EXHIBIT 10.2
RESTATED AND AMENDED
LOAN AND SECURITY AGREEMENT
among
THE A CONSULTING TEAM, INC.
and
INTERNATIONAL OBJECT TECHNOLOGY, INC.,
and
KELTIC FINANCIAL PARTNERS, LP
Dated: March 23, 2004
TABLE OF CONTENTS
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RECITALS ........................................................................................................1
AGREEMENT .......................................................................................................1
1. DEFINITIONS.............................................................................................1
1.1. "Account Debtor"...............................................................................1
1.2. "Advance"......................................................................................1
1.3. "Affiliate.....................................................................................1
1.4. "Banking Day"..................................................................................2
1.5. "Blocked Account"..............................................................................2
1.6. "Borrower".....................................................................................2
1.7. "Borrowers"....................................................................................2
1.8. "Borrower's knowledge".........................................................................2
1.9. "Borrowing Base Certificate"...................................................................2
1.10. "Capital Expenditure"..........................................................................2
1.11. "Code".........................................................................................2
1.12. "Collateral"...................................................................................2
1.13. "Compliance Certificate".......................................................................2
1.14. THIS SECTION INTENTIONALLY OMITTED.............................................................3
1.15. "Core EBITDA"..................................................................................3
1.16. "Corporate/LLC Guarantor"......................................................................3
1.17. "Corporate/LLC Guaranty".......................................................................3
1.18. "Deposit Account"..............................................................................3
1.19. "Default"......................................................................................3
1.20. "Eligible Receivables".........................................................................4
1.21. "Environment"..................................................................................6
1.22. "Environmental Laws"...........................................................................6
1.23. "Equipment"....................................................................................6
1.24. "ERISA"........................................................................................6
1.25. "Events of Default"............................................................................6
1.26. "Fiscal Year"..................................................................................6
1.27. "General Intangibles"..........................................................................7
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1.28. "Generally Accepted Accounting Principles".....................................................7
1.29. "Governmental Rules"...........................................................................7
1.30. "Guarantors"...................................................................................7
1.31. "Guaranty".....................................................................................7
1.32. "Indebtedness".................................................................................7
1.33. "Individual Guarantor".........................................................................7
1.34. "Individual Guaranty"..........................................................................7
1.35. "Inventory"....................................................................................8
1.36. "Investment Property"..........................................................................8
1.37. "LIBOR"........................................................................................8
1.38. "Lien".........................................................................................8
1.39. "Loan Documents"...............................................................................8
1.40. "Loans"........................................................................................8
1.41. "Lockbox"......................................................................................8
1.42. "Material Adverse Effect"......................................................................8
1.43. "Maximum Facility".............................................................................8
1.44. "Notice of Borrowing"..........................................................................8
1.45. "Obligations"..................................................................................9
1.46. "Other Collateral".............................................................................9
1.47. "Permitted Zielczynski Debt"...................................................................9
1.48. "Permitted Seller Debt"........................................................................9
1.49. "Person".......................................................................................9
1.50. "Plan".........................................................................................9
1.51. "Prime Rate"...................................................................................9
1.52. "Property".....................................................................................9
1.53. "Receivables".................................................................................10
1.54. "Reconciliation Report".......................................................................10
1.55. "Reportable Event"............................................................................10
1.56. "Revolving Advances"..........................................................................10
1.57. "Revolving Loan"..............................................................................10
1.58. "Revolving Note"..............................................................................10
1.59. "Solvent".....................................................................................10
1.60. "Stock Purchase Agreement"....................................................................10
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1.61. "Subordination Agreements"....................................................................10
1.62. "Termination Date"............................................................................11
1.63. "This Agreement"..............................................................................11
1.64. "UCC".........................................................................................11
1.65. "Validity/Support Guarantor"..................................................................11
1.66. "Validity/Support Guaranty"...................................................................11
1.67. "Voting Stock"................................................................................11
2. THE REVOLVING LOAN ....................................................................................12
2.1. Revolving Advances............................................................................12
2.2. Overline......................................................................................12
2.3. Reserves......................................................................................12
2.4. Manner of Borrowing...........................................................................12
2.5. Evidence of Borrower's Obligations............................................................13
2.6. Payments......................................................................................15
2.7. Collections/Balance/Statements/etc............................................................15
2.8. Payment on Termination Date...................................................................16
2.9. Borrowers' Absolute Guaranty Obligations......................................................16
3. LENDER'S COMPENSATION..................................................................................19
3.1. Interest on Revolving Advances; Costs and Expenses............................................19
3.2. Commitment and Closing Fee....................................................................19
3.3. Facility Fee..................................................................................19
3.4. Collateral Management Fee.....................................................................19
3.5. Field Examination Fees........................................................................19
3.6. Prepayment Premium............................................................................20
3.7. Computation of Interest and Fees..............................................................20
3.8. Payment of Interest and Fees..................................................................20
4. APPLICATION OF PROCEEDS................................................................................20
5. SECURITY INTEREST IN COLLATERAL........................................................................20
6. RECOURSE TO SECURITY...................................................................................21
7. INDUCING REPRESENTATIONS...............................................................................21
7.1. Organization and Qualifications...............................................................21
7.2. Corporate Name and Address....................................................................22
7.3. Corporate Structure...........................................................................22
7.4. Legally Enforceable Agreement.................................................................22
7.5. Solvent Financial Condition...................................................................22
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7.6. Financial Statements..........................................................................22
7.7. Joint Ventures................................................................................22
7.8. Real Estate...................................................................................22
7.9. Patents, Trademarks, Copyrights and Licenses..................................................23
7.10. Existing Business Relationship................................................................23
7.11. Investment Company Act: Federal Reserve Board Regulations.....................................23
7.12. Tax Returns...................................................................................24
7.13. Litigation....................................................................................24
7.14. Receivables Locations.........................................................................24
7.15. Inventory Locations...........................................................................24
7.16. Equipment List and Locations..................................................................24
7.17. Title Liens...................................................................................24
7.18. Existing Indebtedness.........................................................................25
7.19. ERISA Matters.................................................................................25
7.20. O.S.H.A.......................................................................................25
7.21. Environmental Matters.........................................................................25
7.22. Labor Disputes................................................................................25
7.23. Intellectual Property.........................................................................26
7.24. Location of Bank and Securities Accounts......................................................26
7.25. Compliance With Laws..........................................................................26
7.26. No Other Violations...........................................................................26
7.27. Survival of Representations and Warranties....................................................27
8. FINANCIAL STATEMENTS AND INFORMATION;CERTAIN NOTICES TO LENDER.........................................27
8.1. Borrowing Base Certificate....................................................................27
8.2. Monthly Reports...............................................................................27
8.3. Annual Financial Statements...................................................................27
8.4. Financial Statements..........................................................................28
8.5. Tax Returns...................................................................................28
8.6. Projections...................................................................................28
8.7. Customer Lists................................................................................28
8.8. Insurance.....................................................................................28
8.9. Notice of Event of Default and Adverse Business Developments..................................28
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8.10. Other Information.............................................................................29
9. ACCOUNTING.............................................................................................29
10. RESTATEMENT AND REPLACEMENT OF 2002 LOAN AGREEMENT.....................................................30
11. WARRANTIES WITH RESPECT TO RECEIVABLES.................................................................30
12. SPECIAL PROVISIONS WITH RESPECT TO RECEIVABLES AND RELATED MATTERS.....................................31
12.1. Confirmatory Written Assignments..............................................................31
12.2. Notice of Certain Events......................................................................31
12.3. Communication with Account Debtors............................................................32
13. SPECIAL PROVISIONS RELATING TO EQUIPMENT...............................................................32
13.1. Equipment List................................................................................32
13.2. Borrower's Obligations With Respect to Equipment..............................................32
14. AFFIRMATIVE COVENANTS..................................................................................32
14.1. Business and Existence........................................................................32
14.2. Trade Names...................................................................................32
14.3. Transactions with Affiliates..................................................................32
14.4. Taxes.........................................................................................33
14.5. Compliance with Laws..........................................................................33
14.6. Maintain Properties: Insurance................................................................33
14.7. Business Records..............................................................................33
14.8. Litigation....................................................................................33
14.9. Damage or Destruction of Collateral...........................................................34
14.10. Name Change...................................................................................34
14.11. Access to Books and Records...................................................................34
14.12. Solvent.......................................................................................34
14.13. Compliance With Environmental Laws............................................................34
14.14. Compliance with ERISA and other Employment Laws...............................................34
14.15. Proceeds of Collateral........................................................................34
14.16. Delivery of Documents.........................................................................34
14.17. United States Contracts.......................................................................35
14.18. Accounting System.............................................................................35
14.19. Validity/Support Guaranty.....................................................................35
14.20. TACT Software.................................................................................35
15. NEGATIVE COVENANTS.....................................................................................35
15.1. Indebtedness..................................................................................35
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15.2. Mergers; Consolidations; Acquisitions.........................................................35
15.3. Sale or Disposition...........................................................................36
15.4. Defaults......................................................................................36
15.5. Limitations on Liens..........................................................................36
15.6. Dividends and Distributions...................................................................37
15.7. Borrowers' Names and Offices..................................................................37
15.8. Sales Terms...................................................................................37
15.9. Fiscal Year...................................................................................37
15.10. Intentionally omitted.........................................................................37
15.11. Intentionally omitted.........................................................................37
15.12. Guaranties; Contingent Liabilities............................................................37
15.13. Removal of Collateral.........................................................................38
15.14. Transfer of Notes or Accounts.................................................................38
15.15. Settlements...................................................................................38
15.16. Modification of Governing Documents...........................................................38
15.17. Change of Business............................................................................38
15.18. Change of Accounting Practices................................................................38
15.19. Inconsistent Agreement........................................................................38
15.20. Loan or Advances..............................................................................38
15.21. Investments...................................................................................39
15.22. Intentionally Omitted.........................................................................39
15.23. Core EBITDA...................................................................................39
15.24. Capital Expenditures..........................................................................39
15.25. T3 Media, Inc. Investments....................................................................40
15.26. Stock Purchase Agreement......................................................................40
15.27. Permitted Zielczynski Debt....................................................................40
16. FURTHER RIGHTS OF LENDER...............................................................................40
16.1. Lender's Right to Take Certain Actions........................................................41
16.2. Lender's Right to Perform Either Borrower's Obligations.......................................41
16.3. Lender's Right of Set-Off.....................................................................41
17. CONDITIONS PRECEDENT; CLOSING..........................................................................42
17.1. Conditions Precedent..........................................................................42
17.2. Conditions to All Extensions of Credit........................................................43
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18. TERM...................................................................................................43
18.1. Revolving Loan Availability...................................................................43
18.2. Voluntary Termination.........................................................................43
19. EVENTS OF DEFAULT......................................................................................43
19.1. Defaults......................................................................................43
19.2. Obligations Immediately Due...................................................................45
19.3. Continuation of Security Interests............................................................45
20. REMEDIES OF LENDER.....................................................................................46
20.1. Rights Under UCC..............................................................................46
20.2. Collections; Modification of Terms............................................................47
20.3. Notification of Account Debtors...............................................................47
20.4. Insurance.....................................................................................47
20.5. Waiver of Rights by Borrowers.................................................................47
20.6. Lender's Rights...............................................................................47
21. GENERAL PROVISIONS.....................................................................................48
21.1. Rights Cumulative.............................................................................48
21.2. Successors and Assigns........................................................................48
21.3. Notice........................................................................................48
21.4. Strict Performance............................................................................49
21.5. Amendments....................................................................................49
21.6. Waiver........................................................................................49
21.7. Conflict of Laws..............................................................................49
21.8. Expenses......................................................................................49
21.9. Reimbursements Charged to Revolving Loan......................................................50
21.10. Waiver of Right to Jury Trial.................................................................50
22. INDEMNIFICATION BY BORROWER/WAIVER OF CLAIMS...........................................................51
22.1. Indemnification...............................................................................51
22.2. Savings Clause for Indemnification............................................................51
22.3. Waiver........................................................................................51
23. MISCELLANEOUS..........................................................................................52
23.1. Entire Agreement; Amendments; Lender's Consent................................................52
23.2. Cross Default; Cross Collateral...............................................................52
23.3. Execution in Counterparts.....................................................................52
23.4. Severability of Provisions....................................................................52
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23.5. Table of Contents; Headings...................................................................52
23.6. Exhibits and Schedules........................................................................52
23.7. Consent to Jurisdiction.......................................................................53
Exhibits:
Exhibit A Revolving Note
Exhibit B Notice of Borrowing
Exhibit C Borrowing Base Certificate
Exhibit D Compliance Certificate
Schedules:
Schedule 7.2 Tradenames
Schedule 7.3 Affiliates and Subsidiaries
Schedule 7.8 Real Estate
Schedule 7.9 Patents & Trademarks
Schedule 7.13 Litigation
Schedule 7.14 Receivables Locations
Schedule 7.15 Inventory Locations
Schedule 7.16 Equipment List and Locations
Schedule 7.17 Liens
Schedule 7.18 Indebtedness
Schedule 7.21 Environmental Matters
Schedule 7.24 List of Bank Accounts
Schedule 7.27 Excluded Matters
Schedule 10.4 List of Processors and Warehousemen
Schedule 15.2 Mergers, etc.
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RESTATED AND AMENDED LOAN AND SECURITY AGREEMENT
THIS RESTATED AND AMENDED LOAN AND SECURITY AGREEMENT made as of March
__, 2004, by and among
THE A CONSULTING TEAM, INC., a New York corporation with its
principal executive office and principal place of business at
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
(hereinafter called "TACT") and INTERNATIONAL OBJECT
TECHNOLOGY, INC., a New Jersey corporation with its principal
executive office and principal place of business to be at ▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, Attn: Shmuel Ben Tov
(hereinafter called "IOT"), TACT and IOT being each
hereinafter individually referred to as "BORROWER" and
collectively referred to as "BORROWERS"
and
KELTIC FINANCIAL PARTNERS, LP, a Delaware limited partnership,
with a place of business at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
▇-▇▇▇, ▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ("Lender").
RECITALS:
I. Borrowers have requested that Lender continue to
extend a FOUR MILLION AND NO/100($4,000,000.00) US DOLLARS
revolving credit facility heretofore extended by Lender to
Borrowers on a joint and several basis so as to continue to
provide Borrowers with working capital support.
II. Lender is willing to continue to so extend the
credit facility on the terms and subject to the conditions set
forth in this Agreement.
AGREEMENT:
1. DEFINITIONS. As used herein, the following terms shall have the
following meanings (terms defined in the singular shall have the same meaning
when used in the plural and vice versa):
1.1. "Account Debtor" shall mean any Person who is or may
become obligated under or on account of any Receivable.
1.2. "Advance" shall mean any loan or advance by Lender with
respect to the Revolving Loan.
1.3. "Affiliate" shall mean any Person: (i) which directly or
indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, either Borrower; (ii)
which beneficially owns or holds 5% or more of any class of the Voting
Stock of either Borrower; or (iii) 5% or more of the Voting Stock of
which is beneficially owned or held by either Borrower; provided,
however, that T3 Media, Inc., Always-On Software, Inc., and Methoda,
Ltd. shall not be deemed to be Affiliates. For purposes hereof,
"control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a
Person, whether through the ownership of Voting Stock or other equity
interests, by contract or otherwise.
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1.4. "Banking Day" shall mean any day on which commercial
banks are not authorized or required to close in New York State.
1.5. "Blocked Account" shall mean the account established by
Borrowers at Fleet National Bank (or any other similar account
established by Borrowers with the consent of Lender) opened and held
pursuant to the blocked account agreement among Borrower, Lender and
Fleet National Bank (or other financial institution chosen by Borrowers
with the consent of Lender) into which payments of Receivables are
deposited.
1.6. "Borrower" shall mean either TACT or IOT.
1.7. "Borrowers" is a collective term which means both TACT
and IOT.
1.8. "Borrower's knowledge" shall mean the knowledge of each
of either Borrower's directors, officers and key employees after due
inquiry under the circumstances.
1.9. "Borrowing Base Certificate" shall mean a borrowing base
certificate substantially in the form of Exhibit "A" attached hereto.
1.10. "Capital Expenditure" shall mean, as determined in
accordance with Generally Accepted Accounting Principles, the dollar
amount of gross expenditures (including obligations under capital
leases) made or incurred for fixed assets, real property, plant and
equipment, and all renewals, improvements and replacements thereto (but
not repairs thereof) during any period.
1.11. "Code" shall mean the Internal Revenue Code of 1986, as
from time to time amended.
1.12. "Collateral" shall mean all of the property and
interests in property described in Article 5 hereof, except as set
forth in Article 5(l), and all other personal Property of each Borrower
and all interests of each Borrower in personal Property that now or
hereafter secures the payment and performance of any of the Obligations
pursuant to any of the Loan Documents or otherwise, including, without
limitation, any proceeds and insurance proceeds of the foregoing."
1.13. "Compliance Certificate" shall mean the certificate
substantially in the form of Exhibit "B" attached hereto and made a
part hereof.
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1.14. THIS SECTION INTENTIONALLY OMITTED
1.15. "Core EBITDA" shall mean Borrowers' consolidated total
income and their subsidiaries (excluding, however, any non-cash
income/loss attributable to Always-On Software, Inc., and Methoda,
Ltd., whether by ownership or otherwise) after interest expense,
Collateral Management Fee, Facility Fee, loan extension fee, taxes,
depreciation, amortization and any non-cash writedowns of goodwill, all
calculated in accordance with Generally Accepted Accounting Principles.
1.16. "Corporate/LLC Guarantor" is a collective term which
means each and all of the following:
(a) TACT (as it relates to TACT's guaranty of the
Obligations owed to Lender by IOT, as more fully set
forth in Section 2.9);
(b) IOT (as it relates to IOT's guaranty of the
Obligations owed to Lender by TACT, as more fully set
forth in Section 2.9);
(c) any other corporation, limited liability company,
partnership (whether general or limited) or other
entity which hereafter guarantees the payment of all
or a portion of the Obligations, it being understood
that on the date hereof, there is no other
Corporate/LLC Guarantor.
1.17. "Corporate/LLC Guaranty" is a collective term which
means each and all of the following:
(a) TACT's guaranty of the Obligations owed to Lender by
IOT, as more fully set forth in Section 2.9;
(b) IOT's guaranty of the Obligations owed to Lender by
TACT, as more fully set forth in Section 2.9;
(c) any other guaranty (other than a Validity/Support
Guaranty) of the payment of all or a portion of the
Obligations hereafter executed by any Corporate/LLC
Guarantor; and
(d) all amendments, modifications or supplements of any
of the foregoing guaranties made from time to time
hereafter.
1.18. "Deposit Account" shall have the meaning given to such
term in the UCC Uniform Commercial Code in effect from time to time in
the State of New York.
1.19. "Default" shall mean an event or condition the
occurrence of which would, with the lapse of time or the giving of
notice, or both, become an Event of Default, whether or not Lender has
declared an Event of Default to have occurred.
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1.20. "Eligible Receivables" shall mean and include, only
Receivables of each Borrower comprised of time and material invoices
that are signed off on by the Account Debtor, the records and accounts
of which are located in compliance with Section 7.14 hereof, that are
otherwise acceptable to Lender in Lender's discretion, arise out of
sales in the ordinary course of business made by either Borrower to a
Person which is not an Affiliate of either Borrower nor an employee of
either Borrower nor controlled by an Affiliate of either Borrower,
which are not in dispute and which do not then violate any warranty
with respect to Receivables set forth in Article 11 of this Agreement.
No Receivable shall be an Eligible Receivable if it is more than ninety
(90) days past original invoice date. While Eligible Receivables shall
consist only of Receivables of Borrowers comprised of time and material
invoices that are signed off on by the Account Debtor, Lender may treat
any Receivable as ineligible if:
(a) any Receivable arising out of an invoice for
software, training, maintenance, ▇▇▇▇-in advance,
progress billing and fixed price projects, provided,
however, that notwithstanding the foregoing, a
Receivable arising out of a fixed price project may
be considered an Eligible Receivable if all other
criteria of eligibility set forth in this Section are
met and if, in addition, (1) Lender is given a true
and complete final contract for the applicable fixed
price project if it is in excess of $200,000 and (2)
all invoices have been accepted in writing by the
applicable Account Debtor and (3) if any previous
invoice under the applicable fixed price project has
not been paid, no subsequent invoice will be
considered eligible until all previous invoices have
been paid; or
(b) any warranty contained in this Agreement with respect
to Eligible Receivables or any warranty with respect
to such Receivable contained in this Agreement has
been breached; or
(c) the Account Debtor or any Affiliate of the Account
Debtor has disputed liability, or made any claim with
respect to any other Receivable due from such
customer or Account Debtor to either Borrower, with
respect to any Receivable which Lender, in its
discretion, deems material; or
(d) the Account Debtor or any Affiliate of the Account
Debtor has filed a case for bankruptcy or
reorganization under the Bankruptcy Code, or if any
such case under the Bankruptcy Code has been filed
against the Account Debtor or any Affiliate of the
Account Debtor, or if the Account Debtor or any
Affiliate of the Account Debtor has assigned for the
benefit of creditors, or if the Account Debtor or any
Affiliate of the Account Debtor has failed, suspended
business operations, become insolvent, or had or
suffered a receiver or a trustee to be appointed for
all or a significant portion of its assets or
affairs; or
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(e) if the Account Debtor is also a supplier to or
creditor of either Borrower or if the Account Debtor
has or asserts any right of any offset with respect
to any Receivable or asserts any claim or
counterclaim against either Borrower with respect to
any Receivable or otherwise; or
(f) the sale is to an Account Debtor outside the United
States or Canada, unless the sale is on letter of
credit, acceptance or other terms acceptable to
Lender; or
(g) fifty percent (50%) or more of the accounts of any
Account Debtor and its Affiliates that would
otherwise be treated as Eligible Receivables
hereunder is ineligible by reason of being more than
ninety (90) days past original invoice date, then all
the accounts of such Account Debtor and its
Affiliates may be deemed ineligible by Lender
hereunder; or
(h) the total unpaid Receivables of the Account Debtor
exceed: (i) twenty percent (20%) of the net amount of
all Receivables; or (ii) in the case of Receivables
due from Pfizer, Inc., in which case the total unpaid
Receivables shall not exceed thirty percent (30%) of
the net amount of all such Receivables; or (iii) in
the case of Receivables due from BMW, in which case
the total unpaid Receivables shall not exceed
thirty-five percent (35%) of the net amount of all
such Receivables; or (iv) as otherwise agreed from
time to time, in any case of (i) or (ii) or (iii), to
the extent of such excess; or
(i) it relates to a sale of goods or services to the
United States of America or any agency or department
thereof, unless the applicable Borrower assigns its
right to payment of such Receivable to Lender, in
form and substance satisfactory to Lender, so as to
comply with the Assignment of Claim Act of 1940, as
amended; or
(j) it relates to intercompany sales, employee sales or
any Receivable due from an Affiliate of either
Borrower; or
(k) it consists of a sale to an Account Debtor on
consignment, ▇▇▇▇ and hold, guaranteed sale, sale or
return, sale on approval, payment plan, scheduled
installment plan, extended payment terms or any other
repurchase or return basis; or
(l) the Account Debtor is located in a state in which the
applicable Borrower is deemed to be doing business
under the laws of such state and which denies
creditors access to its courts in the absence of
qualifications to transact business in such state or
of the filing of any reports with such state, unless
the applicable Borrower has qualified as a foreign
corporation authorized to do business in such state
or has filed all required reports; or
5
(m) the Receivable is evidenced by chattel paper or an
instrument of any kind, or has been reduced to
judgment; or
(n) the Receivable arises from a retail sale of goods to
a Person who is purchasing such goods primarily for
personal, family or household purposes; or
(o) if Lender believes, in its reasonable judgment,
collection of such Receivable is insecure or that
such Receivable may not be paid by reason of the
Account Debtor's financial inability to pay.
1.21. "Environment" shall mean any water or water vapor, any
land surface or subsurface, air, fish, wildlife, biota and all other
natural resources.
1.22. "Environmental Laws" shall mean all federal, state and
local environmental, land use, zoning, health, chemical use, safety and
sanitation laws, statutes, ordinances and codes relating to the
protection of the Environment and/or governing the use, storage,
treatment, generation, G30 transportation, processing, handling,
production or disposal of "hazardous substances" and the rules,
regulations, policies, guidelines, interpretations, decisions, orders
and directives of federal, state and local governmental agencies and
authorities with respect thereto.
1.23. "Equipment" shall have the meaning given that term in
the UCC and shall include therein all machinery, equipment, office
machinery, furniture, fixtures, conveyors, tools, materials storage and
handling equipment, molds, dies, stamps and other equipment of every
kind and nature and wherever situated now or hereafter owned by either
Borrower or in which either Borrower may have any interest (to the
extent of such interest), together with all additions and accessions
thereto, all replacements and all accessories and parts therefor, all
manuals, blueprints, know-how, warranties and records in connection
therewith, all rights against suppliers, warrantors, manufacturers,
sellers or others in connection therewith, and together with all
substitutes for any of the foregoing.
1.24. "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended.
1.25. "Events of Default" shall have the meaning set forth in
Article 19 of this Agreement.
1.26. "Fiscal Year" shall mean with respect to any Person, a
year of 365 or 366 days, as the case may be, ending on the last day of
December in any calendar year.
6
1.27. "General Intangibles" shall have the meaning given that
term in the UCC and shall include therein all general intangibles,
including, without limitation, all choses in action, causes of action,
corporate or other business records, Deposit Accounts, inventions,
blueprints, designs, patents, patent applications, trademarks,
trademark applications, trade names, trade secrets, good will, brand
names, copyrights, registrations, licenses, franchises, customer lists,
tax refund claims, computer programs and software, operational manuals,
capitalized finance costs, origination fees, all equipment
formulations, manufacturing procedures, quality control procedures and
product specifications relating to products sold under patents,
trademarks or copyrights owned by either Borrower or in which either
Borrower has an interest, the right to ▇▇▇ for all past, present and
future infringements of such patents, trademarks and copyrights, all
claims under guaranties, security interests or other security held by
or granted to either Borrower to secure payment of any of the
Receivables by an Account Debtor, all rights to indemnification and all
other intangible property of every kind and nature (other than
Receivables).
1.28. "Generally Accepted Accounting Principles" shall mean
generally accepted accounting principles consistently applied and
maintained throughout the period indicated and consistent with the
prior financial practice of the Borrowers, except for changes mandated
by the Financial Accounting Standards Board or any similar accounting
authority of comparable standing. Whenever any accounting term is used
herein which is not otherwise defined, it shall be interpreted in
accordance with Generally Accepted Accounting Principles.
1.29. "Governmental Rules" shall have the meaning given to
such term in Section 7.25 of this Agreement.
1.30. "Guarantors" is a collective term which means all
Individual Guarantors and all Corporate/LLC Guarantors, it being
understood that on the date hereof, there are no Individual Guarantors
and no Corporate/LLC Guarantors except TACT and IOT.
1.31. "Guaranty" is a collective term which means any guaranty
(other than a Validity/Support Guaranty) of the payment of all or a
portion of the Obligations now or hereafter executed by any
Corporate/LLC Guarantor or any Individual Guarantor and all amendments,
modifications or supplements of any such guaranty made from time to
time hereafter, it being understood that on the date hereof, the only
Guaranty has been given by TACT and IOT in Section 2.9 hereof .
1.32. "Indebtedness" shall mean and include all obligations
for borrowed money of any kind or nature, including funded debt and
unfunded liabilities, contingent obligations under letters of credit or
guaranties, and all obligations for the acquisition or use of any fixed
asset, including capitalized leases, or improvements which are payable
over a period longer than one year, regardless of the term thereof or
the person or persons to whom the same is payable.
1.33. "Individual Guarantor" shall mean any individual who now
or hereafter guarantees the payment of all or a portion of the
Obligations, it being understood that on the date hereof, there is no
Individual Guarantor.
1.34. "Individual Guaranty" is a collective term which means
any guaranty (other than a Validity/Support Guaranty) of the payment of
all or a portion of the Obligations now or hereafter executed by any
Individual Guarantor and all amendments, modifications or supplements
of any such guaranty made from time to time hereafter, it being
understood that on the date hereof, there is no Individual Guaranty.
7
1.35. "Inventory" shall have the meaning given to such term in
the UCC.
1.36. "Investment Property" shall have the meaning given that
term in the UCC.
1.37. "LIBOR" shall mean the London Inter-Bank Offered Rate as
quoted by CitiBank, N.A. in New York City at 11:00 a.m. (New York time)
based upon CitiBank, N.A.'s or an affiliated agency's or branch's
quotes to prime banks in the London Inter-Bank Euro-currency Market for
Eurodollar deposits.
1.38. "Lien" shall mean any interest in Property securing an
obligation owed to, or a claim by, a Person, whether such interest is
based on the common law, statute or contract, and including, but not
limited to, the security interest, security title or lien arising from
a security agreement, mortgage, deed of trust, deed to secure debt,
encumbrance, pledge, conditional sale or trust receipt or a lease,
consignment or bailment for security purposes.
1.39. "Loan Documents" shall mean this Agreement, the
Revolving Note, the Subordination Agreements, the Validity/Support
Guaranty and all other documents and instruments to be delivered by
either Borrower or any Guarantor or any Validity/Support Guarantor
under this Agreement or in connection with the Loan or any other
indebtedness or obligation of either Borrower to Lender or any
Affiliate of Lender, as the same may be amended, modified or
supplemented from time to time.
1.40. "Loans" shall mean the loans and advances made by Lender
hereunder, including all Advances.
1.41. "Lockbox" shall mean the account or accounts established
by either Borrower pursuant to the lockbox agreement among either
Borrower, Lender and a financial institution with which such Borrower
maintains a depository account into which the proceeds of all
Collateral are to be deposited, it being understood that on the date
hereof no Lockbox is required.
1.42. "Material Adverse Effect" shall mean any material
adverse effect , as determined in Lender's discretion, on (a) the
business, assets, operations, prospects or condition, financial or
otherwise, of either Borrower or any Guarantor or any Validity/Support
Guarantor; (b) the ability of either Borrower or any Guarantor or any
Validity/Support Guarantor to pay or perform the obligations in
accordance with their terms; (c) the value of the Collateral or the
perfection or priority of Lender's liens; (d) the validity or
enforceability of this Agreement or any of the Loan Documents; or (e)
the practical realization of the benefits, rights and remedies inuring
to Lender hereunder or under the Loan Documents.
1.43. "Maximum Facility" shall mean FOUR MILLION AND 00/100 US
DOLLARS ($4,000,000.00).
1.44. "Notice of Borrowing" shall mean a written borrowing
request substantially in the form of Exhibit "C" attached hereto.
8
1.45. "Obligations" shall mean and include all loans
(including the Loans), advances, debts, liabilities, obligations,
covenants and duties owing by either Borrower to Lender or any
Affiliate of Lender of any kind or nature, present or future, whether
or not evidenced by any note, guaranty or other instrument, whether
arising under this Agreement, the Loan Documents or under any other
agreement or by operation of law, whether or not for the payment of
money, whether arising by reason of an extension of credit, opening,
guaranteeing or confirming of a letter of credit, loan, guaranty,
indemnification or in any other manner, whether direct or indirect
(including those acquired by assignment), absolute or contingent, due
or to become due, now due or hereafter arising and however acquired,
including, without limitation, all interest, charges, expenses,
commitment, facility, collateral management or other fees, attorneys'
fees and expenses, and any other sum chargeable to either Borrower
under this Agreement, the Loan Documents or any other agreement with
Lender.
1.46. "Other Collateral" shall mean all Collateral other than
Receivables.
1.47. "Permitted Zielczynski Debt" shall mean scheduled
payments due on debt of $153,545.00 (original principal amount) owed by
Borrower TACT to Piotr a/k/a/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, payable at the rate of
$5,000 per month (plus interest thereon).
1.48. "Permitted Seller Debt" shall mean scheduled payments
(i.e., $100,000 due on April 1, 2004, and $200,000 due on January 1,
2005) due on debt arising out of a certain stock purchase agreement
dated as of June 28, 2002, among Borrower TACT, International Object
Technology, Inc., and Piotr a/k/a ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and bCompliant,
Inc., and owed by Borrower TACT to said Piotr a/k/a ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and
bCompliant, Inc.
1.49. "Person" shall mean an individual, partnership, limited
liability company, limited liability partnership, corporation, joint
venture, joint stock company, land trust, business trust or
unincorporated organization, or a government or agency or political
subdivision thereof.
1.50. "Plan" shall mean an employee benefit plan or other plan
now or hereafter maintained for employees of either Borrower and
covered by Title IV of ERISA.
1.51. "Prime Rate" shall mean the greater of (a) the rate
published in the "Money Rates" column of The Wall Street Journal from
time to time or, in the event that The Wall Street Journal is not
available at any time, such rate published in another publication as
determined by Lender or (b) LIBOR plus two hundred and fifty (250)
basis points per annum.
1.52. "Property" shall mean any interest in any kind of
property or asset, whether real, personal or mixed, or tangible or
intangible.
9
1.53. "Receivables" shall have the meaning given the term
"Accounts" in the UCC and shall include therein all present and future
accounts, contract rights, promissory notes, chattel paper (whether
tangible or electronic), instruments, documents, letter of credit
rights (whether or not the letter of credit is evidenced by a writing)
all tax refunds and rights to receive tax refunds, bonds, certificates,
rights to payment for the sale or lease of equipment and policies of
insurance and insurance proceeds, investment securities, notes,
instruments and Deposit Accounts, book accounts, credits and reserves
and all forms of obligations whatsoever owing, together with all
instruments, all documents of title representing any of the foregoing,
and all rights in any merchandise or goods which any of the same may
represent, all files and records with respect to any collateral or
security given by either Borrower to Lender, together with all right,
title, security and guaranties with respect to each Receivable,
including any right of stoppage in transit, whether now owned or
hereafter created or acquired by either Borrower or in which either
Borrower now has or hereafter acquires any interest.
1.54. "Reconciliation Report" shall mean a report in form
satisfactory to Lender, reconciling Borrowers' consolidated month-end
Receivable agings and Payable agings to Borrowers' consolidated monthly
financial statements, and including bank reconciliations.
1.55. "Reportable Event" shall have the meaning assigned to
that term in Title IV of ERISA.
1.56. "Revolving Advances" shall mean the Advances to be made
by Lender to either Borrower pursuant to Section 2.1 of this Agreement.
1.57. "Revolving Loan" shall mean the Advances to be made on a
joint and several basis by Lender to Borrowers pursuant to Article 2 of
this Agreement, and all interest thereon and all fees, costs and
expenses payable by each Borrower in connection therewith.
1.58. "Revolving Note" shall mean Borrowers' promissory note
dated on or about even date herewith and given on a joint and several
basis by Borrowers to Lender to evidence the Revolving Advances, as the
same may be amended, modified or supplemented from time to time.
1.59. "Solvent" shall mean when used with respect to any
Person, such Person (i) owns property the fair value of which is
greater than the amount required to pay all of such Person's
Indebtedness (including contingent debts), (ii) owns property the
present fair salable value of which is greater than the amount that
will be required to pay the probable liabilities of such Person on its
then existing Indebtedness as such become absolute and matured, (iii)
is able to pay all of its Indebtedness as such Indebtedness matures,
and (iv) has capital sufficient to carry on its then existing business.
1.60. "Stock Purchase Agreement" shall mean that certain Stock
Purchase Agreement dated as of June 28, 2002 pursuant to which Borrower
TACT acquired all of the issued and outstanding shares of stock of
Borrower IOT.
1.61. "Subordination Agreements" is a collective term which
means all of the following:
10
(a) that certain instrument (relating to the Permitted
Zielczynski Debt) dated as of even date herewith and
entitled "Subordination and Pledge Agreement" given
to Lender by Piotr a/k/a ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇; and
(b) that certain instrument (relating to the Permitted
Seller Debt) dated as of even date herewith and
entitled "Subordination and Pledge Agreement" given
to Lender by Piotr a/k/a ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇ and bCompliant, Inc.; and
(c) any other similar instrument now or hereafter given
by any Validity/Support Guarantor; and
(d) all amendments, modifications or supplements of any
such Subordination and Pledge Agreement made from
time to time hereafter.
1.62. "Termination Date" shall mean the earlier of June 27,
2007 or the date on which Lender terminates this Agreement pursuant to
Section 18.1 hereof or either Borrower terminates this Agreement
pursuant to Section 18.2 hereof.
1.63. "This Agreement" shall include all written amendments,
modifications and supplements and shall refer to this Agreement as the
same may be in effect at the time such reference becomes operative.
1.64. "UCC" shall mean the Uniform Commercial Code in effect
from time to time in the State of New York.
1.65. "Validity/Support Guarantor" shall mean any individual
or entity who now or hereafter executes a Validity/Support Guaranty, it
being understood that on the date hereof, the only Validity/Support
Guarantor is ▇▇▇▇▇▇ ▇▇▇▇▇▇.
1.66. "Validity/Support Guaranty" is a collective term which
means all of the following:
(a) that certain instrument dated as of even date
herewith and entitled "Validity and Support
Agreement" given by ▇▇▇▇▇▇ ▇▇▇▇▇▇; and
(b) any other similar instrument now or hereafter given
by any Validity/Support Guarantor; and
(c) all amendments, modifications or supplements of any
such Validity and Support Agreement made from time to
time hereafter.
1.67. "Voting Stock" shall mean securities of any class or
classes of a corporation the holders of which are ordinarily, in the
absence of contingencies, entitled to elect a majority of the corporate
directors (or Persons performing similar functions).
11
2. THE REVOLVING LOAN.
2.1. Revolving Advances. Subject to the terms and conditions
of this Agreement and relying upon the representations and warranties
set forth in this Agreement, for so long as no Default or Event of
Default exists, Lender shall lend to Borrowers on their request, a sum
equal to the lesser of: (a) FOUR MILLION AND 00/100 ($4,000,000.00) US
DOLLARS, and (b) up to seventy five percent (75%) of the net face
amount of Borrowers' Eligible Receivables, provided, however, that as
it relates to Borrowers' Eligible Receivables arising out of a fixed
price project, the aforesaid percentage shall be 50% not 75%.
2.2. Overline. Each Borrower acknowledges that Lender has
advised Borrowers that Lender does not intend to permit the Borrowers
to incur Obligations at any time in an outstanding principal amount
exceeding the Maximum Facility; however, it is agreed that should the
Obligations of Borrowers to Lender incurred under the Revolving Loan or
otherwise exceed that figure or any other limitation herein set forth,
including without limitation, the borrowing formulas set forth in
Section 2.1 above, all such obligations shall (a) constitute
Obligations under this Agreement, (b) shall be entitled to the benefit
of all security and protection under this Agreement and all Loan
Documents and secured by the Collateral and (c) shall be payable
immediately upon demand by Lender.
2.3. Reserves. The borrowing limits set forth in Section 2.1
above and otherwise herein, shall be subject to such reserves as Lender
shall reasonably deem necessary and proper in Lender's reasonable
discretion. Reserves may be established by Lender from time to time and
in such manner (including reduction of the rate of Revolving Advances)
and for such reasons as Lender may determine from time to time in
Lender's reasonable discretion. Payments, deposits, guaranties or
indemnifications made by Lender under any reimbursement agreement,
guaranty or similar instrument made in respect of any such instrument
may be treated by Lender as Revolving Advances to Borrowers hereunder.
2.4. Manner of Borrowing.
(a) Borrowers have requested that, as a convenience to each of
them, all requests for Revolving Advances and the extension of any
other financial accommodations to either of them under this Agreement
shall be made only by Borrower TACT, acting in its capacity as agent
for both Borrowers.
(b) In furtherance of the foregoing, Borrowers hereby direct,
and Lender hereby agrees, that the making of Revolving Advances and the
extension of any other financial accommodations extended to either
Borrower under this Agreement shall be made by Borrower TACT, acting in
its capacity as agent as aforesaid.
(c) Borrowers further authorize Borrower TACT, acting in its
capacity as agent as aforesaid, to designate any Revolving Advance
received hereunder and any other financial accommodation extended
hereunder as having been made, issued or extended for the account of
the Borrower designated by Borrower TACT.
12
(d) In the absence of any such designation, the request will
be deemed to have been made on behalf of Borrower TACT for itself.
(e) Notwithstanding Borrower TACT's designation (or lack of a
designation) as it relates to any such Revolving Advance or any such
other financial accommodation as having been made or extended for the
account of a designated Borrower, Lender may in addition to charging a
specific loan account of the designated Borrower also charge the joint
and several Revolving Loan account of both Borrowers.
(f) The authority of Borrower TACT, acting in its capacity as
agent as aforesaid, to so request Revolving Advances or other financial
accommodations on behalf of, and to bind, Borrowers, shall continue
unless and until Lender's actual receipt of written notice from both
Borrowers as to the termination of such authority, which notice must be
signed by the respective President of each Borrower, and which notice
must be binding on both Borrowers and shall be effective only as to
Revolving Advances made or financial accommodations extended more than
sixty (60) days following Lender's receipt of such notice. Borrowers
understand that Lender's receipt of any such written notice constitutes
an Event of Default under the Loan Agreement.
(g) Notwithstanding the foregoing, it is the intent of this
Agreement that each entity named as Borrower shall be considered
individually and collectively as a "Borrower" hereunder regardless
whether any such entity actually receives the proceeds of the Revolving
Loan or any Revolving Advances made thereunder or any financial
accommodation provided hereunder and regardless which entity is the
source of any Collateral, it being further intended that each entity
named as "Borrower" is and shall be jointly and severally liable as a
"Borrower" for the payment of all Obligations.
(h) Each Revolving Advance shall be requested in writing via
facsimile by a Notice of Borrowing executed by an authorized officer of
Borrower TACT, not later than 11:00 a.m. Eastern Time on any Banking
Day on which a Revolving Loan is requested. Provided that Borrowers
shall have satisfied all conditions precedent set forth in this
Agreement, including the reaffirmation of the representations and
warranties and covenants as required under Section 17.2 hereof, and
Borrowers shall have sufficient Collateral to permit a Revolving
Advance hereunder in accordance with Section 2.1 hereof, Lender shall
make the Advance in the amount requested in writing by Borrower TACT in
immediately available funds for credit to any account of Borrowers
(other than a payroll account) at a bank in the United States of
America as Borrowers may specify (provided, however, that Borrowers
shall pay Lender its usual and customary fees for such transfer).
Lender shall not be responsible for any failure of any amount so
transferred to be credited to any such account, unless such failure is
due to Lender's gross negligence or willful misconduct.
2.5. Evidence of Borrower's Obligations.
(a) Borrowers' joint and several obligation to pay principal
of, and interest on, the Revolving Advances made to Borrowers shall be
evidenced by the Revolving Note executed by Borrowers on the date
hereof and delivered to Lender, as such note may from time to time be
extended, modified, refinanced, renewed, substituted, replaced and/or
redated with the written consent of Lender.
(b) In addition to being evidenced by the Revolving Note, all
Revolving Advances made by Lender under the Revolving Loan and all
interest due on the Revolving Loan and all other amounts due under the
Revolving Loan and this Agreement and all payments made on account of
principal and/or interest and/or such other amounts may be entered by
Lender on its records. The aggregate unpaid principal and/or interest
and/or other amounts entered and shown on Lender's records shall
further evidence the principal and/or interest and/or other amounts
owing and unpaid on the Revolving Loan and this Agreement.
13
(c) The fact that only one Borrower's Revolving Loan account
may be charged on Lender's books in no way alters or lessens the joint
and several liability of both Borrowers under this Agreement for the
performance and payment of all the Obligations, it being understood (as
also set forth in Section 2.9 below) that EACH BORROWER IS JOINTLY AND
SEVERALLY AND UNCONDITIONALLY LIABLE AS A GUARANTOR OF THE PAYMENT AND
PERFORMANCE OF THE OBLIGATIONS OF THE OTHER BORROWER, SUCH "GUARANTY"
LIABILITY BEING ONE OF PAYMENT, AND NOT MERELY ONE OF COLLECTION.
(d) Lender may from time to time render a statement of the
aforementioned records. If Borrowers fail to object to the statement
within thirty (30) days after it is received by Borrowers, it shall be
deemed to be an account stated and binding upon Borrowers, absent
manifest error. Notwithstanding the foregoing, Lender's failure to
enter on such records the date and amount of any Revolving Advance or
unpaid interest or other amounts shall not, however, limit or otherwise
affect the obligations of Borrowers under this Agreement to repay the
principal amount of the Revolving Advances made by Lender to Borrowers
under the Revolving Loan, together with all interest accruing and other
amounts due thereon.
14
2.6. Payments. All payments with respect to the Obligations
shall either be charged by Lender to Borrowers' account, charged as an
advance or made by Borrowers to Lender in U.S. currency and without any
defense, offset or counterclaim of any kind, at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇-▇▇▇, ▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, or to such other address as
Lender shall specify, by 12:00 noon New York, New York time on the date
when due. Whenever any payment to be made shall otherwise be due on a
day that is not a Banking Day, such payment shall be made on the next
succeeding Banking Day and such extension of time shall be included in
computing interest in connection with any such payment. Lender may make
an Advance to reimburse itself for any payments on the Obligations
(including fees and expenses payable by Borrowers) which are not paid
when due, without prior notice or demand to Borrowers, but which Lender
agrees shall be reflected in the monthly statements set forth in
Section 9 of this Agreement. Prior to the occurrence of an Event of
Default, Lender shall give written notice to Borrowers of any legal,
auditing, or accounting fees or expenses incurred by Lender (other than
such fees and expenses which are attributable to periods prior to the
closing hereof or which are attributable to the closing hereof, all of
which fees and expenses are due and payable at the time of closing),
whereupon Borrowers shall have thirty (30) days to make satisfactory
payment of such fees and expenses. If Borrowers fail to pay such fees
and expenses in full within such thirty (30) day period, then Lender
may, without further notice or demand, make an Advance to reimburse
itself for such fees and expenses; provided, however, that, Borrowers'
right to review, object to and dispute such fees and expenses shall not
be effected thereby; provided, further, however, that Borrowers' right
to review, object and dispute such fees and expenses shall be exercised
in accordance with Section 9 of this Agreement.
2.7. Collections/Balance/Statements/etc.
(a) Collection and Remittance.
Each Borrower covenants and agrees to open the Blocked Account
over which Lender shall have the sole power of withdrawal. All proceeds
of Receivables whether cash, checks, drafts, notes, acceptances or
other forms of payment, if received by either Borrower, shall be
received by each Borrower in trust for Lender, and each Borrower agrees
to deliver or cause to be delivered, such payments forthwith, in the
identical form in which received, to Lender or to the Blocked Account,
as Lender shall require from time to time. Collected funds in the
Blocked Account shall be swept daily and the proceeds deposited to an
account of Lender or Borrowers as Lender shall elect.
(b) Determination of Balance of Revolving Loans.
In determining the outstanding balance of the Revolving Loans,
(i) funds transferred from the Blocked Account to the Lender's account
at Fleet Bank, Account Name: Keltic Financial Partners, LP; Account No.
9428395438, ABA #▇▇▇▇▇▇▇▇▇ (or such other account as Lender may direct
from time to time), before 2 p.m. Eastern Time of a Business Day will
be credited on the second (2nd) Banking Day after such Banking Day, and
thereafter on the following Banking Day, as follows: (a) first, to the
outstanding principal balance of the Revolving Loan, and (b) second, to
all other Obligations in such order as Lender shall elect; (ii) any
other form of funds received by Lender will be credited on the Banking
Day when Lender has received notification that such funds are collected
and available to Lender if before 2 p.m. (Eastern Time), and
15
thereafter on the following Banking Day; (iii) all credits shall be
conditional upon final payment to Lender in cash or solvent credits of
the items giving rise to them and, if any item is not so paid, the
amount of any credit given for it shall be charged to the balance of
the Revolving Loans whether or not the item is returned; and (iv) for
the purpose of computing interest on the Revolving Loans and other
Obligations, interest shall continue to accrue on the amount of any
payment credited to either Borrower's Revolving Loan balance by Lender
for a period of two (2) calendar days after the date so credited.
Subject to Lender's rights, as set forth in Section 16, as soon as
available payment is received by Lender with respect to all credits, if
there are no outstanding Obligations hereunder, then Lender in
accordance with and subject to applicable law, will transfer upon
Borrowers' written request the funds on deposit in the Blocked Account
to Borrowers' operating account.
2.8. Payment on Termination Date. Notwithstanding anything
herein to the contrary, the entire outstanding principal balance of the
Loans, plus all accrued and unpaid interest thereon and all fees and
other amounts payable under this Agreement and the Loan Documents,
shall be due and payable, in full, on the Termination Date.
2.9. Borrowers' Absolute Guaranty Obligations.
(a) Guaranty of Payment. As it relates to each Borrower's
Obligations owed to Lender, the other Borrower hereby absolutely,
unconditionally and irrevocably guarantees to Lender as a primary
obligor and not as a mere surety the punctual payment and performance
of all those Obligations.
(b) Obligations Unconditional. The aforesaid guaranty
obligations shall remain in full force and effect until all Obligations
and all sums due hereunder are paid in full, irrespective of any
interruptions in the business relationships of either Borrower with the
Lender. Each Borrower's guaranty hereunder shall not be affected,
modified or impaired by any state of facts or the happening from time
to time of any event, including, without limitation, any of the
following, whether or not with notice to or the consent of either
Borrower:
(i) the invalidity, irregularity, illegality or
unenforceability of, or any defect in any
Loan Document or any Collateral;.
(ii) any present or future law or order of any
government (de jure or de facto) or of any
agency thereof purporting to reduce, amend
or otherwise affect any Loan Document or any
other obligation of either Borrower or any
other Guarantor of the Obligations or any
other terms of payment;
(iii) the waiver, compromise, settlement, release
or termination of any or all of the
obligations, covenants or agreements of
either Borrower under any Loan Document or
of any other Guarantor of the Obligations or
any part thereof, or of any other party who
has given collateral as security for the
payment of the Obligations or any part
thereof;
(iv) the failure to give notice to either
Borrower of the occurrence of an event of
default under any Loan Document;
16
(v) the loss, impairment by Lender, release
(whether with or without consideration),
sale, exchange, surrender or other change in
any Collateral;
(vi) the extension of the time for payment of any
principal of or interest on the Obligations
or of the time for performance of any other
obligations, covenants or agreements under
or arising out of any Loan Document or the
extension or the renewal of any thereof;
(vii) the modification or amendment (whether
material or otherwise) of any obligation,
covenant or agreement set forth in any Loan
Document;
(viii) the performance of, or the omission to
perform, any of the actions referred to in
any Loan Document;
(ix) any failure, omission or delay on the part
of the Lender to enforce, assert or exercise
any right, power or remedy conferred on the
Lender in any Loan Document;
(x) the voluntary or involuntary liquidation,
dissolution, sale or other disposition of
all or substantially all the assets,
marshaling of assets and liabilities,
receivership, insolvency, bankruptcy,
assignment for the benefit of creditors,
reorganization, arrangement, composition
with creditors or readjustment of, or other
similar proceedings affecting either of the
Borrowers or any assets of either of them,
or any allegation or contest of the validity
of any Loan Document;
(xi) the default or failure of either Borrower to
fully perform any obligations set forth
herein;
(xii) any event or action that would, in the
absence of this paragraph, result in the
release or discharge of either Borrower from
the performance or observance of any
guaranty obligation, covenant or agreement
contained herein (other than payment in full
of the Obligations or a written release
provided by Lender to the applicable
Borrower); or
(xiii) any other circumstances which might
otherwise constitute a legal or equitable
discharge or defense of a surety or a
guarantor.
(c) Waiver by the Borrowers (as Guarantors). Each Borrower (in
its capacity as a Guarantor) hereby waives:
(i) notice of Lender's acceptance of this
guaranty;
(ii) diligence, presentment and demand for
payment of any of the Obligations;
17
(iii) protest and notice of protest, dishonor or
default with respect to any sums due under
any of the Obligations;
(iv) any and all notices to which either Borrower
(in its capacity as a Guarantor) might
otherwise be entitled;
(v) any demand for payment under this guaranty;
(vi) any and all defenses to payment including,
without limitations any defenses and
counterclaims of either of the Borrowers or
any other Guarantor of the Obligations based
upon fraud, negligence or the failure of any
condition precedent or claims of offset or
defenses involving the invalidity,
irregularity or unenforceability of all or
any part of the liabilities herein
guaranteed or any defense otherwise
available to either of the Borrowers or any
other Guarantor of the Obligations.
(d) Delay of Subrogation. Until such time as the Obligations
are paid in full and the Lender has received all other sums due under
the terms of the Loan Documents, any and all rights of subrogation,
reimbursement, indemnity, exoneration, contribution or any other claim
which either Borrower may now or hereafter have against the other
Borrower or any other person directly or contingently liable for the
Obligations guaranteed hereunder, or against or with respect to the
property of either Borrower (including, without limitation, property
collateralizing the Obligations), arising from the existence or
performance of this guaranty and whether or not such claim, right or
remedy arises in equity, under contract, by statute, under common law
or otherwise.
(e) Nature of Guaranty. This guaranty is a guaranty of payment
and not of collection and each Borrower hereby waives the right to
require that any action be brought first against the other Borrower or
any other person directly or contingently liable for the Obligations
guaranteed hereunder, or to require that resort be made to any security
or to any balance of any deposit account or credit on the books of the
Lender in favor of either of the Borrowers or of any other person
directly or contingently liable for the Obligations guaranteed
hereunder.
(f) Continuation of Guaranty. Each Borrower further agrees
that its guaranty obligations hereunder shall continue to be effective
or reinstated, as the case may be, if at any time payment or any part
thereof of any sums due under any of the Obligations is rescinded or
must otherwise be restored by the Lender upon the bankruptcy or
reorganization of either of the Borrowers, or any other person directly
or contingently liable for the Obligations guaranteed hereunder, or
otherwise.
(g) Subordination of Debt. Each Borrower hereby subordinates
to the prior payment of the Obligations any and all indebtedness now or
hereafter owed to it by the other Borrower. Each Borrower also agrees
with Lender that, from and after the date whereon Lender notifies such
Borrower that an Event of Default has occurred hereunder and is
continuing, such Borrower shall not demand or accept any payment from
the other Borrower of any such indebtedness, shall not claim any offset
or other reduction of the guarantying Borrower's liabilities hereunder
because of any such indebtedness and shall not take any action to
obtain any interest in any of the Collateral; provided, however, that,
if Lender so requests, such indebtedness shall be collected, enforced
and received by the guarantying Borrower as trustee for Lender and paid
over to Lender on account of the Obligations, but without reducing or
affecting in any manner the guaranty liability of the guarantying
Borrower under the other provisions of this guaranty except to the
extent the Obligations shall have been reduced by such payment.
18
3. LENDER'S COMPENSATION.
3.1. Interest on Revolving Advances; Costs and Expenses.
Borrowers shall pay interest monthly, in arrears, on the first day of
each month, commencing April 1, 2004, on the average daily unpaid
principal amount of the Revolving Advances made to either Borrower at a
fluctuating rate which is equal to the Prime Rate plus two percent
(2.0%) per annum; provided, however, that so long as there is no Event
of Default hereunder and Borrowers have had four (4) consecutive fiscal
quarters of positive net income as determined in accordance with
Generally Accepted Accounting Principles, then the average daily unpaid
principal amount of the Revolving Advances made to either Borrower at a
fluctuating rate which is equal to the Prime Rate plus one and
three-quarters of one percent (1.75%). Notwithstanding the foregoing,
on and after the occurrence of an Event of Default hereunder, Borrowers
shall pay interest on all Revolving Advances at a rate which is three
percent (3%) per annum above the interest rate which would otherwise be
in effect under this Agreement with respect to the Revolving Advances;
provided, however, in no event shall any interest to be paid hereunder
or under any Loan Document exceed the maximum rate permitted by law.
3.2. Commitment and Closing Fee. Borrowers shall pay to Lender
a $40,000 closing and extension fee.
3.3. Facility Fee. Borrowers shall pay to Lender monthly, in
arrears, on the first day of each month a facility fee in an amount
equal to one percent (1.0%) per annum of the Maximum Facility.
3.4. Collateral Management Fee. Borrowers shall pay to Lender
monthly, in arrears, on the first day of each month, a collateral
management fee in an amount of One Thousand Five Hundred and 00/100
Dollars ($1,500.00). Notwithstanding the foregoing, on and after the
occurrence of an Event of Default hereunder, the collateral management
fee shall be increased by $1,000.00 per month over the otherwise
applicable collateral management fee.
3.5. Field Examination Fees. Borrowers shall promptly
reimburse Lender for all costs and expenses associated with periodic
field examinations performed by Lender and its agents, as deemed
reasonably necessary by Lender; provided, however, Lender agrees that
so long as an Event of Default has not occurred and is not continuing,
Borrowers shall not be required to reimburse Lender for the costs and
expenses associated with more than four (4) such field examinations per
calendar year. Lender shall use its best efforts to complete the on
site portion such field examinations within two (2) man days per field
examination.
19
3.6. Prepayment Premium. If Borrowers prepay all or
substantially all of the principal of the Revolving Loans prior to the
Termination Date other than from funds internally generated in the
ordinary course of business, including, without limitation, by raising
additional capital or any normal course payment on the Loans that do
not have the effect of a permanent reduction in the Loans, Borrowers
shall pay to Lender at the time of such prepayment, a prepayment
premium in an amount equal to four percent (4.0%) of the Maximum
Facility if the prepayment is made on or before June 27, 2005, three
percent (3.0%) of the Maximum Facility if the prepayment is made after
June 27, 2005 but on or prior to June 27, 2006, and one percent (1.0%)
of the Maximum Facility if the prepayment is made after June 27, 2006,
except that no prepayment premium shall be required in connection with
any termination of this Agreement by Lender so long as there is no
Event of Default hereunder.
3.7. Computation of Interest and Fees. All interest and fees
hereunder shall be computed on the basis of a year consisting of three
hundred sixty (360) days for the number of days actually elapsed.
3.8. Payment of Interest and Fees. Interest and fees shall be
payable immediately when due, and shall be paid by Lender's making an
Advance in the amount of the interest and/or fee due against the
Revolving Loan, but any failure or delay by Lender in submitting any
invoice for such interest or fee or in the making of an advance against
the Revolving Loan shall not discharge or relieve Borrower of its
obligation to make such interest or fee payment.
4. APPLICATION OF PROCEEDS. The proceeds of the Revolving Advances
shall be used solely by Borrowers for working capital needed in the normal
operation of Borrowers' business.
5. SECURITY INTEREST IN COLLATERAL. To secure the prompt payment and
performance of all of each Borrower's Obligations to Lender, each Borrower
transfers and assigns to Lender and grants to Lender a first priority Lien on
and first security interest in all of the following property and interests in
property of each such Borrower, whether now owned or existing or hereafter
created, acquired or arising and wheresoever located:
(a) All Receivables, whether now owned or existing or
hereafter created, acquired or arising and
wheresoever located;
(b) all Inventory, whether now owned or existing or
hereafter created, acquired or arising and
wheresoever located;
(c) all Equipment, whether now owned or existing or
hereafter created, acquired or arising and
wheresoever located;
(d) all General Intangibles, whether now owned or
existing or hereafter created, acquired or arising
and wheresoever located;
(e) all Investment Property, whether now owned or
existing or hereafter created, acquired or arising
and wheresoever located;
(f) all Deposit Accounts, whether now owned or existing
or hereafter created, acquired or arising and
wheresoever located;
20
(g) Letter-of-Credit Rights, whether now owned or
existing or hereafter created, acquired or arising
and wheresoever located;
(h) all monies or other Property of any kind, now or at
any time or times hereafter, in the possession or
under the control of Lender or any affiliate of
Lender or any representative, agent or correspondent
of Lender, whether now owned or existing or hereafter
created, acquired or arising and wheresoever located;
(i) all other Business Assets of Debtor, whether now
owned or existing or hereafter created, acquired or
arising and wheresoever located;
(j) all accessions to, substitutions for and all
replacements, products and cash and noncash proceeds
of (a), (b), (c), (d), (e) (f),(g) and (h) above,
including, without limitation, proceeds of and
unearned premiums with respect to insurance policies
insuring any of the Collateral and claims against any
Person for loss of, damage to, or destruction of any
or all of the Collateral; and
(k) all books and records (including, without limitation,
customer lists, credit files, computer programs,
printouts and other computer materials and records)
of each Borrower pertaining to any of (a), (b), (c),
(d), (e), (f) (g), (h), (i) or (j) above.
(l) "Collateral" shall not include any ownership interest
of Borrower TACT in T3 Media, Inc., Always-On
Software, Inc. or Methoda, Ltd.
6. RECOURSE TO SECURITY. Borrowers specifically understand and agree
that Lender's recourse against and/or to any security or Collateral shall not be
required as a prior condition to Lender's exercise of any of its rights and
remedies hereunder.
7. INDUCING REPRESENTATIONS. In order to induce Lender to make the
Loans, each Borrower makes the following representations and warranties to
Lender:
7.1. Organization and Qualifications.
(a) TACT is a corporation duly organized and existing
under the laws of the State of New York.
(b) IOT is a corporation duly organized and existing
under the laws of the State of New Jersey.
(c) Each Borrower is qualified to do business in
every jurisdiction where the nature of its business requires
it to be so qualified and where failure to so qualify might
have a Material Adverse Effect.
21
7.2. Corporate Name and Address.
(a) During the preceding five (5) years, neither
Borrower has been known as or used any corporate, fictitious
or trade names, except as set forth on Schedule 7.2 attached
hereto.
(b) Each Borrower's executive office is at the
addresses set forth above.
7.3. Corporate Structure. Neither Borrower has any
subsidiaries or Affiliates, except as set forth on Schedule 7.3
attached hereto.
7.4. Legally Enforceable Agreement. The execution, delivery
and performance of this Agreement, and each and all of the other Loan
Documents and all and any other instruments and documents to be
delivered by each Borrower or its Affiliates hereunder and the creation
of all Liens and security interests provided for herein are within each
Borrower's corporate power, have been duly authorized by all necessary
or proper corporate action (including the consent of shareholders where
required), are not in contravention of any agreement or indenture to
which either Borrower is a party or by which it is bound, or of the
Certificate of Incorporation or By-Laws of either Borrower, and are
not, to the best of each Borrower's knowledge, in contravention of any
provision of law and the same do not, to the best of each Borrower's
knowledge, require the consent or approval of any governmental body,
agency, authority or any other person which has not been obtained and a
copy thereof furnished to Lender. The execution, delivery and
performance of the Guaranty to be delivered by the Guarantor is not, to
the best of each Borrower's knowledge, in contravention of any
provision of law and the same does not require the consent or approval
of any governmental body, agency, authority or any other person which
has not been obtained and a copy thereof furnished to the Lender.
7.5. Solvent Financial Condition. Borrowers and Guarantor are
each Solvent, as defined in Section 1.59 hereof.
7.6. Financial Statements.
(a) Borrower TACT's filed SEC Form 10-K dated as of
December 31, 2002, a copy of which has been delivered to
Lender, fairly presents Borrower TACT's financial condition
and results of operations as relevant and as of such date and
there have been no material adverse changes since such date.
(b) Neither Borrower has any material contingent
liabilities, liabilities for taxes, unusual forward or
long-term commitments, or unrealized or unanticipated losses
from any unfavorable commitments which were not disclosed to
Lender in such Form 10-K.
7.7. Joint Ventures. Neither Borrower is engaged in any joint
venture or partnership with any other Person.
7.8. Real Estate. Attached hereto as Schedule 7.8 is a list
showing, to the best of each Borrower's knowledge, all real property
owned or leased by each such Borrower.
22
7.9. Patents, Trademarks, Copyrights and Licenses. To the best
of each Borrower's knowledge, each Borrower owns or has a valid license
to use all the patents, trademarks, service marks, trade names,
copyrights and licenses, if any, which are currently used by it in and
are reasonably necessary for the present and planned future conduct of
its business without conflict with the rights of others. To the best of
each Borrower's knowledge, all such licenses and other similar rights
(exclusive of licenses relating to normal office business software
(e.g. licenses for computer programs such as Word and Excel) that are
used by either Borrower in its normal operations) with a value to such
Borrower in excess of $200,000.00 are listed on Schedule 7.9 attached
hereto and made a part hereof, if any. Notwithstanding the foregoing,
neither Borrower is aware of other users of the term "TACT" and
combinations including "A Consulting", which users may be able to
restrict Borrower TACT's ability to establish or protect Borrower
TACT's right to use these terms. Borrower TACT has in the past been
contacted by other users of the term "TACT" alleging rights to the
term. Borrower TACT has completed filings with the U.S. Patent and
Trademark Office in order to protect certain marks, including "TACT"
and "The A Consulting Team".
7.10. Existing Business Relationship. There exists no actual
or, to the best of either Borrower's knowledge, threatened termination,
cancellation or limitation of, or any materially adverse modification
or change in, the business relationship of either Borrower with any
customer or group of customers whose purchases individually or in the
aggregate are material to the operations of either Borrower, or with
any supplier.
7.11. Investment Company Act: Federal Reserve Board
Regulations. Neither Borrower is an "investment company", or an
"affiliated person" of, or "promoter" or "principal underwriter" for,
an "investment company", as such terms are defined in the Investment
Company Act of 1940, as amended (15 U.S.C. ss.80(a)(1), et seq.). The
makings of the Revolving Loans hereunder by Lender, the application of
the proceeds and repayment thereof by Borrowers and the performance of
the transactions contemplated by this Agreement will not violate any
provision of said Act, or any rule, regulation or order issued by the
Securities and Exchange Commission thereunder. Neither Borrower owns
any margin security as that term is defined in Regulation U of the
Board of Governors of the Federal Reserve System and the proceeds of
the borrowings made pursuant to this Agreement will be used only for
the purposes contemplated hereunder. None of the proceeds will be used,
directly or indirectly, for the purpose of purchasing or carrying any
margin security or for the purpose of reducing or retiring any
indebtedness which was originally incurred to purchase or carry margin
security or for any other purpose which might constitute any of the
loans under this Agreement a "purpose credit" within the meaning of
said Regulation U or Regulations T or X of the Federal Reserve Board.
Neither Borrower will take, or permit any agent acting on its behalf to
take, any action which might cause this Agreement or any document or
instrument delivered pursuant hereto to violate any regulation of the
Federal Reserve Board.
23
7.12. Tax Returns. Borrowers and the Guarantors have filed or
timely extended the filing date of all tax returns (Federal, state or
local) required to be filed and paid all taxes shown thereon to be due
including interest and penalties or has provided adequate reserves
therefor. To the best of each Borrower's knowledge, no assessments have
been made against either Borrower or the Guarantors by any taxing
authority nor has any penalty or deficiency been made by any such
authority. To the best of each Borrower's knowledge, no Federal income
tax return of either one of the Borrowers or any Guarantor is presently
being examined by the Internal Revenue Service nor are the results of
any prior examination by the Internal Revenue Service or any State or
local tax authority being contested by Borrower.
7.13. Litigation. Except as disclosed in Schedule 7.13, no
action or proceeding, is now pending or, to the best of each Borrower's
knowledge, is threatened against either Borrower or any Guarantor at
law, in equity or otherwise, before any court, board, commission,
agency or instrumentality of the Federal or state government or of any
municipal government or any agency or subdivision thereof, or before
any arbitrator or panel of arbitrators, and neither one of the
Borrowers nor any Guarantor has accepted liability for any such action
or proceeding. Neither Borrower has received notice of and, to the best
of each Borrower's knowledge, there is no proceeding pending before any
governmental agency (Federal, state or local) and, to the best of
Borrower's knowledge, no investigation has been commenced before any
such government agency the effect of which, if adversely decided, would
affect or impair Borrower's business or financial condition.
7.14. Receivables Locations. Annexed hereto as Schedule 7.14
is a list showing all places at which each Borrower maintains, or will
maintain, records relating to Receivables.
7.15. Inventory Locations. Annexed hereto as Schedule 7.15 is
a list showing all places where each Borrower maintains, or will
maintain, Inventory with, in the aggregate, book value in excess of
$50,000.00. Such list indicates whether the premises are owned or
leased by such Borrower or whether the premises are the premises of a
warehouseman or other third party, and if owned by a third party, the
name and address of such third party.
7.16. Equipment List and Locations. Annexed hereto as Schedule
7.16 is a computer printout from Borrowers' books and records showing
substantially all of each Borrower's Equipment (except for items of
Equipment which in the aggregate do not have material value), and
describing the places where the same is located. All Equipment is free
and clear of all Liens and security interests voluntary created by
either Borrower in favor of any Person other than Lender, except as set
forth on Schedule 7.16, and to the best of each Borrower's knowledge,
there are no other Liens or security interests encumbering any
Equipment.
7.17. Title Liens. Each Borrower has good and marketable title
to the Receivables and, to the best of each Borrower's knowledge, the
Other Collateral, as sole owner thereof. There are no existing Liens
voluntarily created by either Borrower on any property of either
Borrower, except for Liens in favor of Lender and Liens described in
Schedule 7.17 and, to the best of each Borrower's knowledge, there are
no other Liens on any property of either Borrower. Except as set forth
on Schedule 7.17, none of the Receivables and, to the best of each
Borrower's knowledge, none of the Other Collateral is subject to any
prohibition against encumbering, pledging, hypothecating or assigning
the same or requires notice or consent in connection therewith.
24
7.18. Existing Indebtedness. Neither Borrower has existing
Indebtedness except the Indebtedness described in Schedule 7.18.
7.19. ERISA Matters. Neither Borrower has any so-called
"defined benefit" Plan and, with respect to either Borrower's so-called
"defined contribution" Plan, neither Borrower has made any
contributions thereunder, neither is obligated to make any
contributions and neither has any outstanding obligations thereunder
pursuant to the terms thereof. To the best of each Borrower's
knowledge, neither Borrower has engaged in any transaction which would
subject either Borrower to tax, penalty or liability for prohibited
transactions imposed by ERISA or the Code.
7.20. O.S.H.A. To the best of each Borrower's knowledge, each
Borrower has duly complied with, and its facilities, business,
leaseholds, equipment and other property are in compliance in all
respects with, the provisions of the federal Occupational Safety and
Health Act and all rules and regulations thereunder and all similar
state and local Governmental Rules. To the best of each Borrower's
knowledge, there are no outstanding citations, notices or orders of
non-compliance issued to either Borrower or relating to its facilities,
business, leaseholds, equipment or other property under any such
Governmental Rules.
7.21. Environmental Matters. Except as disclosed in Schedule
7.21:
(a) To the best of each Borrower's knowledge, no property
owned or used by either Borrower is or has been used for the
generation, manufacture, refining, transportation, treatment, storage,
handling or disposal of any "hazardous substances" or "hazardous
wastes". The following are all of the Standard Industrial
Classification Codes applicable to the properties and operations of
both Borrowers: 541519; (b) to the best of each Borrower's knowledge,
each Borrower is in compliance with all applicable Environmental Laws;
(c) to the best of each Borrower's knowledge, there has been no
contamination or release of hazardous substances at, upon, under or
within any property owned or leased by either Borrower, and there has
been no contamination (as defined in any applicable Environmental Law)
or release of hazardous substances (as defined in any applicable
Environmental Law) on any other property that has migrated or threatens
to migrate to any property owned or leased by either Borrower; (d) to
the best of each Borrower's knowledge, there are not now and never have
been above-ground or underground storage tanks at any property owned or
leased by either Borrower; (e) to the best of each Borrower's knowledge
there are no transformers, capacitors or other items of Equipment
containing polychlorinated biphenyls at levels in excess of 49 parts
per million, violative of any applicable Environmental Law, at any
property owned or leased by either Borrower; (f) to the best of each
Borrower's knowledge, no hazardous substances are present at any
property owned or leased by either Borrower, nor will any hazardous
substances be present upon any such property or in the operation
thereof by either Borrower, in proper storage containers; (g) to the
best of each Borrower's knowledge, all permits and authorizations
required under Environmental Laws for all operations of each Borrower
have been duly issued and are in full force and effect, including but
not limited to those for air emissions, water discharges and treatment,
storage tanks and the generation, treatment, storage and disposal of
hazardous substances; (h) to the best of each Borrower's knowledge,
there are no past, pending or threatened environmental claims against
either Borrower or any Property owned or leased by either Borrower; to
the best of each Borrower's knowledge, and there is no condition or
occurrence on any Property owned or leased by either Borrower that
could be anticipated (1) to form the basis of an environmental claim
against either Borrower or its properties or (2) to cause any property
owned or leased by either Borrower to be subject to any restrictions on
its ownership, occupancy or transferability under any Environmental
Law; (i) the representations and warranties set forth in this Section
shall survive repayment of the Obligations and the termination of this
Agreement and the Loan Documents.
25
7.22. Labor Disputes. There are no pending or, to the best of
each Borrower's knowledge, threatened labor disputes which could have a
Material Adverse Effect.
7.23. Intellectual Property. To the best of each Borrower's
knowledge, each Borrower owns or has a valid license to use all
necessary patents, trademarks, service marks, copyrights and other
intellectual property, if any, which are currently used by it in and
are reasonably necessary or useful in the operation of its business, in
each case free of any claims or infringements. Notwithstanding the
foregoing, Borrowers are aware of other users of the term "TACT" and
combinations including "A Consulting", which users may be able to
restrict Borrower TACT's ability to establish or protect Borrower
TACT's right to use these terms. Borrower TACT has in the past been
contacted by other users of the term "TACT" alleging rights to the
term. Borrower TACT has completed filings with the U.S. Patent and
Trademark Office in order to protect certain marks, including "TACT"
and "The A Consulting Team".
7.24. Location of Bank and Securities Accounts. Schedule 7.24
hereto sets forth a complete and accurate list of all deposit, checking
and other bank accounts, all securities and other accounts maintained
with any broker dealer and all other similar accounts maintained by
Borrowers, together with a description thereof.
7.25. Compliance With Laws. Each Borrower is in compliance
with all federal, state and local governmental rules, ordinances and
regulations ("Governmental Rules") applicable to its ownership or use
of properties or the conduct of its business, except for violations or
failures to comply, if any, which would not reasonably be expected to
have a Material Adverse Effect. Neither Borrower has received any
notice of violation of any of the foregoing.
7.26. No Other Violations. Neither Borrower is in violation of
any term of its Certificate of Incorporation or By-laws and, to the
best of each Borrower's knowledge, no event or condition has occurred
and is continuing which constitutes or results in (or would constitute
or result in, with the giving of notice, lapse of time or other
condition) (a) a breach of, or a default under, any agreement,
undertaking or instrument to which either Borrower is a party or by
which it or any of its property may be affected, or (b) the imposition
of any Lien on any property of either Borrower. To the best of each
Borrower's knowledge, no Guarantor is in breach or default under any
agreement, undertaking or instrument to which the Guarantor is a party
or by which he/it or his/its property may be affected, nor does any
condition exist which would constitute such a breach or default or
result in the imposition of any Lien on any Property of any Guarantor.
26
7.27. Survival of Representations and Warranties. Each
Borrower covenants, warrants and represents to Lender that all
representations and warranties of each Borrower contained in this
Agreement or any of the other Loan Documents shall be true at the time
of each Borrower's execution of this Agreement and the other Loan
Documents, and Lender's right to bring an action for breach of any such
representation or warranty or to exercise any remedy hereunder based
upon the breach of such representation or warranty shall survive the
execution, delivery and acceptance hereof by Lender and the closing of
the transactions described herein or related hereto until the
Obligations are finally and irrevocably paid in full. Lender
acknowledges and agrees that neither Borrower is making any
representation or warranty to Lender with respect to those matters set
forth on Schedule 7.27 hereto; provided, however, that each Borrower
represents and warrants that it knows of no fact or circumstance, and
it has not failed to disclose to Lender any fact or circumstance known
to it, that would make any such matters false or materially misleading.
8. FINANCIAL STATEMENTS AND INFORMATION; CERTAIN NOTICES TO LENDER. So
long as either Borrower shall have any Obligations to Lender under this
Agreement, each Borrower shall deliver to Lender, or shall cause to be delivered
to Lender:
8.1. Borrowing Base Certificate. Weekly (on or before
Wednesday of each week as of the preceding week end), and monthly
(within two (2) days after the end of each month) and contemporaneously
with each request for an Advance, a satisfactorily completed and
executed Borrowing Base Certificate.
8.2. Monthly Reports. Within twenty (20) days after the end of
each month, an accounts receivable aging and accounts payable aging and
Borrowers' consolidated Reconciliation Report for such month, all in
form satisfactory to Lender, prepared by Borrowers and if Lender so
requests, customer statements, sales journals, cash receipts journals
and detailed sales credit reports.
8.3. Annual Financial Statements. Within ninety (90) days
after the close of each Fiscal Year, (a) a copy of the annual
consolidating and consolidated financial statements of Borrowers
consisting of balance sheets, statements of operations and retained
earnings and statements of cash flow audited by independent certified
public accountants and certified by such accountants, and accompanied
by such accountants' certification that, in the normal course of their
review, such accountants have become aware of no presently existing
state of facts constituting a Default or an Event of Default under this
Agreement, (b) a copy of the annual consolidating financial statements
of Borrowers in the same format as the annual consolidated financial
statements except that such consolidating statements shall be prepared
by management of Borrowers in accordance with Generally Accepted
Accounting Principles and certified by the chief financial officer of
Borrowers, and (c) the Compliance Certificate. In addition, Borrowers
shall deliver, or cause to be delivered, to Lender, if and when issued,
any management letters prepared by Borrowers' independent certified
public accountants; provided that the consolidating financial
statements will not contain footnotes.
27
8.4. Financial Statements. Within (a) forty-five (45) days
after the end of each first, second and third quarter, and (b) ninety
(90) days after the end of each fourth quarter of each Fiscal Year,
consolidating and consolidated financial statements of Borrowers
consisting of balance sheets, statements of operations and retained
earnings and statements of cash flow, prepared by management of
Borrowers in accordance with Generally Accepted Accounting Principles
and certified by the chief financial officer of Borrowers, together
with the Compliance Certificate; provided that the consolidating
financial statements will not contain footnotes.
8.5. Tax Returns. A copy of each Borrower's federal income tax
return, as and when filed with the Internal Revenue Service.
8.6. Projections. Within thirty (30) days prior to the end of
each of Borrowers' fiscal years, financial projections for Borrowers in
form satisfactory to Lender covering not less than a one (1) year
period, commencing with the succeeding fiscal year. If such projections
are for a one (1) year period, then such projections shall be prepared
on a monthly basis. If such projections are for more than a one (1)
year period, then such projections shall be prepared on a monthly basis
with respect to first year thereof and on a quarterly basis thereafter.
8.7. Customer Lists. Semiannually, a list of all of Borrowers'
customers and vendors, including the addresses, telephone and facsimile
numbers which lists shall be delivered within thirty (30) days after
each second fiscal quarter and within thirty (30) days after the each
fiscal year end.
8.8. Insurance. Annually, within thirty (30) days of the
renewal date of such insurance policy, evidence of insurance in form
and content satisfactory to Lender and otherwise in compliance with
Section 14.6 hereof, together with the original insurance policy.
8.9. Notice of Event of Default and Adverse Business
Developments. Immediately after becoming aware of the existence of a
Default or any Event of Default under this Agreement or after becoming
aware of any developments or other information which is likely to (i)
materially adversely affect either Borrower's business, prospects,
profits or condition (financial or otherwise) or its ability to perform
this Agreement, or (ii) adversely affect the properties of either
Borrower, including, without limitation, the following:
(a) any substantial dispute that may arise between
either Borrower and any governmental regulatory body or law
enforcement authority, including any action relating to any
tax liability of either Borrower;
(b) all litigation against either Borrower where the
amount claimed in any one suit or action is $250,000 or more
and all litigation where the amount claimed in the aggregate
is $500,000 or more except when the same is fully covered by
insurance and the insurer accepts liability therefor;
(c) any labor controversy resulting in or threatening
to result in a strike or work stoppage against either
Borrower;
(d) any proposal by any public authority to acquire
the assets or business of either Borrower;
28
(e) the location of any Collateral other than at
either Borrower's place of business or as permitted under this
Agreement;
(f) any proposed or actual change of either
Borrower's name, identity or corporate structure; and
(g) any other matter which has resulted or may result
in a Material Adverse Effect.
In each case, the applicable Borrower will provide Lender with
telephonic or telegraphic notice specifying and describing the nature
of such Default, Event of Default or development or information, and
such anticipated effect, which telephonic or telegraphic notice shall
be promptly confirmed in writing within three (3) Banking Days; and
8.10. Other Information. Such other information respecting the
financial condition of either Borrower or any property of either
Borrower in which Lender may have a Lien as Lender may, from time to
time, reasonably request. Each Borrower authorizes Lender to
communicate directly with each Borrower's independent certified public
accountants and authorizes those accountants to disclose to Lender any
and all financial statements and other information of any kind that
they may have with respect to either Borrower and its business and
financial and other affairs. Each Borrower shall deliver a letter
addressed to such accountants instructing them to comply with the
provisions of this Section. Lender shall treat all non-public documents
and information marked "Confidential" ("Confidential Information") so
obtained or provided by each Borrower or its agents, representatives or
certified public accountants as confidential and will hold and will
cause its respective employees, agents and representatives to hold in
confidence all such Confidential Information concerning either
Borrower, its Affiliates, Always-On Software, Inc., Methoda, Ltd., and
T3 Media except: (i) when Lender is required to disclose pursuant to
Governmental Rules, (ii) when Lender is compelled to disclose by
judicial or administrative process, (iii) when deemed necessary by
Lender in its discretion to enforce this Agreement or any of the other
Loan Documents, and (iv) in connection with the sale of participations
in or the assignment of all or any part of Lender's interest in the
Loans. Lender will not release or disclose such Confidential
Information to any other person, except its auditors, attorneys,
financial advisors and other consultants, advisors, agents and
representatives. If the transactions contemplated by this Agreement are
not consummated, such confidence shall be maintained and, if requested
by or on behalf of either Borrower, Lender will, and will use all
reasonable efforts to cause its auditors, attorneys, financial advisors
and other consultants, agents and representatives to, return to the
applicable Borrower or destroy, at Borrowers' cost and expense, all
copies of all such Confidential Information.
9. ACCOUNTING. Lender shall account monthly to Borrowers. Each and
every account shall be deemed final, binding and conclusive upon Borrowers in
all respects, as to all matters reflected therein, unless Borrowers, within
thirty (30) days after the date the account was rendered, delivers to Lender
written notice of any objections which they may have to any such account and in
that event only those items expressly objected to in such notice shall be deemed
to be disputed by Borrowers. If either Borrower disputes the correctness of any
statement, such Borrower's notice shall specify in detail the particulars of its
basis for contending that such statement is incorrect.
29
10. RESTATEMENT AND REPLACEMENT OF 2002 LOAN AGREEMENT.
10.1. This Agreement, the Revolving Note and the other Loan
Documents are intended to restate and amend the obligations of
Borrowers under that certain June 27, 2001 Loan and Security Agreement
(as amended) and any "Loan Documents" defined therein (collectively the
"2001 Loan Documents").
10.2. This Agreement, the Revolving Note and the other Loan
Documents are intended to substitute for and replace in their entirety
the 2001 Loan Documents.
10.3. Borrowers agree that the principal amount of $-0- is due
on the 2001 Loan Documents as of the opening of business on the date
hereof (all interest being current as of March 1, 2004).
10.4. The foregoing principal amount outstanding under the
2001 Loan Documents on the date hereof shall be and hereby are restated
and recast, without more, as a Revolving Advance under the Revolving
Loan.
10.5. Borrowers acknowledge and agree that Borrowers'
obligations under the 2001 Loan Documents are not subject to any
defenses, recoupments, set-offs or counterclaims of any kind
whatsoever. To the extent that any such defense, recoupment, set-off or
counterclaim exists, it is hereby expressly waived by Borrowers.
10.6. Borrowers also agree that there exist no claims or
charges against any actions or inactions of Lender in extending any
financial accommodations under the 2001 Loan Documents or in making
disbursements under thereunder or in otherwise administering the 2001
Loan Documents or any of the other documents referred to therein.
11. WARRANTIES WITH RESPECT TO RECEIVABLES. Each Borrower represents
and warrants to Lender that each Receivable created by it (i) will be free and
clear of liens and encumbrances in favor of any Person other than Lender, except
as otherwise permitted hereunder, (ii) will cover a bona fide sale and delivery
of merchandise usually dealt in by each such Borrower in the ordinary course of
its business or will cover the rendition of services by each such Borrower to
customers of a kind ordinarily rendered in the ordinary course of each such
Borrower's business, (iii) will be for a liquidated amount from a customer
competent to contract therefor, (iv) is not subject to renegotiation, except in
the ordinary course of each Borrower's business consistent with each such
Borrower's past practice, (v) is not subject to any prepayment or credit and
will not be subject to any deduction, offset, counterclaim, lien or other
condition other than in the ordinary course of each such Borrower's business,
and (vi) is generally enforceable in accordance with its terms. Each Borrower
further represents and warrants that all services to be performed by each such
Borrower in connection with each Receivable have been performed.
30
12. SPECIAL PROVISIONS WITH RESPECT TO RECEIVABLES AND RELATED MATTERS.
12.1. Confirmatory Written Assignments. Promptly after the
creation of any Receivable, if Lender shall so request, each Borrower
shall execute and deliver confirmatory written assignments to Lender of
Eligible Receivables, but the failure to execute or deliver any
schedule or assignment shall not affect or limit any Lien or other
right of Lender in and to any Receivable. Each Borrower shall cause all
of its invoices to be printed and to bear consecutive numbers, and to
issue its invoices in such consecutive numerical order. On Lender's
request therefor, each Borrower shall also furnish to Lender copies of
invoices to customers and employee timesheets. Each Borrower will also
furnish Lender with such other documents and instruments as Lender may
request in connection with any Receivables, including detailed monthly
agings. Each Borrower shall deliver to Lender the originals of all
letters of credit, notes, and instruments in its favor and such
endorsements or assignments as Lender may request. If either Borrower
shall fail to deliver to Lender any Receivables, financial or any other
report with respect to the Collateral required to be delivered by
Borrower pursuant to Section 8 and Section 9 of this Agreement within
ten (10) days after the dates set forth therein, then Borrowers agree
to pay to Lender a fee of fifty dollars ($50.00) per day, beginning on
the date that next follows the date required for delivery of such
report and continuing through the date that either Borrower delivers
said report for each report and/or document that either such Borrower
fails to deliver to Lender under this Agreement.
12.2. Notice of Certain Events. Each Borrower will notify
Lender of all disputes, returns and of all claims asserted with respect
to (i) any Receivables which disputes or claims exceed $50,000 per
occurrence, and (ii) any Receivables (other than Eligible Receivables)
which disputes or claims exceed $150,000 per occurrence. Each Borrower
shall promptly report each such return, repossession or recovery of
merchandise to Lender, advising it of the location thereof and
providing it with a description of such goods and their location.
Neither Borrower shall settle or adjust any dispute or claim, or grant
any discount (except ordinary trade discounts and volume discounts),
credit or allowance or accept any return of merchandise, without
Lender's consent, except for credits, discounts or allowances on
Receivables in an aggregate amount not to exceed (i) $150,000 per
calendar month, and (ii) $400,000 per calendar quarter. Upon the
occurrence of and during the continuance of an Event of Default for a
period of in excess of two (2) months, Lender may settle or adjust
disputes or claims directly with customers or Account Debtors of either
Borrower for amounts and upon terms which it considers advisable. Where
either Borrower receives Collateral of any kind or nature by reason of
transactions between itself and its customers or Account Debtors, it
will hold the same on Lender's behalf, subject to Lender's
instructions, and as property forming part of the Receivables. Where
either Borrower sells to a customer or Account Debtor which also sells
to it or which may have other claims against it, such Borrower will so
advise Lender, promptly upon being notified of such order.
31
12.3. Communication with Account Debtors. Each Borrower
authorizes Lender, before an Event of Default, without the consent of
either Borrower, to communicate directly only with Account Debtors or
customer's accounts payable departments, by whatever means Lender shall
elect, for the purpose of verifying the information supplied by each
such Borrower to Lender with respect to Receivables only. Each Borrower
authorizes Lender, upon the occurrence of an Event of Default, without
the consent of either Borrower, to communicate directly with customers
or Account Debtors of Borrower by whatever means Lender shall elect for
the purpose of verifying the information supplied by either Borrower to
Lender with respect to Receivables. Upon Lender's request, before or
after the occurrence of an Event of Default, each Borrower shall
provide Lender with a list of the addresses of each of their Account
Debtors.
13. SPECIAL PROVISIONS RELATING TO EQUIPMENT.
13.1. Equipment List. Annexed hereto as Schedule 7.16 is a
computer printout from Borrowers' books and records showing
substantially all of each Borrower's present Equipment. All Equipment
hereafter acquired will be kept at the location or locations shown, if
shown, on said Schedule or at the locations where located on the date
hereof, unless the applicable Borrower shall have first advised Lender
of its intention to maintain a plant or offices at some other location
and obtained Lender's prior written consent thereto to keeping the
Equipment at such other location; provided, however, Lender's prior
written consent shall not be required with respect to (i) the
relocation of Equipment from the locations set forth on Schedule 7.16
to the residences of employees, provided that the type and amount of
Equipment so relocated is consistent with a "home office" and provided
that such relocation shall not cause a Material Adverse Effect; and
(ii) the relocation of Equipment between the locations set forth on
Schedule 7.16, provided that such relocation shall not cause a Material
Adverse Effect.
13.2. Borrower's Obligations With Respect to Equipment. Each
Borrower shall keep all of its Equipment in a good state of repair, and
will make all repairs and replacements when and where necessary, will
not waste or destroy Equipment or any part thereof, and will not be
negligent in the care, or use, thereof. Each Borrower shall keep
accurate lists and records reflecting its Equipment and shall retain
copies of all warranties, manuals and manufacturers' or vendors'
requirements with respect thereto. All Equipment shall be used in
accordance with law and prudent business practice and the
manufacturer's instructions and shall be kept separate from and shall
not be annexed or affixed to or become part of the realty except where
Lender first consents in writing thereto.
14. AFFIRMATIVE COVENANTS. Each Borrower represents and warrants that,
so long as it shall have any Obligations to Lender hereunder, each such
Borrower will:
14.1. Business and Existence. Preserve and maintain each such
Borrower's separate corporate existence and rights, privileges and
franchises in connection herewith.
14.2. Trade Names. Transact business in each such Borrower's
own name and invoice all of each such Borrower's Receivables in each
such Borrower's own name.
14.3. Transactions with Affiliates. Whenever either Borrower
engages in transactions with an Affiliate of either Borrower, conduct
the same, with respect to the payment obligations thereof, on an
arms-length basis or other basis more favorable to Borrowers.
32
14.4. Taxes. Pay and discharge all taxes, assessments,
government charges and levies imposed upon either Borrower, each such
Borrower's income or each such Borrower's profits or upon any property
belonging to either such Borrower prior to the date on which penalties
attach thereto, except where the same may be contested in good faith by
appropriate proceedings.
14.5. Compliance with Laws. Substantially comply with all
Governmental Rules applicable to either Borrower, including, without
limitation, all laws and regulations regarding the collection, payment
and deposit of employees' income, unemployment and Social Security
taxes; provided, however, that Borrowers shall not be in default as a
result of their failure to comply with a Governmental Rule if such
failure would not reasonably be expected to result in a Material
Adverse Effect.
14.6. Maintain Properties: Insurance. Safeguard and protect
all property used in the conduct of each Borrower's business and keep
all of each Borrower's property insured with insurance companies
licensed to do business in the states where the property is located
against loss or damage by fire or other risk usually insured against by
other owners or users of such properties in similar businesses under
extended coverage endorsement and against theft, burglary, and
pilferage together with such other hazards as Lender may from time to
time request, in amounts satisfactory to Lender. Each Borrower shall
deliver the policy or policies of such insurance or certificates of
insurance to Lender. All such insurance shall contain endorsements in
form satisfactory to Lender naming Lender as lender loss payee and
providing that the insurance shall not be canceled, amended or
terminated except upon thirty (30) days' prior notice to Lender and
showing Lender as an additional party insured as its interest may
appear. All insurance proceeds received by Lender shall be retained by
Lender for application to the payment of such portion of the
Obligations as Lender may determine in Lender's discretion. Each
Borrower shall promptly notify Lender of any event or occurrence
causing a loss or decline in value of property insured or the existence
of an event justifying a claim under any insurance and the estimated
amount thereof if the amount of any such loss, decline in value or
claim exceeds $250,000.00 in the aggregate.
14.7. Business Records. Keep adequate records and books of
account with respect to each Borrower's business activities in which
proper entries are made in accordance with sound bookkeeping practices
reflecting all financial transactions of each such Borrower.
14.8. Litigation. Give Lender prompt notice of any suit at law
or in equity against itself involving money or property valued in
excess of Two Hundred Fifty Thousand Dollars ($250,000) except where
the same is fully covered by insurance and the insurer accepts
liability therefor, and of any investigation or proceeding before or by
any administrative or governmental agency the effect of which would be
to prohibit or materially limit or restrict the manner in which either
Borrower presently conducts its respective business or to declare any
substance contained in any product manufactured or distributed by
either Borrower to be dangerous.
33
14.9. Damage or Destruction of Collateral. Maintain or cause
to be maintained the Collateral and all its other assets and properties
in good condition and repair at all times, preserve the Collateral and
all its other assets and properties from loss, damage, or destruction
of any nature whatsoever and provide Lender with prompt written notice
of (i) any destruction or substantial damage to any Collateral
evidencing or relating to Receivables and of the occurrence of any
condition or event which has caused, or may cause, loss or depreciation
in the value of any Receivables, and (ii) any material destruction or
substantial damage to any Other Collateral and of the occurrence of any
material condition or event which has caused, or may cause, loss or
depreciation in the value of any Other Collateral.
14.10. Name Change. Provide Lender with (i) not fewer than
thirty (30) days written notice prior to any proposed change of name,
and (ii) contemporaneous written notice of the creation of any
subsidiary.
14.11. Access to Books and Records. Provide Lender with such
reports and with such access upon three (3) days prior written notice
(unless an Event of Default has occurred, in which case no notice shall
be required), during normal business hours, to each Borrower's books
and records and permit Lender to copy and inspect such reports and
books and records all as Lender reasonably deems necessary or desirable
to enable Lender to monitor the credit facilities extended hereby;
provided, however, that Lender shall use reasonable efforts to avoid
disrupting either Borrower's ordinary business operations, particularly
during periods when (i) either Borrower is preparing filings for
submission to the U.S. Securities and Exchange Commission, and (ii)
either Borrower's auditors are present and auditing either Borrower's
books and records.
14.12. Solvent. Continue to be Solvent, as defined in Section
1.59 hereof.
14.13. Compliance With Environmental Laws. Comply in all
material respects with all applicable Environmental Laws.
14.14. Compliance with ERISA and other Employment Laws. Comply
in all material respects with all: (a) applicable provisions of ERISA
and the Code and (b) any other applicable laws, rules or regulations
relating to the compensation of employees and funding of employee
pension plans.
14.15. Proceeds of Collateral. Forthwith upon receipt, pay to
Lender all proceeds of Collateral, whereupon such proceeds shall be
applied to the Obligations in an order and manner as shall be
determined in the discretion of Lender.
14.16. Delivery of Documents. Notify Lender if any proceeds of
Receivables shall include, or any of the Receivables shall be evidenced
by, notes, trade acceptances or instruments or documents, or if any
Inventory is covered by documents of title or chattel paper, whether or
not negotiable, and if required by Lender, immediately deliver them to
Lender appropriately endorsed. Each Borrower waives protest regardless
of the form of the endorsement. If either Borrower fails to endorse any
instrument or document, Lender is authorized to endorse it on the
applicable Borrower's behalf provided Lender has provided such Borrower
with notice of such endorsement, except for checks and wire transfer
authorizations for which Lender shall not be required to give such
notice.
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14.17. United States Contracts. If any of the Eligible
Receivables arises out of a contract with the United States or any of
its departments, agencies or instrumentalities, immediately notify
Lender, and if required by Lender, execute any necessary instruments in
order that all money due or to become due under such contract shall be
assigned to Lender and proper notice of the assignment given under the
Federal Assignment of Claims Act.
14.18. Accounting System. Maintain an accounting system
whereby Receivables aging shall be formatted alphabetically by Account
Debtor and coded to identify all invoices that are not for time and
material, including, without limitation, fixed price, software,
business solutions, training, employee placement and ▇▇▇▇-in advance,
the foregoing to Lender's satisfaction.
14.19. Validity/Support Guaranty. At all times during the term
hereof, each Borrower shall cause an authorized officer of each such
Borrower (e.g., president, chief executive officer, etc.), such
officer's authority to be evidenced by appropriate corporate
resolutions and otherwise acceptable to Lender in all respects, to be
bound under a Validity and Support Agreement.
14.20. TACT Software. Borrower TACT shall cause TACT Software
Inc. to refrain from conducting future business and to winddown the
operations of TACT Software Inc. and Borrower TACT shall not permit
TACT Software Inc. to hold any material assets.
15. NEGATIVE COVENANTS. So long as either Borrower shall have any
Obligations to Lender hereunder and unless Lender has first consented
thereto in writing, Borrowers shall not:
15.1. Indebtedness. Create, incur, assume or suffer to exist,
voluntarily or involuntarily, any Indebtedness, except (i) Obligations
to Lender, (ii) trade debt incurred in the ordinary course of the
applicable Borrower's business, (iii) purchase money financing and
equipment leases not to exceed Seven Hundred Fifty Thousand Dollars
($750,000) in any fiscal year, (iv) existing Indebtedness described on
Schedule 7.18; (v) the Permitted Zielczynski Debt but only so long as
the repayment of such debt has been subordinated to the payment of the
Obligations pursuant to the terms and conditions set forth in the
Subordination Agreement executed in favor of Lender by Piotr a/k/a
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, and (vi) the Permitted Seller Debt but only so long
as the repayment of such debt has been subordinated to the payment of
the Obligations pursuant to the terms and conditions set forth in the
Subordination Agreement executed in favor of Lender by Piotr a/k/a
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and bCompliant, Inc.
15.2. Mergers; Consolidations; Acquisitions. Enter into any
merger, consolidation, reorganization or recapitalization after the
date hereof with any other Person except for such mergers,
consolidations, reorganizations and recapitalizations that (i) have
been disclosed to and consented to by Lender in writing, such consent
not to be unreasonably withheld, and (ii) do not have a Material
Adverse Effect; take any formal steps to dissolve or to liquidate all
or substantially all of the assets of either Borrower except for such
liquidations that have been disclosed to and consented to by Lender in
writing; conduct any part of its business through any corporate
subsidiary, unincorporated association or other entity not disclosed on
Schedule 15.2; acquire the stock or assets of any Person, whether by
merger, consolidation, purchase of stock or otherwise except for
mergers, consolidations, purchases of stock or otherwise that have been
disclosed to and consented to by Lender; or acquire all or any
substantial part of the properties of any Person except for
acquisitions that have been disclosed to and consented to by Lender.
35
15.3. Sale or Disposition. Sell or dispose of all or any
portion of its assets (as that term is defined in accordance with
Generally Accepted Accounting Principles) or grant any Person an option
to acquire any such assets: provided, however, that the foregoing shall
not prohibit (a) sales of Inventory in the ordinary course of business;
(b) the sale of Equipment that is of de minimus value and of no further
use in the operations of either Borrower's business; (c) as required by
Governmental Rules; (d) in transactions relating to T3 Media, Inc.,
subject to the provisions of Section 15.25 hereof, and (e) as required
by contractual obligations existing on the date hereof in an amount not
to exceed $500,000.00, or as otherwise provided for in this Agreement;
so long as there are no Events of Default hereunder and the proceeds of
any such sales are applied to any overline or overadvance, then to
unpaid interest, fees and expenses, then to the outstandings under the
Revolving Loan. The foregoing to the contrary notwithstanding, in no
event shall either Borrower sell, assign or transfer its Receivables
(except as it relates to the existing indebtedness of T3 Media, Inc. to
Borrower TACT that has been disclosed to Lender as of the date hereof).
15.4. Defaults. Permit any landlord, mortgagee, trustee under
deed of trust or lienholder to declare a default under any lease,
mortgage, deed of trust or lien on real estate owned or leased by
either Borrower, which default remains uncured for a period in excess
of thirty (30) days from its occurrence, unless such default is being
contested by the applicable Borrower in good faith by appropriate
proceedings being diligently conducted.
15.5. Limitations on Liens. Suffer (i) any Lien, encumbrance,
mortgage or security interest on any Receivables, or (ii) any Lien,
encumbrance, mortgage or security interest on any other property of
either Borrower which Lien, encumbrance, mortgage or security interest
remains undischarged or unsatisfied for a period in excess of thirty
(30) days after the applicable Borrower receives notification of its
existence, except:
(a) Liens at any time granted in favor of Lender;
(b) Liens for taxes not yet due or being contested,
but only if such Lien does not have a Material Adverse Effect;
(c) Liens securing the claims or demands of
materialmen, mechanics, carriers, warehousemen, landlords and
other like Persons for labor, materials, supplies or rentals
incurred in the ordinary course of the applicable Borrower's
business, but only if the payment thereof is not at the time
required and only if such Liens are junior in priority to the
Liens in favor of Lender;
(d) Liens resulting from deposits made in the
ordinary course of business in connection with workmen's
compensation, unemployment insurance, social security and
other like laws;
36
(e) such other Liens as appear on Schedule 7.17 attached
hereto, if any.
15.6. Dividends and Distributions. Pay any cash dividends
(provided, however, that payment of cash dividends on TACT's Series A
and Series B Preferred Stock is permitted so long as no Event of
Default has occurred and is continuing hereunder), make any capital
distribution in cash or other property or return of capital, or
purchase or redeem any of its stock or other securities (provided,
however, that annual repurchases of TACT's common stock up to $250,000
in any one fiscal year is permitted so long as no Event of Default has
occurred and is continuing hereunder), or retire any of its stock, or
take any action which would have an effect equivalent to any of the
foregoing, except that either Borrower may pay stock dividends and make
non-cash stock splits.
15.7. Borrowers' Names and Offices. Transfer either Borrower's
chief executive office or change its company name or office where it
maintains records (including computer printouts and programs) with
respect to Receivables, except upon not less than thirty (30) days
advance written notice to Lender and after the delivery to Lender of
financing statements in form and content satisfactory to Lender;
provided, however, in no event shall such Transfer be permitted if it
shall render unperfected or otherwise impair Lender's security interest
in the Collateral.
15.8. Sales Terms. Sell merchandise on the basis of any of the
following: a sale in which payment in full is not due within ninety
(90) days of the original invoice date; a ▇▇▇▇-and-hold sale; a
consignment sale; a sale and return; "guaranteed sale" (i.e., one in
which a vendor guarantees resale by vendee or agrees to accept return
of the goods); or any other sale pursuant to which vendor agrees to
accept the return of the goods, or to exchange the same upon the
happening of any event other than failure to conform with quality
specifications except where Lender has been first advised of such
proposed transaction and consented thereto; provided, however, that (i)
the foregoing restrictions shall apply only to Eligible Receivables,
and (ii) Borrower shall notify Lender in writing if more than ten
percent (10%) of Borrower's Receivables (excluding Eligible
Receivables) arise from sales made on any of the foregoing bases.
15.9. Fiscal Year. Change its Fiscal Year.
15.10. Intentionally omitted.
15.11. Intentionally omitted.
15.12. Guaranties; Contingent Liabilities.
(a) Assume, guarantee, endorse, contingently agree to
purchase or otherwise become liable upon the obligation of any
Person, except by the endorsement of negotiable instruments
for deposit or collection or similar transactions in the
ordinary course of business, except for contractual
obligations existing on the date hereof and Borrowers
represent the maximum aggregate liability thereunder is not
more than $100,000.00 in the combined aggregate, and, except
for the indebtedness of T3 Media Inc. to Borrower TACT, in an
amount of up to $800,000.00, or
37
(b) Agree to maintain the working capital or net
worth of any Person or to make investments in any Person
(except for short-term investments of excess cash as herein
permitted, and except for the indebtedness of T3 Media, Inc.
to Borrower TACT existing at March 31, 2003 that has been
disclosed to Lender or as contemplated in Section 15.25
hereof).
15.13. Removal of Collateral. Remove, or cause or permit to be
removed, any of the Collateral or other assets from the premises where
such Collateral is currently located and set forth on Schedule 7.15
hereof, except for sales of Inventory in the ordinary course of
business or unless otherwise expressly permitted under the terms of
this Agreement.
15.14. Transfer of Notes or Accounts. Sell, assign, transfer,
discount or otherwise dispose of any Eligible Receivables or any
promissory note or other instrument payable to it with or without
recourse, except as it relates to the indebtedness of T3 Media, Inc. to
Borrower TACT existing as of March 31, 2003 that has been disclosed to
Lender and such additional indebtedness permitted pursuant to Section
15.25 hereof.
15.15. Settlements. Compromise, settle or adjust any claim
relating to any of the Collateral, except as it relates to the
indebtedness of T3 Media, Inc. to Borrower TACT existing as of March
31, 2003 that has been disclosed to Lender, and subject to the
exceptions set forth in Section 15.25 hereof.
15.16. Modification of Governing Documents. Make or permit any
change, alteration or modification of its Certificate of Incorporation
or By-laws which would result in a Material Adverse Effect, or make any
other change, alteration or modification thereto except upon prompt
written notice to Lender.
15.17. Change of Business. Cause or permit a material change
in the nature of its business as conducted on the date of this
Agreement.
15.18. Change of Accounting Practices. Change its present
accounting principles or practices in any respect, except as may be
required by changes in Generally Accepted Accounting Principles.
15.19. Inconsistent Agreement. Enter into any agreement
containing any provision that would be violated by the performance of
the Obligations or either Borrower's obligations under any document
delivered or to be delivered by it in connection with this Agreement or
any Loan Document.
15.20. Loan or Advances. Make any loans or advances to any
Person, except loans or advances to employees or shareholders of
Borrowers in a combined aggregate amount of up to $25,000.00
outstanding at anytime, except for the indebtedness of T3 Media, Inc.
to Borrower TACT existing as of March 31, 2003 that has been disclosed
to Lender or as contemplated in Section 15.25 hereof.
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15.21. Investments. Make any investment in any person, firm or
corporation, including, without limitation, in any Affiliates or from
any Affiliates or subsidiaries not existing on the date hereof; except
that Borrowers may make such investments to such persons, firms or
corporations in the combined aggregate amount of up to $500,000
provided that Borrowers are in compliance with the Core EBITDA covenant
set forth in Section 15.23 for two (2) consecutive quarters, and except
for the investments permitted pursuant to Section 15.25 hereof. The
foregoing to the contrary notwithstanding, Borrowers shall not make any
investment in or loan any money to TACT Software Inc., except loans of
up to $25,000.00 outstanding at anytime.
15.22. Intentionally Omitted.
15.23. Core EBITDA. Shall maintain Core EBITDA of no less than
the amounts set forth below, tested quarterly at the end of each
calendar quarter during the periods set forth below:
Amount Time Period
------ -----------
$25,000.00 during any period commencing on January 1 of
any calendar year and ending on March 31 of
the same calendar year
$50,000.00 during any period commencing on January 1 of
any calendar year and ending on June 30 of
the same calendar year
$75,000.00 during any period commencing on January 1 of
any calendar year and ending on September 30
of the same calendar year
$100,000.00 during any period commencing on January 1 of
any calendar year and ending on December 31
of the same calendar year
15.24. Capital Expenditures.
(a) Capital Expenditures shall not exceed the combined
aggregate levels set forth below, during the periods set forth below:
Amount Time Period
------ -----------
$800,000.00 during any calendar year, commencing with
the calendar year beginning January 1, 2003
(b) No carry forward to subsequent calendar years shall be
permitted in the event that Borrowers' Capital Expenditures for a given
calendar year are less than the combined maximum amount set forth above
for such period.
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15.25. T3 Media, Inc. Investments.
(a) Make loans or cash advances to or otherwise make
investments in T3 Media, Inc. (collectively, "T3 Media Investments") in
excess of the levels set forth below, during the periods set forth
below:
Amount Time Period
------ -----------
$50,000.00 during any calendar year, commencing with
the calendar year beginning January 1, 2003
(b) No carryforward to subsequent periods shall be permitted
in the event that Borrower TACT's T3 Media, Inc. Investments for a
given period are less than the maximum amount set forth above for such
period.
(c) The assumption by Borrower TACT of any obligations of T3
Media, Inc. existing at March 31, 2003, and disclosed to Lender, shall
not constitute T3 Media Investments for the purposes of this Section;
provided, however, all such T3 Media Investments shall otherwise be
subject to all of the terms and conditions of this Agreement.
(d) Borrowers shall not make any additional loans to or cash
advances to or otherwise make investments in Always On or Methoda.
15.26. Stock Purchase Agreement. Shall not make any remaining
payments under the Stock Purchase Agreement [i.e., two
non-interest-bearing principal installments of $100,000 and $200,000 to
be made, respectively, on April 1, 2004 and January 2, 2005] if (a) an
Event of Default exists and is continuing at the time of any such
payment (not including any technical or reporting defaults as to which
any applicable cure period has not yet expired) or (b)after giving
effect to any such payment, Borrowers would fail to have a positive
borrowing base availability.
15.27. Permitted Zielczynski Debt. Shall not make any
remaining payments under the Permitted Zielczynski Debt if (a) an Event
of Default exists and is continuing at the time of any such payment
(not including any technical or reporting defaults as to which any
applicable cure period has not yet expired) or (b)after giving effect
to any such payment, Borrowers would fail to have a positive borrowing
base availability.
40
16. FURTHER RIGHTS OF LENDER.
16.1. Lender's Right to Take Certain Actions. Each Borrower
shall do all things and shall deliver all instruments requested by
Lender to protect or perfect any security interest, mortgage or Lien
given hereunder or in connection herewith including, without
limitation, financing statements under the UCC and all documents and
instruments necessary under the Federal Assignment of Claims Act. Upon
the occurrence of an Event of Default and in the event that Lender
requests, each Borrower shall instruct its Account Debtors to remit
payments directly to Lender or to Lender's designee. Lender may
examine, inspect and copy or make extracts from all property and all
books and records of each Borrower at any time and all such property
and all books and records shall be kept confidential in accordance with
the requirements of Section 8.10 of this Agreement subject to the
limitations set forth in Section 14.11. Each Borrower authorizes Lender
to execute alone any financing statements or other documents or
instruments that Lender may require to perfect, protect or establish
any Lien or security interest granted to Lender by each Borrower and
further authorizes Lender to sign each such Borrower's name on the
same. Each Borrower appoints such person or persons as Lender may
designate as each such Borrower's attorney-in-fact to endorse the name
of each such Borrower on any checks, notes, drafts or other forms of
payment or security that may come into the possession of Lender or any
Affiliate of Lender, to sign each such Borrower's name on invoices or
bills of lading, drafts against customers, notice of assignment,
verifications and schedules and, generally, and all such property and
all books and records shall be kept confidential in accordance with the
requirements of Section 8.10 of this Agreement, to do all things
necessary to carry out this Agreement. Such attorney-in-fact may notify
the Post Office authorities to change the address of delivery of mail
to an address designated by Lender, and open and dispose of mail
addressed to either Borrower. The powers granted herein, being coupled
with an interest, are irrevocable, and each Borrower approves and
ratifies all acts of the attorney-in-fact, provided, however, that such
powers shall automatically terminate upon the indefeasible repayment in
full of the Indebtedness. Neither Lender nor the attorney-in-fact shall
be liable for any act or omission, error in judgment or mistake of law
so long as the same is not willful or grossly negligent. Lender agrees
that it shall endeavor to give Borrowers prompt written notice of any
such actions but Lender's failure to give any such notice shall not
impair or restrict Lender's rights hereunder.
16.2. Lender's Right to Perform Either Borrower's Obligations.
In the event that either Borrower shall fail to purchase or maintain
insurance, or to pay any tax, assessment, government charge or levy,
except as the same may be otherwise permitted hereunder, or in the
event that any lien, encumbrance or security interest prohibited hereby
shall not be paid in full or discharged pursuant to the terms of this
Agreement, or in the event that either Borrower shall fail to perform
or comply with any other covenant, promise or Obligation to Lender
hereunder or under any Loan Document, Lender may, but shall not be
required to, perform, pay, satisfy, discharge or bond the same for the
joint and several account of Borrowers, and all monies so paid by
Lender, including actual attorneys' fees and reasonable expenses, shall
be treated as an Advance hereunder to Borrowers. Lender agrees that it
shall endeavor to give Borrowers prompt written notice of any such
actions but Lender's failure to give any such notice shall not impair
or restrict Lender's rights hereunder.
16.3. Lender's Right of Set-Off. Lender may, at any time upon
the occurrence of an Event of Default hereunder and without any further
notice to either Borrower, set-off or apply any and all deposits
(general or special, time or demand, provisional or final) at any time
held by, or any other Indebtedness at any time owing by Lender or any
Affiliate of Lender or any participant in Lender's loans, to Borrowers
to or for the credit or the account of Borrowers against any Obligation
irrespective of whether any demand has been made hereunder or whether
such Obligation is mature. The rights given hereunder are cumulative
with all of the other rights and remedies of Lender, including other
rights of set-off, under this Agreement, any other agreement or by
operation of law or otherwise and shall also constitute a security
interest in such deposits. Lender agrees that it shall endeavor to give
Borrowers prompt written notice of any such actions but Lender's
failure to give any such notice shall not impair or restrict Lender's
rights hereunder.
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17. CONDITIONS PRECEDENT; CLOSING.
17.1. Conditions Precedent. As conditions precedent to the
making of any Advance hereunder, Borrowers shall deliver to Lender, or
shall cause to be delivered to Lender the following documents duly
executed and in form satisfactory to Lender and its counsel:
(a) the Revolving Note;
(b) appropriate company resolutions of each Borrower;
(c) the Subordination Agreements;
(d) the favorable written opinion of counsel to Borrowers,
such opinion to be in form and substance satisfactory to Lender;
(e) certificates evidencing all insurance coverages required
by this Agreement, (including, without limitation, credit insurance
policies) together with loss payee endorsements for all such coverages
naming Lender as lender loss payee;
(f) a copy of each Borrower's Certificate of Incorporation and
By-laws and all amendments thereto;
(g) a Good Standing Certificate for Borrower TACT issued by
the Secretary of State of the State of New York and each other
jurisdiction where the conduct of such Borrower's business activities
or the ownership of its Properties necessitates qualification;
(h) a Good Standing Certificate for Borrower IOT issued by the
Secretary of State of the State of New Jersey and each other
jurisdiction where the conduct of such Borrower's business activities
or the ownership of its Properties necessitates qualification;
(i) evidence that Borrower TACT's franchise taxes payable to
the New York State Department of Taxation have been paid;
(j) evidence that Borrower IOT's franchise taxes payable to
the New Jersey State Department of Taxation have been paid;
(k) an initial Borrowing Base Certificate dated as of the date
hereof;
(l) all UCC financing statements required by Lender, all of
which Borrowers authorize Lender to record and file;
(m) a certificate, dated as of the date hereof and executed by
an authorized officer of each Borrower, stating that, as of such date,
no Event of Default or Default exists and to such further effect as
Lender or its counsel may require;
42
(n) all UCC, tax lien and judgment searches deemed necessary
by Lender in form and substance satisfactory to Lender, which searches
shall be obtained by Lender;
(o) payment of all fees and expenses which are payable to
Lender, its counsel, or to third-party providers of services related to
the closing of this transaction;
(p) the Validity/Support Guaranty to be delivered by ▇▇▇▇▇▇
▇▇▇▇▇▇; and
(q) such other documents, instruments, agreements, and
information as Lender or its counsel shall reasonably request.
17.2. Conditions to All Extensions of Credit.
(a) Lender's obligations to advance any Loan is subject to the
condition that, as of the date of the advancing of such Loan, no Event
of Default or Default shall have occurred and be continuing and that
the matters set forth in Section 7, Section 10, Section 11 and Section
13 and the representations set forth in the Loan Documents continue to
be true and complete.
(b) Each Borrower's acceptance of each Loan under this
Agreement shall constitute a confirmation, as of the date of the
advancing of such Loan, of the matters set forth in Section 7, Section
10, Section 11 and Section 13 of the representations set forth in the
Loan Documents, and that no Default or Event of Default then exists. If
requested by Lender, each Borrower shall further confirm such matters
by delivery of a certificate dated the day of the advancing of such
Loan and signed by an authorized officer of the applicable Borrower.
18. TERM.
18.1. Revolving Loan Availability. Unless sooner terminated by
Lender pursuant to the terms of this Agreement, the period during which
the Revolving Loan shall be available shall initially be a period
commencing on the date hereof and concluding on the Termination Date.
18.2. Voluntary Termination. Borrowers shall give Lender at
least fifteen (15) days' advance written notice ("Termination Notice")
of Borrowers' election to terminate the availability of Revolving Loans
hereunder prior to the Termination Date. The Termination Notice shall
be irrevocable and shall specify the effective date of such
termination, which effective date shall not be less than fifteen (15)
days after the giving of the Termination Notice and shall be in no
event later than the Termination Date.
19. EVENTS OF DEFAULT.
19.1. Defaults. Upon the happening of any of the following
events (collectively, "Events of Default"):
(a) if either Borrower shall fail to make payment when due of
any Obligation under this Agreement or any Loan Document, provided,
however, that, for purposes of each Borrower's obligation to make
payment of any Obligations to Lender comprised of Obligations to
reimburse Lender for or to pay field examination expenses and legal
fees and expenses incurred by Lender after the date hereof, no Event of
Default shall be deemed to have occurred, unless sixty (60) days have
elapsed from the date of demand therefor by Lender; provided that,
Lender's right hereunder to charge such fees and expenses to Borrowers
shall not be effected by the foregoing and in the event Lender so
charges Borrowers for such fees and expenses any such incipient Event
of Default shall be deemed cured thereby; or
43
(b) if either Borrower shall fail to comply with any terms,
conditions, covenant, warranty or representation contained in Article
11 or Article 15 of this Agreement; or
(c) if either Borrower shall fail to comply with any term,
condition, covenant or warranty of or in this Agreement, any other Loan
Document or any other agreement between Lender and either Borrower,
other than in Article 11 or Article 15 of this Agreement, and such
failure continues for a period in excess of twenty (20) days after
notice thereof is given by Lender to Borrowers; or
(d) if either Borrower shall cease to be Solvent, make an
assignment for the benefit of its creditors, call a meeting of its
creditors to obtain any general financial accommodation, suspend
business or if any case under any provision of the Bankruptcy Code,
including provisions for reorganizations, shall be commenced by or
against either Borrower; or
(e) if any statement or representation contained in any
financial statement or certificate delivered by either Borrower to
Lender shall be false, in any material respect, when made; or
(f) if any federal tax lien is filed of record against either
Borrower or any Guarantor and is not bonded or discharged within ten
(10) days; or
(g) if either Borrower's independent public accountants shall
refuse to deliver any financial statement required by this Agreement
within ten (10) days after written demand by Lender for delivery of
such financial statements; or
(h) if a receiver, trustee or equivalent officer shall be
appointed for all or any of the assets of either Borrower; or
(i) if a judgment for more than One Hundred Thousand Dollars
($100,000) shall be entered against either Borrower in any action or
proceeding and shall not be stayed, vacated, bonded, paid, discharged
or applied in good faith within twenty (20) days, or in the case of a
judgment against Borrower TACT relating to the T3 Permitted
Indebtedness (as defined below) in which case five (5) days shall be
allowed to stay, vacate, bond, pay, discharge or apply in good faith;
provided, that, no Event of Default shall be deemed to have occurred in
the case of any judgment where the claim is covered by insurance and
the insurance company has accepted liability therefor; or
(j) if any obligation of either Borrower in respect of
Indebtedness shall be declared to be or shall become due and payable
prior to the stated maturity thereof or such obligation shall not be
paid as and when the same becomes due and payable; or there shall occur
any event or condition which constitutes an event of default under any
mortgage, indenture, instrument, agreement or evidence of indebtedness
relating to any obligation of either Borrower in respect of any such
Indebtedness the effect of which is to permit the holder or the holders
of such mortgage, indenture, instrument, agreement or evidence of
Indebtedness, or a trustee, agent or other representative on behalf of
such holder or holders, to cause the Indebtedness evidenced thereby to
become due prior to its stated maturity; provided, that, the foregoing
shall not include (a) Indebtedness to Lender; (b) Indebtedness
aggregating up to $800,000.00 owing by T3 Media, Inc. and guaranteed by
Borrower TACT ("T3 Permitted Indebtedness"), so long as, Borrower TACT
gives Lender prompt notice of the acceleration thereof; or (c)
Indebtedness arising in connection with any real property lease
obligations up to $50,000.00, so long as no judgments are entered
against either Borrower as a result of either Borrower's failure to pay
such Indebtedness; provided, that, subsection c (except for real
property lease obligations for real property located in New York) ; or
44
(k) upon the happening of any Reportable Event which Lender in
its discretion determines could reasonably be expected to constitute
grounds for the termination of any Plan, or if a trustee shall be
appointed by an appropriate United States District Court or other court
of administrative tribunal to administer any Plan, or if the Pension
Benefit Guaranty Corporation shall institute proceedings to terminate
any Plan or to appoint a trustee to administer any Plan; or
(l) upon the occurrence and continuance of any Material
Adverse Effect, which in the sole and absolute opinion of Lender,
impairs Lender's security or increases its risks; or
(m) if ▇▇▇▇▇▇ ▇▇▇▇▇▇ ceases to own at least ten percent (10%)
of the shares of voting stock of or other ownership interests in
Borrower TACT; or
(n) if Borrowers make any payment under the Stock Purchase
Agreement which violates or would cause a violation of Section 15.26.
(o) if Borrowers make any payment under the Permitted
Zielczynski Debt which violates or would cause a violation of Section
15.27.
(p) if Borrower TACT ceases to own 100% of the issued and
outstanding shares of voting stock of or other ownership interests in
Borrower IOT without the prior written consent of Lender; or
(q) upon the happening of any of the events described in
Section 19.1(d), Section 19.1(e), Section 19.1(g), Section 19.1(h),
Section 19.1(i) or Section 19.1(j) or if any Guarantor purports to
terminate its guaranty or if any Validity/Support Guarantor purports to
terminate his/its Validity/Support Guaranty or upon the death of any
Guarantor or Validity/Support Guarantor that is a natural person;
then and in any such event, Lender may terminate this Agreement without
prior notice or demand to either Borrower or may demand payment of all
Obligations (whether otherwise then payable on demand or not) without
terminating this Agreement and shall, in any event, be under no further
responsibility to extend any credit or afford any financial
accommodation to either Borrower, whether under this Agreement or
otherwise.
19.2. Obligations Immediately Due. Upon the effective date of
termination for any reason, all of Borrowers' Obligations to Lender,
including but not limited to the Loans, shall immediately become due
and payable without further notice or demand.
19.3. Continuation of Security Interests. Notwithstanding any
termination, until all Obligations of Borrowers shall have been fully
paid and satisfied, Lender shall retain all security in and title to
all existing and future Receivables, General Intangibles, Inventory,
Equipment, Fixtures, Investment Property, and other Collateral held by
Lender hereunder or under any other agreement and Borrowers shall
continue to assign Receivables and consign Inventory to Lender and
continue to turn over collections to Lender.
45
20. REMEDIES OF LENDER.
20.1. Rights Under UCC. Upon the occurrence of any Event of
Default or upon any termination of this Agreement following an Event of
Default, then Lender shall have, in addition to all of its other rights
under this Agreement or otherwise (which rights shall be cumulative),
all of the rights and remedies of a secured party under the UCC and
shall have the right to enter upon any premises where the Collateral is
kept and peacefully retake possession thereof. Lender may, without
demand, advertising or notice all of which each Borrower hereby waives
(except as the same may be required by law), sell, lease, dispose of,
deliver and grant options to a third party to purchase, lease or
otherwise dispose of any and all Receivables, General Intangibles,
Inventory, Equipment, Fixtures, Investment Property or other security
or Collateral held by it or for its account at any time or times in one
or more public or private sales or other dispositions, for cash, on
credit or otherwise, as such prices and upon such terms as Lender, in
its discretion, deems advisable. Notice of any public sale shall be
sufficient if it describes the security or Collateral to be sold in
general terms, stating the amounts thereof, the nature of the business
in which such Collateral was created and the location and nature of the
properties covered by the other security interests or mortgages and the
prior liens thereon, and is published at least once in The Wall Street
Journal not less than ten (10) business days prior to the date of sale.
If The Wall Street Journal is not then being published, publication may
be made in lieu thereof in any newspaper then being circulated in the
City of New York which Lender may elect. Notice of any public sale
shall be sufficient if it describes the security or Collateral to be
sold in general terms, stating the amounts thereof, the nature of the
business in which such Collateral was created and the location and
nature of the properties covered by the other security interests or
mortgages and the prior liens thereon. Without requiring notice to
either Borrower, all requirements of reasonable notice under this
Article shall be met if such notice is mailed, postage prepaid, to each
Borrower at its address set forth above or such other address as it may
have, in writing, provided to Lender, at least ten (10) days before the
time of such sale or disposition. Lender may, if it deems it
reasonable, postpone or adjourn any sale of any Collateral from time to
time by an announcement at the time and place of the sale to be so
postponed or adjourned without being required to give a new notice of
sale, provided, however, that Lender shall provide each Borrower with
written notice of the time and place of such postponed or adjourned
sale. Lender may be the purchaser at any such sale if it is public, and
payment may be made, in whole or in part, in respect of such purchase
price by the application of Obligations due from either Borrower to
Lender. Each Borrower shall be jointly and severally obligated for, and
the proceeds of sale shall be applied first to, the costs of retaking,
refurbishing, storing, guarding, insuring, preparing for sale, and
selling the Collateral, including the fees and disbursements of
attorneys, auctioneers, appraisers and accountants employed by Lender.
Proceeds shall then be applied to the payment in whatever order Lender
may elect, of all Obligations of either Borrower. Lender shall return
any excess to Borrowers, as their interests may appear, and Borrowers
shall remain jointly and severally liable for any deficiency.
46
20.2. Collections; Modification of Terms. Without limiting any
rights Lender may have pursuant to Section 20.1 above, upon the
occurrence and during the continuance of an Event of Default, Lender
may demand, ▇▇▇ for, collect and give receipts for any money,
instruments or property payable or receivable on account of or in
exchange for any of the Collateral, or make any compromises it deems
necessary or proper, including without limitation, extending the time
of payment, permitting payment in installments, or otherwise modifying
the terms or rights relating to any of the Collateral, all of which may
be effected without notice to or consent by either Borrower and without
otherwise discharging or affecting the Obligations, the Collateral or
the security interest granted under this Agreement or any of the Loan
Documents.
20.3. Notification of Account Debtors. Without limiting any
rights of Lender pursuant to this Agreement or under applicable law,
after a Default or Event of Default has occurred, (i) Borrower, at the
request of Lender, shall notify the Account Debtors of Lender's
security interest in either Borrower's Receivables; and (ii) Lender may
notify the Account Debtors on any of the Receivables to make payment
directly to Lender, and Lender may endorse all items of payment
received by it that are payable to each Borrower.
20.4. Insurance. Without limiting any rights of Lender
pursuant to this Agreement or under applicable law, after a Default or
Event of Default has occurred, Lender may file proofs of loss and claim
with respect to any of the Collateral with the appropriate insurer, and
may endorse in its own and the applicable Borrower's name any checks or
drafts constituting insurance proceeds. Lender agrees that it shall
endeavor to give Borrowers prompt written notice of any such actions
but Lender's failure to give any such notice shall not impair or
restrict Lender's rights hereunder.
20.5. Waiver of Rights by Borrowers. Except as may be
otherwise specifically provided herein or in any other agreement
between Lender and either Borrower which may be applicable, each
Borrower waives, to the extent permitted by law, any bonds, security or
sureties required by any statute, rule or otherwise by law as an
incident to any taking of possession by Lender of property subject to
Lender's Lien. Each Borrower authorizes Lender, upon the occurrence of
an Event of Default, to peacefully enter upon any premises owned by or
leased to either Borrower without obligation to pay rent or for use and
occupancy, through self help, without judicial process and without
having first given notice to either Borrower or obtained an order of
any court.
20.6. Lender's Rights. Each Borrower agrees that Lender shall
not have any obligation to preserve rights to any Collateral against
prior parties or to ▇▇▇▇▇▇▇▇ any Collateral of any kind for the benefit
of any other creditor of either Borrower or any other person. After the
occurrence of an Event of Default, Lender is hereby granted a license
or other right to use, without charge, each Borrower's 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 completing production of,
advertising for sale, and selling any Collateral and each Borrower's
rights under all licenses and any franchise, sales or distribution
agreements shall inure to Lender's benefit for such purpose, subject to
any limitations set forth in the relevant license(s), franchise(s),
sales or distribution agreements, including, without limitation, limits
on assignment rights.
47
21. GENERAL PROVISIONS.
21.1. Rights Cumulative. Lender's rights and remedies under
this Agreement shall be cumulative and non-exclusive of any other
rights or remedies which it may have under any other agreement or
instrument, by operation of law or otherwise.
21.2. Successors and Assigns. This Agreement is entered into
for the benefit of the parties hereto and their successors and assigns.
It shall be binding upon and shall inure to the, benefit of the said
parties, their successors and assigns. Lender shall have the right,
upon written notice to Borrowers, without the necessity of any further
consent or authorization by Borrower, to sell, assign, securitize or
grant participation in all, or a portion of, Lender's interest in the
Loans, to other financial institutions of the Lender's choice and on
such terms as are acceptable to Lender in its sole discretion, and
Lender shall give Borrowers prompt written notice of any such
assignments, securitizations or participations.
21.3. Notice. Wherever this Agreement provides for notice to
any party (except as expressly provided to the contrary), it shall be
given by messenger, telegram, certified U.S. mail with return receipt
requested, or nationally recognized overnight courier with receipt
requested, effective when received by the corporate party to whom
addressed, and shall be addressed as follows, or to such other address
as the party affected may hereafter designate:
If to Lender: Keltic Financial Partners, LP
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Managing Partner
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇-▇▇▇
▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
With a copy to: Meyner and ▇▇▇▇▇▇ LLP
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Suite 2500
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
If to TACT: The A Consulting Team, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇
If to IOT: INTERNATIONAL OBJECT TECHNOLOGY, INC.
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Shmuel Ben Tov
With a copy in
each case to: ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
48
21.4. Strict Performance. The failure, at any time or times
hereafter, to require strict performance by either Borrower of any
provision of this Agreement shall not waive, affect or diminish any
right of Lender thereafter to demand strict compliance and performance
therewith. Any suspension or waiver by Lender of any Event of Default
by either Borrower under this Agreement or any of the other Loan
Documents shall not suspend, waive or affect any other Event of Default
by either Borrower under this Agreement or any of the other Loan
Documents, whether the same is prior or subsequent thereto and whether
of the same or a different type.
21.5. Amendments. This Agreement and the other agreements to
which it refers constitute the complete agreement between the parties
with respect to the subject matter and may not be changed, modified,
waived, amended or terminated orally, but only by a writing signed by
the party to be charged.
21.6. Waiver. Each Borrower waives presentment, protest,
notice of dishonor and notice of protest upon any instrument on which
it may be liable to Lender as maker, endorser, guarantor or otherwise.
21.7. Conflict of Laws. This Agreement shall be governed by
and construed in accordance with the internal laws of the State of New
York; provided, however, that if any of the Collateral shall be located
in any jurisdiction other than New York, the laws of such jurisdiction
shall govern the method, manner and procedure for foreclosure of
Lenders' lien upon such Collateral and the enforcement of Lenders'
other remedies in respect of such Collateral to the extent that the
laws of such jurisdiction are different from or inconsistent with the
laws of New York.
21.8. Expenses.
(a) Each Borrower agrees to pay (i) the actual attorneys' fees
and expenses of Lender's counsel arising from the negotiation and
preparation of this Agreement and the other Loan Documents and all
reasonable expenses, costs, charges and other fees of such counsel of
Lender incurred in connection therewith, and (ii) Lender's
out-of-pocket expenses in connection with periodic audits and
appraisals performed by Lender.
(b) If, at any time prior to the occurrence of an Event of
Default, Lender employs counsel for advice or other representation, or
incurs legal expenses or other costs or out-of-pocket expenses in
connection with: (1) the administration of this Agreement or any of the
other Loan Documents and the transactions contemplated hereby and
thereby; (2) any litigation, contest, dispute, suit, proceeding or
action (whether instituted by Lender, each Borrower or any other
Person) in any way relating to the Collateral, this Agreement or any of
the other Loan Documents or either Borrower's affairs; (3) the
perfection of any Lien on the Collateral; (4) any attempt to enforce
any rights or remedies of Lender against either Borrower or any other
Person which may be obligated to Lender by virtue of this Agreement or
any of the other Loan Documents, including, without limitation, the
Account Debtors; or (5) any attempt to inspect, verify, protect,
preserve, restore, collect, sell, liquidate or otherwise dispose of or
realize upon the Collateral; then, in any such event, the actual
attorneys' fees and expenses arising from such services and all
reasonable expenses, costs, charges and other fees of such counsel of
Lender or relating to any of the events or actions described in this
Section shall be payable on a joint and several basis by Borrowers to
Lender, and shall be additional Obligations hereunder secured by the
Collateral; provided, however, such fees and expenses shall in no event
exceed $20,000.00 per annum.
49
(c) If, upon or after the occurrence of an Event of Default,
Lender employs counsel for advice or other representation, or incurs
legal expenses or other costs or out-of-pocket expenses in connection
with any of the events or actions set forth in subparagraphs (a) or (b)
of this Section; then, in any such event, the actual attorneys' fees
and expenses arising from such services and all reasonable expenses,
costs, charges and other fees of such counsel or of Lender relating to
any of the events or actions described in subparagraphs (a) or (b) of
this Section, including, without limitation, the reasonable cost and
expense to Lender attributable to utilizing Lender's in-house staff for
such purposes, shall be payable on a joint and several basis by
Borrowers to Lender, and shall be additional Obligations hereunder
secured by the Collateral.
(d) Additionally, if any taxes (excluding taxes imposed upon
or measured by the net income of Lender, but including any intangibles
tax, stamp tax or recording tax) shall be payable on account of the
execution or delivery of this Agreement, or the execution, delivery,
issuance or recording of any of the other Loan Documents, or the
creation of any of the Obligations hereunder, by reason of any existing
or hereafter enacted federal or state statute, Borrowers on a joint and
several basis will pay (or will promptly reimburse Lender for the
payment of) all such taxes, including, but not limited to, any interest
and penalties thereon, and will indemnify and hold Lender harmless from
and against liability in connection therewith.
(e) Each Borrower shall also reimburse Lender for all other
expenses incurred by Lender in connection with the transactions
contemplated under this Agreement or the other Loan Documents,
including, without limitation, fees in connection with any bank
account, the Blocked Account, wire charges, ACH Fees and other similar
costs and expenses; provided, however, that Lender shall use
commercially reasonable efforts to minimize the occurrence and amount
of such fees and expenses.
21.9. Reimbursements Charged to Revolving Loan. With respect
to any amount advanced by Lender and required to be reimbursed by
either Borrower pursuant to the foregoing provisions of Section 21.8,
it is hereby agreed that Lender may charge any such amount to
Borrowers' Revolving Loan on the dates such reimbursement is made,
subject to the provisions of Section 2.6 of this Agreement. Lender
agrees to provide Borrowers notice of such charges in the monthly
statement delivered to Borrowers pursuant to Section 9 of this
Agreement. Borrowers' joint and several obligations under Section 21.8
shall survive termination of the other provisions of this Agreement.
21.10. Waiver of Right to Jury Trial. Each Borrower waives the
right to trial by jury in the event of any action, suit, proceeding,
counterclaim or other litigation to which Lender and either Borrower
are parties in respect of any matter arising under this Agreement or
any other matter involving either Borrower and Lender, whether or not
other persons are also parties thereto. Each Borrower acknowledges that
the foregoing waiver is a material inducement to Lender's entering into
this Agreement and that Lender is relying on the foregoing waiver in
its future dealings with each Borrower. Each Borrower represents and
warrants that it reviewed this jury waiver provision with its legal
counsel, and has made this waiver knowingly and voluntarily.
50
22. INDEMNIFICATION BY BORROWER/WAIVER OF CLAIMS.
22.1. Indemnification. Each Borrower hereby covenants and
agrees on a joint and several basis to indemnify, defend and hold
harmless Lender and its officers, partners, employees and agents from
and against any and all claims, damages, liabilities, costs and
expenses (including with limitation, the fees and expenses of counsel)
which may be incurred by or asserted against Lender and/or its
designated agents, and in respect of any claims, damages, liabilities,
costs and expenses resulting from any breach by either Borrower of any
representation or warranty made by it herein or in any other Loan
Document or nonfulfillment of any agreement or covenant of either
Borrower under this Agreement or in any other Loan Document, in
connection with:
(a) any investigation, action or proceeding arising out of or
in any way relating to this Agreement, any of the Loans, any of the
Loan Documents, any other agreement relating to any of the Obligations,
any of the Collateral, or any act or omission relating to any of the
foregoing by either Borrower or its officers, directors, agents,
consultants, advisors or employees; or
(b) any taxes, liabilities, claims or damages relating to the
Collateral or Lender's liens thereon; or
(c) the correctness, validity of genuineness of any
instruments or documents that may be released or endorsed to either
Borrower by Lender (which shall automatically be deemed to be without
recourse to Lender in any event), or the existence, character,
quantity, quality, condition, value or delivery of any goods purporting
to be represented by any such documents; or
(d) any broker's commission, finder's fee or similar charge or
fee in connection with the Loans and the transactions contemplated in
this Agreement, provided, however, it is understood that Lender has
incurred no such fee or charge with respect to this transaction.
22.2. Savings Clause for Indemnification. To the extent that
the undertaking to indemnify, pay and hold harmless set forth in
Section 22.1 above may be unenforceable because it is violative of any
law or public policy, each Borrower shall contribute the maximum
portion which it is permitted to pay and satisfy under applicable law
to the payment and satisfaction of all matters referred to under
Section 22.1.
22.3. Waiver. To the extent permitted by applicable law, no
claim may be made by either Borrower or any other Person against Lender
or any of its Affiliates, partners, officers, employees, agents,
attorneys or consultants for any special, indirect, consequential or
punitive damages in respect of any claim for breach of contract, tort
or any other theory of liability arising out of or related to the
transactions contemplated by this Agreement or any act, omission or
event occurring in connection therewith; and each Borrower hereby
waives, releases and agrees not to ▇▇▇ upon any claim for any such
special, indirect, consequential or punitive damages, whether or not
accrued and whether or not known or suspected to exist in its favor.
Neither Lender nor any of its Affiliates, partners, officers, employees
or agents shall be liable for any action taken or omitted to be taken
by it or them under or in connection with this Agreement or the
transactions contemplated hereby, except for its or their own gross
negligence or willful misconduct.
51
23. MISCELLANEOUS.
23.1. Entire Agreement; Amendments; Lender's Consent. This
Agreement (including the Exhibits and Schedules thereto) and the Loan
Documents supersede, with respect to their subject matter, all prior
and contemporaneous agreements, understandings, inducements or
conditions between the respective parties, whether express or implied,
oral or written. No amendment or waiver of any provision of this
Agreement or any of the Loan Documents, nor consent to any departure by
either Borrower therefrom, shall in any event be effective unless the
same shall be in writing and signed by Lender, and then such waiver or
consent shall be effective only in the specific instance and for the
specific purpose for which given.
23.2. Cross Default; Cross Collateral. Each Borrower hereby
agrees that (a) all other agreements between Borrowers or either
Borrower and Lender or any of Lender's Affiliates are hereby amended so
that a default under this Agreement is a default under all such other
agreements and a default under any one of the other agreements is a
default under this Agreement, and (b) the Collateral under this
Agreement secures the Obligations now or hereafter outstanding under
all other agreements between either Borrower and Lender or any of
Lender's Affiliates and the Collateral pledged under any other
agreement with Lender or any of its Affiliates secures the Obligations
under this Agreement.
23.3. Execution in Counterparts. This Agreement may be
executed in any number of counterparts, each of which when so executed
shall be deemed to be an original and all of which taken together shall
constitute but one and the same agreement.
23.4. Severability of Provisions. Any provision of this
Agreement or any of the Loan Documents that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability
without invalidating the remaining provisions of this Agreement or the
Loan Documents or affecting the validity or enforceability of such
provision in any other jurisdiction.
23.5. Table of Contents; Headings. The table of contents and
headings preceding the text of this Agreement are inserted solely for
convenience of reference and shall not constitute a part of this
Agreement or affect its meaning, construction or effect.
23.6. Exhibits and Schedules. All of the Exhibits and
Schedules to this Agreement are hereby incorporated by reference herein
and made a part hereof.
52
23.7. Consent to Jurisdiction. As part of the consideration
for new value received, and regardless of any present or future
domicile or principal place of business of either Borrower or Lender,
each Borrower hereby consents and agrees that any federal or state
court located in any county, in New York State, shall have jurisdiction
to hear and determine any claims or disputes between either Borrower
and Lender pertaining to this Agreement or to any matter arising out of
or related to this Agreement; provided, however, Lender may, at its
option, commence any action, suit or proceeding in any other
appropriate forum or jurisdiction to obtain possession of or foreclose
upon any Collateral, to obtain equitable relief or to enforce any
judgment or order obtained by Lender against either Borrower or with
respect to any Collateral, to enforce any other right or remedy under
this Agreement or to obtain any other relief deemed appropriate by
Lender. Each Borrower expressly submits and consents in advance to such
jurisdiction in any action or suit commenced in any such court, and
Borrower hereby waives any objection which either Borrower may have
based upon lack of personal jurisdiction, improper venue or forum non
conveniens and hereby consents to the granting of such legal or
equitable relief as is deemed appropriate by such court. Each Borrower
represents and warrants that it has reviewed this consent to
jurisdiction provision with its legal counsel, and has made this waiver
knowingly and voluntarily.
53
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their officers thereunto duly authorized on the day
and year first above written.
KELTIC FINANCIAL PARTNERS, LP
By: KELTIC FINANCIAL SERVICES LLC,
its general partner
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Managing Partner
THE A CONSULTING TEAM, INC.
By: /s/ Shmuel Ben Tov
------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇
Chief Executive Officer
INTERNATIONAL OBJECT TECHNOLOGY, INC.
By: /s/ Shmuel Ben Tov
------------------
Shmuel Ben Tov
Chief Executive Officer
54
EXHIBIT "A"
BORROWING BASE CERTIFICATE
As of __________________
BORROWER:
PREVIOUS DAY A/R { / / } $ -
Sales: $ -
Credits: $ -
Debits: $ -
Collections: $ -
Coll. Adj's: $ -
ENDING A/R { / / } $ -
Ineligibles: Past Due a/o__: $ -
Ineligible a/o__: $ -
ELIGIBLE A/R: $ -
A/R @ 75%: / $ -
TOTAL AVAILABLE COLLATERAL: $ -
OUTSTANDING LOAN BALANCE AS OF / / : $ -
ADVANCE { / / }: $ -
OUTSTANDING LOAN BALANCE AS OF / / : $ -
NET AVAILABILITY: $ -
I hereby certify in connection with the Loan and Security Agreement, dated as of
March __, 2004, among The A Consulting Team, Inc. and International Object
Technology, Inc. and Keltic Financial Partners, LP, that the information and
each calculation set forth above is to the best of my knowledge, true, correct
and complete as of the date hereof and are calculated in accordance with the
Loan and Security Agreement. Unless otherwise defined herein, all terms used
herein shall have the meanings ascribed to them in the Loan and Security
Agreement.
Prepared By: _______________________________________ Dated: ___________
(Authorized Signature)
EXHIBIT "B"
COMPLIANCE CERTIFICATE
The A Consulting Team, Inc. and International Object
Technology, Inc. ("Borrowers") hereby certifies to KELTIC FINANCIAL SERVICES, LP
in accordance with the provisions of a Loan and Security Agreement among
Borrowers and Lender dated March 22, 2004, as the same from time to time may be
amended, supplemented or otherwise modified ("Agreement") that:
(i) each Borrower has complied in all respects with all the
terms, covenants and conditions of the Agreement which are binding upon them;
(ii) there exists no Event of Default or Default as defined in
the Agreement;
(iii) the representations and warranties contained in the
Agreement are true in all respects with the same effect as though such
representations and warranties had been made on the date hereof; and
WITNESS the signature of the undersigned duly authorized
officers of Borrowers on _____________, 20__.
THE A CONSULTING TEAM, INC.
By: ________________________________
Name:
Title:
INTERNATIONAL OBJECT TECHNOLOGY, INC.
By: ________________________________
Name:
Title:
EXHIBIT "C"
NOTICE OF BORROWING
Schedule 7.2
Tradenames
TACT
American Catalyst
TACT Outsourcing India Private Limited
Schedule 7.3
TACT Affiliates:
TACT Software, Inc.
T3 Media, Inc.
Always-On Software, Inc.
Methoda, Ltd.
TACT Subsidiaries:
IOT
IOT Affiliates and Subsidiaries:
None
Schedule 7.8
Real Estate Owned:
None
Real Estate Leased:
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Schedule 7.9
Patents and Trademarks
Trademark Applications:
The A Consulting Team (No. 75/320,927)
TACT (No. 75/320,744)
People Soft
Trademarks:
TACT (Design) (Reg. No. 2244241)
Schedule 7.13
Litigation
None
Schedule 7.14
Receivables Locations
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Schedule 7.15
Inventory Locations
None
Schedule 7.16
Equipment List and Locations
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Schedule 7.17
Liens
None
Schedule 7.18
Indebtedness
Payments Due in
Total 2004 2005 2006
---------- ---------- ---------- ---------
Long Term Obligations
Automobile Loan $ 40,441 $ 13,078 $ 13,885 $ 13,478
Shareholder Loan 78,062 57,985 20,077 -
Acquisition Note 300,000 100,000 200,000 -
---------- ---------- ---------- ---------
Total $ 418,503 $ 171,063 $ 233,962 $ 13,478
========== ========== ========== =========
Schedule 7.21
Environmental Matters
None
Schedule 7.24
List of Bank Accounts
See attached
Schedule 7.27
Excluded Matters
NONE