acceptable to Bank; Bank hereby acknowledges that
Price Waterhouse is acceptable as of the date hereof. All financial statements
shall be on a consolidated and consolidating basis and in accordance with GAAP.
6.2 INSURANCE Each Obligor agrees to keep all of the tangible Collateral
assigned hereunder insured and obtain business interruption insurance, at its
own cost and expense, for the benefit of Bank, and in such amounts, in such
companies, and against such risks as may be acceptable to Bank, and deliver the
policies evidencing such insurance to Bank. If the Obligors fail to take the
action called for herein, Bank may, in its discretion obtain insurance covering
Bank's interest in the Collateral and the amount of the premium for said
insurance shall be added to the Obligations of Borrower to Bank. All policies of
insurance on the Collateral shall be in form and with insurers recognized as
adequate by prudent business persons and all such policies shall be in such
amounts as may be satisfactory to Bank. The Obligors shall deliver to Bank the
original (or certified copy) of each policy of insurance and evidence of payment
of all premiums therefor. Such policies of insurance shall contain an
endorsement, in form and substance satisfactory to Bank showing loss payable to
Bank. Such endorsement or an independent instrument furnished to Bank, shall
provide that the insurance companies will give Bank at least thirty (30) days
prior written notice before any such policy or policies of insurance shall be
altered or canceled and that no act or default of an Obligor or any other Person
shall affect the right of Bank to recover under such policy or policies of
insurance in case of loss or damage. The Obligors hereby direct all insurers
under such policies of insurance to pay all proceeds payable thereunder directly
to Bank. The Obligors irrevocably make, constitute and appoint Bank (and all
officers, employees or agents designated by Bank) as the Obligors' true and
lawful attorney (and agent-in-fact) for the purpose of making, settling and
adjusting claims under such policies of insurance (provided that until an Event
of Default exists, Bank shall consult with such Obligors prior to finally
making, settling or adjusting claims under such policies of insurance),
endorsing the name of an Obligor on any check, draft, instrument or other item
of payment for the proceeds of such policies of insurance and for making all
determinations and decisions with respect to such policies of insurance. In the
event an Obligor, at any time or times hereafter, shall fail to obtain or
maintain any of the policies of insurance required above or to pay any premium
in whole or in part relating thereto, then Bank, without waiving or releasing
any obligation or default by the Obligors hereunder, may (but shall be under no
obligation to do so) at any time or times thereafter obtain and maintain such
policies of insurance and pay such premium and take any other action with
respect thereto which Bank deems advisable. All sums so disbursed by Bank,
including reasonable attorneys' fees, court costs,
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expenses and other charges related thereto, shall be payable, on demand, by the
Obligors to Bank and shall be additional Obligations hereunder secured by the
Collateral. The Obligors also agree to at all times maintain insurance, both
hazard and liability, against such risks and in such amounts as reasonably
prudent to companies similarly situated as such Obligors would maintain and to
furnish to each Bank from time to time evidence that such insurance is in full
force and effect.
6.3 PAYMENT OF EXPENSES The Obligors will pay any and all expenses,
including reasonable counsel fees and disbursements, filing and recording fees
and taxes, and all other charges and expenses incurred or to be incurred by Bank
in connection with the preparation and execution and recording of this Agreement
and all other Loan Documents, and the Advances made under this Agreement and all
amendments and modifications hereto and in defending or prosecuting any actions
or proceedings or otherwise enforcing any rights arising out of or relating to
Bank's transactions with Borrower and/or any other Obligors.
6.4 GUARANTY The Obligors will cause all now existing or hereafter formed
Subsidiaries to execute and deliver to Bank, and remain in full force and
effect, (i) guaranty and suretyship agreements substantially in the form set
forth on Exhibit G-1, wherein said parties shall jointly and severally guarantee
the unconditional payment and performance of all Obligations of Borrower to
Bank, (ii) joinder agreements substantially in the form set forth on Exhibit
G-2, wherein said parties shall agree to be an Obligor hereunder and to be bound
by all of the terms and conditions hereof and (iii) if requested by the Bank,
security agreements in form and substance satisfactory to Bank.
6.5 LANDLORD'S WAIVER The Obligors shall cause the landlord of all premises
where any of the Collateral provided for herein may be located (including
without limitation, any premises now or hereafter leased by Borrower or any
other Obligor) to execute and deliver to Bank a landlord's waiver in the form
set forth on Exhibit E.
6.6 GOOD WORKING CONDITION The Obligors shall maintain all of their
property in good working condition, ordinary wear and tear excepted.
6.7 OBSERVANCE OF LEGAL REQUIREMENT, LICENSES AND PERMITS AND PROTECTION OF
COLLATERAL
(A) Each Obligor shall comply with any and all laws, legislation, rules and
regulations in effect as of the date hereof and subsequent hereto, including but
not limited to all state, local and federal laws, legislation, rules and
regulations relating to employee pension and benefit funds, the payment of
taxes, assessments, and other governmental charges, zoning, and the use,
occupancy, transfer or encumbrancing of the Collateral and all Environmental
Laws, except with respect to the payment of taxes, assessments and other
governmental charges, as such payments thereof shall be contested in good faith
and by appropriate proceedings diligently conducted by such Obligor, provided
that adequate reserves shall have been maintained therefor. Each Obligor agrees
to comply with all reasonable conditions required by Bank designed to
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protect Bank and the Collateral from the effect of all Environmental Laws, ERISA
and such other laws, legislation, rules and regulations as are in, or may come
into, effect and apply to an Obligor, Bank, the transactions contemplated hereby
or the Collateral or any occupants or users thereof, whether as lessees,
tenants, licensees or otherwise. Borrower agrees to pay any costs required to
comply with any of the above conditions.
(B) Each Obligor shall observe and comply in all material respects with all
laws (including ERISA), ordinances, orders, judgments, rules, regulations,
certifications, franchises, permits, licenses, directions and requirements of
all Governmental Bodies, which now or at any time hereafter may be applicable to
such Obligor and the operation of its business.
(C) Each Obligor will continue to hold all necessary licenses and permits
for the operations of their business.
(D) Each Obligor shall, in the event that any Lien shall be filed against
its Collateral by any Governmental Body in connection with the discharge of
hazardous substances or waste, either (i) pay such amounts necessary to
discharge the Lien or (ii) furnish to such Governmental Body a bond, cash
deposit or security necessary to discharge such Lien.
(E) Each Obligor shall promptly clean up any hazardous substances or waste
discharged without a proper permit therefor in accordance with Environmental
Laws.
6.8 INSPECTION Bank (by any of its officers, employees and agents) shall
have the right, at any time or times during the Obligors' usual business hours,
to inspect the Collateral, all records related thereto, all financial records,
and the premises upon which any of the Collateral is located, to make extracts
from and/or audit such records, to discuss the Obligors' affairs and finances
with any Person (including without limitation, the Obligors' officers and
outside accountants) and to verify the amount, quality, quantity, value and
condition of, or any other matter relating to, the Collateral or the Obligors.
6.9 COLLATERAL REQUIREMENTS Unless Bank notifies Borrower in writing that
it dispenses with any one or more of the following requirements, the Obligors
will (A) upon an Event of Default, give Bank assignments, in form acceptable to
Bank, of all Accounts, as defined herein, and of the monies due or to become due
on specific contracts related to Accounts; (B) upon an Event of Default, furnish
to Bank all original and other documents evidencing right to payment including
but not limited to invoices, original orders, shipping and delivery receipts;
(C) upon an Event of Default, give Bank such financial statements, reports,
lists of Account Debtors and other data concerning its Accounts, contracts and
collections and the other Collateral, or any other matters which Bank may, from
time to time specify; (D) inform Bank immediately of the rejection of Goods or
services, delay in performance, or claims made, in regard to Eligible Accounts;
(E) make no change in terms of any Eligible Account against which Bank has
advanced any money; (F) furnish to Bank all information received by an Obligor
adversely affecting the financial standing of any Account Debtor; (G) notify
Bank immediately in writing if any of its Accounts arise out of contracts
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between an Obligor and the United States or any department, agency or
instrumentality thereof, or any other governmental body and take all steps
necessary to protect Bank under the Federal Assignment of Claims Act or other
applicable state or local statutes or ordinances; (H) deliver to Bank,
appropriately endorsed, any Instrument or Chattel Paper connected with any
Account; (I) ▇▇▇▇ its records of its Accounts in any manner satisfactory to Bank
to indicate the interest of Bank; (J) collect its Accounts in the ordinary
course of business and prior to a Default sell its Inventory only in the
ordinary course of business for value to buyers in the ordinary course of
business; (K) upon notice by Bank after a Default with respect to any payment
Obligations of Borrower hereunder, not sell or transfer after a Default any of
its Inventory; (L) keep accurate and complete records of its Accounts and
Inventory; and (M) promptly notify Bank in writing of any trademarks, trade
names, patents or copyrights which it may hereafter own or obtain a license to
use or under which it may issue invoices.
6.10 CONTROL OF ACCOUNTS
(A) Upon an Event of Default, Bank shall have the right at any time and
from time to time, without notice, to notify Account Debtors to make payments to
Bank, to endorse all items of payment which may come into its hands payable to
an Obligor, to take control of any cash or non-cash proceeds of Accounts and of
any returned or repossessed goods; to compromise, extend or renew any Account or
deal with it as it may deem advisable, and to make exchanges, substitutions or
surrenders of Collateral and to notify the postal authorities to deliver all
mail, correspondence or parcels addressed to an Obligor to Bank at such address
as Bank may choose.
(B) The Obligors herewith appoint Bank or its designee as Attorney-in-Fact
to endorse the Obligors' names on any checks, notes, acceptances, drafts or any
other Instrument or document requiring said endorsement and to sign the
Obligors' names on any invoice or bills of lading relating to any Account, or
drafts against its customers, or schedules or confirmatory assignment on
Accounts, or notices of assignment, financing statements under the Uniform
Commercial Code, and other public records, and in verification of Accounts and
in notices to Account Debtors; provided, however, that Bank shall not exercise
any rights pursuant to its appointment as Attorney-in-Fact under this Section
6.10(B) until the occurrence of an Event of Default. Bank shall have no
obligation to preserve any rights against any Person obligated on any Account,
Chattel Paper, Instrument or other item of Collateral.
6.11 CHANGE OF LOCATIONS Each Obligor will furnish Bank with at least ten
(10) days prior written notice of any change in location of or addition to its
chief executive office, the office where it keeps its records concerning its
accounts, its location of Inventory and other assets, and other business
locations.
6.12 PRIMARY DEMAND DEPOSIT ACCOUNTS The Obligors agree to maintain at Bank
their primary demand deposit accounts.
6.13 POST CLOSING REQUIREMENTS. The Obligors agree:
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(i) to use their best efforts to obtain within ninety (90)
days of the Closing Date a landlord's waiver in form acceptable
to Bank duly executed by the landlord of the leased facility at ▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇;
(ii) to use their best efforts to cause within ninety (90)
days of the Closing Date, IBM Credit Corporation and Finova
Capital Corporation to release their liens on the equipment and
other fixed assets of Borrower;
(iii) to cause IBM Credit Corporation within thirty (30)
days of the Closing Date to execute an intercreditor agreement
reasonably acceptable to Bank; and
(iv) to cause Microage Computer Centers, Inc. within sixty
(60) days from the Closing Date to terminate all existing UCC
financing statements.
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VII
NEGATIVE COVENANTS OF OBLIGORS
------------------------------
7.1 LOANS AND ADVANCES AND INVESTMENTS The Obligors will not, without prior
written consent of Bank, make any loans or advances to or investment in any
Person except for Investment Obligations.
7.2 FINANCIAL COVENANTS
(A) Total Liabilities/Tangible Net Worth. The Obligors will not, on a
consolidated basis, allow its ratio of Total Liabilities to Tangible Net Worth
to exceed 2.00:1.00 at any time.
(B) Fixed Charge Coverage Ratio. The Obligors will not allow its Fixed
Charge Coverage Ratio, on a consolidated basis, to be less than 3.00:1.00,
measured quarterly.
7.3 LIENS The Obligors will not allow or suffer any Lien to exist on any of
their assets except for Permitted Encumbrances.
7.4 LIMITATION ON INDEBTEDNESS The Obligors will not create, incur, assume
or suffer to exist any Indebtedness except Permitted Indebtedness.
7.5 TRANSACTIONS AMONG AFFILIATES The Obligors will not become a party to
any transaction with an Affiliate of Borrower or ▇▇▇▇ Gang unless the terms and
conditions relating to such transaction are as favorable to such Obligor as
would be obtainable at the time in a comparable arms-length transaction with a
Person other than an Affiliate or ▇▇▇▇ Gang or pay or incur any obligation to
pay any management, service, consulting or similar fees to any Affiliate or ▇▇▇▇
Gang, excluding salaries, bonuses and benefits to ▇▇▇▇ Gang who is also an
employee of Borrower.
7.6 SPECIAL COVENANTS AS TO ASSETS The Obligors covenant that until
satisfaction in full of all Obligations of Borrower to Bank and until
termination of this Agreement:
(A) no Inventory shall be stored with a bailee, warehouseman or similar
party without Bank's prior written consent and, if Bank gives such consent, the
appropriate Obligor will concurrently therewith cause any such bailee,
warehouseman or similar party to issue and deliver to Bank, in form and
substance acceptable to Bank, warehouse receipts therefor in Bank's name.
(B) The Obligors will not hold any Goods belonging to third parties or in
which other parties have an interest, including any Goods sold on a ▇▇▇▇ and
hold basis, except as set forth on Schedule 5.8.
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(C) The Obligors will not purchase or otherwise hold Goods on a consignment
basis except as set forth on Schedule 5.8.
(D) Except as set forth on Schedule 5.8 none of the Obligors' Inventory
will be of a nature that contains any labels, trademarks, trade names, or other
identifying characteristics which are the property of third parties, and the use
of which by an Obligor is in violation of the rights of such third parties or a
violation of any license, royalty or similar agreements with any third parties.
(E) Except as set forth on Schedule 5.8, the Obligors will not allow any
Goods of the Obligors to be held by any Person in the future.
(F) Except upon prior written notice to Bank, the Obligors will not in the
future purchase any Inventory except in the ordinary course of business from
Persons customarily in the business of selling such Inventory.
(G) The Obligors will not, without prior written consent of Bank, remove
the Collateral from its present location, except for the removal of Inventory
upon its sale;
(H) The Obligors will not sell or transfer any Inventory to any Affiliate,
Subsidiary or ▇▇▇▇ Gang;
(I) The Obligors will not sell, lease or transfer any of their Inventory or
other assets except for sales of Inventory in the ordinary course of business to
good faith purchasers for value; and
(J) The Obligors will not cause any surety bonds to be issued on their
behalf in connection with any contracts or purchase orders except upon not less
than ten (10) days prior written notice to Bank.
7.7 PREPAYMENTS OF INDEBTEDNESS The Obligors will not prepay or obligate
themselves to prepay in whole or in part, any Indebtedness (other than any
Indebtedness due hereunder), excluding ordinary short-term trade debt owing to
Finova Capital Corporation or IBM Credit Corp.
7.8 FISCAL YEAR The Obligors will not change their fiscal years.
7.9 CHANGE IN CONTROL The Obligors will not make or suffer a change in
control that reduces ▇▇▇▇ Gang's ownership in Borrower to an amount that is less
than that of any other shareholder and no other Obligor (other than Borrower)
shall sell or transfer any stock or other equity interest or issue any
additional stock or other equity interest in such Obligor or options or warrants
for the issuance of stock or other equity interest in such Obligor other than
the issuance of common stock to such Obligor's existing stockholders.
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7.10 CHANGE IN ACCOUNTING PRINCIPLES The Obligors will not change or permit
any change in accounting principles applied to the Obligors, except as required
by GAAP.
7.11 SALE AND LEASEBACK The Obligors will not enter into any arrangement
with any Person providing for the leasing by an Obligor of property which has
been or is to be sold or transferred by an Obligor to such Person or to any
other Person to whom funds have been or are to be advanced by such Person on the
security of such property or rental obligations of such Obligor.
7.12 MAINTAIN CORPORATE EXISTENCE AND NATURE OF BUSINESS
(A) The Obligors will not allow their corporate existence to be other than
in good standing and will not dissolve or liquidate (or discontinue their normal
operations with the intent to liquidate), or merge or consolidate with or
acquire or affiliate with any other business entity or form any Subsidiary or
Affiliate; provided, however, that Borrower shall be permitted (i) to consummate
a Permitted Acquisition using the proceeds of an Acquisition Advance, subject to
the limitations set forth in Section 2.1 hereof and provided further that no
Default or Event of Default shall have occurred and be continuing or would
result from the making of such Acquisition Advance or the consummation of such
Permitted Acquisition and (ii) to form a Subsidiary which has resolved by
unanimous resolution of the board of directors and shareholders of such
Subsidiary to execute the Guaranty required under this Agreement and has duly
executed such Guaranty and provided further that no Default or Event of Default
shall have occurred and be continuing or would result from the formation of such
Subsidiary. Notwithstanding anything in the foregoing to the contrary, Borrower
shall be permitted to consummate a Permitted Acquisition in which the
consideration paid consists entirely of cash (other than Acquisition Advances)
or equity in Borrower and provided further that no Default or Event of Default
shall have occurred and be continuing or would result from the consummation of
such Permitted Acquisition.
(B) The Obligors will not change their names without furnishing to Bank at
least ten (10) days prior written notice thereof.
(C) The Obligors will not utilize any trade name not set forth on Schedule
5.8 without furnishing to Bank at least ten (10) days prior written notice
thereof.
(D) The Obligors will not change the general nature of their businesses.
7.13 DIVIDENDS; REDEMPTIONS The Obligors will not pay or declare any cash
or property dividends, nor otherwise make a withdrawal or distribution of
capital or income, nor redeem, retire, repurchase or otherwise acquire or set
aside reserves to acquire any stock, partnership or other ownership interest of
any Obligor if a Default or Event of Default
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exists hereunder or any such action would cause a Default or Event of Default to
occur hereunder.
7.14 DISCHARGE OF HAZARDOUS WASTE The Obligors shall not cause or permit to
exist a discharge of hazardous substances or waste resulting in damage to
natural resources, unless such discharge is in compliance with the conditions of
a valid permit issued by the appropriate Governmental Body.
7.15 LEASES The Obligors shall not enter into any leases of real property,
excluding Permitted Leases.
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VIII
EVENTS OF DEFAULT
-----------------
The occurrence of any of the following shall constitute an Event of
Default:
8.1 NON-PAYMENT Failure on the part of any Obligor to pay any Obligation to
Bank when due.
8.2 NON-PERFORMANCE Failure on the part of any Obligor to perform when such
performance is due any term, covenant or condition contained in this Agreement
or in any other Loan Document or any other agreement now existing or hereafter
entered into with Bank, or in any document executed in connection with any such
agreements.
8.3 MISREPRESENTATION Any representation, covenant or warranty made by any
Obligor in this Agreement, or any other Loan Document, or in connection with any
instrument of guaranty or security furnished to Bank shall have proved to have
been inaccurate in any substantial or material respect as of the date or dates
with respect to which it is made or deemed to have been made.
8.4 OTHER LIEN Any Obligor shall have caused or permitted a security
interest or Lien, perfected or otherwise, other than the security interest and
Liens specifically provided for or permitted hereunder, to be created in any of
its assets, or shall have failed to take any action requested by Bank to perfect
or protect the security interests and Liens provided for herein.
8.5 INSOLVENCY Any Obligor shall have applied for or consented to the
appointment of a custodian, receiver, trustee or liquidator of all or a
substantial part of its assets; a custodian shall have been appointed with or
without consent of any Obligor; any Obligor is generally not paying its debts as
they become due; has made a general assignment for the benefit of creditors; has
been adjudicated insolvent; or has filed a voluntary petition in bankruptcy, or
a petition or an answer seeking reorganization or an arrangement with creditors
or to take advantage of any insolvency law, or an answer admitting the material
allegations of a petition in any bankruptcy, reorganization or insolvency
proceeding; or taken corporate action for the purpose of effecting any of the
foregoing; or an order, judgment or decree shall have been entered, without the
application, approval or consent of any Obligor by any court of competent
jurisdiction approving a petition seeking reorganization of any Obligor, or
appointing a receiver, trustee, custodian or liquidator of any Obligor, or a
substantial part of its assets and such order, judgment or decree shall have
continued unstayed and in effect for any period of forty-five (45) consecutive
days; or a petition in bankruptcy shall have been filed against any Obligor and
shall not have been dismissed for a period of thirty (30) consecutive days, or
if an Order for Relief has been entered under the Bankruptcy Code, or if any
Obligor shall have suspended the transaction of its usual business.
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8.6 JUDGMENT OR LIEN Entry of a judgment, issuance of any garnishment,
attachment or distraint, the filing of any lien or of any governmental
attachment against any property of any Obligor in excess of $250,000 in the
aggregate which entry, issuance, attachment or filing shall have continued
unstayed and in effect for a period of thirty (30) consecutive days.
8.7 NON-COMPLIANCE WITH LEASES OR LAWS Failure of any Obligor to comply
with the terms and conditions of any lease covering the premises where any of
its assets are located, including the Collateral and any orders, ordinances,
laws or statutes of any city, state or other governmental department having
jurisdiction with respect to such premises or the conduct of business thereon,
which such non-compliance has a Material Adverse Effect on such Obligor.
8.8 ORGANIZATIONAL CHANGE Any change in the existing corporate organization
of any Obligor, including but not limited to a change to a partnership (general
or limited), limited liability company or the dissolution of any Obligor.
8.9 IMPAIRMENT OF RESPONSIBILITY Occurrence of any event which, in the
opinion of Bank, impairs the financial responsibility of any Obligor, which such
impairment has a Material Adverse Effect on such Obligor.
8.10 ADVERSE CHANGE The determination by Bank that a Material Adverse
Change has occurred of any Obligor.
8.11 MISREPRESENTATION OF FACT The determination by Bank that a material
misrepresentation of fact has been made by any Obligor in any writing
supplementary or ancillary hereto.
8.12 ERISA If (A) any Reportable Event occurs and shall be continuing for
thirty (30) days after notice from Bank to Borrower, or (B) any Plan shall be
terminated, or (C) the Plan administrator of any Plan shall file with the PBGC a
notice of intention to terminate such Plan, or (D) the PBGC shall institute
proceedings to terminate any Plan or appoint a trustee to administer any Plan,
and, if in any of the cases set forth in (A) through (D) above, Bank reasonably
determines in good faith that any Plan will be terminated and that the amount of
the unfunded guaranteed benefits (within the meaning of Title IV of ERISA)
resulting upon termination of such Plan would have a material adverse effect on
the financial condition and properties or operation of any Obligor if a lien
against the assets of any Obligor were to result under ERISA.
8.13 DEFAULT IN OBLIGATIONS TO THIRD PARTIES Any Obligor is in default
beyond any applicable grace or cure period of any material obligation to any
third party unless (i) a bona fide dispute exists as to such Obligor's
compliance with such obligation, (ii) such bona fide dispute is being diligently
resolved and (iii) any monetary amounts potentially
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owing by such Obligor in connection with such non-compliance are being held in
escrow by such Obligor.
8.14 LICENSES If any license or permit necessary for the continued
operation of any Obligor's customary business is revoked, suspended, terminated
or not renewed.
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IX
CONSEQUENCE OF EVENT OF DEFAULT
-------------------------------
In case any Event of Default shall have occurred, then and in every such
Event of Default, Bank may take any or all of the following actions, at the same
time or at different times, provided that upon the occurrence of an Event of
Default under Section 8.5 hereof the Loan under this Agreement shall
automatically terminate and all Obligations shall automatically be immediately
due and payable;
9.1 ACCELERATION Declare the Loan, sums and Obligations owing Bank from
Borrower under this Agreement or any other agreement or loan between Bank and
Borrower to be forthwith due and payable, whereupon all such sums shall
forthwith become due and payable, without presentment, demand, protest or other
notice of any kind, all of which are hereby expressly waived by the Obligors and
the Commitment shall be terminated.
9.2 POSSESSION Proceed with or without judicial process to take possession
of all or any part of the Collateral provided for herein not already in the
possession of Bank and the Obligors agree that upon receipt of notice of Bank's
intention to take possession of all or any part of said Collateral, the Obligors
will do everything reasonably necessary to assemble the Collateral and make same
available to Bank at a place to be designated by Bank. The Obligors hereby waive
any and all rights they may have, by statute, constitution or otherwise to
notice or a hearing to determine the probable cause of Bank to obtain
possession, by Court proceedings or otherwise, of the Collateral provided for in
this or in any other agreement with Bank.
9.3 METHODS OF SALE So long as Bank acts in a commercially reasonable
manner, assign, transfer and deliver at any time or from time to time the whole
or any portion of the Collateral or any rights or interest therein in accordance
with the Uniform Commercial Code, and without limiting the scope of Bank's
rights thereunder, Bank may sell the Collateral at public or private sale, or in
any other manner, at such price or prices as Bank may deem best, and either for
cash or credit, or for future delivery, at the option of Bank, in bulk or in
parcels and with or without having the Collateral at the sale or other
disposition. Bank shall have the right to be the purchaser at any public sale.
Bank shall have the right to conduct such sales on Borrower's or any other
Obligor's premises or elsewhere and shall have the right to use Borrower's or
any other Obligor's premises without charge for such sales for such time or
times as Bank may see fit. Bank is hereby granted license or other right to use,
without charge, the Obligors' labels, patents, copyrights, rights of use of any
name, trade secrets, trade names, trademarks and advertising matter, or any
property of a similar nature, as it pertains to the Collateral, in advertising
for sale and selling any Collateral and the Obligors' rights under all licenses
and franchise agreements shall inure to Bank's benefit. The Obligors agree that
a reasonable means of disposition of Accounts shall be for Bank to hold and
liquidate any and all Accounts. In the event of a sale of the Collateral, or any
other disposition thereof, Bank shall apply all proceeds first to all costs and
expenses of disposition, including attorneys' fees, and then to the Obligations
of Borrower and the other Obligors to Bank.
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9.4 RETENTION OF COLLATERAL Elect to retain the Collateral or any part
thereof in satisfaction of all Obligations due from Borrower and the other
Obligors to Bank upon notice of such proposed election to Borrower and the other
Obligors and any other party as may be required by the Uniform Commercial Code.
9.5 SET-OFF Bank shall have the right immediately, and without notice or
other action to set-off against any of Obligor's Obligations to Bank any sum
owed by Bank in any capacity to any Obligor whether due or not, and Bank shall
be deemed to have exercised such right of set-off and to have made a charge
against any such sum immediately upon the occurrence of such Event of Default,
even though the actual book entries may be made at some time subsequent thereto.
9.6 ATTORNEYS' FEES AND EXPENSES Add to the Obligations of Borrower, Bank's
reasonable expenses to obtain or enforce payment of any Obligations hereunder
and the enforcement or liquidation of any debt hereunder shall include
reasonable attorneys' fees plus other legal expenses incurred by Bank.
9.7 INCREASE IN INTEREST/LATE CHARGE Increase the rate of interest under
any Obligations to a rate of four percent (4%) in excess of the highest rate
otherwise being charged hereunder. Unless otherwise agreed by Bank, this
increase in interest rate shall be retroactive to the date of the first
occurrence of an Event of Default. Add a late charge of five percent (5%) of any
payment of principal or interest required to be made by Borrower to Bank for
each month or portion thereof such payment remains unpaid, such period to begin
ten (10) days after such payment is required to be made.
9.8 BANK'S PERFORMANCE OF OBLIGORS' OBLIGATION If any Obligor fails to
comply with any of the covenants or perform any of its obligations set forth
herein or in any other Loan Document, Bank may, but shall have no obligation to,
perform any such obligations or undertake any act to cause such covenant to be
complied with, including, but not limited to, discharging any Lien on any asset
other than Permitted Encumbrances. Any and all sums, and all costs and expenses
incurred by Bank in so performing or causing compliance, shall be payable on
demand together with interest at the default rate provided for in Section 9.7
hereof from the date of any such payment by Bank until the date paid by the
Obligors. Any such performance by Bank shall not cure any Default or Event of
Default by the Obligors.
9.9 OTHER REMEDIES Exercise any other remedies under the Uniform Commercial
Code or other applicable law, or any other Loan Document, including but not
limited to (i) enforcing the obligations of any or all of the Guarantors under
the Guaranty and/or (ii) proceeding to enforce its right by suit in equity,
action at law or other appropriate proceeding, whether for payment or the
specific performance of the covenants or agreements contained in this Agreement
or any other Loan Document.
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X
MISCELLANEOUS
-------------
10.1 NO WAIVER The Obligors agree that no delay on the part of Bank in
exercising any power or right hereunder or any other Loan Document shall operate
as a waiver of any such power or right, nor act as a consent to any departure by
any Obligor from any of the terms or conditions hereof or thereof, preclude
other or further exercise thereof, or the exercise of any other power or right.
No waiver whatsoever shall be valid unless in writing signed by Bank and then
only to the extent set forth therein.
10.2 MODIFICATION OR AMENDMENT This Agreement and every other Loan Document
cannot be changed orally and cannot be changed by an executory agreement unless
such agreement is in writing and signed by all parties hereto by their duly
authorized officers.
10.3 WAIVER OF NOTICE The Obligors waive presentment, dishonor and notice
of dishonor, protest and notice of protest of all commercial papers at any time
held by Bank on which any Obligor is in any way liable.
10.4 ONE INSTRUMENT The provisions of this Agreement shall be in addition
to those of any notes or other evidence of the Obligations held by Bank relating
to this particular transaction, all of which shall be construed as one
instrument.
10.5 LAW OF NEW JERSEY This Agreement and all other Loan Documents and the
rights of the parties hereto and thereto shall be governed by the internal laws
of the State of New Jersey without regard to conflict of laws.
10.6 JURISDICTION The Obligors hereby irrevocably consent to the
jurisdiction of the Courts of the State of New Jersey or any Federal Court in
such State in connection with any action or proceeding arising out of or related
to this Agreement or any other Loan Document. In any such litigation, the
Obligors waive personal service of any summons, complaint or other process and
agree that service may be made by certified or registered mail to them, at the
address provided herein.
10.7 SUCCESSORS OR ASSIGNS This Agreement and all other Loan Documents
shall be binding upon and shall inure to the benefit of the parties hereto,
their respective successors and assigns, provided, however, that Borrower shall
not have any right to assign any of its rights hereunder.
10.8 RIGHTS CUMULATIVE The rights and remedies herein expressed or in any
other Loan Document to be vested in or conferred upon Bank shall be cumulative
and shall be in addition to and not in substitution for or in derogation of the
rights and remedies conferred upon secured creditors by the Uniform Commercial
Code or any other applicable law.
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10.9 LIMITATION OF LIABILITY No claim may be made by the Obligors or any
other Person against Bank or, as the case may be, directors, officers,
employees, attorneys or agents of Bank for any special, punitive, indirect or
consequential damages in respect of any claim for breach of contract arising out
of or related to the transactions contemplated by this Agreement, or any act,
omission or event occurring in connection therewith; and the Obligors hereby
waive, release and agree not to ▇▇▇ upon any claim for any such damages, whether
or not accrued and whether or not known or suspected to exist in its favor.
10.10 NOTIFICATION OF DISPOSITION OF COLLATERAL Any notification of a sale
or other disposition of the Collateral will be sufficient if given in the manner
set forth in Section 10.11 hereof not less than five (5) days prior to the day
on which such sales or other disposition will be made, and such notification
shall be deemed reasonable notice.
10.11 ADDRESSES OF NOTICES Any written notice required or permitted to be
given by this Agreement and the other Loan Documents shall be given or made in
writing, including telecopy, and shall be, as elected by the party giving such
notice, served personally by messenger or courier service, telecopied (followed
up by a mailing), or mailed in the United States by prepaid, registered or
certified mail, return receipt requested, to the following:
If to any Obligor:
ALPHANET SOLUTIONS, INC.
▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇, Chief Financial Officer
Fax #: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy (except
for routine notices with
respect to borrowings
hereunder and the like)
to:
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
College Centre
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Fax #: (▇▇▇) ▇▇▇-▇▇▇▇
O:\SSDATA\HAT\BANK\▇▇▇▇▇▇▇.6 51 062797
If to Bank:
FIRST UNION NATIONAL BANK
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇, Senior Vice President, Portfolio Management
Fax #: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy (except
for routine notices with
respect to borrowings
hereunder and the like)
to:
▇▇▇▇▇, DANZIG, SCHERER, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
Headquarters Plaza
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Fax #: (▇▇▇) ▇▇▇-▇▇▇▇
Any notice given in accordance with the provisions of this section shall be
deemed effective, if hand delivered, on the date of such delivery, or on the
date telecommunicated if telecopied, or if mailed, on the date upon which the
return receipt is signed or delivery refused or the notice is designated by the
postal authorities as not deliverable, as the case may be. Each party may give
notice to each of the other parties of a change of its address for the purpose
of giving notice under this section which, thereafter until changed by like
notice, shall be the address of such party for purposes of this Agreement. Any
failure to provide notice to the parties' attorneys shall not affect the
validity of any otherwise proper notice.
10.12 TITLES The titles and headings indicated herein and any table of
contents are inserted for convenience only and shall not be considered a part of
this Agreement or in any way limit the construction or interpretation of this
Agreement.
10.13 DISCLOSURE Bank is hereby authorized to disclose any financial or
other information it may have about the Obligors to any present or future
participant or prospective participant, any regulatory body or agency having
jurisdiction over Bank, or to any Person which succeeds to all or any part of
Bank's interest herein.
10.14 TERM This Agreement shall with respect to Section 2.1 hereof have a
term through the Maturity Date or such later date as Bank may agree to in
writing in its sole discretion. The Advances provided for in Section 2.1 hereof
shall be due and payable in full upon expiration of the term as set forth herein
or as otherwise set forth in this Agreement. Notwithstanding the expiration of
the term, the rights of Bank hereunder and the obligations of
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the Obligors hereunder, including but not limited to the grant of security
interests in and Liens on the Collateral as set forth in Article III hereof,
shall remain in full force and effect until all of the Obligations are
indefeasibly paid in full.
10.15 INTEREST LIMITATION It is the intention of Bank and the Obligors to
conform strictly to the laws of the State of New Jersey or the laws of such
other jurisdiction which may be found to apply to the subject transaction
relating to the maximum rate of interest which may be lawfully contracted for or
charged. Nothing contained in this Agreement or any other Loan Document shall be
construed to mean that Borrower has contracted to pay or is obligated to pay any
sum or sums to Bank in excess of those which may lawfully be charged or
contracted for under applicable law of the State of New Jersey or other
applicable law. If any provision of this Agreement or any of the other Loan
Documents shall require payment of any sum or sums of interest in excess of the
maximum permitted rate which may be lawfully contracted for or charged, then
Borrower and Bank agree that such result is as a consequence of their
inadvertence and/or mistake, and the interest charge for which Borrower is
liable under this instrument shall be recomputed for the sole and limited
purpose of determining the extent of the obligations and liabilities of Borrower
to Bank so that the interest charges for which Borrower is liable shall not
exceed the maximum permitted rate which is determined to be applicable.
Additionally, any sums of interest which are collected by Bank from Borrower or
any other Obligor or other source in connection with the Loan evidenced hereby
which are in excess of the maximum permitted rate shall, for the sole and
limited purpose of determining the extent of the obligations and liabilities of
Borrower to Bank, be credited against the amount of principal for which Borrower
is liable to Bank after giving effect to any recomputation and adjustment
required pursuant to the foregoing provisions of this section, or if such
outstanding principal balance and interest are paid in full, any such excess
shall be remitted by Bank to Borrower.
10.16 INDEMNIFICATION The Obligors hereby agree to and do hereby indemnify,
protect, defend and save harmless Bank and any member, officer, director,
official, agent, employee and attorney of Bank, and its respective heirs,
successors and assigns (collectively, the "Indemnified Parties"), from and
against any and all losses, damages, expenses or liabilities of any kind or
nature and from any suits, claims or demands, including reasonable counsel fees
incurred in investigating or defending such claim, suffered by any of them and
caused by, relating to, arising out of, resulting from, or in any way connected
with the Loan Documents and the transactions contemplated therein or the
Collateral (unless caused by the gross negligence or willful misconduct of the
Indemnified Parties) including, without limitation: (i) losses, damages,
expenses or liabilities sustained by Bank in connection with any environmental
cleanup or other remedy required or mandated by any Environmental Laws; (ii) any
untrue statement of a material fact contained in information submitted to Bank
by Borrower and/or any other Obligor or the omission of any material fact
necessary to be stated therein in order to make such statement not misleading or
incomplete; (iii) the failure of Borrower and/or any other Obligor to perform
any obligations herein required to be performed by Borrower and/or any other
Obligor; and (iv) the ownership, construction, occupancy, operations, use and
O:\SSDATA\HAT\BANK\▇▇▇▇▇▇▇.6 53 062797
maintenance of any of Borrower's and/or any other Obligor's properties. The
provisions of this Section 10.16 shall survive termination of this Agreement and
the other Loan Documents.
10.17 WAIVER OF TRIAL BY JURY THE OBLIGORS WAIVE TRIAL BY JURY IN ANY
LITIGATION ARISING OUT OF OR RELATED TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT.
10.18 ARBITRATION
(A) Upon demand of any party hereto, whether made before or after
institution of any judicial proceeding, any dispute, claim or controversy
arising out of, connected with or relating to this Agreement and the other Loan
Documents ("Disputes") between or among parties to this Agreement shall be
resolved by binding arbitration as provided herein. Institution of a judicial
proceeding by a party does not waive the right of that party to demand
arbitration hereunder. Disputes may include, without limitation, tort claims,
counterclaims, disputes as to whether a matter is subject to arbitration, claims
brought as class actions, claims arising from Loan Documents executed in the
future, or claims arising out of or connected with the transaction reflected by
this Agreement
(B) Arbitration shall be conducted under and governed by the Commercial
Financial Disputes Arbitration Rules (the "Arbitration Rules") of the American
Arbitration Association (the "AAA") and Title 9 of the U.S. Code. All
arbitration hearings shall be conducted in the city in which the office of Bank
first stated above is located. The expedited procedures set forth in Rule 51 et
seq. of the Arbitration Rules shall be applicable to claims of less than
$1,000,000. All applicable statutes of limitation shall apply to any Dispute. A
judgment upon the award may be entered in any court having jurisdiction. The
panel from which all arbitrators are selected shall be comprised of licensed
attorneys. The single arbitrator selected for expedited procedure shall be a
retired judge from the highest court of general jurisdiction, state or federal,
of the state where the hearing will be conducted or if such person is not
available to serve, the single arbitrator may be a licensed attorney.
Notwithstanding the foregoing, this arbitration provision does not apply to
disputes under or related to swap agreements.
10.19 PRESERVATION AND LIMITATION OF REMEDIES
(A) Notwithstanding the preceding binding arbitration provisions, Bank,
Borrower and the other Obligors agree to preserve, without diminution, certain
remedies that any party hereto may employ or exercise freely, independently or
in connection with an arbitration proceeding or after an arbitration action is
brought. Bank, Borrower and the other Obligors shall have the right to proceed
in any court of proper jurisdiction or by self-help to exercise or prosecute the
following remedies, as applicable: (i) all rights to foreclose against any real
or personal property or other security by exercising a power of sale granted
under the Loan Documents or under applicable law or by judicial foreclosure and
sale, including a proceeding to confirm the sale; (ii) all rights of self-help
including peaceful occupation of real
O:\SSDATA\HAT\BANK\▇▇▇▇▇▇▇.6 54 062797
property and collection of rents, set-off, and peaceful possession of personal
property; (iii) obtaining provisional or ancillary remedies including injunctive
relief, sequestration, garnishment, attachment, appointment of receiver and
filing an involuntary bankruptcy proceeding; and (iv) when applicable, a
judgment by confession of judgment. Preservation of these remedies does not
limit the power of an arbitrator to grant similar remedies that may be requested
by a party in a Dispute.
(B) Bank, Borrower and the other Obligors agree that they shall not have a
remedy of punitive or exemplary damages against the other in any Dispute and
hereby waive any right or claim to punitive or exemplary damages they have now
or which may arise in the future in connection with any Dispute whether the
Dispute is resolved by arbitration or judicially.
O:\SSDATA\HAT\BANK\▇▇▇▇▇▇▇.6 55 062797
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered by their proper and duly authorized officers as of the
day and year first above written.
FIRST UNION NATIONAL BANK
By: /s/▇▇▇▇ ▇. Longhine
--------------------
Name: Senior Vice President
Title: ▇▇▇▇ Longhine
ATTEST: ALPHANET SOLUTIONS, INC.
By: /s/▇▇▇▇▇▇▇ Gang By: /s/▇▇▇▇ ▇▇▇▇▇▇
------------------- --------------
Name: ▇▇▇▇▇▇▇ Gang Name: ▇▇▇▇ ▇▇▇▇▇▇
Title: Secretary Title: Vice President
Agreeing to the terms hereof:
ATTEST: NETTEMPS, INC.
By: /s/▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ By: /s/▇▇▇▇ ▇▇▇▇▇▇
-------------------- --------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Name: ▇▇▇▇ ▇▇▇▇▇▇
Title: Title: Vice President
O:\SSDATA\HAT\BANK\▇▇▇▇▇▇▇.6 56 062797
SCHEDULE 1.65
Permitted Encumbrances
----------------------
Existing UCC-1 filings in favor of MicroAge Computer Centers, Inc., and First
Fidelity Leasing Group, Inc.
O:\SSDATA\HAT\BANK\▇▇▇▇▇▇▇.6 i 062797
SCHEDULE 5.1
(A) Jurisdiction of incorporation of Obligors and in which they are in
good standing:
Both Obligors incorporated in New Jersey.
(B) Jurisdiction(s) Obligors are authorized to transact business and are
in good standing:
Borrower qualified as foreign corporation in New York and
Pennsylvania.
(C) Prior changes in structure (mergers, consolidations, etc.):
None.
(D) Prior changes in name of Obligors:
Prior corporate names of Borrower were Alphatronics Associates, Inc.,
and Alphatronics, Inc. Borrower also previously transacted business
under tradenames of Microage of Parsippany Computer Stores and
Microage Parsippany. Borrower no longer uses those or any other trade
names.
(E) Trade names used by Obligors or under which invoices are issued:
None
(F) Subsidiaries and Affiliates
Name % of Outstanding Stock Owned
---- ----------------------------
Nettemps, Inc. 100%
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SCHEDULE 5.4
Litigation
NONE
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SCHEDULE 5.8
(A) (i) Obligors' chief executive office:
▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
(ii) Change in location of foregoing within past four (4) months:
None
(iii) Location of Books and Records of Obligors:
▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
(iv) Change in location of foregoing within past four (4) months:
None
(v) Present location(s) of Inventory and other assets:
▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
See Attachments "A" and "B"
(B) Location from which assets have been moved or other location of assets
within past four (4) months:
See Attachments "A" and "B"
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Schedule 5.8 continued
(C) (i) Name and address of warehouses, bailees or similar parties where
any Inventory of Obligors is located:
See Attachment "B"
(ii) if any: warehouse receipts are/are not issued:
None Issued
(iii)if warehouse receipts issued: they are negotiable/non
negotiable:
N/A
(D) Goods held by Obligors in which other parties have any interests,
including Goods sold on a ▇▇▇▇ and hold basis:
None
(E) Goods held by Obligors on a consignment basis:
None
(F) Inventory with trademarks, trade names, and the like which are the
property of others.
None
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Schedule 5.8 continued
(G) Names and addresses of persons holding Goods belonging to Obligors and
location of Goods:
See Attachment "B"
(H) Purchases of Inventory or other assets not in the ordinary course of
business or from persons not customarily in the business of selling
such Goods:
None
(I) Instruments or Chattel Paper held by Obligors relating to Accounts:
None
(J) Trademark, trade names, patents or copyrights.
AlphaNet Solutions (not registered with U.S. Patent and Trademark
Office).
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SCHEDULE 5.9
Surety Bonds
------------
NONE
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SCHEDULE 5.20
Shareholder/Repurchase Agreements
---------------------------------
NONE
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Attachment "A"
Alphanet Solutions, Inc.
Location Addresses
--------------------------------------------------------------------------------
Location Landlord
▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ Associates
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Service Department NJT Holding Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ 600 Parsippany Road
Parsippany, ▇▇▇▇▇▇ County, NJ ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
07054
Learning Center Metro Park Associates
▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Iselin, Middlesex County, NJ
Learning Center Park ▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Learning Center ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ #▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Eatontown, NJ
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇
▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ Property Ltd.
▇▇▇▇▇▇▇ ▇, ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
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ATTACHMENT "B"
ALPHANET SOLUTIONS, INC.
OTHER INVENTORY LOCATIONS
--------------------------------------------------------------------------------
MicroAge
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
▇▇▇▇▇▇ Micro "D"
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Logicare
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
PSE&G
▇▇▇▇▇▇▇▇
River Terminal
Building 9E
▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
O:\SSDATA\HAT\BANK\▇▇▇▇▇▇▇.6 iii 062797