EXHIBIT 10.18
REVOLVING CREDIT, GUARANTY AND SECURITY AGREEMENT
AMONG
SPAR PERFORMANCE GROUP, INC.
PERFORMANCE HOLDINGS, INC.
and
SPAR INCENTIVE MARKETING, INC.
DATED AS OF: June 30, 2002
SPAR ESOP Revolving Credit Agreement
Table of Contents
Provision Heading Page
SPAR ESOP Revolving Credit Agreement -i- NYC Doc. No. 808896
Exhibit A Form of Revolving Promissory Note
Exhibit B [INTENTIONALLY OMITTED]
Exhibit C Addresses for Notices and Service
Exhibit D Schedule of Targeted Adjusted Cash Flows
Exhibit E Form of Financial Covenants Compliance Certificate
Schedule 1.01 Material Adverse Effect
Schedule 3.03 Certain Required Consents, Etc.
Schedule 3.05 Certain Conflicts, Etc.
Schedule 3.06 Litigation
Schedule 3.08(b) Certain Existing Defaults and Adverse Agreements
Schedule 3.10(a) Existing Indebtedness
Schedule 3.10(b) Existing Guaranties and other Credit Support
Schedule 3.10(c) Existing ERISA Plans
Schedule 3.11 Existing Subsidiaries, Partnerships, Ventures and Other
Investments
Schedule 3.12(b) Existing Liens and Encumbrances
Schedule 3.12(d) Insurance Policies
Schedule 3.12(e) Other Locations of Collateral
Schedule 3.12(f) Existing Employee Contracts and Arrangements
Schedule 3.12(g) Certain General Intangibles
Schedule 3.14(a) Machinery, Equipment and other Fixed Assets
Schedule 3.14(b) Real Estate Leases
Schedule 3.14(c) Real Estate Owned
Schedule 3.14(d) Equipment and other Personal Property Leases
Schedule 3.15 Intellectual Properties
Schedule 3.17 Pledged Securities
Schedule 3.19 Loan Party Securities
Schedule 6.11(b) Permitted Bonuses
SPAR ESOP Revolving Credit Agreement -i-
INTRODUCTION
THIS REVOLVING CREDIT, GUARANTY AND SECURITY AGREEMENT, dated as of June
30, 2002, is by and among SPAR PERFORMANCE GROUP, INC., a Delaware corporation
currently having an address at 2245 Keller Way, Carrollton, Texas 75006 (the
"Borrower"), PERFORMANCE HOLDINGS, INC., a Delaware corporation currently having
an address at 2245 Keller Way, Carrollton, Texas 75006 ("Holdings"), and SPAR
INCENTIVE MARKETING, INC., a Delaware corporation currently having an address at
580 White Plains Road, Tarrytown, New York 10591 (the "Lender").
RECITALS
Holdings has entered into the Stock Purchase Agreement and other Stock
Purchase Documents (as "Stock Purchase Agreement", "Stock Purchase Documents"
and the other terms, words and phrases used in these Recitals are defined in
Article I hereof) in order purchase all of the outstanding SPG Stock from the
Lender pursuant to the Stock Purchase Documents for the benefit of the
Borrower's and Holdings' employees as further provided in the ESOP Related
Documents. Holdings has entered into the Term Loan Agreement in order to fund
such purchase of the SPG Stock.
The Borrower and Holdings have requested that the Lender establish, and
the Lender desires to establish, a revolving line of credit under which advances
may be requested from time to time from the Lender in an amount not to exceed
the Line of Credit through the Overadvance Conversion Date, and thereafter the
lesser of the then applicable Borrowing Base or the Line of Credit, the proceeds
of which will be used to fund the refinancing of the Borrower's share of the
existing Senior Loans and from time to time to finance the working capital needs
of the Borrower. All Advances will be subject to (among other things) the sole
and absolute discretion of the Lender and the availability of corresponding
advances under the Senior Loan Agreement.
The Borrower has agreed to collateralize these Loans with all of its
assets and properties. In order to further induce the Lender to make those Loans
and enter into this Agreement, (a) the Borrower has agreed to guaranty the
Senior Loan Obligations and to secure those obligations with a pledge of all of
its assets and properties, and (b) Holdings has agreed to guaranty (i) the
Obligations pursuant to its guaranty contained in this Agreement, and (ii) the
Senior Loan Obligations pursuant to the Senior Loan Guaranty, which each will be
secured by a pledge of all of Holdings' assets and properties.
Immediately following the closings contemplated in this Agreement and
the Stock Purchase Agreement, Holdings will established the ESOP Trust pursuant
to the ESOP Related Documents), will issue and contribute 1,000,000 shares of
its common stock to for the benefit of the employees of the Borrower and
Holdings as further provided in the ESOP Related Documents, and will repurchase
all of its shares of common stock not owned by the ESOP Trust.
Accordingly, the Borrower, Holdings and the Lender have entered into
this Agreement in order to provide for (among other things) the making and
repayment of the Loans, Holdings' guaranty of the Obligations, the
collateralization of the Obligations of the Borrower and Guarantor and the
documentation of the various representations of and agreements with the
Borrower, all upon the terms and provisions and subject to the conditions
hereinafter set forth.
AGREEMENT
In consideration of the foregoing, the mutual covenants and agreements
hereinafter set forth, and other good and valuable consideration (the receipt
and adequacy of which is hereby acknowledged by the Borrower), the parties
hereto hereby agree as follows:
ARTICLE I.
DEFINITIONS AND INTERPRETATION
Section 1.01. Certain Defined Terms. As used in this Agreement, the
following capitalized terms and non-capitalized words and phrases shall have the
meanings respectively assigned to them below:
"Accounts Receivable" shall mean all of the referenced Person's accounts
(as defined in the UCC) and other rights to receive payments for any inventory,
goods or other products, assets or properties sold,
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SPAR ESOP Revolving Credit Agreement
leased or otherwise disposed of or for services rendered, whether or not earned
by performance, recognized by the referenced Person or recorded on its books and
records, and irrespective of whether any may not be characterized as or
constitute an account (as defined in the UCC) or may be characterized as or also
constitute a chattel paper, chose-in-action, contract right, general intangible,
instrument, invoice, letter of credit right, note, payment intangible or other
collateral type in any document, by any Person or under any Applicable Law, in
each case whether now existing or hereafter acquired, created, executed,
modified or otherwise existing (including, without limitation, during the
pendency of any Bankruptcy Proceeding).
"Adjusted Capital Expenditures" of Holdings and its subsidiaries for any
referenced Computation Period shall mean the aggregate capital expenditures of
Holdings and its subsidiaries for such Computation Period, each as determined in
accordance with GAAP consistently applied.
"Adjusted Cash Flow" shall mean, as at any date of determination,
Adjusted EBITDA for the Computation Period ending at such date, plus (a) the sum
of all extraordinary gains and ESOP contributions deducted during the
Computation Period ending at such date, minus (b) the sum of all (i) cash
interest payments on all Indebtedness, (ii) permitted capital expenditures (iii)
actual ESOP contributions, but not more than the ESOP Maximum Contribution, and
(iv) principal payments on the Term Loans made during the Computation Period
ending at such date.
"Adjusted Current Assets" shall mean, as at any date of determination,
the current assets of Holdings and its subsidiaries at such date, each as
determined in accordance with GAAP consistently applied.
"Adjusted Current Liabilities" shall mean, as at any date of
determination, the current liabilities of Holdings and its subsidiaries at such
date as determined in accordance with GAAP consistently applied, including
(without limitation) the current portion of all Adjusted Debt of Holdings and
its subsidiaries at such date.
"Adjusted Debt" shall mean, as at any date of determination, the sum of
the aggregate amount of all Indebtedness and Credit Support of Holdings and its
subsidiaries at such date determined in accordance with the definitions thereof,
which Indebtedness shall include the unadvanced amount of all letters of credit
as if fully advanced at such date, and which Credit Support shall equal the
amount of the Indebtedness thereby supported (including the unadvanced amount of
all letters of credit as if fully advanced) at such date, in each case
irrespective of any other treatment under GAAP.
"Adjusted Debt Service Ratio" shall mean, as at any date of
determination, the ratio of (a) the Adjusted EBITDA of Holdings and its
subsidiaries for the Computation Period ending at such date, to (b) the Adjusted
Debt Service and Adjusted Lease Service of Holdings and its subsidiaries for the
Computation Period ending at such date.
"Adjusted Debt Service" shall mean, as at any date of determination, the
sum of all payments of principal and interest on Indebtedness of Holdings and
its subsidiaries (including, without limitation, all commissions, discounts and
other fees and charges owed with respect to any and all commitments, lines of
credit, banker's acceptances, letters of credit, and interest rate protection,
foreign currency exchange, or other interest or exchange rate swap or hedging
agreements or arrangements, and the interest and principal components of
capitalized leases) paid or payable during the Computation Period ending at such
date.
"Adjusted Debt to EBITDA Ratio" shall mean, as at any date of
determination, the ratio of (a) the Adjusted Debt of Holdings and its
subsidiaries at such date, to (b) the Adjusted EBITDA of Holdings and its
subsidiaries at such date.
"Adjusted Debt to Equity Ratio" shall mean, as at any date of
determination, the ratio of (a) the Adjusted Debt of Holdings and its
subsidiaries at such date, to (b) the Adjusted Net Worth of Holdings and its
subsidiaries at such date.
"Adjusted EBITDA" of Holdings and its subsidiaries for any referenced
Computation Period shall mean the aggregate earnings of Holdings and its
subsidiaries before interest, income and franchise taxes, amortization and
depreciation for such Computation Period, excluding extraordinary items, each as
determined in accordance with GAAP consistently applied.
"Adjusted Lease Service" shall mean, as at any date of determination,
the sum of all rent, additional rent and other amounts on each lease of Real
Estate or Equipment or other personal property by Holdings and its subsidiaries
(including, without limitation, all assessments, commissions and fees) paid or
payable during the Computation Period ending at such date.
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"Adjusted Leverage Ratio" shall mean, as at any date of determination,
the ratio of (a) the Adjusted Liabilities of Holdings and its subsidiaries at
such date, to (b) the Adjusted Net Worth of Holdings and its subsidiaries at
such date.
"Adjusted Liabilities" shall mean, as at any date of determination, the
sum of (i) the aggregate amount of all Adjusted Debt of Holdings and its
subsidiaries at such date, and (ii) the aggregate amount of all other
liabilities of Holdings and its subsidiaries at such date, each as determined in
accordance with GAAP consistently applied, except that Adjusted Debt shall be
determined in accordance with the definition thereof.
"Adjusted Net Worth" shall mean, as at any date of determination, (a)
the aggregate book value of all assets and properties of Holdings and its
subsidiaries at such date, minus the Adjusted Liabilities of Holdings and its
subsidiaries at such date, each as determined in accordance with GAAP
consistently applied, except that Adjusted Liabilities shall be determined in
accordance with the definition thereof.
"Adjusted Quick Assets" shall mean, as at any date of determination, the
quick assets (consisting of cash, marketable securities and Accounts Receivable)
of Holdings and its subsidiaries at such date, each as determined in accordance
with GAAP consistently applied.
"Adjusted Quick Ratio" shall mean, as at any date of determination, the
ratio of (a) the Adjusted Current Assets of Holdings and its subsidiaries at
such date, to (b) the Adjusted Current Liabilities of Holdings and its
subsidiaries at such date (excluding from current liabilities for this purpose
the current portion of long term Adjusted Debt).
"Advance" shall have the meaning assigned to it in Section 2.01(b)
hereof.
"Advance Date" shall mean either (i) the date duly requested by the
Borrower under Section 2.01(b) for a particular Advance, or such later date as
may be proposed by the Lender, or (ii) the actual date of the Advance if made,
as applicable.
"Affiliate" of a referenced Person shall mean (a) any other Person
controlling, controlled by or under common control with such referenced Person,
(b) any other Person beneficially owning or controlling ten percent (10%) or
more of the outstanding voting securities or rights or of the interest in the
capital, distributions or profits of the referenced Person, provided that the
Lender shall not under any circumstance be deemed an Affiliate of the Borrower
or any of its subsidiaries as a result of any securities pledge or otherwise,
(c) any other Person operating the business or substantially all of the property
of the referenced Person, or vice versa, or (d) any director, officer, manager
or other executive of or partner, member or joint venturer in the referenced
Person or such other Person. If the referenced Person is an individual, then the
term "Affiliate" also shall include members of the immediate family (including
parents, spouse and children) of such individual and any "Affiliate" of one or
more of those family members. The terms "control", "controlling", "controlled"
and the like shall mean the direct or indirect possession of the power to direct
or cause the direction of the management or policies of a Person or the
disposition of its assets or properties, whether through ownership, by contract,
arrangement or understanding, or otherwise.
"Agreement" shall mean this Revolving Credit, Guaranty and Security
Agreement, together with all schedules and exhibits hereto, as the same may be
supplemented, modified, amended, restated or replaced from time to time in the
manner provided herein.
"Alternate Base Rate" shall mean a fluctuating annual rate of interest
in effect from time to time that for any day shall be equal to the highest of:
(i) the rate of interest then applicable to the Term Loans under the Term
Loan Agreement, provided, however, that if the Overadvance Amount
selected by the Borrower pursuant to Section 2.02 hereof is zero, then
after the Overadvance Conversion Date such rate shall be equal to the
rate of interest then applicable to the Term Loans under the Term Loan
Agreement minus four percent (4.00%) per annum; and
(ii) the prime commercial lending rate for such day as announced in the Wall
Street Journal for such day plus four percent (4.00%) per annum.
"Applicable Law" shall mean any applicable law, including (without
limitation) any: (a) federal, state, territorial, county, municipal or other
governmental or quasi-governmental law, statute, ordinance, rule, regulation,
requirement or use or disposal classification or restriction, whether domestic
or foreign; (b) judicial, administrative or other governmental or
quasi-governmental order, injunction, writ, judgment, decree,
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ruling, interpretation, finding or other directive, whether domestic or foreign;
(c) common law or other legal or quasi-legal precedent; (d) arbitrator's,
mediator's or referee's decision, finding, award or recommendation; or (e)
charter, rule, regulation or other organizational or governance document of any
national securities exchange or market or other self-regulatory or governing
body or organization.
"Authority" shall mean any governmental or quasi-governmental authority,
including (without limitation) any federal, state, territorial, county,
municipal or other government or governmental or quasi-governmental agency,
board, branch, bureau, commission, court, department or other instrumentality or
political unit or subdivision, whether domestic or foreign, or any national
securities exchange or market or other self-regulatory or governing body or
organization.
"Bankruptcy Law" shall mean the United States Bankruptcy Code, as
amended, or any other present or future Applicable Law respecting bankruptcy,
reorganization, insolvency, readjustment of debts, relief of debtors,
dissolution or liquidation, any corresponding Applicable Law of any State or
foreign jurisdiction, or any succeeding Applicable Law, and the rules and
regulations promulgated thereunder; in each case as the same may have been and
hereafter may be supplemented, modified, amended, restated or replaced from time
to time.
"Bankruptcy Proceeding" shall mean the filing or submission of any
petition or other document for relief, bankruptcy, insolvency, receivership or
other remedy, or the existence of any case, action, suit, or proceeding, whether
voluntary or involuntary, under any Bankruptcy Law, including (without
limitation) any event referenced in Section 8.01(h) or 8.01(i) hereof.
"Books and Records", "Books" and "Records" each shall mean all of the
referenced Person's books and records, including (without limitation) any and
all (i) corporate, partnership or limited liability company books and minutes or
other records of proceedings, stock, partner or membership books and transfer
ledgers, (ii) other instruments, indentures, agreements, charters, by-laws,
certificates or other documents or statutory equivalents respecting the
referenced Person or its organization, governance or operation, (iii) financial
books, ledgers, bills and other invoices, canceled checks and check registers,
and other receipt, disbursement or financial records and data, (iv) customer and
vendor lists, rent rolls, and computer and other data bases, (v) bills of sale,
contracts, invoices, and other evidence of sales, leases or other dispositions
and purchases, leases or other acquisitions, (vi) tax returns, registrations,
reports and other filings with Authorities, (vii) leases, contracts and other
agreements, (viii) insurance policies, (ix) correspondence, memoranda, notes,
files and folders, and (x) other documents, papers, data and other collections
of information; in each case whether on paper, film or other tangible copy,
stored on disc or tape, in computer memory or other electronic storage or in
some other storage medium, whether transmitted or received by email, internet or
other transmission method or medium, and whether or not in the possession of
such Person or a third party service provider, and as each has been and
hereafter may be supplemented, renewed, extended, modified, amended, restated or
replaced from time to time, and in each case whether now existing or hereafter
acquired, created, executed, modified or otherwise existing (including, without
limitation, during the pendency of any Bankruptcy Proceeding).
"Borrower" shall have the meaning assigned to it in the Introduction,
above.
"Borrowing Base" shall mean the amount determined as of a particular
date equal to the sum of: (a) 85% of the book value of all Eligible Billed
Receivables of the Borrower then outstanding; plus (b) 60% of the book value of
all Eligible Unbilled Receivables of the Borrower then outstanding; plus (c) the
then applicable Overadvance Amount; minus (d) any and all reserves (whether for
doubtful accounts, customer deposits or otherwise) then maintained by the
Borrower or required by the Lender in its or their sole and absolute discretion
(without duplication); provided, however, that (i) only Collateral for which the
Borrower's representations and warranties under this Agreement and the other
Loan Instruments are true and correct at the time of calculation shall be
included in the aggregate Borrowing Base, (ii) the Lender at any time and from
time to time may adjust the preceding percentages or modify or add categories of
eligibility in order to reflect the composition of and experience with its
Accounts Receivable, and (iii) if the Lender at any time determines any such
method of valuation overstates the actual fair market value at the time, the
Lender may recalculate those values to fair market value. The Lender may
determine the Borrowing Base at any time and from time to time, which may (but
need not) be based upon the periodic report of the Borrower in the most recently
delivered Borrowing Base Certificate required under Section 5.02(e) hereof.
"Borrower's Obligations" shall mean any and all (i) Loans (including
future advances), together with accrued and unpaid interest thereon, (ii) other
amounts to be paid and all other obligations to be performed or otherwise
satisfied by the Borrower under any Note or any other Loan Instrument (whether
individually, jointly, severally or otherwise), (iii) any amounts to be paid and
obligations to be performed or otherwise satisfied by the Borrower under any
Stock Purchase Document (whether individually, jointly, severally or
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otherwise), and (iv) overdrafts of the Borrower honored by the Lender (in its
sole and absolute discretion) and other indebtedness, liabilities or obligations
(whether under any note, guaranty or other instrument or document or otherwise)
now or hereafter owed to the Lender by the Borrower (whether individually,
jointly, severally or otherwise); in each case including, without limitation,
any and all interest, fees and other amounts accrued, accruing or otherwise
applicable during the pendency of any Bankruptcy Proceeding, irrespective of
whether such interest, fees and other amounts are allowed or allowable as claims
in any such proceeding.
"Business Day" shall mean any day during which the Senior Lender is open
for business in New York, New York, other than any Saturday, Sunday or other
applicable legal holiday.
"Collateral" shall have the meaning assigned to it in Section 7.01
hereof.
"Computation Period" shall mean any period of twelve consecutive fiscal
months of Holdings and its subsidiaries (including any fiscal year).
"Confidentiality Agreement" shall mean the Confidentiality and
Non-Compete Agreement among the Borrower, Holdings, and the Lender dated as of
June 30, 2002, as the same may be supplemented, modified, amended, restated or
replaced from time to time in the manner provided therein.
"Credit Support" shall respectively mean any and all agreements,
arrangements and obligations whereby the referenced Person directly or
indirectly has guarantied, assumed or otherwise become liable or responsible for
the Indebtedness or other obligation of any other Person, whether contingent or
otherwise, and whether or not recourse is limited to specified amounts or any
asset or property of the referenced Person, including (without limitation) (a)
any guaranty or other assurance of payment or performance of any obligation of
any other Person, (b) any indemnification, hold harmless or similar agreement,
arrangement or obligation respecting any obligation of any other Person, (c) any
pledge, hypothecation or other encumbrance, or any loan or other availability,
of any asset or property of the referenced Person in respect of any obligation
of any other Person, or (d) any agreement, arrangement or other obligation (i)
to purchase, repurchase or otherwise acquire any obligation of any other Person,
(ii) to purchase, repurchase, sell, lease or otherwise provide any securities or
other assets and properties in connection with any obligation of any other
Person, (iii) to provide any discounts, services or other accommodations in
connection with any obligation of any other Person, (iv) to make any capital
contribution, advance or loan in connection with the obligation of any other
Person or (v) to otherwise enhance, support, repay or discharge any obligation
of any other Person; excluding, however, any endorsement of a negotiable
instrument for collection or deposit in the ordinary course of the referenced
Person's business. The amount of an item of Credit Support shall be equal to the
maximum amount of Indebtedness thereby supported irrespective of any other
treatment under GAAP.
"Default" shall mean any event that, with or without the giving or
receipt of notice, the acquisition of knowledge or the passage of time (or any
combination thereof), would constitute an Event of Default.
"Effective Date" shall have the meaning assigned to it in Section 9.10
hereof.
"Eligible Billed Receivables" as of a particular time shall mean all
accounts receivable then outstanding for inventory and other goods, merchandise
and tangible assets and properties sold or services rendered in the ordinary
course of the Borrower's business (as then conducted) (collectively, the
"Products") as determined in accordance with GAAP and that qualify for
eligibility as determined from time to time by the Lender in its sole and
absolute discretion. However, no account receivable will be included in Eligible
Receivables where: (a) the invoice is more than 90 days past due; (b) a final
invoice has not been issued; (c) delivery of the invoiced Product(s) has not
been completed; (d) the invoice is conditional, permits returns or restricts
collection rights or assignments in any respect; (e) the invoice permits payment
(i) more than 30 days after the invoice date, (ii) in any currency other than
United States Dollars, or (iii) at any location outside the United States; (f)
the obligation to pay is evidenced by chattel paper or any note or other
instrument (unless duly endorsed and delivered to the Lender or Senior Lender);
(g) the invoiced Product(s) have been rejected, returned or disputed in any way,
whether in whole or in part, or the customer has attempted to renegotiate the
invoiced price, other than because of mistake or in accordance with the
customary credit and collection practices of the Borrower; (h) the customer has
asserted any right or reduction, setoff, recoupment, counterclaim or defense;
(i) the account receivable is one in which the Lender does not have a perfected
first priority security interest; (j) the invoice or corresponding account
receivable is the subject of any financing statement, lien or other encumbrance
other than in favor of the Lender; (k) the customer and its affiliates account
for more than 25% of all of the Borrower's accounts receivable then outstanding
if and to the extent the Lender determines such concentration poses a credit
risk; (l) the customer or any affiliate has a history of late payments, returns,
rejections,
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renegotiations or disputes; (m) the customer is an affiliate of the Borrower or
any Surety; (n) the customer is any governmental authority; (o) the customer is
located outside the United States; (p) the customer does not meet the
established credit standards of the Borrower or the Lender; (q) the customer has
taken or committed any of the actions specified in Section 8.01(g) hereof in
respect of itself or all or substantially all of its assets and properties or
has had any of those actions taken against it; (r) the account receivable
exceeds any credit limit established by the Lender in its sole discretion for
the customer's accounts receivable with the Borrower; (s) the account receivable
does not conform at the time to the Borrower's representations and in good faith
the exercise of warranties respecting Collateral in general or accounts
receivable in particular; (t) the Lender has determined in good faith in the
exercise of its discretion that the account receivable should be excluded,
whether individually, by customer, by amount or otherwise in a reasonable
manner; or (t) would not otherwise qualify as an "Eligible Receivable" under
(and as defined in) the Senior Loan Agreement; provided that the Lender in its
sole and absolute discretion may permit the partial inclusion of certain
excluded accounts receivable having some value, which shall be subject to such
criteria, limitations, valuations and discounts as the Lender may establish from
time to time.
"Eligible Unbilled Receivables" as of a particular time shall mean all
accounts receivable then outstanding for inventory and other goods, merchandise
and tangible assets and properties sold or services rendered in the ordinary
course of the Borrower's business (as then conducted) (collectively, the
"Products") as determined in accordance with GAAP and that were created no more
than 60 days prior to such time and if billed would otherwise qualify for
eligibility as Eligible Billed Receivables as determined from time to time by
the Lender in its sole and absolute discretion.
"Environmental Claim" shall mean: (a) any responsibility, liability or
unlawful act or omission under any Environmental Law (whether alleged or
otherwise); (b) any tortious act or omission or breach of contract pertaining to
any Environmental Substance (whether alleged or otherwise); or (c) any other
violation or claim under any Environmental Law or in respect of any
Environmental Substance (whether alleged or otherwise).
"Environmental Law" and "Environmental Laws" shall respectively mean any
one or more of the Applicable Laws pertaining to: (a) any emission, discharge,
release, runoff, disposal or presence in the environment of any Environmental
Substance; (b) any cleanup, containment, manufacturing, treatment, handling,
transportation, storage or sale of or other activity pertaining to any
Environmental Substance; or (c) any other peril to public or occupational health
or safety or to the environment that may be posed by an Environmental Substance.
"Environmental Substance" shall mean any toxic substance, hazardous
material, contaminant, waste, pollutant or other similar product or substance
that may pose a threat to public or occupational health or safety or to the
environment.
"Equipment" shall mean any and all equipment, goods and other tangible
personal assets and properties of the Borrower, wherever located, including
(without limitation) any and all accessions, accessories, additions,
communications and computer hardware (including all network, control, routing,
storage, printing and display devices), equipment, Fixtures, furnishings, goods,
machinery, manuals, materials, parts, replacements, supplies, tools and
vehicles, whether or not located upon or affixed to any of the foregoing, in
each case whether now existing or hereafter acquired, created, installed,
modified or otherwise existing (including, without limitation, during the
pendency of any Bankruptcy Proceeding).
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended, or any corresponding or succeeding provisions of Applicable Law, and
the rules and regulations promulgated thereunder; in each case as the same may
have been and hereafter may be supplemented, modified, amended, restated or
replaced from time to time.
"ERISA Affiliate" and "ERISA Affiliates" shall respectively mean any one
or more of any trade, business, Person or persons that together with the
Borrower would be deemed to be a single employer within the meaning of Section
4001 of ERISA.
"ERISA Effect" shall mean any material and adverse effect on (a) any
Plan, (b) the assets and properties of any Plan or (c) any funding or other
liability of any one or more of the Borrower or any ERISA Affiliate in respect
of any Plan (individually or in the aggregate).
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"ERISA Event" shall mean any (a) "accumulated funding deficiency"
(whether or not waived), "prohibited transaction", "reportable event" (other
than any event for which the 30-day notice requirement has been waived by
regulation), "disqualification", "partial withdrawal" or "withdrawal", "partial
termination" or "termination", "insolvency", "reorganization", or the imposition
of any "penalty" or "withdrawal liability" in respect of any Plan under (and as
such words and phrases are defined in) ERISA or the Tax Code, as applicable, (b)
any other violation of ERISA, the Tax Code or any other Applicable Law in
respect of any Plan (whether alleged or otherwise), (c) supplement or amendment
to or modification or restatement of any Plan that could have or has had an
ERISA Effect, or (d) imposition, increase or other adverse change in any funding
obligation or other liability of any one or more of the Borrower or any ERISA
Affiliate in respect of any Plan or to the Pension Benefit Guaranty Corporation
(individually or in the aggregate).
"ESOP Maximum Contribution" shall mean for any Computation Period the
minimum amount required under ERISA and the Code for ESOP Plan compliance.
"ESOP Plan" shall mean the Performance Holdings, Inc. Employee Stock
Ownership Plan established by Holdings pursuant to the ESOP Plan Declaration.
"ESOP Plan Declaration" shall mean the document entitled Performance
Holdings, Inc. Employee Stock Ownership Plan dated as of July 1, 2002, together
with all schedules and exhibits thereto, as the same may be supplemented,
modified, amended, restated or replaced from time to time in the manner provided
therein.
"ESOP Related Document" and "ESOP Related Documents" shall respectively
mean any one or more of the ESOP Plan Declaration, the ESOP Trust Agreement, the
ESOP Trustee Indemnity Agreement and the ESOP Trustee Retention Agreement, the
Holdings Contribution Agreement, the Holdings Redemption Agreement, and the
various assignments, agreements, instruments and other documents executed by the
requisite Person(s) pursuant to or in connection with any of the foregoing and
accepted or delivered by the ESOP Trustee or Borrower, as applicable (whether
prior to, on or from time to time after the Effective Date)and any and all
waivers, consents, agreements, reports, statements, certificates, schedules and
other documents executed by the requisite Person(s) pursuant to or in connection
with any of the foregoing and accepted or delivered by the ESOP Trustee or
Borrower, as applicable (whether prior to, on or from time to time after the
Effective Date), as each may have been and hereafter may be supplemented,
modified, amended, restated or replaced from time to time in the manner provided
therein.
"ESOP Trustee Retention Agreement" shall mean the retention letter
agreement between Holdings and the ESOP Trustee dated as of July 1, 2002,
together with all schedules and exhibits thereto, as the same may be
supplemented, modified, amended, restated or replaced from time to time in the
manner provided therein.
"ESOP Trust" shall mean the SPAR Performance Group, Inc. Employee Stock
Ownership Trust (under which the ESOP Trustee is the trustee) established by
Holdings pursuant to the ESOP Plan Declaration and the ESOP Trust Agreement.
"ESOP Trust Agreement" shall mean the Trust Agreement between Holdings
and the ESOP Trustee dated as of July 1, 2002, together with all schedules and
exhibits thereto, as the same may be supplemented, modified, amended, restated
or replaced from time to time in the manner provided therein.
"ESOP Trustee" shall mean GreatBanc Trust Company, and its successors,
permitted assigns and legal representatives, not in its corporate capacity, but
in its capacity as trustee under the ESOP Trust.
"ESOP Trustee Indemnity Agreement" shall mean the Indemnification
Agreement between Holdings and the ESOP Trustee dated as of July 1, 2002,
together with all schedules and exhibits thereto, as the same may be
supplemented, modified, amended, restated or replaced from time to time in the
manner provided therein.
"event" shall include (without limitation) any event, occurrence,
circumstance, condition or state of facts.
"Event of Default" shall have the meaning assigned to it in Section 8.01
hereof.
"Fixture" shall mean any fixture as defined in the UCC.
SPAR ESOP Revolving Credit Agreement
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"GAAP" shall mean generally accepted accounting principles in the United
States of America consistent with those applied in the preparation of the
financial statements referred to in Section 3.07 hereof.
"Guarantor" and "Guarantors" shall respectively mean any one or more of
Holdings and any subsidiary of Holdings (other than the Borrower) executing an
assumption of the Guarantor's obligations hereunder as contemplated in Section
5.11 hereof.
"Guarantors' Obligations" shall mean any and all of (i) each Guarantor's
joint, several, absolute, unconditional and irrevocable guaranty of the payment
and performance of the Borrower's Obligations and the support thereof with
security interests in the Collateral, (ii) the other amounts to be paid and all
other obligations to be performed or otherwise satisfied by any Guarantor under
this Agreement or any other Loan Instrument (whether individually, jointly,
severally or otherwise), (iii) any amounts to be paid and obligations to be
performed or otherwise satisfied by any Guarantor under any Stock Purchase
Document (whether individually, jointly, severally or otherwise), and (iv)
overdrafts of any Guarantor honored by the Lender (in its sole and absolute
discretion) and other indebtedness, liabilities or obligations (whether under
any note, guaranty or other instrument or document or otherwise) now or
hereafter owed to the Lender by any Guarantor (whether individually, jointly,
severally or otherwise); in each case including, without limitation, any and all
interest, fees and other amounts accrued, accruing or otherwise applicable
during the pendency of any Bankruptcy Proceeding, irrespective of whether such
interest, fees and other amounts are allowed or allowable as claims in any such
proceeding.
"hereunder", "herein", "hereof" and other words and phrases of like
import shall refer to each and every term and provision of this Agreement.
"Holdings" shall have the meaning assigned to it in the Introduction
hereto.
"Holdings Contribution Agreement" shall mean the letter agreement
between the Borrower and the Seller dated as of June 30, 2002, as the same may
be supplemented, modified, amended, restated or replaced from time to time in
the manner provided therein.
"Holdings Redemption Agreement" shall mean the letter agreement between
the Borrower and its sole shareholder (prior to the contribution to the ESOP
Trust contemplated under the Holdings Contribution Agreement) dated as of June
30, 2002, as the same may be supplemented, modified, amended, restated or
replaced from time to time in the manner provided therein.
"Holdings Stock Plan" shall mean the any stock option plan, phantom
stock plan or the like of Performance Holdings, Inc., as approved by the Lender
in its sole discretion, as the same may be adopted and thereafter supplemented,
modified, amended, restated or replaced from time to time in the manner provided
therein.
"Holdings Warrant" shall mean the Warrant Agreement dated as of June 30,
2002, between Holdings and the Seller granting to the Seller the right to
acquire 10% of the outstanding shares of common stock issued by Holdings, as the
same may be supplemented, modified, amended, restated or replaced from time to
time in the manner provided therein..
"Holdings Warrant Shares" shall mean the number of shares of common
stock issued by Holdings that are then purchasable from Holdings under the
Holdings Warrant, which number may fluctuate from time to time as result of
anti-dilution adjustments, or as a result of the adjustment pursuant to Section
2.02 hereof.
"Improvements" shall mean all land development, construction and other
improvements to Real Estate, whether planned, authorized, under construction or
completed, and whether or not enhancing the value of the referenced Real Estate,
including (without limitation) all demolitions, excavations, fills and other
site work, roads and sidewalks, water, sewer and utility lines, buildings and
other structures, and all fixtures, furnishings and Equipment located on or used
in connection with the referenced Real Estate, whether or not affixed thereto.
"Indebtedness" of any referenced Person shall mean any and all
obligations of the referenced Person: (a) for borrowed money, however evidenced;
(b) evidenced by any promissory note, bond, debenture or other similar written
obligation to pay money; (c) for the deferred purchase price of any asset,
property or service; (d) under any interest rate protection, foreign currency
exchange, or other interest or exchange rate swap or hedging agreement or
arrangement; (e) in respect of any letter of credit or banker's acceptance; (f)
to reimburse or compensate any other Person respecting any provisional or other
temporary credit in advance of
SPAR ESOP Revolving Credit Agreement
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collection for deposits of any checks, instruments or other documents made by
the referenced Person or any of its Affiliates; (g) as lessee under leases that
have been capitalized or should be capitalized under GAAP; (h) respecting loans
or advances from any subsidiary or other Affiliate; (i) respecting any preferred
stock issued by the referenced Person bearing any mandatory dividend, interest
or other return, or subject to any repurchase or redemption, that is payable in
cash or any other property (other than as payable only with common stock or like
preferred stock); (j) respecting unfunded accrued benefits under plans covered
by Title IV of ERISA and unfunded accrued post-retirement benefits under any
"welfare benefit plan" (as defined in ERISA); or (k) respecting other items
treated as liabilities under GAAP; provided, however, that Indebtedness shall
not include any trade liability owed by the referenced Person to any other
Person that arose from the purchase or sale from such other Person of goods or
services by the referenced Person in the ordinary course of its business and is
treated (in its entirety) as a current accounts payable under GAAP. In the event
the referenced Person is a corporation with one or more subsidiaries, the term
"Indebtedness" shall mean the Indebtedness of all of them consolidated in
accordance with GAAP consistently applied as of the date of calculation. Except
as otherwise provided in the financial covenant definitions, the amount of an
item of Indebtedness shall include all unused availability under lines of credit
and commitments as if fully advanced irrespective of any other treatment under
GAAP.
"Intellectual Property" shall mean (a) any and all copyrights and
copyrighted materials, logos, patents, service marks, trademarks, trade names,
domain names, computer programs and other , know how and other intellectual
properties of the referenced Person, including (without limitation) any and all
applications, invention disclosures and pending items, any and all designs,
discoveries, formulae, ideas, inventions, products, programs, software and
firmware (whether in source code, object code or otherwise, and including
(without limitation) all "shrink-wrap" licenses that accompanied any item of
Equipment or software when obtained), specifications, styles, techniques, and
other trade secrets and works of authorship for the current and intended
business, products and prospects, any and all license royalties and other
payment intangibles, the proceeds of infringement suits and other proceeds, the
right to sue for past, present and future infringement, all rights corresponding
thereto throughout the world, and all reissues, divisions, continuations,
renewals, extensions and continuations-in-part thereof, and, in the case of
trademarks, the good will of the business to which each of them relates,
including (without limitation) the name "SPAR Performance Group, Inc." and any
and all derivatives thereof; (b) any and all proprietary or confidential
information or trade secrets pertaining to any of the assets, business,
finances, liabilities, operations, procedures or prospects of the Borrower,
including (without limitation) any and all accounting standards, policies and
variances, advertisements and other promotional materials (whether or not
copyrighted), analyses and methodologies, bids, books and records, business,
claims and controversies, correspondence, costs, credit, customer lists,
identities, contacts and other information, data, debt, disbursements, discs,
tapes and other media, documents, expenses, financial information, forecasts,
instructions, interpretations, invoices, leases, ledgers, licenses, litigation
and other proceedings, loans, manuals, materials, methods, orders, payables,
payroll, personnel, policies, presentations, prices, products, programs,
proposals, prospects, receipts, registrations, reports, services, software,
source code, strategies, suppliers, systems, targets, taxes, techniques, terms,
trade secrets, and qualifications; and (c) any and all Books and Records
evidencing or pertaining to any of the foregoing; in each case whether now
existing or hereafter acquired, licensed, created, executed, modified or
otherwise existing (including, without limitation, during the pendency of any
Bankruptcy Proceeding), and irrespective of whether any patent, copyright,
trademark or other right or protection has been or can be sought, issued or
obtained in connection therewith.
"Inventory" shall mean any and all inventory and other goods,
merchandise and other items held by the referenced Person (or on its behalf) for
manufacture, sale, lease or other delivery or consumption, wherever located,
whether raw materials, supplies, parts or other components, work-in-progress,
finished goods, returned goods or otherwise, in each case whether now existing
or hereafter acquired, created, modified, finished or otherwise existing
(including, without limitation, during the pendency of any Bankruptcy
Proceeding).
"Investment" shall mean, with respect to any referenced Person, (a) any
stock, warrant, option, put, call, bond, debenture, commercial paper,
governmental obligation, note, certificate of deposit, partnership interest
(general or limited), limited liability company membership or interest or trust
interest, any commodity or future , any commodity, future, swap, ceiling,
collar, straddle or other hedge or protection, any foreign currency or other
money, any bank, brokerage, deposit, securities, trading or other account, any
other security, investment property, financial asset, investment or interest,
any other obligation or right to acquire or benefit from any such item, (b) any
direct or indirect capital or other equity contribution to any other Person made
or committed to by the referenced Person, (c) any purchase by the referenced
Person of all or substantially all of the assets and properties of any other
Person or any discrete division or other business unit of such other Person, (d)
any agreement or arrangement by or with the referenced Person for the purpose of
entering into any partnership or joint venture with or providing funds or credit
to or for the benefit of any other Person, (e) any direct or indirect loan,
advance or Credit Support by the referenced Person to or for the benefit of any
other
SPAR ESOP Revolving Credit Agreement
-9-
Person (including interest), each related governing document, and any right,
power, privilege, remedies or interest under, in or with respect to any of the
foregoing items in this subsection, or (f) any security entitlement or other
right, power, privilege, remedy or interest (whether under any governing
document or other related contract, instrument, agreement or document or
otherwise) of the referenced Person under, in or with respect to any of the
foregoing items in this definition, in each case whether now existing or
hereafter acquired, created, executed, modified or otherwise existing
(including, without limitation, during the pendency of any Bankruptcy
Proceeding), excluding, however, any (i) current trade liability (other than any
Indebtedness) owed to the referenced Person by any other Person that arose from
the purchase or sale from the referenced Person of goods or services in the
ordinary course of its business, or (ii) for the purposes of Articles III, V and
VI of this Agreement only, prepayment of expenses (A) where such expenses are
being incurred by the referenced Person in the ordinary course of its business,
(B) such expenses are of a type customarily prepaid, and (C) such prepayment is
in a commercially reasonable amount for a commercially reasonable period. The
amount of any Investment shall be the original cost of such Investment, plus the
cost of all additions thereto, and minus the amount of any return of capital or
principal to the extent such return is in cash with respect to such Investment,
without, however, any adjustments for increases or decreases in value or
write-ups, write-downs or write-offs with respect to such Investment.
"Investment Company Act" shall mean the Investment Company Act of 1940,
as amended, or any corresponding or succeeding provisions of any Applicable Law
in any foreign jurisdiction, and the rules and regulations promulgated
thereunder, in each case as the same may have been and hereafter may be
supplemented, modified, amended or restated from time to time.
"Lender" shall have the meaning assigned to it in the Introduction,
above.
"Letter of Credit" and "Letters of Credit" shall mean respectively any
one or more of the letters of credit issued for the account of the Borrower or
Guarantor pursuant to Section 2.18 hereof, whether issued by or through the
actions of the Lender or any other issuer thereof, as the same may be
transferred, renewed, modified, amended, restated or replaced from time to time
in the manner provided therein.
"Letter of Credit Advance" shall mean any payment or advance under or
with respect to any Letter of Credit by the Lender, any other issuer thereof or
their respective designees.
"Letter of Credit Amount" as of a particular date shall mean the sum of
(i) the aggregate issued but unadvanced face amount of all Letters of Credit
then outstanding under this Agreement and (ii) the principal balance of the
Letter of Credit Advances then outstanding and not converted voluntarily by the
Borrower to Revolving Credit Loans.
"Letter of Credit Beneficiary" shall have the meaning assigned to it in
Section 2.18(b) hereof.
"Letter of Credit Expiration Date" shall mean such "expiration" or
"expiry" date as may be specified in a Letter of Credit, as and if extended
pursuant thereto.
"Letter of Credit Fee" shall have the meaning assigned to it in Section
2.18(e) hereof.
"Letter of Credit Issuance Date" shall mean either (i) the date duly
requested (if the date actually made) by the Borrower under Section 2.18(b) for
the issuance, renewal or extension of a particular Letter of Credit, or such
later date as may be proposed by the Lender or any other issuer thereof, or (ii)
the actual date of issuance, renewal or extension of the Letter of Credit if
issued, as applicable.
"Lien" and "Liens" shall respectively refer to any one or more of the
following to which the referenced or relevant Person is a party or by which the
referenced or relevant Person, any of its assets or properties or any other
referenced assets or properties may be bound or subject: (a) any assignment,
pledge, mortgage, hypothecation or security interest (irrespective of whether
the referenced Person is personally obligated with respect to any obligation
thereby secured); (b) any filed financing statement (other than as secured
party); (c) any consignment, finance lease, conditional sale contract or other
title retention agreement; (d) any assignment, pledge or other transfer,
restriction or encumbrance of any right to receive any income or other
distributions or proceeds; (e) any sale/leaseback transaction in which the
referenced Person is the seller/lessee; (f) any lien, charge, claim or other
encumbrance arising under any Applicable Law, whether in favor of an Authority
or otherwise, including (without limitation) liens for taxes, assessments and
other governmental charges and liens of mechanics, carriers, warehouses,
suppliers and laborers; (g) any restrictive covenant, lease, license, right of
use, possession or first refusal, infringement, community property or other
joint ownership interest, limitation or restriction on use or transfer,
exception to title, or other limitation or restriction on the extent, exercise
or enforcement of any right or interest respecting any asset or property; (h)
with respect
SPAR ESOP Revolving Credit Agreement
-10-
to any Real Estate, any easement, right-of-way, servitude, encroachment,
restrictive covenant, reservation, or other exception to title; (i) any
counterclaim, setoff, right of recoupment, abatement, reduction, community
property right or other claim or determination, including (without limitation)
any right of set off or other claim against assets in the possession of the
claimant (whether or not intended as collateral); (j) any other lien,
encumbrance or adverse right or claim of any nature in, to or against any asset
or property, or (k) any covenant or agreement with any other Person to a
"Negative Pledge" (i.e., that the referenced or relevant Person will not (A) do
or permit any one or more of the things specified in the preceding clauses of
this definition or (B) sell, lease, sublease, transfer, exchange, abandon or
otherwise dispose of, surrender management, physical possession or control of,
physically alter or relocate all or any portion of its assets or properties).
"Line of Credit" shall mean the discretionary line of credit established
by the Lender hereunder to make revolving loans to the Borrower from time to
time in the aggregate principal amount outstanding (including the Letter of
Credit Amount as if all outstanding Letters of Credit were fully advanced and
outstanding) at any one time not to exceed $2,000,000.00 (including any
Overadvance Amount), as such amount may be reduced from time to time or
terminated pursuant to the terms of this Agreement.
"Line of Credit Fee" shall have the meaning assigned to it in Section
2.07 hereof.
"Loan" and "Loans" shall respectively mean the principal amounts
outstanding from time to time (including future advances) respecting any and all
of (i) the Advances and Revolving Credit Loans, (ii) the Letter of Credit
Advances, and (iii) the other amounts advanced from time to time to or on behalf
of the Borrower by the Lender or its designee pursuant to this Agreement or any
other Loan Instrument (including, without limitation, during the pendency of any
Bankruptcy Proceeding).
"Loan Instrument" and "Loan Instruments" shall respectively mean any one
or more of this Agreement, the Notes, the Letters of Credit, the applications
for Letters of Credit, any other security agreement, guaranty, hypothecation or
other instrument, agreement or document with or issued or given by the Borrower
or any Surety in direct or indirect support (in whole or in part) of any of the
Borrower's Obligations or Surety's Obligations (as hereinafter defined), the
various mortgages, assignments, agreements, guaranties, instruments and other
documents creating, evidencing, perfecting, governing or supporting any of the
Obligations or any Surety's Obligations or any interest of the Lender in any
collateral securing or intended to secure any of the Obligations or Surety's
Obligations, and all waivers, consents, agreements, reports, statements,
certificates, schedules and other documents executed by the requisite Person(s)
pursuant to or in connection with any of the foregoing and accepted or delivered
by the Lender (whether prior to, on or from time to time after the Effective
Date), as each may be supplemented, modified, amended, restated or replaced from
time to time in the manner provided therein.
"Loan Party" and "Loan Parties" shall respectively mean any one or more
of the Borrower and the Guarantors.
"Margin Stock" shall mean any "margin stock" as defined in any
applicable Margin Stock Regulations.
"Margin Stock Regulations" shall mean Regulation T, U and/or X of the
Board of Governors of the Federal Reserve System, as applicable, , or any
corresponding or succeeding provisions of Applicable Law, and the rules and
regulations promulgated thereunder; in each case as the same may have been and
hereafter may be supplemented, modified, amended, restated or replaced from time
to time.
"Material Adverse Effect" shall mean any material and adverse effect,
whether individually or in the aggregate, upon (a) the assets, business, income,
operations, properties or condition, financial or otherwise, of Holdings or any
of its subsidiaries, other than as would be reasonably likely to result from the
events specified in Schedule 1.01 hereto (but subject to any conditions or
limits noted therein), (b) the ability of the Borrower to make payment as and
when due of all or any part of the Obligations, or (c) the Collateral or its
value or the validity, enforceability, perfection or priority of any security
interest of the Lender in any Collateral.
"Material Document" shall mean any ESOP Related Document, Stock Purchase
Document, Organizational Document, Custody Document or other material
instrument, indenture, agreement, document, arrangement or other obligation: (a)
to which the Borrower or any Surety is or may be a party; (b) by which the
Borrower, any Surety or any of the Collateral is or may be bound or subject; or
(c) by which any of the other material assets and properties of the Borrower or
any Surety is or may be bound or subject; in each case whether now existing or
hereafter existing, acquired or created, and irrespective of whether reduced to
writing, and as each has been and hereafter may be supplemented, modified,
amended, restated or replaced from time to time.
SPAR ESOP Revolving Credit Agreement
-11-
"Maturity Date" shall mean the earliest of (a) the Revolving Credit
Maturity Date with respect to the Revolving Credit Loans and related
Obligations, and (b) with respect to all Loans and other Obligations the date on
which the maturity of the Obligations shall have been accelerated or deemed
accelerated pursuant to Section 8.02 hereof or Applicable Law.
"mortgage" shall mean any mortgage, deed or trust, assignment or rents
or leases or other security deed or security interest in Real Estate.
"Note" and "Notes" shall respectively mean any one or more of the
Revolving Credit Note and any other note or other instrument issued by the
Borrower to the Lender hereunder.
"Obligations" as of any date shall mean any and all of the obligations
of the Borrower's Obligations and Guarantors' Obligations.
"Organizational Document" shall mean any articles or certificate of
incorporation, charter, by-laws, limited liability company certificate or
agreement, partnership certificate or agreement, or other instrument, agreement
or document or any statutory equivalent in whole or in part respecting the
organization, governance, power or authority of the referenced Person, or of any
direct or indirect general partner, manager, trustee or similar principal of the
referenced Person that is not a natural Person, as applicable, including
(without limitation) (i) the Certificate of Incorporation or By-Laws of the
Borrower; (ii) any resolution with continuing effect adopted by the Board of
Directors, the management or other applicable committee of directors, the
managers, or the shareholders or members of a referenced Person, or of any
direct or indirect general partner, manager, trustee or similar principal of the
referenced Person, that is a corporation, limited liability company or similar
entity, or (iii) any agreement, trust or arrangement among any of its equity
holders respecting the securities issued by or any of the beneficiaries of the
referenced Person, or of any direct or indirect general partner, manager,
trustee or similar principal of the referenced Person, that is not a natural
Person; in each case as and when executed, adopted, filed or otherwise
effectuated (as applicable) from time to time (whether before, as of or after
the date hereof), and irrespective of whether reduced to writing, and as each
has been and hereafter may be supplemented, renewed, extended, modified,
amended, restated or replaced from time to time.
"Other Taxes" shall have the meaning assigned to it in Section 2.09
hereof.
"Overadvance Amount" shall have the meaning assigned to it in Section
2.02 hereof.
"Overadvance Conversion Date" shall mean September 30, 2003.
"Permitted Investments" shall mean: (a) certificates of deposit,
commercial paper or other market rate instruments with final maturities of 7
days or less issued by and normal business banking accounts with (i) the Lender,
(ii) the Senior Lender, (iii) any commercial bank that is organized under the
laws of the United States or any state thereof, has total capital and surplus in
excess of $1,000,000,000, or (iv) the holding company of any such bank or any
subsidiary of such holding company; (b) securities or other obligations with
final maturities of 7 days or less from the date of acquisition issued or
unconditionally guarantied by the government of the United States of America or
any agency or instrumentality thereof (but only to the extent backed by the full
faith and credit of the United States of America); and (d) investments in money
market funds having net assets in excess of $1,000,000,000 that invest, and that
are restricted by their respective charters to invest, solely in investments of
the type described in the immediately preceding subsections (a), (b), and (c) of
this definition; provided, however, that any such item shall only constitute a
Permitted Investment as and to the extent held by the Lender, its designee or a
financial institution approved by the Lender pursuant and subject to a control
agreement in form and substance acceptable to the Lender.
"Permitted Lien" for a referenced Person shall mean any of the
following: (a) statutory liens incurred in the ordinary course of the referenced
Person's business (i) for taxes, assessments or other governmental charges,
levies or claims, (ii) of mechanics, carriers, warehouses, suppliers and
laborers, (iii) respecting worker's compensation, unemployment insurance,
statutory obligations or social security legislation, or (iv) required by law as
a condition precedent to the transaction of the referenced Person's business or
the exercise of any of the privileges or licenses by the referenced Person
subject to such Lien, in each case so long as (1) the underlying obligations are
not then required to be paid under Section 5.06 hereof, (2) any reserve has been
established and any bond or insurance has been obtained as required by that
Section, and (3) no such underlying obligation exceeds $10,000 individually or
in the aggregate with other such underlying obligations; (b) liens incurred in
respect of judgments and awards discharged within 30 days from the making
thereof so long as the underlying obligation does not exceed $10,000
individually or in the aggregate with other such underlying obligations; (c) in
the case of Real Estate other than Collateral, easements, rights-of-way,
restrictions, covenants and other agreements of record and other similar charges
or encumbrances not interfering with the ordinary
SPAR ESOP Revolving Credit Agreement
-12-
conduct of the business of the referenced Person; (d) in the case of personal
assets and properties other than Collateral, any deposits made or other security
interests incurred in the ordinary course of the referenced Person's business to
secure the performance of its tenders, bids, leases (other than capitalized
leases), contracts (other than for Indebtedness or guaranties or other Credit
Support), and similar obligations arising as a result of progress payments under
government contracts; (e) the security interests or liens (including leases
treated as security interests or liens) encumbering Equipment purchased or
property leased by the referenced Person with financings permitted by Section
6.02(a)(iii) hereof so long as they respectively secure only the corresponding
purchase money Indebtedness or capitalized lease obligations; (f) the Liens
granted from time to time to the Lender (whether or not assigned to the Senior
Lender); and (g) currently existing Liens that (A) are disclosed in Schedule
3.12(b) hereto, (B) do not secure Indebtedness (including purchase money
obligations), and (C) secure underlying obligations that do not exceed $10,000
individually or in the aggregate with other such underlying obligations, but
those Liens shall not be increased, renewed or extended or extended to other
Indebtedness unless otherwise permitted by the terms and provisions of this
Agreement.
"Permitted Option" shall have the meaning assigned to it in Section
6.07(a) hereof.
"Person" shall include (without limitation) any manner of association,
business trust, company, corporation, estate, governmental or other Authority,
group (including one under Section 13(d)(3) of the Securities Exchange Act),
joint venture, limited liability company, natural person (i.e., human being),
partnership, syndicate, trust or other entity.
"Plan" and "Plans" shall have the meanings respectively assigned to them
in Section 3.10(c) hereof.
"Products" shall have the meaning assigned to it in the definition of
Eligible Billed Receivables.
"Pro Forma Effect" shall mean the effect(s) any action or other event
proposed by or on behalf of the Borrower (if it were to happen as proposed)
could have on (a) the assets, business, operations, properties or condition,
financial or otherwise, of the Borrower, (b) the ability of the Borrower to make
payment, or to otherwise perform or satisfy, of all or any part of the
Obligations as and when due, or (c) the Collateral, including (without
limitation) the effect(s) of including any proposed sale or disposition, new or
altered Indebtedness or other obligation (and the payments required thereunder),
payment or other action or event in a pro forma recalculation of (among other
things) the various financial measurements and covenants set forth in this
Agreement for or as at the end of the applicable computation or reporting period
then most recently ended (based on the then most recently required compliance
calculations and any and all subsequent pro forma calculations on a cumulative
basis with respect to other action(s) or event(s), if and to the extent they
occurred or continue to be proposed).
"Real Estate" shall include (without limitation) (a) all land, leasehold
interests, easements, licenses, rights-of-way or use, appurtenances and other
rights and interests in real property, (b) all buildings and other structures
and Improvements, (c) all fixtures, furnishings, Equipment and other personal
property (including, without limitation, leasehold interests in such personal
property and mobile homes of the type usually installed on a developed site)
located on or used in connection therewith, whether or not affixed thereto, (d)
all leases and subleases thereof, and (e) all rents, profits and other income,
payments and proceeds with respect to any and all of the foregoing; provided,
however, that "Real Estate" shall not include mortgages or interests therein.
"Representative" and "Representatives" shall respectively mean any or
all of: (a) in the case of any referenced Person (including, without limitation,
the Lender or Letter of Credit issuer), such referenced Person's Affiliates,
directors, officers, employees, attorneys, agents and other representatives; and
(b) in addition in the case of the Lender, any Letter of Credit issuer or any
other financial institution, such referenced Person's participants,
correspondents, confirming banks, custodians and designees and their respective
Affiliates, directors, officers, employees, attorneys, agents and other
representatives.
"Revolving Credit Loans" shall have the meaning assigned to it in
Section 2.01(a) hereof.
"Revolving Credit Maturity Date" shall mean with respect to the
Revolving Credit Loans and related Obligations the first to occur of (a) the
Revolving Credit Termination Date, (b) the Term Maturity Date, and (c) the date
on which the maturity of the Obligations shall have been accelerated or deemed
accelerated pursuant to Section 8.02 hereof or Applicable Law.
"Revolving Credit Note" shall mean the Revolving Promissory Note dated
as of June 30, 2002, issued by the Borrower to the Lender to evidence the
Revolving Credit Loans (as referenced in Section 2.03(a)
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hereof), as the same may be modified, amended, restated or replaced from time to
time in the manner provided therein.
"Revolving Credit Period" shall mean that period commencing on the
Effective Date and terminating on the first to occur of (a) the Revolving Credit
Termination Date, (b) the Revolving Credit Maturity Date and (c) the date on
which the maturity of the Obligations shall have been accelerated or deemed
accelerated pursuant to Section 8.02 hereof or Applicable Law.
"Revolving Credit Termination Date" shall mean the first to occur of
(a)September 30, 2005, (b) the date on which the Line of Credit shall have been
reduced permanently to zero, and (c) the first to occur of the "Maturity Date"
or the payment in full of all of the "Obligations" under (and as such terms are
defined in) the Term Loan Agreement.
"Rule 144" shall mean Rule 144, as promulgated under the Securities Act
or any corresponding or succeeding provisions of Applicable Law; in each case as
the same may have been and hereafter may be supplemented, modified, amended,
restated or replaced from time to time.
"securities" of any Person shall mean any and all equity securities and
debt securities, general or limited partnership interests, limited liability
company memberships or interests, investment contracts, and any other instrument
or interest commonly understood to be a security issued by that Person.
"Securities Act" shall mean the Securities Act of 1933, as amended, or
any corresponding provisions of any Applicable Law in any state or foreign
jurisdiction, or any corresponding or succeeding provisions of Applicable Law,
and the rules and regulations promulgated thereunder; in each case as the same
may have been and hereafter may be supplemented, modified, amended, restated or
replaced from time to time.
"Securities Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, or any corresponding provisions of any Applicable Law in any
state or foreign jurisdiction, or any corresponding or succeeding provisions of
Applicable Law, and the rules and regulations promulgated thereunder; in each
case as the same may have been and hereafter may be supplemented, modified,
amended, restated or replaced from time to time.
"Senior Borrower" and "Senior Borrowers" shall respectively mean any one
or more of the borrowers under the Senior Loan Documents, and the successors,
assigns and legal representatives of each, and any and all additional or
replacement borrower(s) under any Senior Loan Document. The Senior Borrowers
currently include SGRP and most of its subsidiaries (including the Lender).
"Senior Lender" shall mean IBJ WHITEHALL BUSINESS CREDIT CORPORATION,
its successors, assigns and legal representatives, and any and all additional or
replacement lender(s) under any restated or replacement Senior Loan Document.
"Senior Loan" and "Senior Loans" shall respectively mean the principal
amounts outstanding from time to time (including future advances) respecting any
and all of advances, loans, letter of credit advances and the other amounts
advanced from time to time to or on behalf of one or more of the Senior
Borrowers by the Senior Lender thereunder or its designee pursuant to any Senior
Loan Document (including, without limitation, during the pendency of any
Bankruptcy Proceeding).
"Senior Loan Agreement" the Second Amended and Restated Revolving
Credit, Term Loan and Security Agreement dated as of September 22, 1999, among
the Senior Borrowers and the Senior Lender, together with all schedules and
exhibits thereto, as each may have been and hereafter may be supplemented,
modified, amended, restated or replaced from time to time in the manner provided
therein.
"Senior Loan Document" and "Senior Loan Documents" shall respectively
mean any one or more of the Senior Loan Agreement, each and every note, letter
of credit application, security agreement, guaranty, hypothecation or other
instrument, agreement or document with or issued or given by any borrower or
surety thereunder in direct or indirect support (in whole or in part) of any of
the Senior Loan Obligations or related surety's obligations, the various
mortgages, assignments, agreements, guaranties, instruments and other documents
creating, evidencing, perfecting, governing or supporting any of the Senior Loan
Obligations or any related surety's obligations or any interest of the Senior
Lender in any collateral securing or intended to secure any of the Senior Loan
Obligations or related surety's obligations, and all waivers, consents,
agreements, reports, statements, certificates, schedules and other documents
executed by the requisite Person(s) pursuant to or in connection with any of the
foregoing and accepted or delivered by the Senior Lender (whether prior to, on
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or from time to time after the Effective Date), as each may have been and
hereafter may be supplemented, modified, amended, restated or replaced from time
to time in the manner provided therein.
"Senior Loan Obligations" as of any date shall mean any and all of the
obligations of the Senior Borrowers (i) to repay the balance of the Senior Loans
then outstanding (including future advances), including accrued and unpaid
interest thereon, (ii) to pay or otherwise perform or satisfy all of the other
amounts to be paid and obligations to be performed or otherwise satisfied by any
Senior Borrower under any Senior Loan Document (whether individually, jointly,
severally or otherwise), (iii) to pay or otherwise perform or satisfy all of the
other amounts to be paid and obligations to be performed or otherwise satisfied
by any Senior Borrower under any interest rate protection, foreign currency
exchange, or other interest or exchange rate swap or hedging agreement or
arrangement (whether individually, jointly, severally or otherwise) with the
Senior Lender or any of its Affiliates, and (iv) to pay or otherwise satisfy any
and all overdrafts of any Senior Borrower honored by the Senior Lender (in its
sole and absolute discretion) and other indebtedness, liabilities or obligations
(whether under any note, guaranty or other instrument or document or otherwise)
now or hereafter owed to the Senior Lender by any Senior Borrower (whether
individually, jointly, severally or otherwise), together with accrued and unpaid
interest thereon; in each case including, without limitation, any and all
interest, fees and other amounts accrued, accruing or otherwise applicable
during the pendency of any Bankruptcy Proceeding, irrespective of whether such
interest, fees and other amounts are allowed or allowable as claims in any such
proceeding.
"SGRP" shall mean SPAR Group, Inc., a Delaware corporation and ultimate
parent of the Lender.
"SPAR eTraining Agreement" shall mean that certain SPG Agreement among
SPG and SGRP dated as of January 11, 2002, together with all schedules and
exhibits thereto, including, without limitation, the "SPAR Standard Terms and
Provisions Exhibit" and the "SPAR Supplemental Terms and Provisions Exhibit", as
the same may be supplemented, modified, amended, restated or replaced from time
to time in the manner provided therein.
"SPG" shall mean SPAR Performance Group, a Delaware corporation
currently having an address at 2245 Keller Way, Carrollton, Texas 75006, and
wholly-owned subsidiary of the Borrower.
"SPG Stock" shall mean the shares of common stock issued by the
Borrower.
"STMI" shall mean SPAR Trademarks, Inc., a Delaware corporation and
indirect subsidiary of SGRP.
"Stock Purchase Agreement" shall mean the Stock Purchase Agreement
between Holdings and the Lender dated as of June 30, 2002, together with all
schedules and exhibits thereto, as the same may be supplemented, modified,
amended, restated or replaced from time to time in the manner provided therein.
"Stock Purchase Document" and "Stock Purchase Documents" shall
respectively mean any one or more of the Stock Purchase Agreement, the SPAR
eTraining Agreement, the Trademark Agreement, the Confidentiality Agreement, and
the various assignments, agreements, instruments and other documents executed by
the requisite Person(s) pursuant to or in connection with any of the foregoing
and accepted or delivered by the Lender (whether prior to, on or from time to
time after the Effective Date)and any and all waivers, consents, agreements,
reports, statements, certificates, schedules and other documents executed by the
requisite Person(s) pursuant to or in connection with any of the foregoing and
accepted or delivered by the Lender (whether prior to, on or from time to time
after the Effective Date), as each may have been and hereafter may be
supplemented, modified, amended, restated or replaced from time to time in the
manner provided therein.
"Subordinated Right" and "Subordinated Rights" shall respectively mean
for each Guarantor any and all: (a) advances, loans, indebtedness and other
similar amounts (including interest) directly or indirectly owed to such
Guarantor by the Borrower, any other Guarantor or any Surety (whether
individually, jointly, severally or otherwise); (b) subrogation, contribution,
reimbursement, restitution and other similar rights of such Guarantor against or
in respect of (i) the Borrower, any other Guarantor or any Surety, or (ii) any
of their respective assets and properties, whether resulting from any payment
made by such Guarantor or otherwise; and (c) security interests or other liens
or encumbrances securing, or guaranties or other credit support securing for,
any such advances, loans, indebtedness, amounts or rights; in each case whether
now or hereafter existing, acquired or created.
"subsidiary" shall mean any corporation or other entity in respect of
which a Person at the time shall own directly, or indirectly (through one or
more corporations, nominees or other persons or otherwise), at
SPAR ESOP Revolving Credit Agreement
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least one-half of the aggregate voting interests of such corporation or other
entity, whether owned or held (i) of record or beneficially or (ii)
individually, jointly or otherwise.
"Surety" and "Sureties" shall respectively mean any one or more of any
Guarantor or other co-obligor, indemnitor, guarantor, pledgor or surety of or
other Person providing Credit Support for any of the Obligations or any Surety's
Obligations, whether or not disclosed to the Borrower or any other Surety.
"Surety's Adverse Effect" shall mean any material and adverse effect,
whether individually or in the aggregate, upon (a) the assets, business,
operations, properties or condition, financial or otherwise, of any Surety, (b)
the ability of any Surety to pay or otherwise satisfy (as and when due) any of
its obligations under any of the Loan Instruments, or (c) any collateral
provided by any Surety or its value or the validity, enforceability, perfection
or priority of any security interest of the Lender in any collateral provided by
any Surety.
"Surety's Obligations" shall mean any and all: (a) "Guarantor's
Obligations" or "Guarantors' Obligations" under (and as defined in) any
Guaranty, as applicable; and (b) other Credit Support and obligations of any
other Surety under any Loan Instrument.
"Tax Code" shall mean the United States Internal Revenue Code of 1986,
as amended, any corresponding Applicable Law of any State or foreign
jurisdiction, or any corresponding or succeeding provisions of Applicable Law,
in each case as the same may have been and hereafter may be supplemented,
modified, amended, restated or replaced from time to time.
"Taxes" shall have the meaning assigned to it in Section 2.09 hereof.
"Term Loan" and "Term Loans" shall have the meanings respectively
assigned to them in the Term Loan Agreement.
"Term Loan Agreement" shall mean the Term Loan, Guaranty and Security
Agreement among Holdings (as borrower), the Borrower (as a guarantor) and the
Lender dated as of June 30, 2002, together with all schedules and exhibits
thereto, as the same may be supplemented, modified, amended, restated or
replaced from time to time in the manner provided therein.
"Term Loan Documents" shall mean the Term Loan Agreement, the Term
Notes, any other security agreement, guaranty, hypothecation or other
instrument, agreement or document with or issued or given by Holdings, the
Borrower or any Surety in direct or indirect support (in whole or in part) of
any of the "Borrower's Obligations" or "Surety's Obligations" (as defined in the
Term Loan Agreement), the various mortgages, assignments, agreements,
guaranties, instruments and other documents creating, evidencing, perfecting,
governing or supporting any of such Borrower's Obligations or such Surety's
Obligations, and all waivers, consents, agreements, reports, statements,
certificates, schedules and other documents executed by the requisite Person(s)
pursuant to or in connection with any of the foregoing and accepted or delivered
by the Lender (whether prior to, on or from time to time after the "Effective
Date" under and as defined in the Term Loan Agreement), as each may be
supplemented, modified, amended, restated or replaced from time to time in the
manner provided therein..
"Term Note" and "Term Notes" shall have the meanings respectively
assigned to them in the Term Loan Agreement.
"Trademark Agreement" shall mean the Trademark License Agreement between
the Borrower and STMI dated as of June 30, 2002, together with all schedules and
exhibits thereto, as the same may be supplemented, modified, amended, restated
or replaced from time to time in the manner provided therein.
"UCC" shall mean the Uniform Commercial Code of the State of New York,
or any corresponding or succeeding provisions of Applicable Law of the State of
New York, or any corresponding or succeeding provisions of Applicable Law, in
each case as the same may have been and hereafter may be supplemented, modified,
amended, restated or replaced from time to time.
Section 1.02. Certain Definitions in Other Loan Instruments. Capitalized
terms used and not otherwise defined in this Agreement shall have the meanings
respectively assigned to them in the other applicable Loan Instruments.
Section 1.03. UCC Definitions. The following terms shall have the
meanings respectively assigned to them in the UCC: "chattel paper"; "commercial
tort claim"; "deposit account"; "equipment"; "farm
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product"; "financial asset"; "fixture"; "general intangibles"; "goods";
"instrument"; "inventory"; "investment property"; "letter of credit rights";
"payment intangible"; "proceeds"; "products"; "securities account"; "security
entitlement"; and "software". The term "document of title" shall mean a
"document" as defined in the UCC.
Section 1.04. Singular and Plural Terms. Each definition in this
Agreement or any other Loan Instrument using a singular capitalized term or
other word or phrase also shall apply to the plural form of such term, word or
phrase, and vice versa, and all references to the masculine gender shall include
reference to the feminine or neuter gender, and vice versa, in each case as the
context may permit or require.
Section 1.05. Pronouns. Each use in this Agreement or any other Loan
Instrument of a neuter pronoun shall be deemed to include references to the
masculine and feminine variations thereof, and vice versa, and a singular
pronoun shall be deemed to include a reference to the plural variation thereof,
and vice versa, in each case as the context may permit or require.
Section 1.06. Including. The term "including" shall mean "including
(without limitation)", whether or not so stated. The terms "including",
"including, but not limited to", "including (without limitation)" and similar
phrases (i) mean that the items specifically listed after such term are examples
of the provision preceding such term and are not intended to be all inclusive,
(ii) shall not in any way limit (or be deemed or construed to limit) the
generality of the provision preceding such term, and (iii) shall not in any way
preclude (or be deemed or construed to preclude) any other applicable item
encompassed by the provision preceding such term.
Section 1.07. Section and Other Headings. The table of contents and
section and other headings contained in this Agreement are for reference
purposes only and shall not affect the meaning or interpretation of this
Agreement.
Section 1.08. Amended Documents. The inclusion in this Agreement and the
other Loan Instruments of supplements, modifications, amendments, restatements,
replacements and the like in the definitions of Material Document,
Organizational Document, ESOP Related Documents, Stock Purchase Documents, or
other term for any instrument, agreement or document (other than a Loan
Instrument) or group thereof shall not, and shall not be deemed or construed to,
(a) limit or otherwise modify or affect any term or provision of this Agreement
or any other Loan Instrument requiring notice to or the consent of the specified
parties thereunder to any supplement, modification, amendment, restatement or
replacement of any such item, or (b) be permission for or acceptance of any of
the foregoing by the parties required under any such term or provision.
ARTICLE II.
AMOUNTS AND TERMS OF THE OBLIGATIONS
Section 2.01. The Discretionary Revolving Credit Loans. (a) Upon the
terms and provisions and subject to the conditions contained in this Agreement,
the Lender will consider making revolving credit loans (with all such loans by
the Lender being referred to collectively as the "Revolving Credit Loans") from
time to time during the Revolving Credit Period to the Borrower at its request
(as provided in subsection (b), below) up to an aggregate maximum principal
amount outstanding at any one time (including the Letter of Credit Amount as if
all outstanding Letters of Credit were fully advanced and outstanding) not to
exceed the Line of Credit; provided that (i) after the Overdraft Conversion
Date, the maximum obligation of the Lender shall be further limited to the
amount of the Borrowing Base from time to time if the Borrowing Base is less
than the Line of Credit, (ii) once duly requested, the decision of whether to
make any requested Advance shall be in the sole and absolute discretion of the
Lender, and (iii) each requested Advance shall be subject to the availability of
a corresponding amount under the Senior Loan Documents based on the Lender's
"borrowing base" thereunder. Subject to the terms and provisions of this
Agreement, during the Revolving Credit Period the Borrower may request to
reborrow Advances previously repaid by it.
(b) The Borrower from time to time may request an advance of Revolving
Credit Loans pursuant to subsection (a) of this Section (as made by the Lender,
an "Advance") by giving the Lender a signed notice of its request, or by giving
the Lender notice of its request both by telephone and telecopy of a signed
notice and promptly confirming its request by delivery of an original copy of
the signed notice to the Lender. The notice requesting an Advance (i) shall be
delivered to the Lender at least one Business Day prior to the requested Advance
Date, or such greater number of Business Days as may be required for the Lender
to obtain a corresponding advance under the Senior Loan Agreement if applicable
(unless the Lender permits a shorter
SPAR ESOP Revolving Credit Agreement
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notice period in its sole and absolute discretion), (ii) shall be deemed to have
been delivered on the following Business Day unless actually received by the
Lender prior to 11:00 A.M. (New York City time) on a Business Day, (iii) shall
be irrevocable once given, and (iv) shall specify (A) the requested Advance
Date, (B) the principal amount of the requested Advance and (C) the purpose or
purposes to which the Borrower will apply the requested Advance. Subject to
compliance with the terms and provisions of this Agreement and the Lender's
approval in its sole and absolute discretion, the Lender shall make the
requested Advance on the proposed Advance Date. Each Advance shall be made by
crediting the demand deposit account maintained by the Borrower with the Senior
Lender.
(c) The Borrower may voluntarily elect to permanently reduce the Line of
Credit in whole at any time, or in part from time to time in integral multiples
of $100,000 , by giving the Lender a signed notice of its election, or by giving
the Lender notice of its election both by telephone and telecopy of a signed
notice and promptly confirming its election by delivery of an original copy of
the signed notice to the Lender; provided, however, that no such reduction shall
be made unless and until the Term Loans and all related obligations have been
repaid in full. Notice of such reduction election (i) shall be delivered to the
Lender at least three Business Days prior to the requested reduction date
(unless the Lender permits a shorter notice period in its sole and absolute
discretion), (ii) shall be deemed to have been delivered on the following
Business Day unless actually received by the Lender prior to 11:00 A.M. (New
York City time) on a Business Day, and (iii) shall be irrevocable once given.
Each such reduction shall be accompanied by a prepayment of the Revolving Credit
Loans in the amount, if any, necessary to make the aggregate outstanding
principal balance of the Revolving Credit Loans plus the Letter of Credit
Amount, after giving effect to the prepayment, not more than the Line of Credit
(as so reduced) prior to the Overadvance Conversion Date and thereafter not more
than the lesser of Line of Credit (as so reduced) or the Borrowing Base.
(d) The Borrower and Guarantor hereby each acknowledges, certifies and
represents to and covenants and agrees with the Lender that: (a) the Lender
shall be deemed to have made an Advance to the Borrower of $1,240,347.00 on the
date hereof, which is reflected on the Borrower's June 30, 2002, pro forma
balance sheet as "Line of Credit" or "Long-Term Bank Line of Credit", and the
Lender shall be deemed to have caused the issuance of a Letter of Credit at the
Borrower's request by the Senior Lender in the principal amount of $70,000,
which is reflected on the Borrower's June 30, 2002, pro forma balance sheet as
"Line of Credit" or "Long-Term Bank Line of Credit", each of which are
outstanding as of the date of this Agreement; and (b) the obligations of the
Borrower to repay those Loans and Letter of Credit Advances (with interest) to
the Lender, and to perform or otherwise satisfy its related Obligations, (i) are
not subject to any defense, counterclaim, setoff, right of recoupment,
abatement, reduction or other claim or determination, and (ii) are and shall
continue to be governed and secured by the terms and provisions of this
Agreement and other Loan Instruments.
Section 2.02. Overadvance Election. (a) At least 30, but not more than
90, days prior to the Overadvance Conversion Date, the Borrower shall have the
right (by written notice to the Lender during such period) to irrevocably
designate the amount (the "Overadvance Amount") the Borrower desires be
available under the Line of Credit in excess of the actual Borrowing Base (i.e.,
without regard to the Overadvance Amount) during the one or two year period
following the Overadvance Conversion Date (the "Overadvance Period"), as such
Overadvance Period may be designated by the Borrower in such notice, which
Overadvance Amount shall be either zero or increments of $100,000 but not less
than $500,000 (other than a zero election) or more than $1,000,000. In the event
the Borrower fails to so designate an Overadvance Amount, the Overadvance Amount
shall be deemed to be zero. Upon and after the expiration of any Overadvance
Period, the Overadvance Amount shall be zero.
(b) If the Overadvance Amount that takes effect on the Overadvance
Conversion Date is zero, Holdings shall have the right to repurchase the entire
Holdings Warrant for a total of $100.
(c) If the Overadvance Amount that takes effect on the Overadvance
Conversion Date is more than zero, Holdings shall have the right to reduce by
the number of Holdings Warrant Shares purchasable under the Holdings Warrant,
for a total of $100, in accordance with the following table:
OVERDRAFT # OF HOLDINGS TOTAL # OF LENDER'S
OVERADVANCE PERIOD WARRANT SHARES SHARES (AS DEFINED REDUCTION REMAINING
AMOUNT (IN YEARS) PURCHASABLE BY IN THE HOLDINGS AMOUNT WARRANT SHARES
LENDER WARRANT) (FULLY
DILUTED)
- ----------------------------------------------------------------------------------------------------------
$ 500,000 1 130,000 1,300,000 93,750 36,250
$ 600,000 1 130,000 1,300,000 87,500 42,500
$ 700,000 1 130,000 1,300,000 81,250 48,750
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$ 800,000 1 130,000 1,300,000 75,000 55,000
$ 900,000 1 130,000 1,300,000 68,750 61,250
$1,000,000 1 130,000 1,300,000 62,500 67,500
$ 500,000 2 130,000 1,300,000 62,500 67,500
$ 600,000 2 130,000 1,300,000 50,000 80,000
$ 700,000 2 130,000 1,300,000 37,500 92,500
$ 800,000 2 130,000 1,300,000 25,000 105,000
$ 900,000 2 130,000 1,300,000 12,500 117,500
$1,000,000 2 130,000 1,300,000 -- 130,000
In the event the quantity of Warrant Securities (as defined in the Holdings
Warrant) purchasable by the Lender under the Warrant changes, the "reduction"
and "remaining" amounts specified above shall be adjusted proportionally.
(d) If Holdings is permitted to repurchase all or a portion of the
warrant shares covered by the Holdings Warrants, it shall do so within 60 days
following the Overadvance Conversion Date.
Section 2.03. The Notes. (a) The obligation of the Borrower to repay the
Revolving Credit Loans, together with interest thereon (including, without
limitation, any and all interest, fees and other amounts accrued, accruing or
otherwise applicable during the pendency of any Bankruptcy Proceeding,
irrespective of whether such interest, fees and other amounts are allowed or
allowable as claims in any such proceeding), shall be evidenced by the Revolving
Promissory Note issued by the Borrower to the Lender in the aggregate principal
amount of $2,000,000.00 in the form of Exhibit A hereto and dated as of the date
hereof.
(b) [INTENTIONALLY OMITTED]
(c) [INTENTIONALLY OMITTED]
Section 2.04. Interest; Additional Interest. (a) Except as otherwise
provided in this Section, the Loans shall bear interest (computed on the basis
of the actual number of days elapsed and a year of 360 days) on the unpaid
principal balance of those Loans outstanding from time to time, from (and
including) the Effective Date to (and including) the date such principal balance
of such Loans is repaid in full (including, without limitation, any and all
interest, fees and other amounts accrued, accruing or otherwise applicable
during the pendency of any Bankruptcy Proceeding, irrespective of whether such
interest, fees and other amounts are allowed or allowable as claims in any such
proceeding), at a fluctuating rate that shall be equal to the Alternate Base
Rate per annum, which rate shall change with each corresponding change in the
Alternate Base Rate. Interest on those Loans shall be payable by the Borrower in
arrears: (x) prior to the Maturity Date, on the last Business Day of each
calendar month; (y) in full on the Maturity Date; and (z) on demand after the
Maturity Date.
(b) Any payment of principal, interest or other amount that is not paid
when due under this Agreement or any other Loan Instrument, and all of the Loans
during the continuance of any Event of Default, shall, to the extent permitted
by Applicable Law, bear interest (computed on the basis of the actual number of
days elapsed and a year of 360 days), until the overdue amount is paid in full
(with interest) or such Event of Default is no longer continuing, as applicable
(including, without limitation, any and all interest, fees and other amounts
accrued, accruing or otherwise applicable during the pendency of any Bankruptcy
Proceeding, irrespective of whether such interest, fees and other amounts are
allowed or allowable as claims in any such proceeding), at a fluctuating annual
rate equal to the sum of (i) the Alternate Base Rate per annum, plus (ii) four
percent (4.00%) per annum (which fluctuating annual rate under this subsection
shall change from time to time simultaneously with each change in the Alternate
Base Rate), which interest rate shall be payable by the Borrower with respect to
such amount(s) instead of the rate (if any) established by subsection (b) of
this Section with respect thereto, and which interest amount(s) shall be payable
upon demand (including, without limitation, any and all interest, fees and other
amounts accrued, accruing or otherwise applicable during the pendency of any
Bankruptcy Proceeding, irrespective of whether such interest, fees and other
amounts are allowed or allowable as claims in any such proceeding), subject,
however, to the maximum rate permitted by Applicable Law as provided in Section
2.11 hereof.
Section 2.05. Increased Costs, Capital Adequacy. (a) In addition to the
payment of principal, interest and fees as stated in this Article, if there
shall be any increase in the direct or indirect costs to the Lender of lending,
funding or maintaining any Loan, or any reduction in any amount received or to
be received by the Lender hereunder, due to:
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(i) the introduction of or any change in any Applicable Law or the
interpretation or administration thereof, including (without limitation)
the imposition, modification or application of, or increase in, (A) any
reserve, capital adequacy, special deposit, assessment or similar
requirements, (B) any requirement to withhold or deduct from any amount
payable to the Lender any taxes, levies, imposts, duties, fees,
deductions, withholdings or charges of a similar nature (other than
federal, state and local income and franchise taxes imposed upon the
Lender), or any interest thereon or any penalties with respect thereto,
imposed, levied, collected, assessed, withheld or deducted by any
Authority, including subdivisions and taxing authorities thereof, or (C)
any other restriction or condition affecting a Loan, the interest rate
applicable thereto or this Agreement or any other Loan Instrument;
(ii) the compliance by the Lender with any regulation, guideline or request
or change therein from any central Lender or other Authority (whether or
not having the force of law);
(iii) therepayment, prepayment or other reduction, in whole or in part, of any
Loan prior to the natural expiration of the applicable Interest Period,
whether as a result of miscalculation, change in circumstance, consent
of the Lender, acceleration of the Obligations or otherwise;
(iv) the failure by the Borrower to pay the accrued and unpaid interest on or
repay the outstanding principal balance of any Loan, or any portion
thereof, when required by the terms and provisions of this Agreement; or
(v) any increase in the Lender's cost of funds under the Senior Loan
Documents, including (without limitation) any increase in interest rates
or fees or any reimbursement to the Senior Lender of the kinds described
in clauses (i) through (iv) of this subsection;
then the Borrower from time to time, upon demand by the Lender, shall pay to the
Lender additional amounts sufficient to indemnify the Lender against and
reimburse it for such increased costs and reduced receipts (but only to the
extent such increased cost or reduced receipt has not already been included in
the calculation of any interest rate or fee or otherwise reimbursed under any
other subsection of this Section), including (without limitation) amounts
sufficient to compensate the Lender for any breakage or other costs and any
decrease in margin or other return incurred in connection with the repayment,
prepayment or other reduction of any Loan and the liquidation or redeployment of
the affected deposits or other funding arrangements, in each case including,
without limitation, any and all amounts accrued, accruing or otherwise
applicable during the pendency of any Bankruptcy Proceeding (irrespective of
whether such interest, fees and other amounts are allowed or allowable as claims
in any such proceeding). In the event the Senior Lender requires the payment of
any similar amount under the Senior Loan Documents, the Lender may demand that
the Borrower pay to the Lender or its Affiliate additional amounts sufficient to
compensate it for the portion of such amount proportional to the ratio of the
Loans to the Senior Loans. A certificate as to the amount of such increased
costs and reduced receipts submitted to the Borrower by the Lender shall be
conclusive as to the existence and amount thereof absent manifest error. If the
Lender has not received payment for such amounts within five (5) Business Days
of the date of such certificate, the Lender may apply all or a portion of the
next succeeding payment or prepayment made by the Borrower, whether intended by
the Borrower to be interest, principal or otherwise, first to the reduction of
the amounts of such increased costs and reduced receipts.
(b) In addition to the payment of interest or fees under this Agreement,
if the Lender or any of its Affiliates determines or has determined that (i)
compliance with any existing or future Applicable Law, including (without
limitation) any regulation, guideline or request from any central bank or other
Authority (whether or not having the force of law), or any change therein or in
the interpretation or administration thereof, affects or would affect the amount
of capital required or expected to be maintained by the Lender or its Affiliate
(taking into account its policies with respect to capital adequacy and desired
rate of return on capital), and (ii) the amount of such capital is increased by
or based upon any commitment or funding to the Borrower or any other obligation
of the Lender or its Affiliates under or related to this Agreement or any other
Loan Instrument (using such averaging, attribution and allocation methods as the
Lender may reasonably deem appropriate), then the Borrower from time to time,
upon demand by the Lender, shall pay to the Lender or its Affiliate additional
amounts sufficient to compensate it for those circumstances, in each case
including, without limitation, any and all amounts accrued, accruing or
otherwise applicable during the pendency of any Bankruptcy Proceeding
(irrespective of whether such amounts are allowed or allowable as claims in any
such proceeding). In the event the Senior Lender requires the payment of any
similar amount under the Senior Loan Documents, the Lender may demand that the
Borrower pay to the Lender or its Affiliate additional amounts sufficient to
compensate it for the portion of such amount proportional to the ratio of the
Loans to the Senior Loans. A certificate as to the amount of such compensation
submitted to the Borrower by the Lender shall be conclusive as to the existence
and amount thereof absent manifest error. If the Lender has not received payment
for such amounts within five (5) Business Days of the date of such certificate,
the Lender may apply all or a
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portion of the next succeeding payment or prepayment made by the Borrower,
whether intended by the Borrower to be interest, principal or otherwise, first
to the reduction of such billed amount.
(c) In addition to the payment of increased costs and reduced receipts
as provided in this Section (but without duplication of such amounts), as well
as the payment of principal, interest and fees as stated elsewhere herein, the
Borrower acknowledges and agrees that: in extending the Loans (rather than
receiving a cash payment under the Stock Purchase Agreement) the Lender will be
carrying a corresponding higher level of loans under the Senior Loan Documents;
and accordingly, from time to time, upon demand by the Lender, the Borrower
shall pay to the Lender or its Affiliate additional amounts sufficient to
compensate it for its pro rata share (based on the ratio of the then outstanding
balance of the Loans to the then outstanding balance of the loans under the
Senior Loan Documents) of any and all fees, costs, reimbursements, expenses or
other amounts (other than principal and interest and without duplication of the
amounts covered by subsections (a) and (b) of this Section) owed by any Senior
Borrower under the Senior Loan Documents, in each case including, without
limitation, any and all amounts accrued, accruing or otherwise applicable during
the pendency of any Bankruptcy Proceeding (irrespective of whether such amounts
are allowed or allowable as claims in any such proceeding).
Section 2.06. Voluntary and Mandatory Payments. (a) The Borrower may
voluntarily prepay the Revolving Credit Loans, whether in full at any time or in
part from time to time in integral multiples of $10,000 in an amount that is not
less than $100,000, in either case without premium or penalty, by giving the
Lender a signed notice of its election, or by giving the Lender notice of its
election both by telephone and telecopy of a signed notice. Notice of such
prepayment election (i) shall be delivered to the Lender at least three Business
Days prior to the requested prepayment date (unless the Lender permits a shorter
notice period in its sole and absolute discretion)and (ii) shall be irrevocable
once given. The Borrower shall repay the Loans on the date and in the amount
specified in such notice of prepayment election.
(b) Each payment received by the Lender (including any such amount
received by the Senior Lender and applied to the Senior Loans or any related
obligation) on an Account Receivable of the Borrower (whether or not an Eligible
Receivable, Eligible Unbilled Receivable or otherwise included in the Borrowing
Base) as and when collected shall be applied (or deemed to be applied in the
case of such application by the Senior Lender) as a mandatory prepayment of the
Obligations hereunder. In the event no monetary Obligations are then
outstanding, such payments shall be deemed to be held as cash Collateral by the
Lender with interest thereon at the Federal Funds Rate, although such payments
in actuality may be commingled with the other funds of the Lender or its
affiliates, or used to repay the Senior Loans and related Obligations, so long
as a credit therefore is carried on the Books of the Lender in favor of the
Borrower.
(c) Each voluntary and mandatory prepayment made on the Obligations
shall be applied first to reduce any unpaid or unreimbursed fees and expenses of
the Lender under the Loan Instruments and Term Loan Documents until paid in
full, then to reduce any accrued and unpaid interest until paid in full, then to
reduce the Revolving Credit Loans until repaid in full, and thereafter in
accordance with Section 2.08(d) hereof.
(d) The Borrower shall repay the Revolving Credit Loans immediately at
any time and from time to time in an amount by which the outstanding principal
balance of the Revolving Credit Loans plus the Letter of Credit Amount together
exceeds (i) the Line of Credit prior to the Overadvance Conversion Date and (ii)
the lesser of Line of Credit or the Borrowing Base on and after the Overadvance
Conversion Date.
(e) [INTENTIONALLY OMITTED]
(f) The Borrower shall repay the principal balance then outstanding
under the Revolving Credit Loans in full on the Maturity Date.
(g) The Borrower shall make an additional mandatory prepayment of the
Loans promptly, but in any event within three Business Days, following each
receipt of net cash proceeds by the Borrower in an amount equal to the net cash
proceeds received in connection with (1) any voluntary sale, lease, transfer,
assignment, liquidation or other disposition of (A) any equity interest in the
Borrower or (B) any Collateral other than Inventory as expressly permitted by
Section 7.03(a) hereof or (2) any involuntary transfer, assignment,
discontinuation, liquidation, condemnation, destruction or other disposition of
any Collateral, in each case applied first as required under the Term Loan
Agreement until all "Obligations" thereunder (and as defined therein) have been
paid in full, and thereafter as provided in subsection (c) of this Section;
provided, however, that the first $10,000 in the aggregate of net cash proceeds
received by the Borrower in connection with any such asset disposition within
any fiscal year shall be excluded for the purpose of determining such additional
mandatory prepayments; and provided further that nothing in this subsection is
intended, or shall be deemed or construed, to authorize or permit any sale or
other disposition of any Collateral in violation of any term or
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provision of this Agreement or any other Loan Instrument. To the extent
applicable and not already reflected, the Borrower may in determining such net
cash proceeds deduct reasonable and usual costs of voluntary disposition (other
than payments to Affiliates), and real property and transfer taxes paid or
currently payable in respect to the transaction, as well as the principal amount
of any permitted purchase money indebtedness required to be repaid from the
proceeds of any disposition of the underlying collateral. The Borrower shall
give the Lender prompt notice of any occurrence that could result or has
resulted in any of the events described above involving net cash proceeds in
excess of $1,000, which notice shall specify the terms thereof, and upon the
request of the Lender the Borrower shall give the Lender copies of all related
documentation as it becomes available to the Borrower.
(h) Notwithstanding anything to the contrary contained in this Agreement
or any other Loan Instrument, the Borrower acknowledges and agrees that the
Letter of Credit Advances and any reimbursable amount or expense or other
advance that is not described elsewhere in this Section and for which no due
date or time period for payment is specified in this Agreement or any other Loan
Instrument, together with interest thereon as provided in Section 2.04 hereof,
shall be due and payable on demand, and that the representations, warranties,
covenants and other terms and provisions of this Agreement and the other Loan
Instruments set forth herein and therein are not intended and shall not be
deemed or construed to limit the demand nature of the obligations of the
Borrower in respect of such other amount, expense or advance hereunder and
thereunder, without, however, in any way limiting the applicability of the terms
and provisions of this Agreement and the other Loan Instruments in respect of
any collateral or any of the other Loans or other Obligations of the Borrower.
(i) The Obligations then outstanding shall be due and payable in full on
the Maturity Date, and to the extent arising thereafter shall be due and payable
on demand, in each case notwithstanding anything in this Article to the
contrary.
Section 2.07. Line of Credit Fee. The Borrower shall pay to the Lender
on the first Business Day of January, April, July and October of each year
during the Revolving Credit Period, and on the last day of the Revolving Credit
Period, in arrears, commencing on the first such date following the Effective
Date, a fee respecting the availability of the Line of Credit (the "Line of
Credit Fee") equal to two percent (2.00%) per annum (computed on the basis of
the actual number of days elapsed and a year of 360 days) of the average daily
unadvanced portion of the Line of Credit during the then most recently concluded
calendar quarter or portion thereof (with the Letter of Credit Amount being
considered an advance under the Line of Credit).
Section 2.08. Payments and Applications. (a) All payments of principal,
interest, fees and other amounts due the Lender pursuant to this Agreement and
the other Loan Instruments shall be made in U.S. Dollars in immediately
available funds by 12:30 P.M. (New York City time) on the date payment is due to
the Lender at its offices at 580 White Plains Road, Tarrytown, New York 10591,
as otherwise provided in subsection (b) of this Section, or as otherwise
instructed by the Lender. All advances and payments made pursuant to this
Agreement and the other Loan Instruments may be recorded by the Lender on its
books and records, and such books and records shall be conclusive as to the
existence and amounts thereof absent manifest error. The Lender in its sole and
absolute discretion at any time and from time to time (whether prior to any
transfer or production of any Note or otherwise) may endorse or otherwise list
(in whole or in part) on any Note or on any schedule thereto prepared by the
Lender the date, amount, type and/or other pertinent characteristic of any
advance or other Loan or any interest rate or Interest Period applicable thereto
and/or all payments of principal on any Loan or other Obligation.
(b) The parties intend that payments of the Obligations will be made
through the wire transfer of immediately available funds to the Lender to such
account as the Lender from time to time may direct by written notice to the
Borrower, as and when such Obligations become due. The Obligations shall be
deemed to have been paid or repaid only to the extent of the immediately
available funds actually received from any Loan Party and applied to the
Obligations notwithstanding any internal procedure of the Lender to the
contrary.
(c) Should any payment become due and payable on other than a Business
Day, the maturity thereof shall be extended to the next succeeding Business Day,
and, in the case of any payment of principal, interest shall be payable thereon
at the rate per annum specified in this Agreement during such extension.
(d) Except as otherwise provided in this Agreement, so long as no Event
of Default or Default is then continuing, any funds received by the Lender from
or on behalf of any Loan Party (whether pursuant to any of the terms and
provisions of this Agreement or any other Loan Instrument) shall be applied to
the following items in the manner and order reasonably designated by the
Borrower to the extent permitted by
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Applicable Law; provided, however, that absent such designation or during the
continuance of any such Event of Default or Default, those funds (including the
net cash proceeds from any Collateral) instead may be applied by the Lender to
the following items in such order and manner as may be determined by the Lender
in its sole and absolute discretion to the extent permitted by Applicable Law:
(i) the payment to or reimbursement of the Lender for any fees and expenses
for which it is entitled to be paid or reimbursed pursuant to any of the
provisions of this Agreement and the other Loan Instruments;
(ii) the payment of accrued and unpaid interest on the Revolving Credit
Loans;
(iii) the payment of due and unpaid principal on the Revolving Credit Loans;
(iv) the establishment or maintenance of any cash collateral required or
permitted under any Loan Instrument;
(v) the payment in full of all other Obligations under this Agreement and
the other Loan Instruments; and
(vi) the payment in full of all "Obligations" under (and as defined in) the
Term Loan Agreement.
Section 2.09. Taxes. Any and all payments made by any Loan Party under
this Agreement or any other Loan Instrument shall be made free and clear of and
without any reduction for any and all present or future taxes, levies, imposts,
deductions, charges or withholdings, and any and all liabilities and obligations
with respect thereto, excluding, however, such taxes as are imposed on the
Lender by the jurisdiction of its organization or its lending office engaged in
the Loans (or any political subdivision thereof) with respect to the income or
franchise of the Lender (all such non-excluded taxes, levies, imposts,
deductions, charges or withholdings being hereinafter collectively referred to
as the "Taxes"). In addition, the Loan Parties shall (on a joint and several
basis) pay, as and when due, any and all present or future stamp or documentary
taxes or other excise or property taxes, charges or similar levies that may
arise from any execution, delivery, performance, existence or registration of
this Agreement or any other Loan Instrument or any payment made hereunder or
thereunder (collectively, "Other Taxes"). If any Loan Party shall be required by
Applicable Law to deduct any Taxes or Other Taxes from or in respect of any sum
payable to the Lender under this Agreement or any other Loan Instrument, (i) the
sum payable shall be increased as may be necessary so that, after making all
required deductions, the Lender shall receive an amount equal to the sum the
Lender would have received if no such deductions had been made, (ii) the Loan
Party shall make such deductions, and (iii) the Loan Party shall pay the full
amount deducted to the relevant taxation Authority or other Authority in
accordance with Applicable Law. Within 30 days after the date of any payment of
Taxes or Other Taxes by a Loan Party, the Loan Party will furnish to the Lender
the original or a certified copy of a receipt evidencing payment or other
documentation reasonably satisfactory to the Lender evidencing payment. The Loan
Parties will furnish to the Lender, upon the Lender's request from time to time,
an officer's certificate stating that, to the knowledge of the signer, all Taxes
and Other Taxes that are or have become due have been paid. The Loan Parties
shall (on a joint and several basis) indemnify and reimburse the Lender on
demand (payable within 30 days of written demand) for the full amount of Taxes
or Other Taxes paid by the Lender (as the case may be) and any and all claims,
liabilities, losses and expenses (including, without limitation, penalties,
interest, and attorneys and other professional expenses, disbursements and fees)
of the Lender arising therefrom or related directly or indirectly thereto,
whether or not such Taxes or Other Taxes were correctly or legally asserted. In
the event the Senior Lender requires the payment of any similar amount under the
Senior Loan Documents, the Lender may demand that the Borrower pay to the Lender
or its Affiliate additional amounts sufficient to compensate it for the portion
of such amount proportional to the ratio of the Loans to the Senior Loans.
Section 2.10. Lost or Damaged Notes. In the event of the loss, theft or
destruction of a Note, the Borrower shall execute and deliver an identical new
Note to the Lender in substitution therefor upon the receipt by the Borrower of
(i) notice from the Lender confirming such event and (ii) if requested by the
Borrower, an indemnity agreement from the Lender in such form and substance as
may be acceptable to the Lender and reasonably acceptable to the Borrower. In
the event of the mutilation of or other damage to a Note, the Borrower shall
execute and deliver an identical new Note to the Lender in substitution
therefor, following which the Lender will return the mutilated or damaged Note
to the Borrower.
Section 2.11. Maximum Interest Rate. It is the intention of the Lender
and the Borrower that the interest (as defined under Applicable Law) on the
Loans that may be charged to, collected from or received from the Borrower shall
not exceed the maximum rate permissible under Applicable Law. Accordingly,
anything in this Agreement, any Note or any other Loan Instrument to the
contrary notwithstanding, in the event any interest (as so defined) is charged
to, collected from or received from the Borrower by the Lender pursuant hereto
or thereto in excess of such maximum lawful rate, then the excess of such
payment over that maximum
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shall be applied to the reduction of the outstanding principal balance of the
Loans and the other Obligations (without any prepayment premium or penalty), and
any portion of such excess payment remaining after payment and satisfaction in
full of the Obligations shall be returned by the Lender to the Borrower.
Section 2.12. Guaranty of Payment and Expenses. Each Guarantor (on a
joint and several basis with the other Guarantors) hereby absolutely,
unconditionally and irrevocably guaranties to the Lender the full and punctual
payment and satisfaction of the Borrower's Obligations as and when due, whether
at stated maturity, by acceleration or otherwise, and agrees to pay and satisfy
in full any and all expenses that may be paid or incurred by the Lender in the
collection of all or any portion of the Borrower's Obligations or the exercise
or enforcement of any one or more of the other rights, powers, privileges,
remedies and interests of the Lender under this Agreement or any other Loan
Instrument, irrespective of the manner or success of any such collection,
exercise or enforcement, and whether or not such expenses constitute part of the
Borrower's Obligations. The Lender in its sole and absolute discretion shall be
entitled to demand payment of the Borrower's Obligations (in whole at any time,
or in part from time to time) from the Guarantors (or any of them) under this
Agreement upon the occurrence and during the continuance of any Event of
Default. If the Lender makes such a demand: (a) any and all principal, interest
and other Borrower's Obligations outstanding or accrued under any Note and/or
any other Loan Instrument shall be deemed to be immediately due and payable in
full (or for the item(s) in the amount(s) demanded if a partial demand was
made), all without presentment, protest, demand or notice of any kind, all of
which are expressly waived by each Guarantor (and in the case of a partial
demand, without in any way affecting any of the Guarantors' Obligations with
respect to the balance of the Borrower's Obligations not demanded); and (b) each
Guarantor (on a joint and several basis with the other Guarantors) shall
immediately pay to the Lender the amount demanded in full.
Section 2.13. Continuing Guaranty and Agreement, Payment in Accordance
with Terms, Etc. Each Guarantor covenants and agrees that: (a) its guaranty
hereunder is a continuing guaranty of the full and timely payment and
satisfaction of the Borrower's Obligations, and not guarantying collectibility
only, and the security interests granted by it hereunder are continuing security
interests securing the full and timely payment and satisfaction of the
Borrower's Obligations or the Guarantors' Obligations, and not securing
collectibility only, in each case whether the Borrower's Obligations or the
Guarantors' Obligations are now or hereafter existing, acquired or created, and
irrespective of the fact that from time to time under the terms and provisions
of the Loan Instruments monies may be advanced, repaid and readvanced and the
outstanding balance of the Loans may be zero; (b) the Mortgagor's Guaranty may
not be revoked or terminated by any Guarantor until such time as the Borrower's
Obligations and the Guarantors' Obligations shall have been fully paid and
satisfied; (c) none of the Borrower's Obligations or the Guarantors' Obligations
shall be deemed to have been otherwise fully paid and satisfied so long as any
Loan Instrument (other than the Mortgagor's Guaranty) shall have any continuing
force or effect; and (d) the Borrower's Obligations and the Guarantors'
Obligations will be paid and satisfied in full in accordance with the terms and
provisions of the Loan Instruments without regard to any applicable law now or
hereafter in effect in any jurisdiction, including (without limitation) any
applicable law that might in any manner affect any of those terms and provisions
or any of the rights, powers, privileges, remedies and interests of the Lender
with respect thereto, or that might cause or permit to be invoked any alteration
in the time, amount or manner of payment of any of the Borrower's Obligations,
the Guarantors' Obligations or any Surety's Obligations by the Borrower, any
Guarantor, any Surety or any other person (other than the Lender).
Section 2.14. Agreement Absolute, Survival of Representations, Etc. Each
of the collateral grants, guaranties and other payment obligations,
representations and warranties (as of the date(s) made or deemed made),
covenants, waivers and other agreements of each Guarantor (whether individual,
joint, several or otherwise) contained in this Agreement and the other Loan
Instruments: (a) shall be absolute, irrevocable and unconditional, irrespective
of (among other things) the validity, legality, binding effect or enforceability
of any of the other terms and provisions of this Agreement or any other Loan
Instrument or any other event described in this Section; (b) shall survive the
execution and delivery of this Agreement and the other Loan Instruments, and any
and all advances, repayments and readvances of any or all of the monies to be
lent hereunder and thereunder; (c) shall remain and continue in full force and
effect without regard (i) to whether the Loans or other Borrower's Obligations,
Guarantors' Obligations or Surety's Obligations are now or hereafter existing,
acquired or created, and irrespective of the fact that from time to time under
the terms and provisions of the Loan Instruments monies may be advanced, repaid
and readvanced and the outstanding balance of the Loans may be zero, (ii) to any
extension or change in the time, manner, place and other terms and provisions of
payment or performance of any one or more of the Loans or other Borrower's
Obligations, any Guarantors' Obligations or any Surety's Obligations, (iii) to
any waiver, modification, extension, renewal, consolidation, spreading,
amendment or restatement of any term or provision of this Agreement or any other
Loan Instrument (except as and to the extent expressly modified by the terms and
provisions of any such waiver, modification, extension, renewal, consolidation,
spreading, amendment or restatement), (iv) to any acceptance by the Lender of
(A) any partial or late payment, which shall not constitute a satisfaction or
waiver of the full amount then due or the
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resulting Default or Event of Default, or (B) any payment during the continuance
of any Default or Event of Default, which shall not constitute a waiver or cure
thereof; and the Lender may accept or reject any such payment without affecting
any of its rights, powers, privileges, remedies and other interests under this
Agreement, the other Loan Instruments and applicable law; (v) to any full,
partial or non-exercise of any of the rights, powers, privileges, remedies and
interests of the Lender under any Loan Instrument or applicable law, against the
Borrower, any Surety or any other Person or with respect to any of the
Borrower's Obligations, Guarantors' Obligations, any Surety's Obligations, any
other obligations or any collateral or security interest therein, which exercise
or enforcement may be delayed, discontinued or otherwise not pursued or
exhausted for any or no reason whatsoever, or which may be waived, omitted or
otherwise not exercised or enforced (whether intentionally or otherwise), (vi)
to any surrender, repossession, sequestration, foreclosure, conveyance or
assignment (by deed in lieu or otherwise), sale, lease or other realization,
dealing, liquidation or disposition respecting any collateral or setoff
respecting any account or other asset in accordance with the Loan Instruments or
applicable law (except as and to the extent the Borrower's Obligations have been
permanently reduced by the application of the net proceeds thereof), (vii) to
the perfected or non-perfected status or priority of any mortgage or other
security interest in any such collateral, which may be held without recordation,
filing or other perfection (whether intentionally or otherwise), (viii) to any
release, settlement, adjustment, subordination or impairment of all or any part
of the Borrower's Obligations, Guarantors' Obligations, any Surety's
Obligations, any other obligations or any collateral or any security interest
therein, whether intentionally or otherwise (except as and to the extent
expressly modified by the terms and provisions of any such release, settlement
or adjustment), (ix) to any extension, stay, moratorium or statute of
limitations or similar time constraint under any applicable law, (x) to any
investigation, analysis or evaluation by the Lender or its designees of the
assets, business, operations, properties or condition (financial or otherwise)
of the Borrower, any Guarantor, any other Surety, or any other person, (xi) to
any application to any obligations of the Borrower, any Guarantor or any other
Surety other than any Borrower's Obligations, Guarantors' Obligations or
Surety's Obligations of (A) any payments from such person not specifically
designated for application to the Borrower's Obligations, Guarantors'
Obligations or Surety's Obligations or (B) any proceeds of collateral from such
person other than from the Collateral, (xii) to any sale, conveyance,
assignment, participation or other transfer by the Lender (in whole or in part)
to any other person of any one or more of this Agreement and the other Loan
Instruments or any one or more of the rights, powers, privileges, remedies or
interests of the Lender herein or therein, (xiii) to any act or omission on the
part of the Lender or any other person, or (xiv) to any other event or
circumstance that otherwise might constitute a legal or equitable counterclaim,
defense or discharge of a borrower, co-obligor, indemnitor, guarantor, pledgor
or surety; in each case in such manner and order, upon such terms and provisions
and subject to such conditions as the Lender may deem necessary or desirable in
its sole and absolute discretion, and without notice to or further assent from
the Borrower, any Guarantor, any other Surety, or any other person (except for
such notices as may be expressly required to be given to such party under the
applicable Loan Instrument); (d) shall not be subject to any defense,
counterclaim, setoff, right of recoupment, abatement, reduction or other claim
or determination that may have against the Lender, any Surety or any other
person; (e) shall not be diminished or qualified by the death, disability,
dissolution, reorganization, insolvency, bankruptcy, custodianship or
receivership of the Borrower, any Guarantor, any other Surety, or any other
person, or the inability of any of them to pay their respective debts or perform
or otherwise satisfy their respective obligations as they become due for any
reason whatsoever; and (f) shall remain and continue in full force and effect
without regard to any of the foregoing acts, circumstances or events (i) until
all of the Borrower's Obligations and Guarantors' Obligations have been fully
paid and satisfied and (ii) thereafter with respect to any and all events
occurring prior to such payment and satisfaction and any and all resulting
claims, liabilities, losses and expenses (including, without limitation, the
attorneys' disbursements, expenses and fees), whenever incurred or asserted.
Notwithstanding the foregoing in this Section, however, each Guarantor retains
the defense of indefeasible payment to the extent actually paid.
Section 2.15. Subordination of Indebtedness, Subrogation and
Contribution Rights, Etc. Each Guarantor covenants and agrees that until the
Borrower's Obligations and Guarantors' Obligations have been fully paid and
satisfied, any and all Subordinated Rights of such Guarantor shall be
subordinate and inferior in priority and dignity to the Borrower's Obligations
and Guarantors' Obligations and shall not be entitled to any payment or
satisfaction (in whole or in part) until, all of the Borrower's Obligations and
Guarantors' Obligations have been fully paid and satisfied. Until such time (if
ever) as the Borrower's Obligations and Guarantors' Obligations have been fully
paid and satisfied: (A) no Guarantor shall seek any payment or exercise or
enforce any right, power, privilege, remedy or interest that such Guarantor may
have with respect to any Subordinated Right and (B) any payment, asset or
property delivered to or for the benefit of any Guarantor in respect of any
Subordinated Right shall be accepted in trust for the benefit of the Lender and
shall be promptly paid or delivered to the Lender to be credited and applied to
the payment and satisfaction of the Borrower's Obligations and Guarantors'
Obligations, whether contingent, matured or unmatured, or to be held by the
Lender as additional collateral, as the Lender may elect in its sole and
absolute discretion. Each Guarantor hereby acknowledges and agrees that pursuant
to this Agreement such Guarantor has granted to the Lender a continuing security
interest in and to any and all Subordinated Rights of such Guarantor, together
with
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the proceeds thereof and all payments and other distributions with respect
thereto. In addition to the rights, powers, privileges, remedies and interest
accorded to the Lender by this Agreement or applicable law, the Lender may
exercise any voting, consent, enforcement or other right, power, privilege,
remedy or interest pertaining to any Subordinated Right to the same extent as if
the Lender were the outright owner thereof.
Section 2.16. Waiver of Impairment of Subrogation and Other Rights. Each
Guarantor acknowledges and agrees that: (a) the amounts (if any) that
potentially could be realized by such Guarantor (or any other Guarantor), as
well as the enforceability, practicality or value of any right, power,
privilege, remedy or interest of such Guarantor (or any other Guarantor), under
or in respect of any Subordinated Right may be substantially reduced or limited
or completely eliminated by any one or more of the following (either
individually or in the aggregate): (i) the delay inherent in the subordination
of those rights under this Agreement, (ii) payments by the Borrower, any
Guarantor, any Surety or any other person to the Lender or any other person,
(iii) any foreclosure, sale, lease or other liquidation or disposition or
realization respecting any collateral, (iv) any action or inaction by the Lender
or any other person authorized or waived by the Borrower, any Guarantor or any
other authorized person, whether under this Agreement or otherwise, or
contemplated, permitted or provided for under this Agreement, any other Loan
Instrument or applicable law, (v) the exercise or enforcement by the Lender of
any one or more of the Lender's rights, powers privileges, remedies and
interests of the Lender under any Loan Instrument or applicable law, or (vi) any
adverse change (however material) in the assets, business, operations,
properties, or condition (financial or otherwise) of the Borrower, any
Guarantor, any Surety or any other person arising out of or related directly or
indirectly to any of the foregoing; (b) the Lender is not acting as an agent,
trustee or other representative (regarding collateral or otherwise) with respect
to any Subordinated Right; (c) the Lender may exercise or enforce any of the
Lender's rights, powers, privileges, remedies or interests under the Loan
Instruments or applicable law without any consideration of or regard to any
Subordinated Right or any direct or indirect adverse effect thereupon (however
material); (d) no Guarantor shall be entitled to any payment or other asset or
property (or any part thereof) delivered to or otherwise realized by the Lender
on account of the Borrower's Obligations, Guarantors' Obligations or Surety's
Obligations or to any accounting thereof; (e) none of the foregoing (whether
individually or in the aggregate) shall (i) release, limit or otherwise affect
the liability of any Guarantor to the Lender under this Agreement or any other
Loan Instrument, or (ii) give rise to any action, claim, counterclaim, right of
setoff or recoupment, defense, or other remedy on the part of the Borrower, any
Guarantor, any Surety or any other person, irrespective of frequency, direct or
indirect effect, materiality or direct or indirect consequences; and (f) no
Guarantor shall raise any, and each Guarantor hereby expressly waives and
releases each and every, such action, claim, counterclaim, right of setoff, or
recoupment, defense, or other remedy.
Section 2.17. Bankruptcy. In the event the Lender is not permitted or is
otherwise unable (because of the pendency of any Bankruptcy Proceeding or other
proceeding) to accelerate or demand payment of any of the Borrower's Obligations
or Guarantors' Obligations, but otherwise would have been permitted to do so at
such time pursuant to any Loan Instrument, the Lender may demand payment in
full, may proceed against any of the Collateral and may exercise and enforce the
Lender's other rights, powers, privileges, remedies and interests under this
Agreement or any other Loan Instrument to which any Guarantor is a party as if
the Borrower's Obligations and/or Guarantors' Obligations had been duly
accelerated and payment had been duly demanded, and no Guarantor shall raise,
and each Guarantor hereby expressly waives and releases, any claim or defense
with respect to such deemed acceleration.
Section 2.18. Letters of Credit. (a) Upon the terms and provisions and
subject to the conditions contained in this Agreement, in lieu of a cash advance
under the Line of Credit the Lender in its sole and absolute discretion may
issue or cause the issuance of Letters of Credit from time to time upon the
request of the Borrower up to a cumulative maximum face amount (whether or not
advanced) not to exceed $250,000 (unless the Lender permits a greater amount in
its sole and absolute discretion) in order to secure the debts or obligations of
the Borrower or its designee; provided that the Lender's agreement to consider
the issuance of Letters of Credit shall terminate on the first to occur of the
Maturity Date and the expiration of the Revolving Credit Period; and provided
further that the Lender may not consider the issuance of any Letter of Credit if
the face amount of the Letter of Credit to be issued plus the sum of the Letter
of Credit Amount and the principal balance outstanding under the Revolving
Credit Loans together would exceed (i) the Line of Credit prior to the
Overadvance Conversion Date and (ii) the lesser of Line of Credit or the
Borrowing Base on and after the Overadvance Conversion Date.
(b) The Borrower may request that a Letter of Credit be issued pursuant
to subsection (a) of this Section by giving the Lender a signed notice of its
request, or by giving the Lender notice of its request both by telephone and
telecopy of a signed notice and promptly confirming its request by delivery of
the original copy of the signed notice to the Lender. The notice requesting a
Letter of Credit (i) shall be delivered to the Lender at least ten Business Days
prior to the requested Letter of Credit Issuance Date (unless the Lender permits
a shorter notice period in its sole and absolute discretion), (ii) shall be
deemed to have been delivered on
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the following Business Day unless actually received by the Lender prior to 11:00
A.M. (New York City time) on a Business Day, (iii) shall be irrevocable once
given, and (iv) shall specify (A) the requested Letter of Credit Issuance Date,
face amount and expiration date of the desired Letter of Credit, (B) the
beneficiary to whom it is to be issued (each a "Letter of Credit Beneficiary"),
and (C) the purpose for which the Letter of Credit is being requested. On or
before the requested Letter of Credit Issuance Date, the Borrower also must
complete and deliver to the Lender an application for each requested Letter of
Credit in form and substance acceptable to the Lender and issuer and pay the
issuer's normal application and issuance fees for each requested Letter of
Credit. Each requested Letter of Credit shall be in a face amount of not less
than $10,000 and shall terminate no later than the first anniversary of the
Letter of Credit Issuance Date or the scheduled expiration of the Revolving
Credit Period, whichever occurs first. The issuance of each Letter of Credit is
subject to compliance on the Letter of Credit Issuance Date with the conditions
precedent to obtaining an Advance under this Agreement, subject to the Lender
being able to obtain such issuance from the Senior Lender or other issuer, and
subject always to the sole and absolute discretion of the Lender. Each Letter of
Credit will be issued on a standard form of the issuing bank then in effect .
Unless the issuer's standard form provides otherwise, each Letter of Credit
shall be governed by and construed in accordance with: (a) the Uniform Customs
and Practice for Documentary Credits, 1993 Revision, ICC Publication 500LF, as
supplemented, revised and restated from time to time (the "UCP"); and (b) to the
extent the UCP is not dispositive, the Applicable Law pertaining in the State of
New York (including the UCC). The requested Letter of Credit may be delivered by
the Lender to the Letter of Credit Beneficiary, to the Borrower or to such other
Person as the Borrower reasonably may request. The Letters of Credit may not be
transferred or assigned without (x) the prior written consent of the Lender and
issuer, (y) submission to the Lender of a notice of transfer in the form annexed
to the Letter of Credit, and (z) the payment of the issuer's normal transfer
fee.
(c) Each of the Letters of Credit may be drawn upon by presentment to
the Lender, at its office (or such other office as may be specified therein), of
the original Letter of Credit, duly endorsed by the Letter of Credit Beneficiary
(which presentment may be waived by the Lender with respect to Letters of Credit
permitting multiple drawings), together with a sight draft payable to the Letter
of Credit Beneficiary or its order and the Letter of Credit Beneficiary's
certificate that it is entitled to the amount of the sight draft as a result of
nonpayment of the obligations thereby secured, each substantially in the form
annexed to the relevant Letter of Credit. The promissory note or other
instrument evidencing the obligation thereby secured, duly endorsed to the
Lender, also shall be presented with the Letter of Credit if that obligation
will be paid in full as a result of the payment in accordance with the Letter of
Credit. If the relevant note or other instrument will not be so paid in full,
the Lender (in its sole and absolute discretion) may require that the Person
presenting the Letter of Credit present it to the Lender for copying and return.
The Lender or issuer may accept any draft, certificate or other document
reasonably conforming in form and substance to the requirements described in the
Letter of Credit and the forms annexed thereto, and may afford the Letter of
Credit Beneficiary notice of and an opportunity to correct non-conforming items
capable of cure, each in the sole and absolute discretion of the Lender or
issuer and without any notice to or assent from the Borrower. The Lender, any
other issuer and their respective Representatives may in good faith (without
inquiry) with respect to a particular Letter of Credit: (i) act in reliance upon
any written, telegraphic, facsimile, electronic, telephonic, oral or other
request, notice or communication believed to be from, by, on behalf of or
authorized by the Borrower, the Letter of Credit Beneficiary or their respective
Representatives, successors or assigns, whether or not from or signed by an
authorized Person; (ii) accept or pay as complying with the terms of the
relevant Letter of Credit any drafts or other documents that appear on their
face (A) to be reasonably conforming to the required forms or (B) to be issued
or signed by the Letter of Credit Beneficiary or other proper party or their
respective Representatives, successors or assigns (including, without
limitation, any bankruptcy trustee or similar official); (iii) reject any
presentment, draft or other document that it determines (in its sole and
absolute discretion) to not conform to the requirements of the Letter of Credit
or this Agreement; or (iv) act or refrain from acting in reliance upon or in
accordance with the UCP, Applicable Law (including, without limitation,
statutes, orders, regulations, decisions or directives) or customs in effect in
the place of issuance, confirmation, presentment, negotiation or payment of the
Letter of Credit.
(d) Each amount paid by the Lender or its designee pursuant to a Letter
of Credit or otherwise in respect of the obligation thereby secured (a "Letter
of Credit Advance") shall be repaid by the Borrower to the Lender on the same
day payment is made by the Lender or its designee. If a Letter of Credit Advance
is not so repaid (without, however, in any way consenting to such non-payment),
(i) such Letter of Credit Advance shall be deemed to be an Advance of a
Revolving Credit Loan and shall be repayable ON DEMAND, together with interest
thereon at the rate specified in this Article for overdue payments of the Loans
(including, without limitation, any and all interest, fees and other amounts
accrued, accruing or otherwise applicable during the pendency of any Bankruptcy
Proceeding, irrespective of whether such interest, fees and other amounts are
allowed or allowable as claims in such proceeding), pursuant to the terms and
provisions of this Agreement notwithstanding any term or provision contained in
any Letter of Credit application to the contrary, and (ii) the resulting default
shall not be deemed or construed to have been cured until payment has
SPAR ESOP Revolving Credit Agreement
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been duly made. Nothing in this subsection, however, is intended to limit the
ability of the Borrower to request an Advance prior to an anticipated Letter of
Credit payment date or (assuming satisfaction of the requisite conditions) to
apply the proceeds thereof to the payment of a Letter of Credit Advance.
(e) The Borrower shall pay to the Lender on each of the quarterly
anniversaries of the issuance of each outstanding Letter of Credit, in advance,
a fee respecting each Letter of Credit (the "Letter of Credit Fee") for the
quarter commencing with that date (computed on the basis of the actual number of
days in such quarter and a year of 360 days) equal to six percent (6.00%)per
annum of the unadvanced face amount thereof, with such amount being determined
as of the Business Day immediately preceding the quarterly payment date
(including, without limitation, any and all interest, fees and other amounts
accrued, accruing or otherwise applicable during the pendency of any Bankruptcy
Proceeding, irrespective of whether such interest, fees and other amounts are
allowed or allowable as claims in any such proceeding); provided that the
Borrower shall pay that fee on the Letter of Credit Issuance Date, in advance,
for the forthcoming quarter[; and provided further that the minimum fee for any
Letter of Credit shall be two percent (2.00%) of the face amount irrespective of
any shorter expiry. The Borrower also shall pay to the Lender any and all
customary fees (without duplication of the Letter of Credit Fee), commissions
and/or charges of the Lender for any increase, extension, renewal, amendment or
transfer of the Letter of Credit. The Borrower also shall pay to the Lender or
issuer any and all customary fees (without duplication of the Letter of Credit
Fee), commissions and/or charges of the Lender for any increase, extension,
renewal, amendment or transfer of the Letter of Credit. The Borrower also shall
pay to the Lender any fees or other charges of any other issuer or any
participant, correspondent, confirming bank, custodian or designee of the Lender
or other issuer involved with the Letter of Credit.
(f) In addition to the payments of principal, interest and fees as
stated above, if there shall be any increase in the direct or indirect costs to
the Lender of issuing, causing the issuance of or maintaining a Letter of
Credit, or any reduction in any amount received or to be received with respect
to a Letter of Credit by the Lender hereunder, due to:
(i) the introduction of or any change in any Applicable Law or the
interpretation or administration thereof, including (without limitation)
the imposition, modification or application of (A) any reserve, capital
adequacy, special deposit, assessment or similar requirement respecting
Letters of Credit issued by, assets held by, or deposits in or for the
account of the Lender or other issuer of a Letter of Credit, (B) any
requirement to withhold or deduct from any amount payable to the Lender
hereunder, or payable directly or indirectly to the issuer of a Letter
of Credit, any taxes, levies, imposts, duties, fees, deductions,
withholdings or charges of a similar nature (other than federal, state
and local income and franchise taxes imposed upon the Lender), or any
interest thereon or any penalties with respect thereto, imposed, levied,
collected, assessed, withheld or deducted by any governmental Authority,
including subdivisions and taxing authorities thereof, or (C) any other
restriction or condition affecting a Letter of Credit or this Agreement;
or
(ii) the compliance by the Lender or other issuer of a Letter of Credit with
any regulation, guideline or request from any central bank or other
Authority (whether or not having the force of law);
then the Borrower from time to time, upon demand by the Lender, shall pay to the
Lender additional amounts sufficient to indemnify the Lender or other issuer
against and reimburse the Lender or other issuer for such increased costs and
reduced receipts. A certificate as to the amount of such increased costs and
reduced receipts submitted to the Borrower by the Lender shall be conclusive as
to the existence and amount thereof absent manifest error. If the Lender has not
received payment for such amounts by the time it receives from the Borrower the
next succeeding payment or prepayment of a portion of the Obligations, whether
intended by the Borrower to be interest, principal or otherwise, the Lender may
apply such payment or prepayment first to the reduction of the amounts of such
costs and receipts.
(g) The Obligations shall not otherwise be deemed to have been fully
paid or satisfied until all of the Letters of Credit have been paid (and the
corresponding Letter of Credit Advance repaid by the Borrower) or have been
surrendered to the Lender for return to and cancellation by the issuer(s)
thereof; provided that any Letter of Credit that has not been presented for
payment shall be deemed for this purpose to have been canceled on the
forty-fifth day following the stated expiry date, without, however, relieving
the Borrower of any of the Obligations with respect to any such Letter of Credit
that is in the process of payment.
(h) In addition to the payment of fees and other amounts as stated
above, after notice from the Lender during the continuance of any Event of
Default prior to maturity, and at all times on and after the Maturity Date, the
Borrower shall pay to the Lender a fee respecting the Letters of Credit
outstanding from time to time during such period(s) equal to four percent
(4.00%) per annum of the outstanding face amount thereof (computed on the basis
of the actual number of days elapsed and a year of 360 days), which amounts
shall be
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payable by the Borrower at the same times as the regular interest payments on
the Loans required by Section 2.04 of this Agreement (including, without
limitation, any and all interest, fees and other amounts accrued, accruing or
otherwise applicable during the pendency of any Bankruptcy Proceeding,
irrespective of whether such fees and other amounts are allowed or allowable as
claims in any such proceeding), subject, however, to the maximum rate permitted
by Applicable Law as provided in Section 2.11, hereof.
(i) Each of the payment obligations, covenants and other obligations and
agreements of the Borrower contained in this Agreement and the other Loan
Instruments shall be paid and satisfied by the Borrower strictly in accordance
with their terms in each case without regard to, none of the Lender, any other
issuer and their respective Representative shall have any liability or
responsibility for, and the Borrower hereby expressly waives any claim or
defense against or in respect of each such Person with respect to: (i) any
payment or other action or inaction under or with respect to any Letter of
Credit in accordance with the terms and provisions of the relevant Letter of
Credit, this Agreement or any other Loan Instrument; (ii) any payment against
presentation of any required draft or other document that does not reference, or
incompletely or incorrectly references, the existence, amount, date, number or
other aspect of the relevant Letter of Credit; (iii) any presentment or payment
under or with respect to any Letter of Credit after the expiry thereof in
reliance upon or in accordance with the UCP, Applicable Law (including, without
limitation, statutes, orders, regulations, decisions or directives) or customs
in effect in the place of issuance, confirmation, presentment, negotiation or
payment of the Letter of Credit; (iv) the form, validity, sufficiency,
completeness, accuracy, genuineness or legal effect of (A) any Letter of Credit,
(B) any draft or other document required or permitted under the relevant Letter
of Credit, this Agreement or any other Loan Instrument, or (C) any instrument or
document transferring or assigning the Letter of Credit, any rights or benefits
thereunder or any proceeds thereof (in whole or in part), or purporting to do
so, even if any of them should in fact prove to be in any or all respects
invalid, insufficient, ineffective, incomplete, inaccurate, fraudulent or
forged; (v) the failure of any Person to surrender, obtain, forward or otherwise
deal with the Letter of Credit or any other document other than the surrender
and obtaining of any drafts or other documents specifically required by the
terms of the Letter of Credit; (vi) any failure to note the amount of any draft
on the reverse of the Letter of Credit; (vii) any and all errors, omissions,
interruptions or delays in transmission or delivery of any notice, request,
demand or other communication permitted or required to be given under this
Agreement or any other Loan Instrument, whether by mail, cable, telegraph,
telex, telecopy or otherwise, whether or not an error in processing, cipher,
translation or otherwise or an error in interpretation (of technical terms or
otherwise); (viii) any loss or delay in the delivery of any draft, document or
proceeds; (ix) the existence, character, quality, quantity, condition, packing,
value, or delivery of any goods or other property relating to any Letter of
Credit, the time, place, manner or order in which shipment may have been made,
the existence, form, validity, sufficiency or legal effect of any insurance
covering or purporting or required to cover any such goods, or any act or
omission of any insurer, shipper, warehouseman, carrier, correspondent or other
Person; or (x) without limiting the foregoing, any consequences arising from
causes beyond the control of the Lender, any other issuer or any of their
respective Representatives or any act or omission by any of them not done or
omitted in bad faith (each of which provision, if contained in the Letter of
Credit itself, may be waived by the Lender or other issuer in its sole and
absolute discretion). If the Letter of Credit provides that payment is to be
made by a designated Representative of the Lender or other issuer, none of the
Lender, any other issuer or any of their respective Representatives (other than
such designated Representative) shall be responsible or otherwise liable for the
failure of any document specified in the Letter of Credit to come into the hands
of the Lender or other issuer or for any delay in connection therewith, and the
obligation of the Borrower to reimburse the Lender or any other issuer for
payments made or obligations incurred shall not be affected by such failure or
delay in the receipt by the Lender or any other issuer of any or all of such
documents whether sent to the Lender or any other issuer in one or multiple
mailings. In any event, neither the Lender nor any other issuer shall be
responsible for any error, neglect, suspension or insolvency of any of the
Representatives of the Lender or other issuer designated to confirm or pay with
respect to any Letter of Credit. The Borrower acknowledges and agrees that this
Agreement has been entered into and all Letters of Credit have been obtained by
the Borrower for commercial purposes. The Borrower agrees that it will not raise
(as a defense or otherwise), and hereby expressly waives, any immunity or
exemption from liability, jurisdiction, forum or service that may now or
hereafter be accorded to the Borrower, its Representatives or their respective
assets and properties. The preceding agreements and waivers are not intended
(and shall not be deemed or construed) to in any way qualify, condition,
diminish, restrict, limit or otherwise affect any (and is in addition to each)
other release, waiver, consent, waiver, exculpation, indemnification, permitted
action or other similar term or provision of this Agreement or any other Loan
Instrument.
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ARTICLE III.
REPRESENTATIONS AND WARRANTIES
To induce the Lender to enter into this Agreement and the other Loan
Instruments to which it is a party and to make and continue the Loans to the
Loan Parties, the Loan Parties jointly and severally represent and warrant to
the Lender as follows in each Section of this Article:
Section 3.01. Organization, Powers, Etc. Each Loan Party: (a) is duly
organized, validly existing and in good standing under the laws of its state of
incorporation, which state is correctly set forth in the Introduction hereto
(i.e., first paragraph of this Agreement); (b) has the power and authority to
carry on its business as now conducted and to own or hold under lease the assets
and properties it purports to own or hold under lease; (c) is duly qualified,
licensed or registered to transact its business and in good standing in every
jurisdiction in which it purports to or carries on its business or holds under
lease any of its assets and properties; (d) has the power and authority to
execute and deliver this Agreement and each of the other Loan Instruments to
which it is or will be a party and to perform all of its obligations hereunder
and thereunder; and (e) has its executive office and principal place of business
at the address set forth in the Introduction, which has been so since its
organization.
Section 3.02. Separate Legal Entity, Etc. (a) The full, complete and
correct legal name of each Loan Party is set forth in the Introduction hereto
(i.e., first paragraph of this Agreement) and on the signature page hereto, and
has never been changed and is and has been the only name ever used by such Loan
Party. Each Loan Party has at all times: (i) done business exclusively under its
own name and employer and taxpayer identification numbers, held itself out to
the public as a legal entity separate and distinct from any other Person (and
not as a department or division of someone else), and corrected any
misunderstandings known to it regarding the separate identity of each Loan
Party; (ii) used its own separate stationery, invoices and checks; (iii) used
its own logos and trademarks and not shared any common logo or trademark with
any other Person; (iv) observed all corporate or equivalent formalities for
maintaining its status as a valid separate entity; (v) maintained its records,
books of account, bank accounts and other assets and properties separate and
apart from those of any other Person and not commingle any of them with those of
any other Person; (vi) promptly corrected any other Person's misunderstanding as
to (A) the identity of such Loan Party or any Affiliate with whom such other
Person is transacting business, or (B) such Loan Party's alleged responsibility
for the Indebtedness or other obligations of any other Person; (vii) allocated
fairly and reasonably any overhead expenses that are shared with each relevant
Affiliate, including paying for office space and services performed by any
employee of an Affiliate or vice versa; and (viii) maintained a sufficient
number of employees or independent contractors in light of its business
operations.
(b) No Loan Party has at any time: (i) engaged in any business or
activity other than the ownership and operation and maintenance of its incentive
marketing business, and activities incidental thereto; (ii) acquired or owned
any assets other than the securities of such subsidiaries and such assets as may
be incidental thereto; (iii) merged into or with or consolidated with any Person
or entity or changed its legal structure; and (iv) entered into any agreement or
arrangement that would not have been permitted after the date hereof under
Section 6.11 hereof.
Section 3.03. Consents, Etc. Except as already obtained and listed on
Schedule 3.03 hereto, no consent, approval or authorization of, or registration,
declaration or filing with, any Authority or other Person (including, without
limitation, the shareholders of any Loan Party) is required as a condition
precedent, concurrent or subsequent to or in connection with the due and valid
execution, delivery and performance by any Loan Party of this Agreement or any
other Loan Instrument to which such Loan Party is or will be a party or the
legality, validity, binding effect or enforceability of any of their respective
representations, warranties, covenants and other terms and provisions. Each
franchise, license, certificate, authorization, approval or consent from any
Authority necessary to the present conduct of the business and operations of
each Loan Party, or required for the acquisition, ownership, improvement,
operation or maintenance by each Loan Party of any portion of the assets and
properties it now owns, operates or maintains, has been obtained and validly
granted, is in full force and effect and constitutes valid and sufficient
authorization therefor.
Section 3.04. No Restriction on Borrowing Ability, Etc. (a) No Loan
Party is regulated by or otherwise subject to any Applicable Law that directly
or indirectly limits or otherwise restricts or governs its ability to incur,
continue or repay Indebtedness, to provide Credit Support or to grant security
interests or other Liens in or to any of its assets and properties as security
for the Indebtedness of itself or others or its Credit Support for others.
Without limiting the generality of the foregoing:
(b) Except as expressly permitted by Section 6.09 hereof, no part of the
proceeds of the Loans will be used to purchase or carry any Margin Stock, to
extend credit to any other Person for the purpose of purchasing or carrying any
Margin Stock or in any way or for any purpose that otherwise violates or is
inconsistent with any applicable Margin Stock Regulations. No Loan Party is
engaged principally, or as one of
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its important activities, in the business of extending credit for the purpose of
purchasing or carrying any Margin Stock.
(c) No Loan Party is an "investment company", an "affiliated person",
"promoter" or "principal underwriter" of an "investment company" or "controlled"
by an "investment company" (as such terms are defined in the Investment Company
Act). None of the transactions contemplated by this Agreement and the other Loan
Instruments (including the making of the Loans and the permitted use of the
proceeds thereof) will violate any provision of the Investment Company Act.
(d) No Loan Party is a "holding company" or an "Affiliate" or a
"subsidiary company" of a "holding company" within the meaning of the Public
Utility Holding Company Act of 1935, as amended, or any corresponding provisions
of any Applicable Law in any foreign jurisdiction, and as the same may have been
and hereafter may be supplemented, modified, amended or restated from time to
time, and the rules and regulations promulgated thereunder, or any corresponding
or succeeding provisions of Applicable Law.
(e) No Loan Party is an "employee benefit plan" governed by (and as
defined in) ERISA, and none of the assets or properties of the Borrower
constitutes or will constitute "plan assets" governed by (and as defined in)
ERISA.
(f) No Loan Party is a "foreign Person" under (and as defined in)
ss.1455(f)(3) of the Tax Code or any successor provision.
Section 3.05. Authorization, Conflicts and Validity. Except as set forth
in Schedule 3.05 hereto, the execution and delivery by each Loan Party of this
Agreement and each of the other Loan Instruments to which it is or will be a
party and the performance by each Loan Party of all of its obligations hereunder
and thereunder: (a) have been duly authorized by all requisite corporate action;
(b) will not violate or be in conflict with any term or provision of (i) any
Applicable Law (including, without limitation, any applicable usury or similar
law), (ii) any judgment, order, writ, injunction, decree or consent of any court
or other judicial Authority, or (iii) any Organizational Document of each Loan
Party or any Surety; (c) will not violate, be in conflict with, result in a
breach of or constitute a default (with or without the giving or receipt of
notice, the acquisition of knowledge or the passage of time or any combination
thereof) under any term or provision of any Organizational Document or other
Material Document; and (d) except as specifically contemplated by this Agreement
or any other Loan Instrument, will not result in the creation or imposition of
any Lien of any nature upon any of its assets and properties. This Agreement and
each Note are, and the other Loan Instruments to which each Loan Party is or
will be a party when executed and delivered will be, legal, valid and binding
obligations of such Loan Party, enforceable in accordance with their respective
terms and provisions, except as enforceability may be limited by (a) applicable
bankruptcy, insolvency, reorganization and other laws affecting the rights or
remedies of creditors generally and (b) rules of equity affecting the
enforcement of obligations generally (whether at law or in equity).
Section 3.06. Litigation. Except as set forth in Schedule 3.06 hereto,
there are no actions, suits, investigations or proceedings (whether or not
purportedly on behalf of any one or more of the Loan Parties or any Surety)
pending or, to the best knowledge of the Loan Parties, threatened or
contemplated at law, in equity, in arbitration or by or before any other
Authority involving or affecting: (a) any Loan Party or any Surety that, if
adversely determined, could have a Material Adverse Effect or Surety's Adverse
Effect; (b) any alleged criminal act or activity on the part of any Loan Party
or (to the knowledge of the Loan Parties) any of its representatives; (c) any
ESOP Related Document, Stock Purchase Document, or any Organizational Document
of any Loan Party or any Surety; (d) any Material Document (other than
Collateral) that, if adversely determined, could have a Material Adverse Effect
or Surety's Adverse Effect; (e) any Environmental Claim respecting any Loan
Party or any part of the Collateral; (f) the Obligations; (g) any part of the
Collateral; or (h) any of the transactions contemplated in this Agreement and
the other Loan Instruments; nor, to the best knowledge of the Loan Parties, is
there any reasonable basis for the institution of any such action, suit,
investigation or proceeding. None of the Loan Parties nor any Surety is in
default with respect to any judgment, order, writ, injunction, decree or consent
of any court or other judicial Authority, which default could have or has had a
Material Adverse Effect or Surety's Adverse Effect.
Section 3.07. Financial Statements, No Material Adverse Change,
Solvency, Etc. (a) The Borrower heretofore has provided to the Lender the
balance sheet of Holdings as at December 31, 2001, and the related statements of
earnings, shareholders' equity, and cash flow for the fiscal year ended on that
date, as part of SGRP's consolidated financial statements audited and reported
upon by Ernst & Young, independent certified public accountants. Those financial
statements and reports of the Borrower and the related notes and schedules, as
well as those related to later periods (whenever delivered), (i) were prepared
in accordance with GAAP consistently applied throughout the period covered
thereby, except as otherwise expressly noted therein, and (ii) are complete,
accurate and a fair presentation of the financial condition of the Borrower as
of the date thereof and the results of its operations for the period covered
thereby (subject in the case of interim statements to normal year-end audit
adjustments).
(b) The Borrower heretofore has provided to the Lender the pro forma
consolidated and consolidating balance sheet of the Borrower as at June 30,
2002, and the related pro forma consolidated and consolidating statements of
earnings, shareholders' equity, and cash flow for the six-month period ended on
that date. Those financial statements and reports of Holdings and its
subsidiaries and the related notes and schedules, as well as those related to
later periods (whenever delivered), (i) were prepared in accordance with GAAP
consistently applied throughout the period covered thereby, (ii) fully reflect
all of the Accounts Receivable, trade payables and other assets and liabilities
of Holdings and its subsidiaries, (iii)
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are complete, accurate and a fair presentation of the financial condition of
Holdings and its subsidiaries as of the date thereof and the results of its
operations for the period covered thereby (subject in the case of interim
statements to normal year-end audit adjustments), provided that statements
relating to or incorporating the period January 1, 2002, through June 30, 2002,
have been or will have been prepared on a pro forma basis to reflect the pro
forma balance sheet of Holdings and its subsidiaries as at June 30, 2002,
immediately after the conclusion of the closing under this Agreement and the
Stock Purchase Agreement and to include the results of operations for Holdings
for such periods, and (iv) have been separately certified to the Lender by the
chief executive officer and chief financial officer (or controller or other most
senior accounting officer or employee if there is no chief financial officer) of
the Borrower as satisfying clauses (i), (ii) and (iii) of this subsection.
(c) The Borrower heretofore has provided to the Lender the separate
actual balance sheets of the Borrower and Holdings as at May 31, 2002
(immediately preceding Holding's purchase of the SPG Stock), and the Borrower's
related statements of earnings, shareholders' equity, and cash flow for the
six-month period ended on that date. Those financial statements and reports and
the related notes and schedules, as well as those related to later periods
(whenever delivered), (i) were prepared in accordance with GAAP consistently
applied throughout the period covered thereby, (ii) fully reflect all of the
Accounts Receivable, trade payables and other assets and liabilities of the
Borrower and Holdings, respectively, (iii) are complete, accurate and a fair
presentation of the financial condition of the Borrower and Holdings,
respectively, as of the date thereof and in the case of the Borrower the results
of its operations for the period covered thereby (subject in the case of interim
statements to normal year-end audit adjustments), and (iv) have been separately
certified to the Lender by the chief executive officer and chief financial
officer (or controller or other most senior accounting officer or employee if
there is no chief financial officer) of the Borrower as satisfying clauses (i),
(ii) and (iii) of this subsection;
(d) Since December 31, 2001, no event or events have occurred that
individually or in the aggregate could have or has had a Material Adverse
Effect.
(e) After giving effect to the direct and indirect Indebtedness and
other liabilities and obligations of each Loan Party arising under this
Agreement and the other Loan Instruments, whether absolute or contingent
(treating all guaranties, pledges and other contingent credit support and all
unused availability under lines of credit and commitments as fully funded
indebtedness in the maximum amount thereof), the Loan Parties taken as a whole:
(i) are solvent (i.e., the aggregate fair value of their assets exceeds the sum
of their liabilities); (ii) have adequate working capital; and (iii) are able to
pay their debts as they mature.
(f) No Loan Party is or has ever been the subject of any Bankruptcy
Proceeding, and no Loan Party is currently taking or considering or planning to
take, and has not ever taken or considered or planned to take, any action under
any Bankruptcy Law or any of the other actions specified in Section 8.01(h)
hereof, and to the knowledge of each Loan Party no other Person is currently
considering or planning, or has ever considered or planned, to take any of those
actions.
Section 3.08. Document Delivery; Absence of Defaults and Certain
Agreements. (a) Each Loan Party has delivered to the Lender and its counsel
true, complete and correct copies of each Organizational Document of each Loan
Party and each Surety, ESOP Related Document, and Stock Purchase Document, and
Material Document, together with all supplements, modifications and amendments
thereto and restatements and replacements thereof.
(b) Except as set forth in Schedule 3.08(b) hereto, no act or event has
occurred and is continuing that violates, is in conflict with, results in a
breach of or constitutes a default (with or without the giving or receipt of
notice, the acquisition of knowledge or the passage of time or any combination
thereof) under any term or provision of (i) this Agreement or any other Loan
Instrument, (ii) any ESOP Related Document, or Stock Purchase Document; (d) or
other Material Document, or (iii) any Organizational Document of any Loan Party
or any Surety. No Loan Party nor any Surety is a party to any instrument,
indenture,
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agreement, document, arrangement or other obligation, or subject to any charter
or other restriction, that could have or has had a Material Adverse Effect or
Surety's Adverse Effect.
Section 3.09. Payment of Taxes and Debts, Compliance with Applicable
Law, Etc.. (a) Each Loan Party: (i) has filed all required tax returns with the
appropriate taxing authorities respecting its operations, assets and properties;
and (ii) has paid or caused to be paid all taxes shown on those returns to the
extent due, which with respect to federal income taxes and returns is to the
knowledge of the Loan Parties prior to June 30, 2002; except in either case to
the extent that (A) extensions of time to make such filing have been duly
granted by the appropriate taxing authorities and those extensions have not
expired, or (B) payment is not yet required pursuant to Section 5.06 hereof.
(b) Each Loan Party is current in its payment of debts and performance
of obligations (other than taxes) except to the extent payment or performance is
not yet required pursuant to Section 5.06 hereof.
(c) Each Loan Party is in compliance with and conforms to all
Environmental Laws and other Applicable Law, and has so complied and conformed
since its organization.
Section 3.10. Indebtedness, Guaranties, ERISA Plans, Etc. (a) Schedule
3.10(a) hereto (as and if updated pursuant to Section 5.02 hereof) contains a
complete and accurate list of all direct and indirect Indebtedness of each Loan
Party (whether individual, joint, several or otherwise), including commitments,
lines of credit and other credit availabilities, identifying with respect to
each the respective parties, amounts and maturities, excluding, however, the
Loans.
(b) Schedule 3.10(b) hereto (as and if updated pursuant to Section 5.02
hereof) contains a complete and accurate list of all guaranties and other Credit
Support by each Loan Party (whether individual, joint, several or otherwise),
identifying with respect to each the respective parties to such Credit Support
and parties, amounts and maturities of the underlying obligations.
(c) Schedule 3.10(c) contains a complete and accurate list of all
"employee pension benefit plans" and "employee welfare benefit plans" (as
defined in ERISA) established, funded or maintained by any Loan Party or any
ERISA Affiliate, whether currently or since its organization, or to which any
Loan Party or any ERISA Affiliate is required to contribute (as each may be
supplemented, modified, amended, restated or replaced from time to time pursuant
to ERISA or the Tax Code, as applicable, a "Plan", and collectively, the
"Plans"). Except as set forth in that schedule: (i) each Plan is in full force
and effect and has been (or is expected to be) determined to be duly qualified
under ERISA and the Tax Code, as applicable; (ii) no ERISA Event is currently
continuing, and none has occurred since its organization; (iii) each report,
statement or other document has been timely prepared and delivered in accordance
with, and conforms in form and substance to the requirements of, ERISA and the
Tax Code; (iv) each Plan complies with ERISA, the Tax Code and all other
Applicable Law in all other respects; (v) the present value of all accrued
benefits under each Plan subject to Title IV of ERISA does not, and did not as
of the last annual valuation date, exceed the value of the assets of such Plan
allocable to such accrued benefits (which benefit value shall be determined
either on an ongoing basis, using the Plan's reasonable actuarial assumptions,
or on a termination basis, using the assumptions employed by the Pension Benefit
Guaranty Corporation in connection with plan terminations, as applicable); (vi)
there are no actions, suits, investigations or proceedings (whether or not
purportedly on behalf of any fiduciary, sponsor, participant or beneficiary)
pending, or to the best knowledge of the Loan Parties, threatened or
contemplated at law, in equity, in arbitration or by or before any Authority
involving or affecting any Plan or any assets and properties of a Plan that, if
adversely determined, could have an ERISA Effect; (vii) there are no facts or
circumstances that might give rise to any liability of or claim against any Loan
Party, any Surety or the Collateral under Title IV of ERISA; and (viii) none of
the Plans is, and no Loan Party or any ERISA Affiliate in the past established,
funded, maintained, contributed or was required to contribute to, any
"multi-employer plan" (as defined in ERISA). The present value of all accrued
post-retirement benefits under each "employee welfare benefit plan" (as defined
in ERISA) to which one or more of the Loan Parties and their ERISA Affiliates is
required to contribute does not in the aggregate exceed the assets of such plan
allocable to such benefits (determined using the actuarial and other assumptions
required under FAS106).
Section 3.11. Subsidiaries, Other Ventures, Loans and Other Investments.
Schedule 3.11 hereto contains a complete and accurate list of: (a) all of the
subsidiaries of each Loan Party or any of its subsidiaries, including with
respect to each subsidiary (i) its state of incorporation, (ii) all
jurisdictions (if any) in which the subsidiary is qualified to do business as a
foreign corporation, (iii) the name of the owner and the number of shares of
capital stock of the subsidiary owned, specifying whether owned beneficially
and/or of record, and if that is less than all of the outstanding shares issued
by the subsidiary, stating the total outstandings, and (iv) all related funding
commitments and obligations of any Loan Party and/or any other
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subsidiary of any Loan Party to contribute capital or other funds to such
subsidiary; (b) all partnerships and other ventures in which any Loan Party or
any of its subsidiaries is a member or venturer, including with respect to each
such partnership or venture (i) its jurisdiction of organization and any other
jurisdiction in which it is qualified to do business as a foreign entity, (ii)
the name of the owner and the percentage and type of interest in such
partnership or venture owned, specifying whether owned beneficially and/or of
record, (iii) all related funding commitments and obligations of any Loan Party
and/or any subsidiary of any Loan Party to contribute capital or other funds to
such venture, and (iv) the names and addresses of the other members or
venturers; (c) any and all loans or advances from any Loan Party to any Surety
or to any of the Affiliate of any Loan Party, identifying with respect to each
the respective parties, amounts and maturities; and (d) all other Investments of
any Loan Party other than Permitted Investments.
Section 3.12. Assets, Liens and Collateral. (a) The Loan Parties are the
holders and severally are the legal and beneficial owners of, and have good
title to the Collateral, which constitutes all of the assets and properties of
the Loan Parties (i) reflected on the most recent report or financial statement
furnished to the Lender or (ii) subsequently acquired; excluding, however, such
assets and properties as may have been sold or otherwise disposed of (1) in the
ordinary course of business prior to the date of this Agreement or (2) as
permitted by this Agreement after the date hereof. Each Loan Party has full
corporate power and authority and the unconditional right to grant to the Lender
the mortgages and other security interests respecting the Collateral
contemplated in this Agreement and the other Loan Instruments. The Lender has
received legal, valid, binding, enforceable and perfected security interests in
and to the Collateral pursuant to this Agreement and the other Loan Instruments.
(b) No part of the Collateral is subject to any Lien or any adverse
claim of any kind whatsoever, except (A) those in favor of the Lender, (B) those
permitted by Section 6.04 hereof (if any) and (C) those described in Schedule
3.12(b) annexed hereto.
(c) There are no claims of third parties that would prevent any assignee
or purchaser of all or any portion of the Collateral from receiving any
payments, distributions and proceeds with respect thereto, if any, without any
defense, counterclaim, setoff, right of recoupment, abatement or other claim or
determination whatsoever.
(d) All of the Collateral has been and currently is operated, insured
and maintained as respectively required by Sections 5.05, 5.07 and 5.08 hereof.
Each Loan Party currently is, and since the Effective Date has been, insured as
required by Section 5.07 hereof, and was insured in a comparable manner since
its organization. No fact, circumstance or other event currently exists or has
occurred that (i) could violate or has violated any term or provision of any
insurance policy, (ii) could permit or has permitted any insurer to cancel or
refuse to renew (upon similar terms) any such insurance policy, or (iii) could
prevent or has prevented any Loan Party from obtaining a similar insurance
policy on similar terms. Schedule 3.12(d) hereto contains a complete and
accurate list of all insurance policies, contracts and arrangements of any Loan
Party with, individually or jointly, any other Loan Party.
(e) The Loan Parties have full possession and control of the Collateral,
and all of the Collateral is located (or in the case of accounts and general
intangibles are deemed to be located) at the addresses of the Loan Parties set
forth in the Introduction, except (i) that certain items may be physically
located at the other locations listed in Schedule 3.12(e) hereto, which schedule
contains a complete and accurate description of each other location and the
items located there, (ii) for items physically held by the Lender or its
designee, and (iii) for items physically held for the benefit and at the
direction of the Loan Parties by the persons identified in that schedule.
(f) Schedule 3.12(f) hereto contains a complete and accurate list of all
employee contracts and arrangements of any Loan Party (with individually or
jointly with any other Loan Party). All employees of each Loan Party have signed
confidentiality and non-compete agreements appropriate to their respective
levels of access.
(g) Each note, stock certificate, security, financial asset, investment
property,, instrument, agreement, account, document or intangible of any Loan
Party included in the Collateral: (i) was duly executed and delivered in a
written instrument or document and to the best knowledge of the Loan Parties
contains no forgeries or unauthorized signatures; (ii) is legal, valid, binding
and enforceable against the signer in accordance with its terms and provisions;
(iii) does not violate or conflict with any provision of Applicable Law; (iv)
has not been amended or modified in any respect or prepaid; (v) except as set
forth in Schedule 3.12(g) hereto, fully reflects all agreements and
understandings with the signer with respect thereto; (vi) is assignable, and has
been duly assigned to the Lender in accordance with the terms and provisions
hereof and thereof; and (vii) is maintained at the chief executive office of the
Loan Parties (or at such other office as may have been specified
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in a notice to the Lender) in a file and location that would be readily
identifiable by anyone examining the books and records of the Loan Parties,
except (A) that certain items may be physically located at the other locations
listed in Schedule 3.12(e) hereto, which schedule contains a complete and
accurate description of each other location and the items located there, (B) for
items physically held by the Lender or its designee, and (C) for items
physically held for the benefit and at the direction of the Loan Parties by the
Person identified in that schedule.
(h) To the best knowledge of the Loan Parties, there is no existing,
proposed or contemplated plan, study or effort by any governmental Authority or
other Person that in any way affects or could affect the continued authorization
of the present or contemplated ownership, financing, construction, use or
operation of any part of the Collateral, or that could result or has resulted in
any tax or other charge being levied or assessed against, or in the creation of
any Lien upon, any part of the Collateral.
Section 3.13. Environmental Compliance. The procurement, storage,
containment, presence, manufacture, distribution, removal and disposition of all
Environmental Substances by or on behalf of any Loan Party and the use and
operation of all assets and properties owned, leased or used by or on behalf of
any Loan Party (including, without limitation, machinery, Equipment, Real Estate
and Improvements), as now or previously existing (whenever created), as
conducted by or for any Loan Party, or as contemplated, are in full compliance
with and conform to all Environmental Laws and other Applicable Law. Without
limiting the generality of the foregoing: (i) all permits, licenses,
authorizations, consents or approvals of authorities necessary or desirable for
such activities have been obtained and they are in full force and effect; (ii)
no part of those activities or the Collateral is in violation of any
Environmental Law or other Applicable Law and (iii) no notice has been served
upon any Loan Party (other than a notice subsequently withdrawn or with regard
to a violation subsequently cured) from any governmental Authority or other
Person claiming, nor does there currently exist, any violation of any
Environmental Law or other Applicable Law in connection with any of those
activities or the Collateral.
Section 3.14. Machinery, Equipment and Real Estate. (a) The machinery,
Equipment and other fixed assets owned or leased by each Loan Party are in good
working order and condition (ordinary wear and tear and retirement excepted),
all of the machinery, Equipment and other fixed assets owned or leased by each
Loan Party are used or usable in the current conduct of its business, and each
of the Loan Parties has all of the machinery, Equipment and other fixed assets
necessary for the current conduct of its business. Schedule 3.14(a) contains a
complete and accurate copy of the Borrower's fixed asset schedule as of the date
hereof; provided that if the Borrower does not have such a schedule, Schedule
3.14(a) shall consist of a complete and accurate list of all items of machinery,
Equipment and other fixed assets owned or leased by each Loan Party having
individual book values in excess of $10,000 as of the date hereof.
(b) (i) No Loan Party leases any interest in or has any license or other
agreement to use any Real Estate other than its leasehold interests under the
leases and licenses under the agreements listed in Schedule 3.14(b) hereto (as
the same may have been or hereafter may be supplemented, modified, amended,
restated or replaced from time to time in the manner provided therein, each a
"Lease" and collectively the "Leases"); (ii) each Loan Party is the tenant and
user under each Lease, and each Loan Party has furnished to the Lender copies of
each Lease, certified to be true, complete and correct by each Loan Party; (iii)
each Lease contains the entire agreement of the parties thereto in respect of
those premises and their use by each Loan Party; (iv) except as set forth in
Schedule 3.08(b) hereto, each Loan Party is in full compliance under each Lease,
no default or event that (with or without the giving or receipt of notice, the
acquisition of knowledge or the passage of time or any combination thereof)
would constitute a default has occurred and is continuing under any Lease, and
each Lease is in full force and effect; (v) each Loan Party has the right to
quiet use and enjoyment of those premises to the extent respectively
contemplated in the Lease; and (vi) no Lease provides for termination on account
of or is otherwise affected by any employee strike, lockout or other work
stoppage.
(c) Schedule 3.14(c) contains a complete and accurate description of all
of the Real Estate owned by each Loan Party, which to the extent applicable
includes lot, block and section or other identifying numbers; and each Loan
Party has good and marketable fee title thereto. All portions of the
Improvements, if any, to the Property have been, are being or will be
constructed and completed within the perimeter of the land owned or leased by
each Loan Party and in accordance with: (i) all zoning ordinances and other
Applicable Law; (ii) the requirements of governmental authorities having
jurisdiction, including all land use and construction licenses, permits and
approvals relating to the Improvements; (iii) accepted standards of good
materials and workmanship; (iv) the plans and specifications for such work as
furnished to the Lender and to the authorities having jurisdiction, if any; and
(v) all covenants, conditions, restrictions and agreements of any kind or nature
affecting the Improvements, including the applicable contracts and construction
loan agreements and instruments. To the best knowledge of each Loan Party there
are no design or structural defects in any part of the Improvements. The
Property and Improvements are, or are capable of being, connected to and
serviced by
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water, sewage disposal, gas, electric, transportation and communication
facilities that are adequate for the intended use of the Improvements. There is
no existing, or to the best knowledge of each Loan Party, proposed or
contemplated eminent domain proceeding or public Improvement that would affect
the Property or the Improvements in any way, including (without limitation) any
plan that would widen, modify or realign any street, highway, park, wetlands,
preserve or other public or utility easement or other right of access or
enjoyment, whether public or private.
(d) Schedule 3.14(d) hereto contains a complete and accurate list of all
equipment and other personal property leases, contracts and arrangements of any
Loan Party (with individually or jointly with any other Loan Party), identifying
with respect to each the lessor, term and monthly payment).
Section 3.15. Intellectual Properties. Schedule 3.15 contains a complete
and accurate list of all Intellectual Properties licensed to or owned or
otherwise used by each Loan Party, which indicates the relevant jurisdiction of
registration and the extent of each Loan Party's interest in each such item.
Except as set forth in Schedule 3.15 hereto, each of the Intellectual Properties
owned by any Loan Party and each of the Intellectual Properties licensed to any
Loan Party: (i) is subsisting and has not been determined to be invalid or
unenforceable by any Authority; (ii) to the best knowledge of each Loan Party is
legal, valid, binding and enforceable; (iii) is not and has not been the subject
of any claim of infringement or other adverse claim; (iv) has been maintained
and used in accordance with all Applicable Law; and (v) is assignable, and has
been duly collaterally assigned, to the Lender in accordance with the terms and
provisions hereof and thereof. Each Loan Party has all of the Intellectual
Properties necessary for the current conduct of its business.
Section 3.16. Accounts Receivable. (a) Each account receivable of each
Loan Party arose in the ordinary course of business in a bona fide arm's-length
transaction, has been fully reflected on its books and records in accordance
with GAAP consistently applied, and is represented by a written invoice or other
written document that: (i) was duly executed and delivered and to the best
knowledge of the Loan Parties contains no forgeries or unauthorized signatures;
(ii) is legal, valid, binding and enforceable against the customer in accordance
with its terms and provisions; (iii) does not violate or conflict with any
provision of Applicable Law; (iv) has not been amended or modified in any
respect; (v) fully reflects all agreements and understandings with the customer
with respect thereto; (vi) is assignable, and has been duly assigned to the
Lender in accordance with the terms and provisions hereof; and (vii) is
maintained at the chief executive office of the Loan Parties (or at such other
office as may have been specified in a notice to the Lender) in a file and
location that would be readily identifiable by anyone examining the Loan Party's
Accounts Receivable . The reserves for uncollectible accounts established by the
Loan Parties are adequate in the 'judgment of the Loan Parties to fully cover
current and future uncollectible Accounts Receivable.
(b) Each Account Receivable booked by any Loan Party is a receivable for
which a final or permitted interim invoice has been issued unless it is booked
separately as an unbilled receivable. Amounts booked as unbilled receivables are
a good faith estimate and a fair approximation of the amount to be billed. No
Account Receivable (whether billed or unbilled) has been booked by any Loan
Party as a receivable (whether billed or unbilled) where: (i) delivery has not
been completed of the invoiced program(s), product(s) or service(s), except for
invoiced program deposits; or (ii) the customer is an affiliate of any Loan
Party or any Surety.
Section 3.17. Pledged Securities. (a) Schedule 3.17 hereto contains a
complete and accurate list of all Investments currently owned of record and/or
beneficially by each Loan Party (whether individually, jointly or otherwise),
identifying with respect to each the issuer, certificate or other identifying
number(s), type and amount(s) and, if held by a clearing corporation, custodian
or other financial intermediary, the account(s), account number(s), account
holder(s) and name(s) and address(es) of the relevant office(s). Each of those
Investments is owned beneficially and of record by the applicable Loan Party, is
assignable, and has been duly assigned and transferred as collateral to the
Lender.
(b) Each of those Investments was acquired in a transaction in
compliance with and registered under or exempt from registration under the
Securities Act and other Applicable Law, and in the case of such exempt
acquisitions has been held for at least one year following full payment
therefor. Except for the normal restrictions on public offerings and the like
under the Securities Act, none of those Investments: (i) is subject to any
warrant, option, put, call or other right to acquire, redeem, sell, transfer or
encumber it (other than such call and redemption rights as may be intrinsic to
such securities where issued by a Person not Affiliated with any Loan Party or
any Surety); (ii) is governed by or otherwise subject to any shareholders
agreement, voting trust or similar agreement or arrangement; and (iii) is
limited or otherwise restricted in any way respecting assignability,
transferability or any voting, dividend, distribution or other ownership right
(whether or not reflected on the face of the certificate, in any Organizational
Document, or otherwise). To the best
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knowledge of the Loan Parties, each of those Investments was duly authorized and
validly issued, is fully paid and non-assessable, and is not and will not be
subject to any preemptive or similar right or restriction.
Section 3.18. The Loan Parties' Independent Investment Decision, Etc.
Each Loan Party hereby acknowledges and agrees that: (a) each Loan Party (i) is
a sophisticated and knowledgeable investor, both generally and with respect to
each item of Collateral, (ii) has received directly from each holder or issuer
of Collateral (which for the purpose of this Section shall be deemed not to
include the Lender), reviewed, and evaluated all financial and other information
necessary or prudent to make the Loan Party's investment decision, and will
continue to do so, and (iii) has made, and will continue to make, independent
investment selections and decisions respecting the Collateral without reliance
upon or regard to any evaluation or investigation by the Lender of any
Collateral or any holder or issuer of any Collateral; (b) neither the Lender nor
any of its Representatives has, and none of them shall be deemed or construed to
have, (i) made any representation, warranty or guaranty, (ii) offered or
furnished any recommendation, advice, analysis or information, or (iii)
undertaken or assumed any liability, responsibility or other obligation
whatsoever respecting any Collateral or any holder or issuer of any Collateral,
whether oral or otherwise, and whether express or implied, including (without
limitation) anything with respect to any existing or future (A) existence,
enforceability, genuineness, value or condition of any Collateral or (B) assets,
business, financial condition, investments, prospects, reputation, or strategies
of any holder or issuer of Collateral or any other Person; (c) neither the
Lender nor any of its Representatives shall have any liability, obligation or
responsibility whatsoever for any acts or omissions of any issuer or holder of
Collateral or any other Person or any failure by anyone to perform any of its
obligations under or with respect to any of the Collateral; and (d) neither the
Lender nor any of its representatives has, or shall be deemed or construed to
have, any agreement, duty or obligation to inform any Loan Party of any matter
relating to any of the Collateral or any holder or issuer of any of the
Collateral or to furnish to any Loan Party any information pertaining thereto.
Section 3.19. Loan Party Securities, Etc. (a) Holdings is authorized to
issue 2,000,000 shares of common stock with a par value of $0.00001 per share,
of which 1 share is currently issued and outstanding. The Holdings Contribution
Agreement requires that, immediately after the closing of the Stock Purchase
Agreement and the advance of the Loans, Holdings issue and contribute 1,000,000
shares of Holdings' capital stock to the ESOP Trust, and the Holdings Redemption
Agreement requires that Holdings redeem (immediately after such ESOP Trust
contribution) all shares of its capital stock held by its shareholders other
than the ESOP Trust, and thereafter the ESOP Trust is the record and beneficial
owner of all of Holding's issued and outstanding capital stock. Except for the
Permitted Options and Holdings Warrant, there are no other outstanding
securities issued by Holdings or any warrant, option or other right to acquire
from Holdings any securities issued by it. Except for the normal restrictions on
public offerings and the like under the Securities Act, except for the Permitted
Options, except as otherwise provided in its Organizational Documents or the
ESOP Related Documents, except as otherwise provided in the Term Loan Agreement
and this Agreement, and except as otherwise set forth in Schedule 3.19 hereto,
none of those outstanding securities: (i) is subject to any warrant, option,
put, call or other right to acquire, redeem, sell, transfer or encumber it; (ii)
is governed by or otherwise subject to any shareholders agreement, voting trust
or similar agreement or arrangement; and (iii) is limited or otherwise
restricted in any way respecting assignability, transferability or any voting,
dividend, distribution or other ownership right (whether or not reflected on the
face of the certificate, in any Organizational Document, or otherwise). Except
as otherwise set forth in Schedule 3.19 hereto, each of those outstanding
securities was duly authorized and validly issued, is fully paid and
non-assessable, and is not and will not be subject to any preemptive or similar
right or restriction. Each of those outstanding securities was acquired from the
issuer in a transaction in compliance with and exempt from registration under
the Securities Act and other Applicable Law.
(b) The Borrower is authorized to issue 2,500 shares of common stock
with no par value, of which 72 shares are currently issued and outstanding.
Holdings is the record and beneficial owner of all of the outstanding stock
issued by the Borrower and each Guarantor (other than Holdings). There are no
other outstanding securities issued by the Borrower or any Guarantor (other than
Holdings) or any warrant, option or other right to acquire from any Loan Party
any securities issued by the Borrower or any Guarantor (other than Holdings).
Except for the normal restrictions on public offerings and the like under the
Securities Act, except the pledge of any and all such securities under the Loan
Instruments, and except as otherwise set forth in Schedule 3.19 hereto, none of
those outstanding securities: (i) is subject to any warrant, option, put, call
or other right to acquire, redeem, sell, transfer or encumber it; (ii) is
governed by or otherwise subject to any shareholders agreement, voting trust or
similar agreement or arrangement; and (iii) is limited or otherwise restricted
in any way respecting assignability, transferability or any voting, dividend,
distribution or other ownership right (whether or not reflected on the face of
the certificate, in any Organizational Document, or otherwise). Except as
otherwise set forth in Schedule 3.19 hereto, each of those outstanding
securities was duly authorized and validly issued, is fully paid and
non-assessable, and is not and will not be subject to any preemptive or similar
right or restriction. Each of those outstanding securities was acquired from the
issuer (or
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from the Lender in the case of the SPG Stock) in a transaction in compliance
with and exempt from registration under the Securities Act and other Applicable
Law.
Section 3.20. Relationship of the Loan Parties and Guarantors. The Loan
Parties are engaged as an integrated group in the business of owning,
developing, operating and selling their incentive marketing business and of
providing the required services and other facilities for those integrated
operations. The Loan Parties are seeking the Loans and Letters of Credit for the
purpose of refinancing the Borrower's share of the existing Senior Loans and
funding the working capital needs of the Borrower for the benefit of all of the
employees of the Loan Parties. Each of the Loan Parties expects to derive
financial and other benefit, directly or indirectly, in return for undertaking
their respective obligations under this Agreement and the other Loan
Instruments, both individually and as a member of the integrated group.
Section 3.21. No Misrepresentation by the Loan Parties. No
representation or warranty of any Loan Party made or contained in this Agreement
or any other Loan Instrument (whether with respect to any Loan Party or
otherwise) and no report, statement, certificate, schedule or other document or
information furnished or to be furnished by or on behalf of any Loan Party in
connection with the transactions contemplated by this Agreement and the other
Loan Instruments (whether with respect to any Loan Party or otherwise) contains
or will contain a misstatement of a material fact or omits or will omit to state
a material fact required to be stated therein in order to make it, in the light
of the circumstances under which made, not misleading.
Section 3.22. No Misrepresentation by any Surety. No representation or
warranty of any Surety made or contained in the Guaranty or any other Loan
Instrument (whether with respect to any Surety or otherwise) and no report,
statement, certificate, schedule or other document or information furnished or
to be furnished by or on behalf of any Surety in connection with the
transactions contemplated by this Agreement, the Guaranty and the other Loan
Instruments (whether with respect to any Surety or otherwise) contains or will
contain a misstatement of a material fact or omits or will omit to state a
material fact required to be stated therein in order to make it, in the light of
the circumstances under which made, not misleading.
ARTICLE IV.
CONDITIONS TO LENDING
The obligation of the Lender to consider making any discretionary
Advance of a Revolving Credit Loan hereunder and consider the issuance of any
requested Letter of Credit hereunder is subject to the satisfaction in full of
all of the conditions precedent set forth in and the other terms and provisions
of each of the Sections of this Article, unless the Lender (in its sole and
absolute discretion) shall consent otherwise in writing:
Section 4.01. Representations and Warranties. (a) On the Effective Date
and on each Advance Date and Letter of Credit Issuance Date, both prior to and
after giving effect to any applicable Advance or Letter of Credit issuance
(whether through any Pro Forma Effect or otherwise), each of the
representations, warranties, acknowledgements and certifications of each of the
Loan Parties and the Sureties set forth in this Agreement and the other Loan
Instruments shall be true and correct in all respects on and as of that date
with the same effect as though those representations and warranties had been
made on and as of such Effective Date.
Section 4.02. No Default. On the Effective Date and on each Advance Date
and Letter of Credit Issuance Date, both prior to and after giving effect to any
applicable Advance or Letter of Credit issuance (whether through any Pro Forma
Effect or otherwise), no Default and no Event of Default shall have occurred and
be continuing.
Section 4.03. No Material Adverse Effect. On the Effective Date and on
each Advance Date and Letter of Credit Issuance Date, both prior to and after
giving effect to any applicable Advance or Letter of Credit issuance (whether
through any Pro Forma Effect or otherwise), no event or events have occurred
that individually or in the aggregate could have, or since the date of this
Agreement has had, a Material Adverse Effect.
Section 4.04. Loan Parties' Bringdown; Financial Covenant Compliance
Certificate. On the Effective Date, the Loan Parties shall have delivered to the
Lender a financial covenant compliance certificate in the form of Exhibit E
hereto, dated that date and signed by an executive officer of the Loan Parties.
By each request for an Advance or Letter of Credit issuance, the Loan Parties
shall be deemed to have delivered to the Lender a bringdown certificate (clauses
(i) through (n) of such form) dated the date of such Advance or Letter of Credit
issuance . The Lender in its sole and absolute discretion may accept the
certificate of the officer of the Loan Parties delivered (or deemed to be
delivered) pursuant to this Section as evidence of the
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satisfaction of the conditions precedent specified in Sections 4.01, 4.02 and
4.03 hereof without in any way waiving or limiting any of the Lender's rights,
powers, privileges, remedies and interests under any term or provision of this
Agreement or any other Loan Instrument.
Section 4.05. Delivery of the Loan Instruments, Collateral and Fees. (a)
On or before the Effective Date, the Lender or its designee shall have received
delivery of: (i) the Note provided for in Section 2.03 hereof, duly executed by
the Loan Parties; and (ii) payment of the disbursements, fees and expenses of
Jenkens & Gilchrist Parker Chapin LLP, counsel to the Lender, and of any local
or special counsel retained by them or the Lender.
(b) On or before the Effective Date, the Lender or its designee shall
have received delivery of: (i) the insurance policies and endorsements required
by Section 5.07 hereof; and (ii) the other instruments and documents required by
this Agreement or any other Loan Instrument or listed in the final version of
the Checklist of Closing Documents delivered to the Loan Parties on or before
the Effective Date, which instruments and documents shall have been duly
executed by the appropriate parties.
(c) Each of the foregoing instruments and documents shall be in such
form and substance as may be acceptable to the Lender.
Section 4.06. Additional Conditions Precedent. On or before the
Effective Date, the Lender shall have received:
(a) certified copies of all (i) other material documents, and (ii)
organizational and governing documents and (if applicable) authorizing
resolutions for each Loan Party and each Surety, in each case as amended
to date, and a satisfactory review of each of them by the Lender and its
counsel;
(b) the approval by the Senior Lender (as and to the extent it deems it
necessary or desirable) of the ESOP Related Documents, the Stock
Purchase Documents, the Holdings Stock Plan, the Term Loan Documents and
the Loan Instruments;
(c) satisfactory (i) pro forma consolidated and consolidating financial
statements for Holdings and its subsidiaries as at the date of the most
recent balance sheet delivered pursuant to the preceding paragraph,
adjusted to give effect to the consummation of the transactions
contemplated hereby as if such transactions had occurred on such date,
and (ii) consolidated and consolidating financial projections and
operating budgets for Holdings and its subsidiaries for the forthcoming
[five and one half] fiscal years (commencing with respect to the fiscal
quarter beginning July 1, 2002), including (without limitation) balance
sheets and the related statements of earnings, shareholders' equity and
cash flow for such periods, all certified by the chief executive
officer, chief financial officer (or controller or other most senior
accounting officer or employee if there is no chief financial officer)
and other executive officers of each Loan Party as (i) having been
prepared in accordance with GAAP consistently applied, and (ii) a fair
estimate of the financial condition of each Loan Party as of such date
and the reasonably likely results of operations for the periods covered
thereby;
(d) evidence satisfactory to the Lender that the Collateral is owned by the
pledging parties free and clear of all security interests, liens and
other claims and encumbrances;
(e) a favorable fairness opinion respecting Holdings and its subsidiaries
from an independent appraiser acceptable to the Lender reflecting (among
other things) the fairness to the shareholders of Holdings of the
transactions contemplated by the ESOP Related Documents, the Stock
Purchase Documents, the Revolving Credit Documents, and the Loan
Instruments;
(f) evidence satisfactory to the Lender that there has not occurred any
Material Adverse Effect since December 31, 2001;
(g) evidence satisfactory to the Lender that, except as set forth in
Schedule 3.06 hereto, there is no action, suit, investigation,
proceeding or other claim pending or threatened respecting any Loan
Party, any Surety or any collateral to be pledged by any of them;
(h) execution and delivery of the Stock Purchase Documents, the Holdings
Contribution Agreement, the Holdings Redemption Agreement and the Term
Loan Documents; and
(i) a certificate from the chief executive officer, chief financial officer
(or controller or other most senior accounting officer or employee if
there is no chief financial officer) and other executive officers
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certifying that (i) each has read this Agreement and other Loan
Instruments and the financial statements referenced in Section 3.07
hereof, (ii) each has made an examination sufficient in the opinion of
the signer(s) to make informed statements in such certificate that the
financial statements and other information furnished to the Lender
pursuant hereto and representations and warranties of any Loan Party set
forth in this Agreement and the other Loan Instruments are true and
correct in all respects.
Section 4.07. Organizational Documents. On or before the Effective Date,
the Loan Parties shall have furnished to the Lender the following certificates
and other documents with respect to each Loan Party: (a) a copy of its
certificate of incorporation and all modifications, amendments and restatements
thereof, certified as of a recent date by the Secretary of State of its state of
incorporation; (b) a copy of its by-laws, together with all modifications,
amendments and restatements thereof, certified as of a recent date by its
Secretary; (c) a certificate of the Secretary of State of its state of
incorporation, dated as of a recent date, as to its existence and good standing;
(d) a certificate of its Secretary or an Assistant Secretary, dated the
Effective Date, as to the due authorization of the negotiation, execution,
delivery and performance by it of this Agreement and each of the other Loan
Instruments to which it is or becomes a party (with the appropriate resolutions
adopted by its directors and shareholders attached thereto and reflecting among
other things the appointment of the ESOP Trustee and approval of the Stock
Purchase Documents, Loan Instruments and ESOP Related Documents to which is or
becomes a party and the transactions contemplated thereunder) and the incumbency
and signatures of its officers and directors who are authorized to execute any
instrument, agreement or other document in connection with the transactions
contemplated by this Agreement and the other Loan Instruments; (e) copies of all
agreements and trusts respecting securities of its issue or related rights,
together with all modifications, amendments and restatements thereof, certified
as of a recent date by its Secretary; and (f) such Organizational Documents and
additional supporting documents and other information with respect to the
Collateral or the organization, operations and affairs of each Loan Party and
those of its subsidiaries, partnerships and other ventures as the Lender may
request.
Section 4.08. Acceptable Documents. All certificates and other documents
provided to the Lender pursuant to this Article shall be in such form and
substance as may be acceptable to the Lender and its counsel.
Section 4.09. Additional Condition to All Advances. On the Effective
Date and on each Advance Date and Letter of Credit Issuance Date, both prior to
and after giving effect to any applicable Advance or Letter of Credit issuance
(whether through any Pro Forma Effect or otherwise), the Lender shall be able to
borrow the full amount of the requested Advance or obtain the requested Letter
of Credit from the Senior Lender under the Senior Loan Documents.
ARTICLE V.
AFFIRMATIVE COVENANTS
The Loan Parties jointly and severally covenant and agree that each will
comply in all respects on a timely basis (except as otherwise expressly
provided) and at its own expense with each, and will not cause, suffer or permit
any violation of any, of the terms and provisions of each Section in this
Article, from the date hereof and until the Obligations have been fully paid and
satisfied, unless the Lender (in its sole and absolute discretion) shall consent
otherwise in writing (as provided in Section 9.15 hereof):
Section 5.01. Required Notices. The Loan Parties shall give, or cause to
be given, immediate written notice to the Lender of any of the following, but
without in any way authorizing or approving any event requiring the consent of
the Lender hereunder:
(a) any change in the name (whether change in legal name, use of other name
or otherwise), name(s) of controlling equity owner(s), the state or
other jurisdiction of incorporation or other organization or the
location of the chief executive office of any Loan Party or any Surety;
(b) the institution or, to the best knowledge of the Loan Parties, the
threat or contemplation of, or any adverse determination or change in,
any action, suit, investigation or proceeding (whether or not
purportedly on behalf of any Loan Party or any Surety) at law, in
equity, in arbitration or by or before any other Authority involving or
affecting (i) any Loan Party or any Surety that, if adversely
determined, could
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have a Material Adverse Effect or Surety's Adverse Effect, (ii) any
alleged criminal act or activity on the part of any Loan Party or any of
its representatives, (iii) any ESOP Related Document, Stock Purchase
Document, or any Organizational Document of any Loan Party or any
Surety; (iv) any Material Document, (v) any Environmental Claim
respecting any Loan Party or any part of the Collateral, (vi) any Plan
or any assets and properties of a Plan that, if adversely determined,
could have an ERISA Effect, (vii) any part of the Collateral, (viii) any
of the Obligations, or (ix) any of the transactions contemplated in this
Agreement and the other Loan Instruments;
(c) the occurrence of any ERISA Event;
(d) the occurrence of any act or event that violates, is in conflict with,
results in a breach of or constitutes a default (with or without the
giving or receipt of notice, the acquisition of knowledge or the passage
of time or any combination thereof) under any term or provision of: (i)
any ESOP Related Document, Stock Purchase Document, or any
Organizational Document of any Loan Party or any Surety; or (ii) any
Material Document;
(e) any labor dispute to which any of the Loan Parties may become a party,
any strikes or walkouts relating to any of its offices, plants or other
facilities, or the expiration of any labor contract;
(f) any change in location or change in the status of the Collateral other
than as expressly permitted in Section 7.03 or 7.09 hereof;
(g) any attachment, confiscation, detention, levy, requisition, seizure or
other taking of any part of the Collateral, whether through process of
law or otherwise, the filing or other imposition of any Lien known to
any Loan Party against any part of the Collateral (other than as
expressly permitted by Section 6.04 hereof), or any destruction or other
loss of or any damage to any part of the Collateral; or
(h) to the extent not otherwise enumerated in this Section, the occurrence
of any other act or event that (i) has resulted or could result in any
Default or Event of Default, or (ii) has had or could have a Material
Adverse Effect or a Surety's Adverse Effect.
Section 5.02. Accounts and Reports. The Loan Parties shall maintain a
standard system of accounting in accordance with GAAP consistently applied, and
the Loan Parties shall provide to the Lender the following:
(a) as soon as available and in any event within 45 days after the end of
each fiscal year of the Borrower, commencing with the fiscal year ended
December 31, 2002, a consolidated and consolidating balance sheet of
Holdings and its subsidiaries as at the end of that fiscal year and the
related consolidated and consolidating statements of earnings,
shareholders' equity and cash flow for such fiscal year, all with
accompanying notes, in reasonable detail and stating in comparative form
the figures as at the end of and for the previous fiscal year, prepared
in accordance with GAAP consistently applied, and audited and reported
upon by Ernst & Young or other independent certified public accountants
of recognized standing regularly retained by the Borrower to audit its
books and approved by the Lender;
(b) concurrently with the delivery of the financial statements described in
subsection (a) above, the annual auditor's report prepared by those
independent certified public accountants, and concurrently with the
delivery of the financial statements described in subsections (a) above
and (c) below, a letter to the Lender signed by Holding's accountants to
the effect that, having read this Agreement, (i) the compliance
calculations of the Loan Parties delivered under subsection (d)(i) of
this Section were correct and (ii) nothing came to their attention
during the course of their regular examination that caused them to
believe any Event of Default or Default had occurred and had not
theretofore been reported and remedied, or if any such Event of Default
or Default had occurred and was continuing or was not previously
reported, specifying the facts with respect thereto;
(c) as soon as available, and in any event within 15 days after the end of
each month (including December) of each fiscal year of the Borrower
(commencing with the month ending July 31, 2002), a consolidated and
consolidating balance sheet of Holdings and its subsidiaries as at the
end of such month and the related consolidated and consolidating
statements of earnings, shareholders' equity and cash flow for the
period from the beginning of such fiscal year to the end of such month,
unaudited but certified by the chief executive officer and chief
financial officer (or controller or other most senior accounting officer
or employee if there is no chief financial officer) of the Borrower as
(i) prepared in accordance with GAAP consistently applied, (ii) fully
reflecting all of the Accounts Receivable, trade payables and other
liabilities of Holdings and its subsidiaries, and (iii) complete,
accurate and a fair presentation of the financial condition of Holdings
and its subsidiaries as of such date and the results of operations for
the period covered thereby, subject to normal year-end audit
adjustments, and in the case of quarterly statements audited or reviewed
by such independent certified public accountants to the extent deemed
necessary by SGRP's auditors in connection with the SPAR Group annual
audit or quarterly review;
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(d) concurrently with the delivery of the documents described in subsection
(c), above, (i) a certificate in the form of Exhibit E hereto setting
forth the calculations of and establishing compliance with (among other
things) the financial covenants set forth in Section 6.01, 6.02, 6.03
and 6.08 of this Agreement for the Computation Period just ended, as
well as the calculation of any prepayment required under Section 2.06(f)
and 2.06(h) hereof and a bringdown of the Loan Parties' representations
and warranties, (ii) a certificate respecting the completeness and
accuracy of the attached aging summaries of the consolidated and
consolidating receivables and payables of Holdings and its subsidiaries
as at the end of the month just ended, and (iii) a certificate listing
any changes in Indebtedness, Credit Support and corresponding
information for each Loan Party of the types required to be scheduled
under any of Sections 3.10(a) and 3.10(b) hereof since the delivery of
Schedules 3.10(a) and 3.10(b) (as and if previously modified by all
supplements thereto delivered to the Lender under this clause) in the
same form as Schedules 3.10(a) and 3.10(b) hereto, in each case with
such certificate being dated as of the last day of the relevant
reporting period and signed by the chief executive officer and chief
financial officer (or controller or other most senior accounting officer
or employee if there is no chief financial officer) of the Loan Parties
and further certifying each has read this Agreement and made an
examination sufficient in the opinion of the signer(s) to make informed
statements in such certificate;
(e) as soon as available, and in any event within 5 days after the end of
each month (including December) of each fiscal year of the Borrower, a
Borrowing Base Certificate in the form of Exhibit D hereto setting forth
the Borrowing Base as at the end of such month, provided that the
Borrowing Base Certificate may be requested as frequently as the Lender
requires, in each case with such certificate being dated as of the last
day of the relevant reporting period and signed by the chief executive
officer and chief financial officer (or controller or other most senior
accounting officer or employee if there is no chief financial officer)
of the Loan Parties and further certifying each has read this Agreement
and made an examination sufficient in the opinion of the signer(s) to
make informed statements in such certificate;
(f) as soon as available, and in any event within 30 days prior to the
commencement of each fiscal year, a consolidated and consolidating
annual budget and projections for Holdings and its subsidiaries for the
forthcoming fiscal year (commencing with respect to the fiscal year
beginning January 1, 2003) certified by the chief executive officer and
chief financial officer (or controller or other most senior accounting
officer or employee if there is no chief financial officer) of the Loan
Parties;
(g) as soon as available, and in any event not more than five Business Days
after receipt, a copy of any annual management letter issued by any
accountant or auditor to any Loan Party;
(h) on or before each anniversary of the date of this Agreement, an
independent insurance broker's certificate stating (i) that the
insurance required by Section 5.07 of this Agreement is in full force
and effect, (ii) that all premiums under those policies have been paid
to the extent due through the date of the certificate, and (iii) the
amounts and due dates of premiums due within the following 12-month
period; and, as soon as received, copies of all insurance policies,
endorsements and certificates received from time to time by any Loan
Party;
(i) promptly, and in any event not more than five Business Days, following
execution, but without in any way authorizing or approving any such
action requiring the consent of the Lender hereunder, copies of all
loan, security and other instruments, agreements and documents
respecting Indebtedness of any Loan Party in excess of $10,000,
individually or in the aggregate, including commitments, lines of credit
and other credit availabilities, and of all guaranties and other Credit
Support by any Loan Party respecting any Indebtedness or other
obligation of any other Person in excess of $10,000, individually or in
the aggregate, except those to which the Lender also is a party;
(j) as soon as available, and in any event not more than five Business Days
after receipt, a copy of any notice or other communication alleging any
nonpayment or other breach or default, or any foreclosure or other
action respecting any part of its assets and properties, received
respecting any of the Indebtedness of any Loan Party (other than the
Obligations), or any demand or other request for payment under any
guaranty or other Credit Support by any Loan Party respecting any
Indebtedness or other obligation of any other Person, including any
received from any Person acting on behalf of the holder or beneficiary
thereof, provided that the no Loan Party shall wait for such copies to
become available to give any notice required under the circumstances by
any other provision hereof;
(k) as soon as available, and in any event not more than five Business Days
after receipt, a copy of any summons or complaint, or any other notice
of any action, suit, investigation or proceeding, involving or affecting
any Loan Party where the damages sought exceed, or if unspecified
reasonably could exceed, $10,000 individually or in the aggregate;
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(l) as soon as available, a copy of any notice or other communication
alleging the invalidity, non-binding effect or unenforceability of, any
error or other defect in, any omission from, or any nonpayment or other
breach or default under any ESOP Related Document, Stock Purchase
Document, or any Organizational Document of any Loan Party or any
Surety, or any note, stock certificate, security, financial asset,
investment property, instrument, agreement, account, document or
intangible of any Loan Party included in the Collateral, provided that
no Loan Party shall wait for such copies to become available to give any
notice required under the circumstances by any other provision hereof;
(m) as soon as available, and in any event not less than 15 days prior to
adoption, but without in any way authorizing or approving any such
action requiring the consent of the Lender hereunder, copies of each
proposed modification, waiver, amendment or termination of any of the
terms and provisions of any ESOP Related Document, Stock Purchase
Document, or any Term Loan Document of any Loan Party or any Surety, or
any note, stock certificate, security, financial asset, investment
property, instrument, agreement, account (other than account writeoffs
of $10,000 or less in the aggregate for any customer in any year),
document or intangible of the Loan Parties included in the Collateral;
(n) as soon as available, and in any event not less than 30 days prior to
adoption, but without in any way authorizing or approving any such
action requiring the consent of the Lender hereunder, copies of each
proposed modification, waiver, amendment or termination of any of the
terms and provisions of any Organizational Document respecting any Loan
Party or any Surety or any agreement between the shareholders of any
Loan Party or any Surety; promptly following adoption, copies of each of
the foregoing certified as to the accuracy thereof by the Secretary of
State or the Secretary or similar official of the Loan Parties or
Surety, as applicable; and promptly following request, such other
supporting documents of the kind specified in Section 4.06 hereof as the
Lender from time to time may request;
(o) as soon as possible, and in any event not more than five Business Days
after filing, copies of all tax returns, informational statements and
reports filed by any Loan Party with the Internal Revenue Service of the
United States of America;
(p) promptly upon the request of the Lender, copies of each notice, report,
statement or other document or communication, whether periodic or
otherwise, concerning the occurrence, existence or correction of any
ERISA Event in any respect, any responsive communication on the part of
any Loan Party or any of its ERISA Affiliates, or any preliminary or
final determination of any Authority in respect thereof, provided that
no Loan Party shall wait for such request or copies to become available
to give any notice required by any other provision hereof; and
(q) contemporaneously with each submission or filing, a copy of any report,
registration statement, proxy statement, financial statement, notice or
other document, whether periodic or otherwise: (i) submitted to the
shareholders of any Loan Party in their capacities as shareholders; or
(ii) submitted to or filed by any Loan Party with any governmental or
self-regulatory Authority involving or affecting (A) any Loan Party, (B)
the Obligations, (C) any part of the Collateral or (D) any of the
transactions contemplated in this Agreement or the other Loan
Instruments, provided that no Loan Party shall wait for such copies to
become available to give any notice required under the circumstances by
any other provision of Section 5.01 hereof;
together with such supplements to any of the aforementioned documents and
additional accounts, reports, certificates, statements, documents and
information as the Lender from time to time may request, each in such form and
substance as may be acceptable to the Lender.
Section 5.03. Access to Premises, Records and Collateral. At all
reasonable times and as often as the Lender reasonably may request, each Loan
Party shall permit representatives designated by the Lender to (a) have complete
and unrestricted access to the premises of each Loan Party, the books and
records of each Loan Party and the Collateral, provided that so long as no
Default or Event of Default is then continuing, the Lender shall give each Loan
Party at least one Business Day's prior notice (which may be given by telephone)
prior to any such visit, (b) make copies of, or excerpts from, those books and
records, and (c) discuss the Collateral or the accounts, assets, business,
operations, properties or condition, financial or otherwise, of the each Loan
Party with its officers, directors, employees, accountants and agents.
Section 5.04. Good Standing, Qualifications, Powers, Separate Legal
Existence, Organizational Documents, Etc. (a) Each Loan Party shall do, or cause
to be done, all things, or proceed with due diligence with any actions or
courses of action, that may be necessary (i) to maintain its due organization,
valid existence and good standing under the laws of its state of incorporation,
and (ii) to preserve and keep in
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full force and effect all foreign and other qualifications, licenses and
registrations required in those jurisdictions in which each Loan Party conducts
business or has any assets or properties.
(b) Except for its agreements under the Loan Instruments and Stock
Purchase Documents, each Loan Party shall at all times maintain its full and
unrestricted right, power and authority, and shall not, and shall not cause,
suffer or permit anyone else to, take or fail to take any action (with respect
to itself or otherwise), or offer, commit or enter into to any agreement or
arrangement, that would, or could, in any way restrict, limit, make subject to
third-party approval or otherwise impair its right, power or authority, (A) to
carry on its business as now conducted or (B) to execute or deliver this
Agreement or any other Loan Instrument to which it is or becomes a party or any
supplement, modification or amendment thereto or restatement or replacement
thereof from time to time in the manner provided therein, or (C) to perform any
of its obligations hereunder or thereunder.
(c) No Loan Party shall at any time cause, suffer or permit any change
in its name (whether a change in legal name, use of other name or otherwise),
the state or other jurisdiction of its incorporation or other organization or
the location of its chief executive office.
(d) Each Loan Party shall at all times: (i) do business exclusively
under its own name(s) and employer and taxpayer identification numbers, hold
itself out to the public as a legal entity separate and distinct from any other
Person (and not as a department or division of someone else), and correct any
misunderstandings known to it regarding the separate identity of each Loan
Party; (ii) use its own separate stationery, invoices and checks; (iii) use its
own logos and trademarks and (other than as permitted by the Trademark
Agreement) not share any common logo or trademark with any other Person; (iv)
observe all corporate or equivalent formalities for maintaining its status as a
valid separate entity; (v) maintain its records, books of account, bank accounts
(other than as required by the Loan Instruments) and other assets and properties
separate and apart from those of any other Person and not commingle any of them
with those of any other Person; (vi) promptly correct any other Person's
misunderstanding as to (A) the identity of any Loan Party or any Affiliate with
whom such other Person is transacting business, or (B) each Loan Party's alleged
responsibility for the Indebtedness or other obligations of any other Person;
(vii) allocate fairly and reasonably any overhead expenses that are shared with
an Affiliate, including paying for office space and services performed by any
employee of an Affiliate or vice versa; and (viii) maintain a sufficient number
of employees or independent contractors in light of its contemplated business
operations.
(e) No Loan Party shall cause, suffer or permit any supplement,
modification or amendment to, or any waiver of any term or provision of, any of
its Organizational Documents without the prior written consent of the Lender,
which consent will not be unreasonably withheld if the same will not adversely
affect any of the rights, powers, privileges, remedies and interests of the
Lender under this Agreement or any other Loan Instrument.
Section 5.05. Compliance with Applicable Law; Operations. Each Loan
Party shall promptly and fully comply with, conform to and obey any and all
Applicable Law now or hereafter in effect, other than to the extent the
noncompliance therewith or violation thereof could not have a Material Adverse
Effect. In any event, the each Loan Party shall procure, store, contain,
manufacture, distribute, remove and dispose of all Environmental Substances and
use and operate all assets and properties (including, without limitation,
machinery, Equipment, Real Estate and Improvements) in full compliance with and
conformity to all Environmental Laws and other Applicable Law in all respects,
including (without limitation) all applicable permits, licenses, and other
authorizations, consents or approvals of Authorities.
Section 5.06. Payment of Debts, Taxes, Etc. Each Loan Party shall (a)
pay, or cause to be paid, all of its Indebtedness and other liabilities and
lawful claims (whether for services, labor, materials, supplies or otherwise) as
and when due, (b) perform, or cause to be performed, all of its obligations
promptly and in accordance with the respective terms and provisions thereof, and
(c) promptly pay and discharge, or cause to be paid and discharged, all taxes,
assessments and other governmental charges and levies imposed upon any of the
Loan Parties, upon their respective income or receipts or upon any of their
respective assets and properties on or before the last day on which the same may
be paid without penalty; provided, however, that it shall not constitute a
breach of this Section if any Loan Party fails to perform any such obligation or
to pay any such Indebtedness or other liability (except for the Obligations),
tax, assessment, or governmental or other charge, levy or claim (i) that (A) is
being delayed, in the case of trade payables (but not other obligations), in
accordance with the normal payment practices of the Loan Party, but not beyond
any demand in payment therefor, or (B) is being contested in good faith and by
proper proceedings diligently pursued, (ii) if the effect of such failure to pay
or perform will not (A) cause or permit the acceleration of the maturity of any
other Indebtedness or obligation of any Loan Party (i.e., other than the one
being contested) or (B) subject any part of the assets and properties of any
Loan Party to attachment, levy or forfeiture, (iii) for which the Loan Party has
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obtained a bond or insurance, or established a reserve, in such amount as may be
required by GAAP and that in the judgment of the Lender is adequate and
satisfactory, and (iv) so long as the aggregate amount of such unpaid overdue
items for all of the Loan Parties does not at any time exceed $10,000.
Section 5.07. Insurance. Each Loan Party shall maintain or cause to be
maintained, at its own expense, insurance in form, substance and amounts
(including deductibles) acceptable to the Lender (i) adequate to insure all
assets and properties of the Loan Parties, which assets and properties are of a
character usually insured by persons engaged in the same or similar business,
against loss or damage resulting from fire, flood, hurricanes or other risks
included in an extended coverage policy, (ii) against ESOP liability, (as and to
the extent the same is available), public liability, directors and officers
liability and other tort claims that may be incurred by or asserted against the
Loan Parties or any of their Representatives, (iii) as may be required by the
other Loan Instruments or Applicable Law and (iv) as may be reasonably requested
by the Lender, all with adequate, financially sound and reputable insurers
acceptable to the Lender, and all naming the Lender as an additional insured and
loss payee under a standard mortgagee's endorsement as the Lender's interest may
appear. In the event the Lender receives any insurance proceeds respecting any
loss, damage or destruction of any insured Collateral, the Lender at its option
may (1) hold and disburse the proceeds (or a portion thereof) to fund the costs
of such repair, rebuilding or replacement as the Loan Parties may elect (subject
to such conditions as the Lender may establish), or (2) apply the proceeds (or
any remaining balance) as provided in Section 2.08(d) hereof. In the event any
Loan Party receives any insurance proceeds (other than disbursements from the
Lender), the Loan Party shall accept and hold those funds in trust for the
benefit of the Lender and shall promptly pay or deliver those proceeds to the
Lender for application as provided above.
Section 5.08. Maintenance of Assets, Intellectual Properties, Etc. (a)
Each Loan Party shall maintain or cause to be maintained all of its assets and
properties in good working order and condition (ordinary wear and tear and
retirement excepted), making all necessary repairs thereto and renewals and
replacements thereof. Each Loan Party shall perform all servicing, repairs,
overhauls, replacements, modifications, improvements and tests, or shall cause
them to be performed, (i) with personnel duly qualified for the applicable task,
(ii) in accordance and compliance with the manuals and service bulletins of the
applicable manufacturer(s) and (iii) with suitable replacement, substitute or
additional parts or components (A) in good operating condition, (B) of
equivalent or better performance, durability, utility and value than the item
replaced, (C) owned solely by such Loan Party, and (D) free of any Lien other
than any Permitted Lien.
(b) Each Loan Party shall maintain or cause to be maintained, at its own
expense, all of its Intellectual Property rights, registrations and
applications, including (without limitation) the diligent pursuit of all
applications, the payment of all maintenance, license or other fees and
expenses, and the vigorous prosecution of suits and proceedings to enforce those
rights and applications and to object or oppose the conflicting rights or
applications of any other Person, except in each case where the applicable Loan
Party decides in good faith that a particular item is of negligible economic
value to the business of such Loan Party or where the cost of doing so would be
reasonably likely to exceed the economic value of such item, such Loan Party
notifies the Lender of such decision and the Lender does not object thereto.
Each Loan Party (i) shall continue to use each trademark and trade name of the
Loan Parties in its business and on its goods, (ii) shall use the appropriate
symbol of registration with each use of a trademark or trade name by the Loan
Parties, (iii) shall not reduce the quality of existing goods or services
bearing a trademark or trade name of the Loan Parties or use any such trademark
or trade name with any other goods or services of less than comparable quality,
and (iv) shall not take, or cause suffer, suffer or permit anyone else to take,
any action that may invalidate the registration of any trademark or trade name,
except in each case where the applicable Loan Party decides in good faith that a
particular item is of negligible economic value to the business of such Loan
Party or where the cost of doing so would be reasonably likely to exceed the
economic value of such item, such Loan Party notifies the Lender of such
decision and the Lender does not object thereto. The Loan Parties shall seek or
cause to be sought, at its own expense, (i) patent applications and patents
respecting all unpatented but patentable inventions made or obtained by the Loan
Parties, (ii) trademark applications and registered trademarks on registrable
but unregistered trademarks developed, used or obtained by the Loan Parties, and
(iii) trade name applications and registered trade names on registrable but
unregistered trade names developed, used or obtained by the Loan Parties, except
in each case where the applicable Loan Party decides in good faith that a
particular item is of negligible economic value to the business of such Loan
Party or where the cost of doing so would be reasonably likely to exceed the
economic value of such item, such Loan Party notifies the Lender of such
decision and the Lender does not object thereto.
Section 5.09. Preservation and Defense of Collateral, Etc. Each Loan
Party shall maintain, enforce, preserve and defend in all respects: (a) any and
all of the rights, powers, privileges, remedies and interests of the Loan Party
and the Lender under or with respect to each note, stock certificate, security,
financial asset or other account, chattel paper, commercial tort claim, deposit
account, document of title, general intangible, instrument, investment property,
letter of credit, letter-of-credit-right, oil, gas or mineral before
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extraction, money or other intangible included in the Collateral and each of the
Organizational Documents and other instruments and documents relating thereto;
and (b) all of the right, title and interest of any Loan Party and the Lender in
and to each and every part of the Collateral against all manner of claims and
demands; in each case on a timely basis to the full extent permitted by
Applicable Law. In the event any of the Collateral is attached or levied or any
Lien is imposed on any of the Collateral (other than a Permitted Lien), then
(without limiting the generality of the preceding sentence) the Loan Parties
shall pay, discharge or bond the underlying obligation and cause the release of
such Collateral therefrom within five days of any attachment or levy or thirty
days of the imposition of any Lien, but in any case before the claimant may
defeat the right of the relevant Loan Party to bond, contest or redeem.
Section 5.10. Margin Stock Regulation Compliance. (a) From time to time
at the request of the Lender, and in any event prior to (i) using any proceeds
of any of the Loans and other credit from the Lender directly or indirectly
secured by any Margin Stock to directly or indirectly purchase or carry any
Margin Stock, or (ii) making any permitted substitution or withdrawal of
Collateral if before or after such substitution or withdrawal any such loan or
other credit is or would be directly or indirectly secured by any Margin Stock,
in each case as determined by the Lender (in its sole and absolute discretion),
each Loan Party will provide to the Lender duly completed and executed
statements on Federal Reserve Form U-1 and any other statement that the Lender
may deem to be necessary or desirable under any applicable Margin Stock
Regulations.
(b) If at any time the Lender determines (in its sole and absolute
discretion) that (i) any of the Loans or other Obligations or other credit
extended by the Lender (A) are being or have been directly or indirectly used to
purchase or carry any Margin Stock and (B) are directly or indirectly secured by
any Margin Stock, and (ii) the aggregate value of the Margin Stock and other
assets and properties directly and indirectly securing them (computed and
discounted in accordance with applicable Borrowing Base criteria, Margin Stock
Regulations and policies of the Lender then in effect) is insufficient to fully
cover the outstanding Loans and other included credit from the Lender, then
immediately after receipt of notice from the Lender the relevant Loan Party
shall repay the Loans in such amount(s) as the Lender may have requested in such
notice in order to comply with any applicable Margin Stock Regulations. This
Section imposes a continuing test, and the Lender at any time and from time to
time may demand such payment and delivery whenever such a deficiency is
determined by the Lender (in its sole and absolute discretion).
Section 5.11. Additional Subsidiary Guarantor. Without in any way
authorizing or approving any such action requiring the consent of the Lender
hereunder under Section 6.07 hereof, as soon as practicable, and in any event
within thirty days following formation or acquisition, each Loan Party shall
cause each newly formed or acquired corporation, venture or other Person meeting
the definition of "subsidiary" of the Loan Parties to execute and deliver to the
Lender an assumption of the obligations of a Guarantor and Loan Party hereunder,
which (a) shall be accomplished by such Person's written assumption of this
Agreement and the other Loan Documents to which any Guarantor is a party in form
and substance acceptable to the Lender and (b) shall not require any notice to
or the consent of any other Loan Party. Such assumption shall be a Loan
Instrument hereunder and an amendment of this Agreement, but shall not require
the signature of any other Loan Party.
Section 5.12. Management and Board of Directors, Etc. (a) No Person
shall be hired or made any binding offer for any position with any Loan Party as
a director, chief executive officer, chief operating officer, chief financial or
accounting officer, controller or any other position performing a substantially
similar function without first obtaining the prior written approval of the
Lender, which approval shall not be unreasonably withheld.
(b) For so long as the Loans are outstanding, each Loan Party shall (i)
cause [a] designee of the Lender to be elected as a director of the Loan Party
and each of its subsidiaries, and (ii) not cause, suffer or permit the Board of
Directors of the Loan Parties or any of its subsidiaries to have more than
[three] directors. The Lender's designee[s] shall be covered by the Loan
Parties' D&O policy, which policy shall be provide SGRP's policies will not be
taken into account in any way in defending or indemnifying such designee[s] and
otherwise shall satisfy the requirements of Section 5.07 hereof.
ARTICLE VI.
NEGATIVE COVENANTS
The Loan Parties jointly and severally covenant and agree that they will
comply in all respects with each, and will not cause, suffer or permit any
violation of any, of the terms and provisions of each Section in this Article,
from the date hereof until the Obligations have been fully paid and satisfied,
unless the Lender (in its sole and absolute discretion) shall consent otherwise
in writing (as provided in Section 9.15 hereof):
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Section 6.01. Certain Financial Requirements. The financial measurements
used in the following covenants: (i) shall be determined in accordance with GAAP
(as of the date of calculation) consistently applied except to the extent
otherwise specified by a particular definition or covenant; (ii) shall be
computed for the Loan Parties and all of its subsidiaries (if any) on a
consolidated basis in accordance with GAAP except to the extent otherwise
specified in a particular definition or provision; and (iii) shall refer to the
corresponding items in the financial statements of the Loan Parties and its
subsidiaries (if any) for the relevant periods except to the extent otherwise
specified or defined herein. (The Loan Parties and the Lender covenant and agree
to reset in good faith the financial covenants set forth in this Section, as
well as the corresponding provisions of the financial covenants compliance
certificate required by Section 5.02(d) hereof, from time to time with each
change in GAAP so as to maintain the integrity and intent of such covenants.)
(a) The consolidated Selling, General and Administrative Expenses of
Holdings and its subsidiaries (inclusive of sales commission but excluding tax
deductible pension payments to the ESOP Trust) shall not exceed 24% of their
total consolidated revenue in any fiscal quarter.
(b) The Adjusted Net Worth of the Loan Parties and their subsidiaries
shall not be less than: (i) $(900,000) at December 31, 2002, or at any time
thereafter through March 30, 2003; (ii) $(1,150,000) at March 31, 2003, or at
any time thereafter through June 29, 2003; (iii) $(680,000) at June 30, 2003, or
at any time thereafter through September 29, 2003; (iv) $(670,000) at September
30, 2003, or at any time thereafter through December 30, 2003; (v) $(780,000) at
December 31, 2003, or at any time thereafter through March 30, 2004; (vi)
$(580,000) at March 31, 2004, or at any time thereafter through June 29, 2004;
(vii) $(380,000) at June 30, 2004, or at any time thereafter through September
29, 2004; (viii) $(180,000) at September 30, 2004, or at any time thereafter
through December 30, 2004, (ix) $0 at December 31, 2004, or at any time
thereafter through March 30, 2005; (x) $475,000 at March 31, 2005, or at any
time thereafter through June 29, 2005; (xi) $950,000 at June 30, 2005, or at any
time thereafter through September 29, 2005; (xii) $1,425,000 at September 30,
2005, or at any time thereafter through December 30, 2005, (xiii) $1,900,000 at
December 31, 2005, or at any time thereafter through March 30, 2006; (xiv)
$2,700,000 at March 31, 2006, or at any time thereafter through June 29, 2006;
(xv) $3,500,000 at June 30, 2006, or at any time thereafter through September
29, 2006; (xvi) $4,300,000 at September 30, 2006, or at any time thereafter
through December 30, 2006, (xvii) $5,100,000 at December 31, 2006, or at any
time thereafter through March 30, 2007; and (xviii) $6,300,000 at March 31,
2007, or at any time thereafter.
(c) The Adjusted EBITDA of Holdings and its subsidiaries shall not be
less than: (i) $(400,000) for the six consecutive fiscal months ended December
31, 2002; (ii) $(30,000) for the three consecutive fiscal months ended March 31,
2003; (ii) $700,000 for the six consecutive fiscal months ended June 30, 2003;
(iv) $970,000 for the nine consecutive fiscal months ended September 30, 2003;
(vi) $1,090,000 for for the Computation Period ended December 31, 2003; (vii)
$350,000 for the three consecutive fiscal months ended March 31, 2004; (viii)
$700,000 for the six consecutive fiscal months ended June 30, 2004;
(ix)$1,050,000 for the nine consecutive fiscal months ended September 30, 2004;
(x) $1,400,000 for the Computation Period ended December 31, 2004; (xi) $580,000
for the three consecutive fiscal months ended March 31, 2005; (xii) $1,160,000
for the six consecutive fiscal months ended June 30, 2005; (xiii)$1,740,000 for
the nine consecutive fiscal months ended September 30, 2005; (xiv) $2,300,000
for the Computation Period ended December 31, 2005; (xv) $850,000 for the three
consecutive fiscal months ended March 31, 2006; (xvi) $1,700,000 for the six
consecutive fiscal months ended June 30, 2005; (xvii) $2,550,000 for the nine
consecutive fiscal months ended September 30, 2005; (xviii) $3,400,000 for the
Computation Period ended December 31, 2006; (xix) $1,250,000 for the three
consecutive fiscal months ended March 31, 2007 or for any fiscal quarter
thereafter.
(d) The Adjusted Debt Service Ratio of Holdings and its subsidiaries
shall not be less than: (i) (1.37):1.00 for the six consecutive fiscal months
ended December 31, 2002; (ii) (10.77):1.00 for the three consecutive fiscal
months ended March 31, 2003; (iii) .80:1.00 for the three consecutive fiscal
months ended June 30, 2003; (iv) 1.45:1.00 for the three consecutive fiscal
months ended September 30, 2003; (v) 2.39:1.00 for the three consecutive fiscal
months ended December 31, 2003; (vi) 1.45:1.00 for the Computation Period ended
December 31, 2003 and any quarter thereafter through September 30, 2004; (vii)
1.09:1.00 for the Computation Period ended December 31, 2004 and any quarter
thereafter through September 30, 2005; (viii) .84:1.00 for the Computation
Period ended December 31, 2005, and any quarter thereafter through September 30,
2006; (ix) .73:1.00 for the Computation Period ended December 31, 2006; and (x)
..63:1.00 for the three consecutive fiscal months ended March 31, 2007, or at the
end of any fiscal quarter thereafter.
(e) The Adjusted Debt to EBITDA Ratio of Holdings and its subsidiaries
shall not exceed: (i) 4.92:1:00 at December 31, 2003 and any quarter thereafter
through September 30, 2004; (ii) 3.31:1:00 at December 31, 2004 and any quarter
thereafter through September 30, 2005; (iii) 1.48:1.00 at December 31,
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2005 and any quarter thereafter through September 30, 2006; and (iv) .41:1.00 at
December 31, 2006 or at the end of any fiscal quarter thereafter.
(f) The Adjusted Capital Expenditures of Holdings and its subsidiaries
shall not exceed $65,000 in any fiscal year.
(g) The Adjusted Lease Service of Holdings and its subsidiaries for the
referenced Computation Period shall not exceed $100,000 in any fiscal quarter.
(h) The Loan Parties shall not cause or permit any change of their
fiscal year from a calendar year of each year without the prior written consent
of the Lender.
Section 6.02. Indebtedness. (a) No Loan Party shall directly or
indirectly create, incur, assume, permit to exist, increase, renew or extend any
Indebtedness on its part, including commitments, lines of credit and other
credit availabilities, or apply for or offer, commit or agree to do any of the
foregoing, excluding, however:
(i) Indebtedness owed to the Lender under any of the Loan Instruments;
(ii) Indebtedness under the Term Loan Agreement;
(iii) purchase money Indebtedness incurred in the purchase of Equipment
in the ordinary course of business so long as each is secured only by the
Equipment purchased, and obligations constituting Indebtedness under
generally accepted accounting principles arising under capitalized leases
entered into in the ordinary course of business, in each case so long as (A)
the aggregate amount of all such purchase money Indebtedness and capitalized
lease amounts does not at any time exceed $65,000 during the 18 month period
ended December 31, 2003, $130,000 during 2004, or $195,000 thereafter, and
(B) no Default or Event of Default then exists or could result therefrom
(whether through any Pro Forma Effect or otherwise), provided that the Loan
Parties may continue such purchase money Indebtedness and capital lease
obligations within those limits, but without any increase, renewal or
extension, once incurred as so permitted; and
(iv) the continuation of the Indebtedness listed in Schedule 3.10(a)
hereto, excluding, however, any increase therein or renewal or extension
thereof or the continuation of any Indebtedness being retired with the
proceeds of the Loans.
(b) No Loan Party shall prepay, acquire or otherwise satisfy, in whole
or in part, any of its Indebtedness prior to when due, except (i) for
Indebtedness owed to the Lender under any of the Loan Instruments, (ii) for
Indebtedness permitted under Section 6.02(a)(iii) hereof so long as no Default
or Event of Default then exists or could result therefrom (whether through any
Pro Forma Effect or otherwise), or (iv) as permitted by agreement or consent of
the Lender.
Section 6.03. Guaranties and other Credit Support. No Loan Party shall
directly or indirectly make, create, incur, assume, permit to exist, increase,
renew or extend any guaranty or other Credit Support on its part of any
Indebtedness or other obligation of any other Person, or offer, commit or agree
to do so, excluding, however: (a) any guaranty of or other Credit Support for
Indebtedness or other obligations owed to the Lender; (b) the Credit Support
under the Term Loan Agreement; and (c) the continuation of those guaranties and
other Credit Support listed in Schedule 3.10(b) hereto, excluding, however, any
increase therein or renewal or extension thereof.
Section 6.04. Liens and Encumbrances. No Loan Party shall directly or
indirectly make, create, incur, assume or permit to exist any Lien of any nature
in, to or against any part of the Collateral, or offer, commit or agree to or
cause or assist the inception or continuation of any of such Lien; excluding,
however, any Permitted Lien to the extent otherwise not prohibited by this
Agreement.
Section 6.05. Sale or Disposition of Collateral, Etc. No Loan Party
shall directly or indirectly: (a) sell, lease, sublease, transfer, exchange,
abandon or otherwise dispose of, surrender management, physical possession or
control of, physically alter or relocate all or any portion of the Collateral,
other than as expressly permitted by Section 7.03 hereof; (b) cause, suffer or
permit any supplement, modification or amendment to, or any waiver of any term
or provision or any termination of, any material note, stock certificate,
security, financial asset, investment property,, instrument, agreement, account,
document or intangible of any Loan Party included in the Collateral, other than
as expressly permitted by Section 7.03 hereof; or (c) offer, commit or agree to
or cause or assist the inception or continuation of any of the foregoing.
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Section 6.06. Investments, Loans, Advances, Etc. No Loan Party shall
directly or indirectly purchase or otherwise acquire or hold any Investment or
make any Investment in or for the benefit of any other Person, or offer, commit
or agree to do so, except for: (a) securities received in connection with past
contributions to or Investments in the subsidiaries and ventures listed in
Schedule 3.11 hereto; (b) the continuation of the existing Investments listed on
Schedule 3.11 hereto; (c) the Permitted Investments; (d) any guaranty or other
Credit Support permitted under Section 6.03 hereof; and (e) any collateral
account established under this Agreement or any other Loan Instrument; and (f)
any loans or advances of salary to any officer or employee of any Loan Party or
any of its subsidiaries in the ordinary course of its business that in the
aggregate do not at any time exceed (i) 5% of that Person's regular annual
salary, and (ii) $10,000 for all such officers and employees, excluding,
however, usual and customary draws in the ordinary course of business by any
non-salaried salesperson against his or her reasonably expected commissions over
the next succeeding twelve months.
Section 6.07. Certain Fundamental Changes. No Loan Party shall directly
or indirectly effect, enter into or offer, commit or agree to: (a) award, grant
or issue any option to any Person to purchase any shares of the Borrower's
capital stock, phantom stock or similar right, or offer or agree to do so, other
than (A) an option or right that (i) is exercisable at or set to a price equal
to the fair market value thereof at the time of issuance, (ii) does not vest (in
whole or in part) before the Term Loans have been repaid in full, (iii) has been
awarded, granted or issued pursuant to the approved form of Holdings Stock Plan,
(iv) is in form and substance acceptable to the Lender in its sole discretion,
and (v)is otherwise acceptable, and is being awarded, granted or issued to a
Person who is acceptable, to the Lender in its sole and absolute discretion
(each a "Permitted Option") and (B) the Holdings Warrant; (b) any issuance,
sale, transfer, pledge or other disposition or encumbrance of any capital stock,
partnership or membership interests or other equity securities issued by any
Loan Party (other than pursuant to the Permitted Options and Holdings Warrants),
the registration of such securities for sale or resale under Applicable Law, or
the issuance of any option (other than a Permitted Option), warrant (other than
the Holdings Warrant) or other right to acquire any such securities; (c) any
capital reorganization or reclassification of the capital stock, partnership or
membership interests or other securities issued by any Loan Party; (d) any
transaction in which the capital stock, partnership or membership interests or
other securities issued by any Loan Party prior to the transaction would be
changed into or exchanged for different securities, whether of that or any other
Person, or for any other assets or properties (other than as such transactions
may be permitted by Section 6.08 hereof); (e) any sale, lease, assignment,
conveyance, spin-off or other transfer or disposition of all or any substantial
part of the business or assets and properties of any Loan Party; (f) any merger,
consolidation, reincorporation or reorganization in a different jurisdiction,
dissolution, liquidation or winding up of any Loan Party; (g) the acquisition or
establishment of any new subsidiary or joint venture by any Loan Party; (h) the
acquisition by any Loan Party of all or substantially all of the assets and
properties of any other Person or any discrete division or other business unit
thereof; or (i) any material change in the character of the business of any Loan
Party as conducted on the date of this Agreement or any adverse change in the
method by which that business is conducted.
Section 6.08. Distributions to Shareholders. No Loan Party shall
directly or indirectly: (a) declare or make any dividend, payment or other
distribution of cash, assets or property with respect to any equity securities
issued by any Loan Party, whether now existing or hereafter outstanding; (b)
redeem, purchase or otherwise acquire any securities issued by any Loan Party or
any option or other right to acquire any such securities; (c) covenant or
otherwise arrange with any Person (other than the Lender in any Loan Instrument)
to directly or indirectly limit or otherwise restrict any dividend, advance or
other payment or distribution (whether of cash or otherwise); or (d) offer,
commit or agree to do any of the foregoing; excluding, however, (i) the
redemptions pursuant to the Holdings Redemption Agreement, (ii) distributions by
the Borrower to Holdings to permit Holdings to pay the Obligations under (and as
defined in) the Term Loan Agreement, and (iii) so long as no Default or Event of
Default then exists or could result therefrom (whether through any Pro Forma
Effect or otherwise) distributions by the Borrower to Holdings to fund, and
Holding's use of such funds to either (A) redeem its common stock from the ESOP
Plan, or (B) make contributions to the ESOP Trust to fund its redemptions of
Holding's stock, in each case to the extent required under the ESOP Related
Documents in connection with the termination of participants.
Section 6.09. Use of Loans. (a) No Loan Party shall directly or
indirectly use any portion of the Loans, or cause, assist, suffer or permit the
use of any portion of the Loans, in whole or in part, other than use of the
Loans for the funding of the refinancing the Borrower's share of the existing
Senior Loans and funding the working capital needs of the Borrower.
(b) No part of the proceeds of the Loans or other credit from the Lender
shall be used at any time directly or indirectly to purchase or carry any Margin
Stock or otherwise in any way or for any purpose that violates or is
inconsistent with any applicable Margin Stock Regulations.
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Section 6.10. ERISA Plans. (a) Except for the Plans, no Loan Party
shall, and no Loan Party shall cause, suffer or permit any of its ERISA
Affiliates to, directly or indirectly establish, maintain, participate in,
contribute to or permit to exist any "employee pension benefit plan" or
"employee welfare benefit plan"(as defined in ERISA) for any employees of any
Loan Party or any ERISA Affiliate; provided, however, that any Loan Party or any
ERISA Affiliate from time to time may establish any such plan in accordance with
Applicable Law (including ERISA and the Tax Code) with the prior written consent
of the Lender. The Loan Parties shall use their best efforts to obtain or
continue the qualification of each Plan under ERISA and the Tax Code, as
applicable, shall prepare and deliver each report, statement or other document
required by ERISA and the Tax Code within the periods specified therein and
conforming in form and substance to the provisions thereof, and shall administer
each Plan in all respects in accordance with ERISA, the Tax Code and all other
Applicable Law, as applicable; and shall use their best efforts to cause its
ERISA Affiliates to do each of the foregoing. In any event, no Loan Party shall
cause, suffer or permit any of its ERISA Affiliates to: (i) incur, continue or
fail to correct in any respect any ERISA Event; (ii) fail to file with the
appropriate Authority any required notice or report respecting any Plan as and
when due; (iii) fail to respond in a timely fashion to any notice or other
communication respecting any Plan from any Authority; (iv) increase or adversely
modify any funding obligation or other liability of any one or more of the Loan
Parties or any ERISA Affiliate (individually or in the aggregate) under any Plan
(whether through amendment or termination) without the prior written consent of
the Lender (which will not be withheld unreasonably); (v) permit the present
value of all accrued benefits under each Plan subject to Title IV of ERISA to
exceed the value of the assets of such Plan allocable to such accrued benefits
(which benefit value shall be determined either on an ongoing basis, using the
Plan's reasonable actuarial assumptions, or on a termination basis, using the
assumptions employed by the Pension Benefit Guaranty Corporation in connection
with plan terminations, as applicable); or (vi) enter into any "employee welfare
benefit plan" (as defined in ERISA) to which one or more of the Loan Parties and
its ERISA Affiliates is required to contribute.
(b) No Loan Party shall, and no Loan Party shall cause, suffer or permit
any of its subsidiaries to, directly or indirectly contribute to or for the
benefit of the Plans or its participants thereunder more than the ESOP Maximum
Contribution in the aggregate in any fiscal year.
Section 6.11. Transactions with Affiliates, Etc.. (a) No Loan Party
shall directly or indirectly enter into any transaction with, or use any asset
or property of, any Affiliate of any Loan Party (including, without limitation,
the lease, purchase, sale or exchange of any asset or property, any advance or
loan, the provision of any services, or any allocation of administrative
salaries, expenses and other general overhead), other than in the ordinary
course and pursuant to the reasonable requirements of the business of any Loan
Party and upon fair and reasonable terms and provisions no less favorable to any
Loan Party than it would have been reasonably likely to have obtained in a
comparable arm's-length transaction with a Person who is not an Affiliate of any
Loan Party.
(b) The Loan Parties shall not (individually or in the aggregate): (i)
pay or accrue to or for the benefit of any Person aggregate compensation in
excess of $250,000 in any year other than (A) permitted sales commissions, and
(B) any bonus due to the officers of SPG listed in Schedule 6.11(b) hereto under
their bonus formulas in effect on the date hereof (as summarized in such
schedule) (a "Permitted Bonus"); (ii) pay or accrue to or for the benefit of any
Person any sales commission in excess of 17% of the actual gross profits (before
internal labor allocations) from that persons eligible sales; or (iii) enter
into any new employment agreement or extend or renew any existing employment
agreement. In addition, all officers and employees of the Loan Parties, as of
the date hereof and from time to time hereafter as Persons enter into such
positions or change levels of access, shall execute and deliver to Lender the
appropriate non-compete and confidentiality agreements with the Loan Parties in
the form agreed to by the Loan Parties and the Lender.
Section 6.12. Execution and Modification of the ESOP Related Documents,
Etc. (a) No Loan Party shall enter into any new ESOP Related Document, enter
into or cause, suffer or permit any supplement to or any waiver (of its rights),
modification, amendment or restatement of any ESOP Related Document existing on
the date hereof or hereafter approved by the Lender, or commit or agree to do
any of the foregoing, without the prior written consent of the Lender. The
inclusion of supplements, modifications, restatements and the like in the
various definitions of the ESOP Related Documents is not intended, and shall not
be deemed or construed, to be permission for or acceptance of any of the
foregoing by the Lender, which will not be unreasonably withheld to the extent
such change is required under ERISA or the Code.
(b) No Loan Party shall remove or replace, or consent to any change in,
the ESOP Trustee, or commit or agree to do so, without the prior written consent
of the Lender, which will not be unreasonably withheld to the extent such change
is to an institutional trustee that is not an Affiliate of the Borrower or the
Lender.
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Section 6.13. Execution and Modification of the Stock Purchase
Documents, Etc. No Loan Party shall enter into any new Stock Purchase Document,
enter into or cause, suffer or permit any supplement to or any waiver (of its
rights), modification, amendment or restatement of any Stock Purchase Document
existing on the date hereof or hereafter approved by the Lender, or commit or
agree to do any of the foregoing, without the prior written consent of the
Lender. The inclusion of supplements, modifications, restatements and the like
in the various definitions of the Stock Purchase Documents is not intended, and
shall not be deemed or construed, to be permission for or acceptance of any of
the foregoing by the Lender.
Section 6.14. Execution and Modification of the Term Loan Documents,
Etc. No Loan Party shall enter into any new Term Loan Document, enter into or
cause, suffer or permit any supplement to or any waiver (of its rights),
modification, amendment or restatement of any Term Loan Document existing on the
date hereof or hereafter approved by the Lender, or commit or agree to do any of
the foregoing, without the prior written consent of the Lender. The inclusion of
supplements, modifications, restatements and the like in the various definitions
of the Term Loan Documents is not intended, and shall not be deemed or
construed, to be permission for or acceptance of any of the foregoing by the
Lender.
Section 6.15. Execution and Modification of the Holdings Stock Plan. No
Loan Party shall enter into any new stock option plan, phantom stock plan or the
like, no Loan party shall award, grant or issue any stock option, phantom stock
or similar right other than the issuance of Permitted Options by Holdings, and
Holdings shall not enter into or cause, suffer or permit any supplement to or
any waiver (of its rights), modification, amendment or restatement of any
Permitted Option approved by the Lender or the Holdings Stock Plan, or commit or
agree to do any of the foregoing, without the prior written consent of the
Lender. The inclusion of supplements, modifications, restatements and the like
in the various definitions of the Holdings Stock Plan is not intended, and shall
not be deemed or construed, to be permission for or acceptance of any of the
foregoing by the Lender.
Section 6.16. Certain Accounts. No Loan Party will render any invoice
that: (i) is expressly conditional, permits returns or restricts collection
rights or assignments in any respect; (ii) permits payment (A) more than 30 days
after the invoice date, (B) in any currency other than United States Dollars, or
(C) at any location outside the United States; or (iii) provides for the
underlying obligation to be evidenced by chattel paper or any note or other
instrument; provided, however, that a Loan Party may do so if and only to the
extent specifically authorized in advance to do so by the Lender in writing in
its sole and absolute discretion.
ARTICLE VII.
COLLATERAL
Section 7.01. Grant of Security Interest. Each Loan Party hereby
pledges, assigns, conveys, mortgages, transfers and delivers to the Lender, and
grants to the Lender a continuing security interest in and to, all of the assets
and properties of the Loan Party, including (without limitation) each of the
following, in each case whether now or hereafter existing, acquired or created
and wherever located:
(a) any and all Accounts Receivable of the Loan Party;
(b) any and all Inventory of the Loan Party, wherever located, including any
and all raw materials, work-in-progress and finished goods;
(c) any and all of the Real Estate of the Loan Party, any and all Fixtures
and Improvements thereto, and any and all interests therein, wherever
located;
(d) any and all Equipment and other tangible personal assets and properties
of the Loan Party, wherever located, including (without limitation) any
and all accessions, accessories, additions, Equipment, Fixtures,
furnishings, goods, Inventory, machinery, materials, parts,
replacements, supplies, tools and vehicles, whether or not located upon
or affixed to any of the foregoing;
(e) any and all of the Intellectual Property of the Loan Party;
(f) any and all (i) Investments of the Loan Party, including (without
limitation) the SPG Stock in the case of Holdings (ii) any and all
dividends, interest and distributions on, under or related to any of the
foregoing items (whether cash, stock or otherwise) and splits and
reclassifications thereof, (iii) any and all options, warrants and other
rights to acquire any such Investments, and (iv) any and all security
entitlements and other rights, powers, privileges, remedies and
interests of the referenced Person in, to
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and under any and all the foregoing and any and all Organizational
Documents and Custody Documents pertaining thereto;
(g) any and all (i) advances, loans, and other Indebtedness and amounts
(including interest) directly or indirectly owed to the Loan Party by
any Surety, (ii) subrogation, contribution and other similar rights of
the Loan Party against or in respect of any Surety, or any of its assets
and properties, whether resulting from any payment made by the Loan
Party or otherwise, and (iii) Liens or Credit Support securing any such
advances, loans, Indebtedness, amounts or rights;
(h) any and all other accounts, instruments, chattel paper, documents of
title and trust receipts (and the goods covered thereby, wherever
located), letter of credit rights, financial assets, investment
property, security entitlements, deposit accounts, contract rights,
warranties, casualty and other insurance policies and rights, commercial
tort claims and other litigation claims and rights, tradenames,
software, payment intangibles, and other general intangibles of the Loan
Party, and any and all computer programming data and other books and
records of the Loan Party; and
(i) any and all deposit accounts and other deposits of the Loan Party
(whether general or special, time or demand, provisional or final, or
individual or joint) maintained with the Lender or any of its
Affiliates, custodians, participants or designees; any and all
Indebtedness and other amounts and obligations at any time owing by the
Lender or any of its Affiliates or participants to or for the credit,
account or benefit of the Loan Party; and any and all assets and
properties of the Loan Party in the possession, custody or control of
the Lender, or any of the Lender's Affiliates, custodians, participants
or designees, including (without limitation) other monies, certificates
of deposit, securities, instruments of debt or credit, documents of
title and trust receipts (and the goods covered thereby, wherever
located), and other instruments and documents;
in each case whether any of the foregoing items is now or hereafter owned
beneficially or of record and whether now or hereafter owned individually,
jointly or otherwise, together with the products and proceeds thereof, all
collections, payments and other distributions and realizations with respect
thereto, any and all other rights, powers, privileges, remedies and interests of
the Loan Party therein, thereto or thereunder, and any and all renewals,
substitutions, modifications and extensions of any and all of the items in the
foregoing subsections (the foregoing items will be referred to collectively as
the "Collateral"), as security for the timely and full payment and satisfaction
of the Obligations as and when due. However, items released in writing by the
Lender from time to time from the lien of this Agreement and the other Loan
Instruments shall no longer be considered to be "Collateral" hereunder.
Section 7.02. Collateral Documentation. (a) The Loan Parties shall
deliver to the Lender on or before the Effective Date and thereafter
concurrently with each item becoming Collateral such assignments, pledges,
deeds, mortgages, financing statements, attornments, estoppels, waivers,
consents, recognitions, bailments, legal opinions and other instruments,
documents and agreements as the Lender from time to time may request to further
evidence, confirm, effect or perfect any mortgage or other security interest
granted or required to be granted under this Agreement or any other Loan
Instrument, each in such form and substance as may be acceptable to the Lender.
(b) Without in any way limiting the right, power or authority of the
Lender under the UCC or other Applicable Law, each Loan Party hereby irrevocably
authorizes the Lender in its sole and absolute discretion, at any time and from
time to time: (i) to file without the review, approval or signature of the Loan
Party any and all financing statements, modifications and continuations in
respect of the Collateral, the Loan Party, any other or additional debtor or the
transactions contemplated by this Agreement or any other Loan Instrument in such
jurisdictions as the Lender deems necessary or desirable; (ii) to sign any such
statement, modification or continuation on behalf of the Loan Party if the
Lender deems such signature necessary or desirable under Applicable Law; and
(iii) to file a carbon, photographic or other reproduction of any financing
statement or modification if the Lender deems such filing necessary or desirable
under Applicable Law; provided that so long as no Event of Default is then
continuing, if possible the Lender shall endeavor to accord the Loan Party an
opportunity to review any proposed financing statement or modification (but not
continuation), but if the Loan Party has not reviewed it within a reasonable
period of time (not to exceed 30 days from the date sent), the Lender at any
time thereafter may exercise its authority under this Agreement and Applicable
Law to file such proposed financing statement or modification; and provided
further that the failure to send any such copy for review or signature shall not
affect the validity or enforceability of any such signature or filing by the
Lender. Without in any way limiting the foregoing, each Loan Party hereby
acknowledges and agrees that, prior to the execution of this Agreement, the Loan
Party reviewed the initial UCC financing statements respecting the Collateral
prepared by the Lender and authorized the Lender to file them (i.e., "prefile")
in such jurisdictions as the Lender deemed necessary or desirable, and the Loan
Party hereby confirms
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and ratifies the authority of the Lender to make each such filing. The Lender
shall endeavor to send a copy of any such filing to each Loan Party; provided,
however, that the failure to send that copy shall not affect the validity or
enforceability of any such filing. The Lender shall not be liable for any
mistake in or failure to file any financing statement, modification,
continuation or other perfection document.
(c) The Lender from time to time may request that items of Collateral be
legended or otherwise marked from time to time to reflect the Lender's security
interests therein, and each Loan Party shall promptly mark each requested item
in a prominent location with such legend as the Lender may direct, which may be
affixed directly or on a permanently attached plaque of customary size. No Loan
Party shall, and no Loan Party shall cause, suffer or permit anyone else to,
alter, cover, deface or remove any such legend without the prior written consent
of the Lender, except that such legend may be removed from items released by the
Lender in writing from time to time from the security interests created under
this Agreement and the other Loan Instruments as provided herein or therein.
(d) The Borrower shall enter into one or more lock box and control
agreements with the Lender and the Senior Lender, its affiliates or such
commercial bank(s) as may be acceptable to the Lender (the "Depository"), which
agreements shall be in such form and substance as may be acceptable to the
Lender. The Borrower shall instruct each person who from time to time is billed
any amount by the Borrower or owes any amount to the Borrower under any Account
Receivable to all payments to the Borrower in care of the Depository for
collection and deposit in a designated lock box account (the "Lock Box
Account"). All of the Borrower's Account Receivable collections and any and all
other sources of revenue, income or cash flow of the Borrower, including
(without limitation) any and all cash, check, credit card or other receipts,
shall be the subject of such lock box agreements by no later than 10 days after
such request. Amounts in the Lock Box Account shall be collected in or
periodically transferred to the Lender's account with the Senior Lender for
application as provided in Section 2.06(b) hereof Nothing contained in this
Agreement, however, shall be deemed to alter or amend the Obligations of the
Borrower, and neither the assignment of the accounts receivable nor any receipt
of any payments thereunder shall be deemed to constitute a payment with respect
to any of the Obligations absent an exercise by the Lender of its rights to make
any application of collected funds under this Agreement.
Section 7.03. Rights of the Borrower to the Collateral. Subject to the
terms and provisions of this Agreement and until such time as the Lender shall
give notice to the Loan Parties to the contrary during the continuance of any
Event of Default or Default, without regard to whether any other action has been
taken by the Lender under this Agreement or any other Loan Instrument, each Loan
Party shall have the right to do the things expressly permitted by any
subsection of this Section notwithstanding the restrictions contained in Section
6.05 hereof (but shall not have such right after such notice has been given to
the extent specified in such notice):
(a) Each Loan Party shall have the full power and authority in the
ordinary course of business with reasonable business prudence (i) to use in its
business any item of Collateral (other than instruments, securities and other
general intangibles in the possession of the Lender), (ii) to sell, lease or use
any Inventory, (iii) to relocate finished goods Inventory to one or more public
warehouses from which the Loan Party has obtained recognition and access
agreements acceptable to the Lender, (iv) to maintain, repair, replace and
retire Equipment in accordance with Section 5.08(a) hereof (subject to the
provisions of Section 2.06(g) hereof), (v) to sell or otherwise voluntarily
dispose of any unused Equipment or other goods (subject to the provisions of
Section 2.06(g) hereof, (vi) except as otherwise provided herein, to hire and
fire officers and other employees, and to waive, release, supplement, modify,
amend, restate or replace any of the Loan Party 's contracts with officers and
other employees, (vi) to exercise in good faith any and all voting, waiver or
consensual rights and powers relating or pertaining to the Collateral covered by
Section 6.05(b) hereof or any part thereof, or waive, release, supplement,
modify, amend, restate or replace any term or provision thereof, (vii) to
diligently service and collect the proceeds of any Accounts Receivable or
Investment, which may include such discounts, reductions and settlements as may
be usual and customary and consistent with its past practice, (viii) to use in
its business the cash proceeds from such Inventory and Accounts Receivable, and
(ix) to deposit, withdraw and use in its business funds and other cash
equivalents constituting Collateral under Section 7.01(i) hereof; provided,
however, that such power is not authorized and shall not be exercised to the
extent such exercise could in any way (individually or in conjunction with other
such actions contemplated or taken by the Loan Party) (A) adversely affect the
business or operations of the Loan Party or the value of the Collateral, (B)
diminish any of the rights, powers, privileges, remedies or interests of the
Loan Party in any item of the Collateral (other than through such permitted
sales, replacements and retirements, use of cash proceeds or withdrawals), (C)
conflict with or prejudice the continued perfection of any security interest of
the Lender, or (D) result in any Event of Default or Default (whether through
any Pro Forma Effect or otherwise).
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(b) Each Loan Party shall be entitled to exercise in good faith any and
all voting, waiver or consensual rights and powers relating or pertaining to the
Collateral or any part thereof for any purpose not inconsistent with the terms
of this Agreement; provided, however, that each Loan Party shall not be
permitted to exercise or refrain from exercising any such right or power if such
exercise or nonexercise could (A) have an adverse effect on the value of the
Collateral or any part thereof in the sole judgment of the Lender or (B) result
in any Default or Event of Default; and provided further that each Loan Party
shall give the Lender at least five (5) Business Days' prior written notice of
the manner in which the Loan Party intends to exercise or not exercise any such
right or power that could have such an effect, together with any reasons
therefor, except that notice need not be given with respect to any re-election
of directors.
Section 7.04. Performance by the Lender. In the event any Loan Party
fails to pay or otherwise perform or satisfy any of its obligations to others or
under or in respect of any of the Collateral or any ESOP Related Document as
required by this Agreement or any other Loan Instrument, the Lender shall have
the right in its sole and absolute discretion (but shall be under no duty or
obligation) to make any such payment or cause the performance or satisfaction of
any other such obligation, including (without limitation) the payment of any
tax, claim or insurance premium, the maintenance or defense of any part of the
Collateral or the purchase or discharge of any Lien on any part of the
Collateral. The Lender will endeavor to give the Loan Parties prior notice
(which may be by telephone or telecopy) of any such payment or action; provided,
however, that the failure to give such notice or any time to perform shall not
affect the validity of the payment or action or the reimbursement obligations of
the Loan Parties' with respect thereto. The Loan Parties shall pay or reimburse
on demand any and all amounts advanced or expenses incurred by the Lender or its
designee under this subsection, which shall constitute additional Loans under
(and secured by) this Agreement and shall bear interest at the rate applicable
to the Loans. No payment made or action taken by the Lender or its designee
shall be deemed or construed to be a waiver, cure or satisfaction of the
underlying default, which default shall be deemed to be continuing until such
time (if ever) as the Loan Parties have, prior to the Maturity Date, (i) resumed
the payment, performance and satisfaction required by this Agreement and the
other Loan Instruments and (ii) repaid all Loans advanced for such payments and
actions, together with interest thereon, and paid all others to whom the Lender
has requested direct payment respecting such payments and actions.
Section 7.05. Litigation Respecting Collateral. (a) In the event that
any action, suit or other proceeding (whether or not purportedly on behalf of
any Loan Party) at law, in equity, in arbitration or before any other Authority
involving or affecting the Collateral (a "Proceeding") is contemplated by any
Loan Party or is otherwise commenced by or against any party hereto, the Loan
Parties shall give the Lender immediate notice thereof. Within twenty Business
Days after its receipt of such notice, the Lender shall notify the Loan Parties
that either (i) the Lender will join in the Proceeding, (ii) a specified
designee of the Lender will join in the Proceeding, or (iii) the Loan Parties
may prosecute the Proceeding without the participation of the Lender or its
designee, which Proceeding in any event shall be conducted in accordance with
the provisions of subsection (b) of this Section. In the event the Lender fails
to respond to such notice of the Proceeding within that period, the Lender shall
be deemed to have elected alternative (iii) above, and the Loan Parties shall
prosecute the proceeding accordingly, without, however, waiving any other right,
power, privilege, remedy or interest of the Lender under this Agreement, the
other Loan Instruments and Applicable Law.
(b) If any Loan Party elects to commence a Proceeding or a Proceeding
has otherwise commenced by or against any party hereto, the Loan Parties shall
cause the same to be prosecuted (A) in such a manner that all the rights of the
Lender are preserved and protected to the fullest extent reasonably possible and
(B) with counsel to that Loan Party that is acceptable to and represents both
that Loan Party and the Lender. Subject to compliance by the Loan Parties with
the foregoing, (x) the Lender (if named as a party by someone other than the
Borrower or any Surety) shall join in the Proceeding and take any other action
reasonably requested by counsel to that Loan Party to facilitate the prosecution
thereof, all at the sole cost and expense of that Loan Party, and (y) the
Proceeding may be prosecuted by that Loan Party in such manner as that Loan
Party and its counsel reasonably deem appropriate. In any event, if the Lender
determines at any time during the pendency of a Proceeding (after consultation
with counsel to the Lender) that the interests of the Lender are at variance
with the interests of any Loan Party, the Lender may appoint its own counsel
(whose expenses, disbursements and fees shall be paid for by that Loan Party) to
represent the Lender in the Proceeding, and the Loan Parties and its counsel
shall cooperate with the Lender and its counsel to the fullest extent possible
in that Proceeding.
(c) Each Loan Party acknowledges that pursuant to Section 7.01 hereof it
granted to the Lender a senior security interest in and to, among other things,
all such Proceedings by or for the benefit of the Loan Party, whether related to
any of the enumerated Collateral or otherwise.
Section 7.06. Power of Attorney. With respect to the various assets and
properties included or required to be included in the Collateral hereunder, each
Loan Party hereby irrevocably makes, constitutes
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and appoints the Lender and the Lender's executive officers (Vice President or
above), and each of them, with full power of substitution, as the true and
lawful attorney-in-fact of the Loan Party, with full power and authority from
time to time in the name, place and stead of the Loan Party to: (a) do any of
the things specified in Section 7.07(b) hereof in the name of the Loan Party,
utilizing the Loan Party 's letterhead (or an approximation thereof) to the
extent the Lender may deem necessary or desirable; (b) pay any Indebtedness or
other liability or perform any other obligation required to be paid or performed
under this Agreement or any other Loan Instrument by any Loan Party, any Surety
or any other Person (other than the Lender); (c) prepare and execute on behalf
of each Loan Party any additional Note as contemplated in Section 2.03(c) hereof
and any mortgage, financing statement or other evidence of a security interest
contemplated by this Agreement, or any modification, refiling, continuation or
extension thereof; (d) take any other action contemplated by this Agreement or
any other Loan Instrument; and (e) sign, execute, acknowledge, swear to, verify,
deliver, file, record and publish any one or more of the foregoing; provided,
however, that the above-named attorneys-in-fact may exercise the powers set
forth in subsections (a), (b), and (d) of this Section only following the
Lender's written notice pursuant to Section 7.07 of this Agreement and during
the continuance of the subject Event of Default, whether or not any reference to
this Power of Attorney is made in that notice, and without regard to whether any
other action has been taken by the Lender under this Agreement or any other Loan
Instrument. This Power of Attorney is hereby declared to be irrevocable, with
full power of substitution and coupled with an interest. This Power of Attorney
shall survive the dissolution, reorganization or bankruptcy of any Loan Party
and shall extend to and be binding upon the successors, assigns, heirs and legal
representatives of each Loan Party. This Power of Attorney may be exercised (i)
by any one of the above-named attorneys-in-fact, or by any substitute designated
by any of those attorneys-in-fact, and (ii) by signing for any Loan Party
individually on any document or instrument or by listing two or more of the
persons, including the Loan Parties, for whom any document or instrument is
being signed and signing once, with a single signature by the attorney-in-fact
or substitute being effective to exercise the Powers of Attorney of all persons
so listed. A facsimile signature shall be effective if so affixed. The Lender
shall not be liable for any failure to collect or enforce the payment of any of
those assets and properties.
Section 7.07. Rights of the Lender to the Collateral, Deficiencies, Etc.
If any Event of Default shall have occurred and is then continuing, the Lender
may take (and/or may cause one or more of its designees to take) any or all of
the following actions, after giving the Loan Parties prior written notice, or in
the case of subsection (e) of this Section after giving the Loan Parties at
least three (3) Business Days' prior written notice (which notice period each
Loan Party acknowledges and agrees to be adequate and reasonable), with a single
such notice being sufficient to entitle the Lender from time to time thereafter
to take any one or more of the actions described below:
(a) prohibit any Loan Party from taking any action respecting any Collateral
otherwise permitted by this Agreement and the other Loan Instruments;
(b) (i) notify each of the account debtors, obligors, issuers, securities
intermediaries, financial institutions, custodians, lessees or lessors,
mortgagors, and other parties under or with respect to or interested in
any item of the Collateral of the security interest of the Lender
therein (without limiting the right of the Lender to do so at other
times as permitted by this Agreement or any other Loan Instrument) or of
any action proposed to be taken with respect thereto, and direct one or
more of those parties to make all payments, distributions and proceeds
with respect thereto otherwise payable to any Loan Party directly to the
Lender or its order until notified by the Lender that all the
Obligations have been fully paid and satisfied, (ii) demand, collect,
receive and retain any and all payments, distributions and proceeds of
any kind with respect to any and all of the Collateral, demand and
direct other performance, enforce payment or other performance by legal
proceedings as permitted by law, and give receipts, releases and
acquittances in connection therewith, (iii) take possession or control
of, and execute or endorse (to the Lender or otherwise) and negotiate,
present or otherwise collect, any item of Collateral and any one or more
notes, checks, drafts, bills of exchange, money orders, invoices,
freight bills, bills of lading or other instruments, agreements or
documents received in payment for or under or on account of any
Collateral, (iv) receive, open and dispose of all mail and other
deliveries to any Loan Party, take over any Loan Party's post office
boxes and request postal authorities and others to change the delivery
address(es) for any Loan Party or make other arrangements with such
authorities as the Lender may deem necessary or desirable in order to
receive any Loan Party's mail and other deliveries, (v) negotiate,
settle, adjust, compromise, discharge, release, extend or renew any
account, instrument, payment intangible or other agreement, right or
claim of any Loan Party included in the Collateral, whether as an
inducement to prompt payment or performance and whether or not
meritorious, customary or in the ordinary course of business, and
commence, prosecute, defend, settle, abandon or withdraw any claims,
suits or proceedings pertaining to or arising out of any Collateral,
(vi) prepare, file and sign any Loan Party's name on any proof of claim
in bankruptcy, notice of Lien, assignment or satisfaction of Lien or
similar document in any action or proceeding by, against or otherwise
involving to any obligor under any Collateral, (vii) use or disclose in
any way any of the information contained in any Loan Party's
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Books and Records, and (viii) exercise and enforce all of the any Loan
Party's other rights, powers, privileges, remedies and interests with
respect to the Accounts Receivable, other accounts, instruments,
documents of title, chattel paper, financial assets, investment
property, payment intangibles and general intangibles and other assets
and properties included in the Collateral, whether against ;
(c) direct the Loan Parties or any other holder of Collateral to assemble
and deliver such Collateral to the Lender or its designee at such
time(s) and place(s) as the Lender from time to time may specify, all
without any risk or expense to the Lender; and enter any premises where
any item of Collateral may be located, with or without permission or
process of law but without breach of the peace, and seize and remove
such Collateral or remain upon such premises and use or dispose of such
Collateral as contemplated under this Agreement and the other Loan
Instruments;
(d) request the judicial appointment of a receiver respecting the Collateral
(excluding funds in the possession of the Lender and such other
Collateral as the Lender may specify in its request) in any action, suit
or proceeding in which claims are asserted against the Collateral by the
Lender or its designee, irrespective of the solvency of any Loan Party
or any other Person or the adequacy of any collateral, and without
notice to or the approval of the Loan Party, which receiver shall have
the power to manufacture, operate, sell, lease or rent such items of
Collateral pending the sale of all of the Collateral and to collect the
rent, issues and profits therefrom, together with such other powers as
may have been requested by the Lender, and shall apply the amounts
received (net of all proper charges and expenses) to the Obligations as
provided in this Agreement;
(e) take any action with respect to the offer, sale, lease or other
disposition, and delivery of the whole of, or from time to time any one
or more items of, the Collateral, including, without limitation: (i) to
sell, assign, lease or otherwise dispose of the whole of, or from time
to time any part of, the Collateral, or offer, commit or agree to do so,
in any established market or at any broker's board, private sale or
public auction or sale (with or without demand on any Loan Party or any
advertisement or other notice of the time, place or terms of sale) for
cash, credit or any other asset or property, for immediate or future
delivery, and for such consideration and upon such terms and subject to
such conditions as the Lender in its sole and absolute discretion may
determine, and the Lender may purchase (the consideration for which may
consist in whole or in part of cancellation of Indebtedness) or any
other Person may purchase the whole or any one or more items of the
Collateral, and all items purchased shall be free and clear of any and
all rights, powers, privileges, remedies and interests of the Loan
Parties (whether individual, joint, several or otherwise), which each
Loan Party has expressly waived pursuant to Section 7.08 hereof; (ii) to
postpone or adjourn any such auction, sale or other disposition, to
cause the same to be postponed or adjourned from time to time to a
subsequent time and place, or to abandon or cause the abandonment of the
same, all without any advertisement or other notice thereof; and (iii)
to carry out any agreement to sell any item or items of the Collateral
in accordance with the terms and provisions of such agreement,
notwithstanding that, after the Lender shall have entered into such an
agreement, all the Obligations may have been paid and satisfied in full;
(f) exercise any voting, consent, enforcement or other right, power,
privilege, remedy or interest of any Loan Party pertaining to any item
of Collateral to the same extent as if the Lender were the outright
owner thereof, provided that the Lender shall not be entitled to
exercise any of the voting rights of any Loan Party pertaining to any
equity interest in another Person unless and until the Lender has given
specific written notice to the Loan Parties, apart from the notice first
referred to in this subsection, of the Lender's election to exercise one
or more, or all, such voting rights;
(g) take possession of and thereafter deal with or use from time to time all
or any part of the Collateral in all respects as if the Lender were the
outright owner thereof, which shall include (without limitation) the
right to manufacture, operate, sell, lease or rent items of Collateral,
as well as to sell parts of the Collateral pending the sale of all of
the Collateral, and to collect the rent, issues and profits therefrom;
(h) transfer or cause the transfer of the ownership of all or any part of
the Collateral to its own name or any designee and have such transfer
recorded in any jurisdiction(s) and publicized in any manner deemed
appropriate by the Lender; and
(i) in addition to, and not by way of limitation of, any of the rights
specified above, exercise or enforce any and all rights, powers,
privileges, remedies and interests afforded to the Lender under this
Agreement, the other Loan Instruments and any and all provisions of
Applicable Law (including, without limitation, the UCC), whether as a
secured party or mortgagee, whether in possession or control of
collateral or otherwise.
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Each Loan Party acknowledges and agrees that the term "default" as used in the
UCC includes (without limitation) any Default or Event of Default.
Section 7.08. Certain Acknowledgments and Waivers by the Loan Parties.
(a) Each Loan Party acknowledges and agrees that the rights, powers, privileges,
remedies and interests granted to or conferred upon the Lender in respect of any
of the Collateral by this Agreement, the other Loan Instruments (in certain
cases) and Applicable Law are purely discretionary and shall not, and shall not
be deemed or construed to, impose upon the Lender any duty or other obligation
(i) to sell, foreclose or otherwise realize upon any of the Collateral, (ii) to
protect, preserve, process, prepare, repair or improve any of the Collateral,
whether or not in the possession or control of the Lender or any of its
designees, (iii) to perform or satisfy any obligation under or respecting any of
the Collateral or any Loan Party, (iv) to make any representation or warranty or
assume any liability or obligation in its liquidation or disposition of any
Collateral, (v) to mitigate or otherwise reduce any damage or other loss, or
(vi) to otherwise exercise or enforce any such right, power, privilege, remedy
or interest. Any sale, foreclosure or other realization upon any of the
Collateral, or any other exercise or enforcement of any such right, power,
privilege, remedy or interest, if undertaken by the Lender in its sole and
absolute discretion, may be delayed, discontinued or otherwise not pursued or
exhausted for any reason whatsoever (whether intentionally or otherwise).
(b) Each Loan Party acknowledges and agrees that: (i) the Lender may be
unable to effect a public sale of certain of the Collateral by reason of certain
prohibitions contained in the Securities Act, and may be otherwise delayed or
adversely affected in effecting any sale by reason of present or future
restrictions thereon imposed by governmental Authorities ("Affected
Collateral"), and a ready market may not exist for Affected Collateral that is
not traded as such on a national securities exchange or quoted on an automated
quotation system; (ii) as a consequence of such prohibitions and restrictions
the Lender may be deem it necessary or desirable (A) to resort to one or more
private sales to a restricted group of purchasers who will be obliged to agree,
among other things, to acquire Affected Collateral for their own account, for
investment and not with a view to the distribution or resale thereof, (B) to
seek regulatory approval of any proposed sale or sales, or (C) to limit the
amount of Affected Collateral sold to any Person or group: (iii) private sales
so made may be at prices and upon terms less favorable to the Loan Parties than
if such Affected Collateral was sold either at public sales or at private sales
not subject to such restrictions; (iv) the Lender has no obligation to delay the
sale of any Affected Collateral for the period of time necessary to permit any
Loan Party or any other Person to register or otherwise qualify them under or
exempt them from any applicable restriction, even if any Loan Party or other
Person would agree to register or otherwise qualify or exempt such Affected
Collateral so as to permit a public sale under the Securities Act or applicable
state law; and (v) the use of private sales made under the foregoing
circumstances to dispose of Affected Collateral shall be deemed to be
dispositions in a commercially reasonable manner.
(c) Without limiting the generality of the foregoing, each Loan Party
hereby irrevocably, unconditionally and expressly waives forever (to the fullest
extent permitted by Applicable Law) each and every claim or defense, and each
Loan Party agrees that it will not assert or pursue (by action, suit,
counterclaim or otherwise) any claim or defense, respecting, and each Loan Party
acknowledges and agrees that it would not be commercially unreasonable for the
Lender to make or effect, (i) any settlement or compromise with any obligor or
other third party under any Account Receivable, account, note, instrument,
agreement, document or general intangible included in the Collateral,
irrespective of any reduction in the potential proceeds therefrom, (ii) the
selection or order of disposition of any Collateral (which may be at random or
in any order(s) the Lender may select in its sole and absolute discretion),
(iii) any disposition of any Collateral in its then current condition, in each
case without any processing, preparation, repair, or improvement, any
registration, qualification or other approval or change therein, or any other
beneficial action respecting any Collateral, any of which the Lender in its
discretion may (but shall not be required to) undertake and which if so
undertaken may be delayed, discontinued or otherwise not pursued or exhausted by
the Lender in its discretion for any or no reason whatsoever (whether
intentionally or otherwise), (iv) any private sale or other disposition of any
Collateral in a commercially reasonable manner, whether or not any public market
exists, or any sale, redemption or other disposition of any Collateral in
accordance with the applicable Collateral Acknowledgment, Custody Document or
Organizational Document, (v) the choice or timing of any disposition date (which
the Lender may select in its sole and absolute discretion), irrespective of
whether greater proceeds or other amounts would be realizable on a different
date, (vi) the choice of whether to sell, lease, license or otherwise dispose of
any Collateral (which the Lender may select in its discretion), irrespective of
whether greater proceeds or other amounts would be realizable (immediately or
otherwise) with a different form of disposition, (vii) any sale or other
disposition of Collateral irrespective of (A) the amount of the proceeds or
other amounts received, whether such amounts are the maximum possible, and
whether such amounts are adequate to satisfy the Obligations, or (B) any other
term or condition of any disposition of any Collateral, including (without
limitation) any disposition by the Lender "as is" or with limited or no
representations or warranties from the Lender respecting title, infringement,
interference, merchantability, fitness for a particular purpose or other
condition, circumstance or event, (viii) any
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sale or other disposition of Collateral to the first Person to receive an offer
or make a bid, (ix) the selection of any purchaser or other acquiror of any
Collateral, or (x) any action or inaction in the event of any default by any
purchaser or other acquiror of any Collateral. Neither the Lender nor any of its
representatives shall incur any liability in connection with any sale of or
other action taken respecting any Collateral in accordance with the provisions
of this Agreement, any other Loan Instrument or Applicable Law.
(d) Each Loan Party hereby unconditionally, irrevocably and expressly
waives forever the applicability of each and every Applicable Law pertaining to
notice (other than notices required by this Agreement or any other Loan
Instrument), appraisal, valuation, stay, extension, moratorium, marshaling of
assets, exemption and equity of redemption and similar provisions respecting
collateral or its disposition that are or may be in conflict with the terms and
provisions of this Agreement and the other Loan Instruments now or at any time
in the future to the extent waiver is not limited under Applicable Law.
(e) Notwithstanding anything herein to the contrary, each Loan Party
shall remain liable under each note, instrument, agreement, account, document or
similar general intangible of the Loan Party (each a "Pledged Agreement") or
other item of Collateral to observe and perform all the terms, provisions,
conditions and obligations to be observed and performed by it thereunder, all in
accordance with the terms thereof. Neither the Lender nor any of its
Representatives shall have any duty, obligation or liability under any Pledged
Agreement or any other Collateral by reason of or arising out of this Agreement,
the security interests granted hereunder or the receipt by the Lender or any of
its Affiliates or designees of any payment relating to any Account Receivable,
Pledged Agreement or other item of Collateral, nor shall the Lender or any of
its Representatives be obligated in any manner to perform any of the obligations
of any Loan Party or any other party under or pursuant to any Account
Receivable, Pledged Agreement or other item of Collateral, to make any payment,
to make any inquiry as to the nature or the sufficiency of any payment received
by it or as to the sufficiency of any performance by any party under any Account
Receivable, Pledged Agreement or other item of Collateral, to present or file
any claim, to take any action to enforce any performance or to collect the
payment of any amounts which may have been assigned to it or to which it may be
entitled at any time or times.
Section 7.09. Application of Proceeds; Liability for Deficiencies. (a)
The Lender shall collect the cash proceeds received from any sale or other
disposition of Collateral, and, after deducting all costs and expenses incurred
by the Lender and any Person designated by the Lender to take any of the actions
enumerated in this Article or under Applicable Law in connection with such
collection and sale or disposition (including attorneys' disbursements, expenses
and fees), the Lender shall apply the same in accordance with the terms and
provisions of this Agreement unless the Lender shall elect (in its sole and
absolute discretion) to retain the same as additional or substitute Collateral.
In the event any funds remain after satisfaction in full of the Obligations,
then the remainder shall be returned to each Loan Party, subject, however, to
any other rights or interests the Lender may have therein under any other
instrument, agreement or document or Applicable Law.
(b) If the amount of all proceeds received with respect to and in
liquidation of the Collateral that shall be applied to payment of the
Obligations shall be insufficient to pay and satisfy all of the Obligations in
full, each Loan Party acknowledges and agrees that it shall remain liable for
any deficiency (i.e., any Obligations remaining unpaid), together with interest
thereon and costs of collection thereof (including attorneys' disbursements,
expenses and fees), in accordance with the terms and provisions of this
Agreement and the other Loan Instruments.
Section 7.10. Partial Releases. The Lender from time to time shall
release portions of the Collateral from the liens and security interests granted
under this Agreement and the other Loan Instruments qualifying for release under
(and subject to the terms and conditions of) subsection [(a) or (b)] of this
Section, shall execute and deliver the documentation reasonably required to
effect each such release (in such form and substance as may be acceptable to the
Lender), all upon the terms and provisions and subject to the conditions of the
subsections of this Section, in each case subject to receipt of evidence and
documentation in such form and substance as may be acceptable to the Lender that
those terms and conditions have been satisfied; provided that no Default or
Event of Default then exists or could result therefrom (whether through any Pro
Forma Effect or otherwise), unless, after giving effect to the consummation of
the transaction for which the release was requested and the application of the
net cash proceeds thereof, if any, toward the prepayment of the Obligations, the
default or other event shall cease to exist. Any and all actions under this
Section shall be without any recourse to or representation or warranty by the
Lender and shall be at the sole cost and expense of the Loan Parties.
(a) In the event of any sale or other disposition of any Collateral
expressly permitted under Section 7.03(a) hereof or any other term or provision
of this Agreement or any other Loan Instrument, the Lender will release that
item, subject to receipt by the Lender of any payment or prepayment from any
Loan Party required by this Agreement or any other Loan Instrument.
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(b) In the event any debtor under any indenture, agreement, note,
instrument or account receivable pledged to the Lender pursuant to this
Agreement shall have paid all amounts due thereunder in full and shall have
complied with all other terms and conditions thereof, the Lender will release
that item and if requested return the applicable instruments and other documents
to the applicable Loan Party or its designee, subject to receipt by the Lender
of any payment or prepayment from the Loan Parties required by this Agreement or
any other Loan Instrument.
Section 7.11. Termination of Security Interests. The security interests
granted to the Lender hereunder shall terminate when the Line of Credit shall
have been fully extinguished and the Obligations shall have been fully paid and
satisfied. Upon such complete extinguishment, payment and satisfaction: the
Lender shall reassign, release and/or deliver to the Loan Parties all Collateral
then held by or at the direction of the Lender under the Loan Instruments; and,
if requested by the Loan Parties, the Lender shall execute and deliver to the
Loan Parties for filing in each office in which any financing statement,
mortgage, or lease, or assignment thereof, relating to the Collateral, or any
part thereof, shall have been filed, a termination statement under the UCC or an
appropriate satisfaction, release, reconveyance or reassignment releasing the
Lender's interest therein, and any other instrument or document that the Loan
Parties deem reasonably necessary to evidence the termination of the Lender's
security interest, each in such form and substance as may be acceptable to the
Lender. Any and all actions under this Section shall be without any recourse to
or representation or warranty by the Lender and shall be at the sole cost and
expense of the Loan Parties.
ARTICLE VIII.
DEFAULTS AND REMEDIES
Section 8.01. Events of Default. Each of the following events shall
constitute a default under this Agreement (each an "Event of Default"):
(a) any representation, warranty, acknowledgement or certification made in
this Agreement or any other Loan Instrument shall prove to have been
false or misleading in any material respect when made (or deemed made);
or any report, statement, certificate, schedule or other document or
information furnished (whether prior to, on or after the Effective Date)
in connection with this Agreement or any of the other Loan Instruments
shall prove to have been false or misleading in any material respect
when furnished (or deemed furnished);
(b) any default, whether in whole or in part, shall occur in the payment of
the principal of, the interest on or any other amount respecting: (i)
the Loans or any of the other Obligations; (ii) any other Indebtedness
of any Loan Party or any Surety to the Lender or any of its Affiliates;
or (iii) any guaranty or other Credit Support from any Loan Party or any
Surety to the Lender or any of its Affiliates respecting any
Indebtedness of any other Person;
(c) any default, whether in whole or in part, shall occur in the payment or
satisfaction of any amount required under Section 2.06(h) of this
Agreement, and such default shall continue (after the earlier of notice
thereof to or knowledge thereof by any Loan Party) for a period of three
(3) Business Days;
(d) any default, whether in whole or in part, shall occur in the due
observance or performance of any covenant, term or provision to be
performed under Article VI of this Agreement (other than under Section
6.10 or 6.11 hereof) or the Confidentiality Agreement, and such default
shall continue after the earlier of notice thereof to or knowledge
thereof by any Loan Party;
(e) any default, whether in whole or in part, shall occur in the due
observance or performance of any other covenant, term or provision to be
performed under this Agreement and the other Loan Instruments, any Stock
Purchase Document or any ESOP Related Document by any Loan Party, any
Surety or any other party thereto (other than the Lender), which default
is not described in any other subsection of this Section, and such
default shall continue for a period of ten (10) days after the earlier
of notice thereof to or knowledge thereof by the Borrower; provided,
however, that if such default is capable of being cured and if the
Borrower, any Surety or such other party shall have commenced to cure
such default within such period and shall proceed continuously in good
faith and with due diligence to cure such default, then such period
instead shall be thirty (30) days;
(f) any Event of Default, whether in whole or in part, shall occur under the
Term Loan Agreement;
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(g) any payment default shall occur and continue beyond any applicable grace
period under any instrument or agreement (other than a Loan Instrument)
respecting any Indebtedness of any Loan Party or any Surety or any
Indebtedness of any other Person covered (in whole or in part) by any
guaranty or other Credit Support from any Loan Party or any Surety; or
any default, whether in whole or in part, shall occur in the due
observance or performance of any term or provision of any instrument or
agreement (other than a Loan Instrument) respecting any Indebtedness of
any Loan Party or any Surety, or any guaranty or other Credit Support
from any Loan Party or any Surety respecting any Indebtedness or other
obligations of any other Person, that shall cause or permit acceleration
of any such Indebtedness or demand for payment or any additional
interest or other amount under any such Indebtedness or Credit Support,
which default is not described in any other subsection of this Section,
unless payment shall be made or action shall be taken within five (5)
Business Days after such default in an amount or manner sufficient to
cure it and the Lender receives confirmation of such cure from the
lender thereunder, provided that such payment or -------- ---- action
will not result in a breach of any term or provision of this Agreement
and the other Loan Instruments;
(h) any Loan Party or any Surety shall (i) fail to, be unable to or
otherwise not generally pay its debts as they become due, (ii) conceal,
remove or transfer any of its assets and properties in violation or
evasion of any bankruptcy, fraudulent conveyance or similar Applicable
Law, (iii) make an assignment for the benefit of its creditors, (iv)
petition or apply for or consent to the appointment of a receiver,
trustee, assignee, custodian, sequestrator, liquidator or similar
official for itself or any of its assets and properties, (v) commence a
voluntary case for relief as a debtor under any Bankruptcy Law, (vi)
file with or otherwise submit to any governmental Authority any
petition, answer or other document seeking (A) reorganization, (B) an
arrangement with creditors or (C) to take advantage of any other present
or future Applicable Law respecting bankruptcy, reorganization,
insolvency, readjustment of debts, relief of debtors, dissolution or
liquidation, (vii) file or otherwise submit any answer or other document
admitting or failing to contest the material allegations of a petition
or other document filed or otherwise submitted against it in any
proceeding under any such Applicable Law, (viii) be adjudicated a
bankrupt or insolvent, or (ix) take any action for the purpose of
effecting any of the foregoing;
(i) any petition shall be filed or case, proceeding or other action shall be
commenced against any Loan Party or any Surety for the purpose of
effecting, or an order, judgment or decree shall be entered by any court
of competent jurisdiction approving (in whole or in part), anything
specified in subsection (h) of this Section, or any receiver, trustee,
assignee, custodian, sequestrator, liquidator or other official shall be
appointed with respect to any Loan Party or any Surety, or shall be
appointed to take or shall otherwise acquire possession or control of
all or a substantial part of the assets and properties of any Loan Party
or any Surety, and any of the foregoing involuntary actions shall not be
vigorously contested in good faith by such party and shall continue
unstayed and in effect for any period of 30 days;
(j) one or more final judgments for the payment of money in excess of an
aggregate of $10,000 shall be rendered against any Loan Party or any
Surety (other than fully insured losses) and the same shall remain
undischarged for a period of 30 days during which levy and execution
shall not be effectively stayed or contested in good faith;
(k) any ERISA Event shall occur, or any action, suit, investigation or
proceeding involving or affecting any Plan or any assets or properties
of any Plan shall be adversely determined; any fiduciary or sponsor of,
or participant in, any Plan shall take or commit any of the actions
specified in subsection (h) of this Section in respect of the Plan or
all or substantially all of its assets and properties; or any action,
suit or proceeding shall otherwise be commenced against any Plan or any
of its fiduciaries, sponsors or participants for the purpose of
effecting, or any order, judgment or decree shall be entered by any
court of competent jurisdiction approving (in whole or in part),
anything specified in subsection (h) of this Section in respect of any
Plan or all or substantially all of its assets and properties, or any
receiver, trustee, assignor, custodian, sequestrator, liquidator or
other official shall be appointed with respect to any Plan or all or a
substantial part of its assets and properties, or shall be appointed to
take or shall otherwise acquire possession or control of all or a
substantial part of the assets and properties of any Plan, and any of
the foregoing shall continue unstayed and in effect for any period of 30
days;
(l) any seizure, levy, attachment, distraint, loss, destruction,
termination, foreclosure or other material loss, destruction,
termination, foreclosure or other material impairment, deterioration or
diminution, in whole or in part, shall occur with respect to all or any
part of (i) the Collateral or any collateral granted by any Surety
(other than fully insured casualty losses to the extent the Lender has a
perfected first priority security interest in and actually receives all
insurance proceeds with respect thereto to the extent required by this
Agreement and the other Loan Instruments), or (ii) the Lender's
perfected security
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interest therein, or any Loan Party or any Surety shall do or fail to do
or resist, or cause, suffer or permit anyone else to do, anything that
would so affect any such collateral or security interest;
(m) any Loan Instrument (in whole or in part) at any time and for any reason
whatsoever (i) shall cease to be in full force and effect, (ii) shall be
declared null and void, (iii) shall be contested or otherwise challenged
as to its validity or enforceability by any Loan Party or any Surety or
(iv) shall be the subject of any denial by any Loan Party or any Surety
of any liability or obligation of such party thereunder;
(n) any Loan Party or any Surety shall be or become the subject of or a
party to any criminal indictment or conviction;
(o) a change shall occur in the identity or control of the ESOP Trustee
unless replaced by an institutional trustee that (i) is not an Affiliate
of the Borrower or the Lender and (ii) has been approved in advance of
such change in writing by the Lender, which approval will not be
withheld unreasonably;
(p) any Loan Party or any of its subsidiaries shall cease to be or be
qualified to be a subchapter "S" corporation under the Tax Code;
(q) the failure of Holdings to issue 1,000,000 shares of its capital stock
to the ESOP Trust immediately after the closing of the sale of the SPG
Stock under the Stock Purchase Agreement, or the failure of Holdings to
redeem (immediately after its delivery of the Term Notes and such
issuance to the ESOP Trust) its capital stock from its shareholder(s)
other than the ESOP Trust;
(r) any Person shall be or become a record holder of any of the capital
stock issued by the Borrower other than (i) the ESOP Trust, (ii) the
employees of the Borrower or Holdings as expressly permitted under the
ESOP Plan, (iii) the employees of the Borrower or Holdings pursuant to
the exercise of any Permitted Option in accordance with its terms, or
(iv) the holder(s) of the Holdings Warrant;
(s) any Person other than Holdings shall be or become a record or beneficial
owner of any capital stock issued by the Borrower or any other Guarantor
(other than Holdings), or a change shall occur in the control of any
Surety, whether by a change in ownership or otherwise;
(t) if either of Tom Hunter or John Hawkins shall cease to actively function
and continue in their current positions with any Loan Party unless
replaced within 30 days thereof by a Person approved by the Lender in
writing, which approval shall not be unreasonably withheld; or
(u) there shall occur any event or events that (individually or in the
aggregate with any other event(s)) could have or has had a Material
Adverse Effect or Surety's Adverse Effect, as determined by the Lender
in the exercise of its reasonable judgment, and the Lender shall have
given the Loan Parties notice of such determination.
Section 8.02. Remedies upon Default. Upon the occurrence or at any time
thereafter during the continuance of any Event of Default, the Lender, upon
notice to the Loan Parties, shall be entitled, without limiting its ability to
do so at other times (each Loan Party hereby acknowledging that all Letter of
Credit Advances and interest thereon and certain other Obligations are payable
on demand as provided in Article II hereof notwithstanding anything in this
Section or in Section 8.01 to the contrary): (a) to terminate the Line of
Credit; (b) to declare the Loans and all other Obligations to be immediately due
and payable, whether principal, interest or otherwise, without presentment,
demand, protest or other notice of any kind, all of which are hereby expressly
waived by each Loan Party, notwithstanding anything contained in this Agreement,
any Note or any of the other Loan Instruments to the contrary; (c) to exercise
or enforce any one or more of the Lender's rights, powers, privileges, remedies
and interests under this Agreement, each Note, the Guaranty, the other Loan
Instruments and Applicable Law; and (d) to demand the immediate deposit by the
Borrower of cash Collateral in a non-interest bearing demand deposit account
with the Lender or such other institution as the Lender may designate in an
amount equal to the aggregate unadvanced face amounts of the Letters of Credit
then outstanding in order to further secure repayment of all Letter of Credit
Advances, together with interest thereon, and all of the other Obligations in
full, which deposits shall remain Collateral until the all of the Letters of
Credit have been paid (and the corresponding Letter of Credit Advance repaid by
the Borrower) or have been surrendered to the Lender for return to and
cancellation by the issuers thereof (provided that any Letter of Credit that has
not been presented for payment shall be deemed for this purpose to have been
canceled on the forty-fifth day following the stated expiry date, without,
however, relieving the Borrower of any of the Obligations with respect to any
such Letter of Credit that is in the process of payment) and all of the other
Obligations have been fully paid and satisfied, and which obligation to deposit
is itself secured by the Collateral pursuant to this Agreement and the other
Loan Instruments; provided, however, that in the event of the occurrence of any
of the
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Events of Default respecting each Loan Party set forth in subsections (h) and
(i) of Section 8.01, then simultaneously with that event, and without the
necessity of any notice or other action by the Lender, the Line of Credit shall
be automatically extinguished and the Loans and all of the other Obligations
shall be accelerated and immediately due and payable as stated above.
Section 8.03. Enforcement, Etc. The Lender, in its sole and absolute
discretion, may proceed to exercise or enforce any right, power, privilege,
remedy or interest that the Lender may have under this Agreement, any other Loan
Instrument or Applicable Law: (a) at law, in equity, in rem or in any other
forum available under Applicable Law; (b) without notice except as otherwise
expressly provided herein; (c) without pursuing, exhausting or otherwise
exercising or enforcing any other right, power, privilege, remedy or interest
that the Lender may have against or in respect of any Loan Party, the
Collateral, any Surety, or any other co-obligor, guarantor, surety, pledgor,
collateral or other Person or thing; and (d) without regard to any act or
omission of the Lender or any other Person. The Lender may institute one or more
proceedings (which may be separate proceedings) with respect to this Agreement
and each of the other Loan Instruments in such order and at such times as the
Lender may elect in its sole and absolute discretion. This Agreement and the
other Loan Instruments may be enforced without possession of any Note or its
production in any action, suit or proceeding. This Agreement and the other Loan
Instruments may be enforced with respect to any Loan Party without the presence
or participation of any Surety or any co-obligor (joint or several), guarantor,
pledgor or surety, whether through lack of jurisdiction, venue or service or
otherwise, and no Loan Party will raise, and each Loan Party hereby expressly
waives, any objection or defense respecting the need for any such presence or
participation.
Section 8.04. Equitable Relief. Each Loan Party acknowledges and agrees
that it may be impossible to measure in money the damage to the Lender in the
event of a breach of or default under any of the terms and provisions of
Sections 6.04, 6.05, 6.07, 6.08, 6.11, 6.12, 7.03, 7.05, and 7.07(a) of this
Agreement, and that, in the event of any such breach or default, the Lender, in
addition to all other rights, powers, privileges and remedies that it may have,
shall be entitled to injunctive relief, specific performance or such other
equitable relief as the Lender may request to exercise or otherwise enforce any
of the terms and provisions of those Sections and to enjoin or otherwise
restrain any act prohibited thereby, and no Loan Party will raise and hereby
expressly waives any objection or defense that there is an adequate remedy
available at law.
Section 8.05. Reinstatement. In the event any payment of or any
application of any amount, asset or property to any of the Obligations, or any
part thereof, at any time is rescinded or must otherwise be restored or returned
by the Lender upon the insolvency, bankruptcy or reorganization of any Loan
Party, any Surety or any other Person, whether by order of any court, by any
settlement approved by any court, or otherwise, then the terms and provisions of
this Agreement shall continue to apply, or shall be reinstated if not then in
effect, as the case may be, with respect to the Obligations so rescinded,
restored or returned, all as though such payment or application had never been
made.
Section 8.06. Waivers of Notice, Etc. Except for any written notice or
demand expressly required under this Agreement or any other Loan Instrument
under the circumstances, each Loan Party hereby expressly waives: (a) notice of
acceptance of this Agreement or any other Loan Instrument; (b) notice of any
action taken or omitted in reliance hereon; (c) presentment; (d) demand for
payment; (e) protest or notice of protest; (f) notice of any nonpayment or other
event that constitutes, or with or without the giving or receipt of notice, the
acquisition of knowledge or the passage of time (or any combination thereof)
would constitute, any nonpayment, nonperformance, misrepresentation or other
breach or default under this Agreement or any other Loan Instrument; (g) notice
of any material and adverse effect, whether individually or in the aggregate,
upon (i) the assets, business, operations, properties or condition (financial or
otherwise) of any Loan Party, any Surety or any other Person, (ii) the ability
of any of them to pay or otherwise satisfy (as and when due) any of their
respective obligations under any of the Loan Instruments, or (iii) any
collateral securing the obligations of any of them under the Loan Instruments or
its value or the validity, enforceability, perfection or priority of any
security interest of the Lender therein; or (h) any other proof, notice or
demand of any kind whatsoever with respect to any or all of the Obligations or
Surety's Obligations or promptness in making any claim or demand under this
Agreement or any other Loan Instrument. No act or omission of any kind in
connection with any of the foregoing shall in any way impair or otherwise affect
the legality, validity, binding effect or enforceability of any term or
provision of this Agreement or any other Loan Instrument or any of the
Obligations or Surety's Obligations.
Section 8.07. Consent to Jurisdiction, Waiver of Personal Service, Etc.
Each Loan Party hereby consents and agrees that the Supreme Court of the State
of New York for the County of Westchester and the United States District Court
for the Southern District of New York (Westchester Division) each shall have
personal jurisdiction and proper venue with respect to any dispute between the
Lender and the Loan Party under any Loan Instrument; provided that the foregoing
consent shall not deprive the Lender of the right in its sole and absolute
discretion to voluntarily commence or participate in any action, suit or
proceeding in any other court
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having jurisdiction and venue over any Loan Party. In any dispute with the
Lender, no Loan Party will raise, and each Loan Party hereby expressly waives,
any objection or defense to any such jurisdiction as an inconvenient forum.
Without in any way limiting the preceding consents to jurisdiction and venue,
the parties agree to submit to the jurisdiction of such New York courts in
accordance with Section 5-1402 of the General Obligations Law of the State of
New York or any corresponding or succeeding provisions thereof. Each Loan Party
hereby expressly waives personal service of any summons, complaint or other
process, which may be delivered by any of the means permitted for notices under
Section 9.01 hereof. In addition to (and without limitation of) any such
delivery or any other delivery permitted under Applicable Law, each Loan Party
agrees to execute an deliver to the Lender a Designation of Agent for Service
appointing CT CORPORATION SYSTEM as the agent of the Loan Party for service in
the State of New York, which the Loan Party hereby irrevocably authorizes the
Lender to date with such date (if undated) and file with the appropriate
Authority at such time as the Lender in its sole and absolute discretion may
elect. Within thirty (30) days after service of process, each Loan Party agrees
to appear or answer any summons or complaint of the Lender, and should that Loan
Party fail to appear or answer within said thirty-day period, that Loan Party
shall be deemed in default under that action and judgment may be requested by
the Lender and entered in favor of the Lender against that Loan Party for the
relief demanded in any complaint so served. Each Loan Party acknowledges and
agrees that a final judgment in any such action, suit or proceeding shall be
conclusive and binding upon that Loan Party and may be enforced against that
Loan Party or any of its assets or properties in any other appropriate
jurisdiction selected by the Lender (in its sole and absolute discretion) by an
action, suit or proceeding in such other jurisdiction. To the extent that that
Loan Party may be entitled to immunity (whether by reason of sovereignty or
otherwise) from suit in any jurisdiction, from the jurisdiction of any court or
from any other legal process, each Loan Party hereby irrevocably waives such
immunity.
Section 8.08. Waiver of Setoff, Special Damages, Etc. (a) Each Loan
Party hereby expressly waives, and agrees that it will not exercise, any and all
rights of setoff, recoupment, abatement or reduction or other claims or
counterclaims respecting any payment due (whether as scheduled or required, upon
acceleration or as sought in any action, suit or proceeding by the Lender) under
this Agreement, any other Loan Instrument, any Stock Purchase Document` or any
other agreement, facility or relationship with the Lender that may now or
hereafter be accorded to the Loan Party under Applicable Law or otherwise. To
the extent not required as a compulsory counterclaim in any related ongoing
proceeding, each Loan Party (i) shall pursue separate exercise and enforcement
of any right, power, privilege, remedy or interest retained (and not waived) by
the Loan Party under this Agreement, the other Loan Instruments, any other
agreement, facility or relationship with the Lender and Applicable Law, and (ii)
shall not seek to exercise or enforce any such right, power, privilege, remedy
or interest in any proceeding instituted by the Lender under or in respect of
any Loan Instrument, whether through joinder, consolidation, setoff, recoupment,
abatement, reduction, counterclaim, defense or otherwise.
(b) In any dispute with the Lender, each Loan Party covenants and agrees
that it will not seek, recover or retain any, and each Loan Party hereby
expressly waives any and all, special, exemplary, punitive, statutory and/or
consequential damages (whether through action, suit, counterclaim or otherwise
and whether in contract, tort, strict liability or otherwise) to the extent
waiver is not limited under Applicable Law.
Section 8.09. Relationship of the Borrower and the Lender, Etc. (a) Each
Loan Party represents, warrants, acknowledges and agrees that: (i) the Lender is
acting solely in the capacity of lender respecting this Agreement, the other
Loan Instruments, and the Collateral; (ii) the sole relationship of each Loan
Party with the Lender is that of debtor and creditor, respectively, and no term
or provision of this Agreement or any other Loan Instrument is intended to
create, nor shall any such term or provision be deemed or construed to have
created, any joint venture, partnership, trust, agency or other fiduciary or
advisory relationship with any Loan Party, any of its subsidiaries, any Surety
or any of their respective Affiliates; (iii) Each Loan Party is experienced in
the ownership, operation and financing of its current and contemplated business,
assets and properties; (iv) Each Loan Party and each Surety has independently
and fully reviewed and evaluated the Loan Instruments, the transactions
contemplated thereunder and the potential effects of such transactions on the
assets, business, operations, properties and condition (financial or otherwise)
of each of the Loan Parties and the subsidiaries and Affiliates of any Loan
Party (if any), which review and evaluation was made together with counsel and
(to the extent deemed prudent by the Loan Party) financial and other advisors to
each Loan Party and each Surety; and (v) neither Loan Party nor any Surety is
relying upon (A) the expertise, business acumen or advice of the Lender in
connection with any aspect of the ownership, operation or financing of its
business, assets or properties or its condition (financial or otherwise), or (B)
any oral or written advice, analysis or assurance of any kind whatsoever from
the Lender.
(b) Each Loan Party acknowledges and agrees that the Lender, its
Affiliates and its representatives may be providing debt financing, equity
capital or other services (including merchandising, research, financial advisory
or other services) to other companies or persons in respect of which the Loan
Party or a Surety may have conflicting interests regarding the transactions
described herein and otherwise. Neither the
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Lender nor any of its Affiliates will use or disclose to third parties
confidential information obtained from any Loan Party or any Surety by virtue of
the transactions contemplated by the Loan Instruments or its other relationships
with any Loan Party in connection with the performance by it of services for
other companies or persons, and neither the Lender nor any of its Affiliates
will furnish any such information to other companies or persons. Each Loan Party
also acknowledges and agrees that neither the Lender nor any of its Affiliates
or representatives has any obligation to use in connection with the transactions
contemplated by any Loan Instrument, or to advise any Loan Party or any Surety
of, or furnish to any Loan Party or any Surety, any confidential or other
information obtained by the Lender or any of their Affiliates or representatives
from or with respect to other transactions, companies or persons.
(c) By accepting or approving any certificate, statement, report or
other document or information required to be given to the Lender (whether as a
required notice or report, for approval or otherwise), or any alleged
performance of anything required to be observed, performed or fulfilled by any
Loan Party or any Surety, pursuant to this Agreement and the other Loan
Instruments, neither the Lender nor any of its Representatives shall have, or
shall be deemed or construed to have, made any representation or warranty to or
agreement with any Loan Party or any Surety with respect thereto (other than as
expressly provided therein) or affirmed the sufficiency, the legality,
enforceability, effectiveness or financial impact or other effect thereof.
Section 8.10. Lender's Right of Setoff, Etc. Upon the occurrence and
during the continuance of any Event of Default, the Lender hereby is authorized
at any time and from time to time, without notice to any Loan Party (any such
notice being hereby expressly waived by each Loan Party), to set off and apply,
directly or through any of its Affiliates, custodians, participants and
designees, any and all deposits (whether general or special, time or demand,
provisional or final, or individual or joint) and other assets and properties at
any time held in the possession, custody or control of the Lender or any of its
Affiliates, custodians, participants and designees, and any Indebtedness or
other amount or obligation (including, without limitation, any obligation under
any interest rate protection, foreign currency exchange, or other interest rate
or exchange rate swap or hedging agreement or arrangement) at any time owing by
the Lender or any of its Affiliates or participants, to or for the credit,
account or benefit of any Loan Party against any and all of the Obligations now
or hereafter existing under this Agreement or the other Loan Instruments,
whether or not the Lender shall have declared a default, accelerated the
obligations or made any demand or taken any other action under this Agreement or
any other Loan Instrument, and although such obligations may be contingent or
unmatured. Each Loan Party acknowledges that pursuant to Section 7.01 hereof it
granted to the Lender a senior security interest in and to, among other things,
all such deposits, assets, properties and Indebtedness in the possession of each
of the Affiliates, custodians, participants and designees of the Lender, and
each Loan Party hereby authorizes each such Person to so set off and apply such
amounts at such times and in such manner as the Lender may direct pursuant to
this Section, in each case to the fullest extent possible as if the Person
making the setoff were a direct creditor of the Loan Party in the full amount of
the Obligations. The Lender shall notify the Loan Parties after any such setoff
and application; provided, however, that the failure to give such notice shall
not affect the validity of such setoff and application. In debiting any such
account, the Obligations shall be deemed to have been paid or repaid only to the
extent of the funds actually available in that account notwithstanding any
internal procedure of the Lender or any of its Affiliates, custodians,
participants and designees to the contrary. The rights of the Lender under this
Section are in addition to and without limitation of any other rights, powers,
privileges, remedies and other interests (including, without limitation, other
rights of setoff and security interests) that the Lender may have under this
Agreement, the other Loan Instruments and Applicable Law.
Section 8.11. Reliance. The Lender shall be entitled to rely upon any
notice, consent, certificate, affidavit, statement, paper, document, writing or
other communication (which to the extent permitted hereunder may be by telecopy
or telephone) reasonably believed by the Lender to be genuine and to have been
signed, sent or made by the proper Person or persons, and upon opinions and
advice of legal counsel (including counsel for the Loan Parties), independent
public accountants and other experts selected by the Lender. The Lender shall be
entitled to rely, and in entering into this Agreement and the other Loan
Instruments in fact has relied, upon the representations, warranties and other
information respecting each Loan Party and each Surety contained in this
Agreement and the other Loan Instruments notwithstanding any investigation,
analysis or evaluation that may have been made or from time to time may be made
by the Lender or its designees of all or any part of the assets, business,
operations, properties or condition (financial or otherwise) of any Loan Party,
any Surety or any other Person.
Section 8.12. Exculpation and Indemnification. The Lender and its
participants, Affiliates and designees, and their respective shareholders,
partners, members, directors, officers, managers, employees, attorneys and
agents (together with the Lender, each an "indemnitee"), shall not incur any
liability for any acts or omissions (and each Loan Party hereby expressly waives
any and all related claims and actions against each indemnitee), and each
indemnitee shall be indemnified, reimbursed and held harmless by any Loan Party
on demand, and (at the request of the Lender) defended at the expense of any
Loan Party with counsel selected by
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the Lender, from and against any and all claims, liabilities, losses and
expenses (including, without limitation, the disbursements, expenses and fees of
their respective attorneys) that may be imposed upon, incurred by, or asserted
against any indemnitee, in each case arising out of or related directly or
indirectly to this Agreement, any other Loan Instrument, any of the Collateral,
any of the Loans or Letters of Credit or the application of any proceeds
thereof, any ERISA violation or claim, or any Environmental Claim, except to the
extent occasioned by the indemnitee's own acts or omissions breaching a duty
owed to any Loan Party and amounting to gross negligence or willful misconduct
as finally determined pursuant to Applicable Law by a governmental Authority
having jurisdiction. The preceding general exculpation and indemnification is
not intended (and shall not be deemed or construed) to in any way qualify,
condition, diminish, restrict, limit or otherwise affect any (and is in addition
to each) other release, waiver, consent, acknowledgment, agreement or other term
or provision of this Agreement or any other Loan Instrument.
Section 8.13. Sole Discretion of the Lender. Wherever pursuant to this
Agreement (a) the Lender exercises any right given to it to approve or
disapprove, (b) any arrangement or term is to be satisfactory to the Lender, or
(c) any other decision or determination is to be made by the Lender, the
decision of the Lender to approve, disapprove or make such determination shall
be in the sole and absolute discretion of the Lender, except as may be otherwise
expressly and specifically provided in this Agreement.
ARTICLE IX.
MISCELLANEOUS
Section 9.01. Notices, Etc. Except as otherwise expressly provided, any
notice, request, demand or other communication permitted or required to be given
under this Agreement or any other Loan Instrument shall be in writing, shall be
signed by the party giving it, shall be sent by one of the following means to
the addressee at the address set forth in Exhibit C hereto (or at such other
address as shall be designated hereunder by notice to the other parties and
persons receiving copies, effective upon actual receipt) and shall be deemed
conclusively to have been given: (i) on the first Business Day following the day
timely deposited for next Business Day delivery with Federal Express (or other
equivalent national overnight courier) or United States Express Mail for
overnight delivery, in either case designated for next Business Day delivery and
with the cost of such delivery prepaid or for the account of the sender; (ii) on
the fifth Business Day following the day duly sent by certified or registered
United States mail, postage prepaid and return receipt requested; or (iii) when
otherwise actually received by the addressee on a Business Day (or on the next
Business Day if received after the close of normal business hours or on any
non-Business Day). If a certificate, signed notice or other signed item is
expressly required by another provision of this Agreement or any other Loan
Instrument, a manually signed original must be delivered by the party giving it;
any other notice, request, demand or other communication instead may be sent by
telecopy, with the cost of transmission prepaid or for the account of the
sender, and shall (except as otherwise specified in this Agreement or any other
Loan Instrument) be deemed conclusively to have been given on the first Business
Day following the day duly sent. Refusal to accept delivery of any item shall be
deemed to be receipt of such item by the refusing party. Copies of notices to
persons specified in Exhibit C hereto (if any) may be sent by regular
first-class mail, postage prepaid, to such persons, but any failure or delay in
sending copies shall not affect the validity of any such notice, request, demand
or other communication so given to a party.
Section 9.02. Expenses of the Lender. Each Loan Party shall pay or
reimburse on demand any and all costs and expenses incurred by the Lender,
whether directly or indirectly, in connection with (a) the preparation,
execution and delivery of the Lender's term sheet or commitment letter, (b) any
syndication of this facility, (c) the preparation, execution and closing of this
Agreement and the other Loan Instruments, and all waivers, releases, discharges,
satisfactions, modifications and amendments thereof and approvals and consents
with respect thereto, (d) all payments made and actions taken thereunder in the
name or on behalf of any Loan Party, any Surety or any other guarantor, surety
or pledgor under any Loan Instrument, (e) all periodic collateral audits and
other evaluations and the ongoing monitoring of the Accounts Receivable,
Inventory and other Collateral (including, without limitation, the per diem fees
and expenses of the Lender and its designees in performing such audits and other
evaluations), (f) all searches (whether respecting financing statements, unpaid
taxes and other liens or otherwise), surveys and appraisals, title examinations
and insurance, surety bond premiums, mortgage recording, documentary, transfer,
intangible, note or other similar taxes and revenue stamps, and all filings and
recordings, and (g) the administration, maintenance, enforcement and
adjudication of this Agreement, the other Loan Instruments and the Lender's
rights, powers, privileges, remedies and other interests thereunder and under
Applicable Law, in each case including (without limitation) the disbursements,
expenses and fees of counsel to the Lender (including, without limitation, the
allocated costs of in-house
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counsel), currently Jenkens & Gilchrist Parker Chapin LLP, and the
disbursements, expenses and fees of any local or special counsel retained by the
Lender or its counsel.
Section 9.03. Further Assurances. Each Loan Party agrees to do such
further acts and things and to execute and deliver such statements, assignments,
agreements, instruments and other documents as the Lender from time to time
reasonably may request in connection with the administration, maintenance,
enforcement or adjudication of this Agreement and the other Loan Instruments in
order (a) to evidence, confirm, perfect or protect any security interest or
other Lien granted or required to have been granted under this Agreement and the
other Loan Instruments, (b) to give the Lender or its designee confirmation and
assurance of the Lender's rights, powers, privileges, remedies and interests
under this Agreement, the other Loan Instruments and Applicable Law, (c) to
better enable the Lender to exercise any such right, power, privilege or remedy,
or (d) to otherwise effectuate the purpose and the terms and provisions of this
Agreement and the other Loan Instruments, each in such form and substance as may
be acceptable to the Lender. The Lender shall execute and deliver to each Loan
Party such documents (in form and substance acceptable to the Lender) as any
Loan Party reasonably may request in order to effectuate the purpose and terms
and provisions of this Agreement.
Section 9.04. Interpretation. The parties acknowledge and agree that:
each party and its counsel have reviewed and negotiated the terms and provisions
of this Agreement (excluding schedules) and have contributed to its revision;
the normal rule of construction, to the effect that any ambiguities are resolved
against the drafting party, shall not be employed in the interpretation of it;
and its terms and provisions shall be construed fairly as to all parties hereto
and not in favor of or against any party, regardless of which party was
generally responsible for the preparation of this Agreement.
Section 9.05. Provisions of the Notes and Collateral Loan Instruments.
The Notes and the various Loan Instruments creating or evidencing the Lender's
interest in the Collateral are each subject to the covenants and other terms and
provisions contained in this Agreement to the same extent and effect as if fully
set forth therein; and in the event that any term or provision of those
instruments and documents conflicts or is inconsistent with any term or
provision of this Agreement, the term or provision of this Agreement shall
control and be given effect.
Section 9.06. Governing Law. This Agreement and the other Loan
Instruments: (a) have been executed and delivered in the State of New York; and
(b) shall be governed by and construed in accordance with the Applicable Law
pertaining in the State of New York (other than those conflict of law provisions
that would defer to the substantive laws of another jurisdiction). Without in
any way limiting the preceding choice of law, the parties elect to be governed
by New York law in accordance with, and are relying (at least in part) on,
Section 5-1401 of the General Obligations Law of the State of New York.
Section 9.07. Severability. In the event that any term or provision of
this Agreement or any other Loan Instrument shall be finally determined to be
superseded, invalid, illegal or otherwise unenforceable pursuant to Applicable
Law by an Authority having jurisdiction and venue, that determination shall not
impair or otherwise affect the validity, legality or enforceability (a) by or
before that Authority of the remaining terms and provisions of this Agreement
and the other Loan Instruments, which shall be enforced as if the unenforceable
term or provision were deleted, or (b) by or before any other Authority of any
of the terms and provisions of this Agreement and the other Loan Instruments.
Section 9.08. Survival of Representations, Etc. Each of the payment
obligations, collateral grants, representations and warranties (as of the
date(s) made or deemed made), covenants, waivers and other agreements of the
Loan Parties contained in this Agreement and the other Loan Instruments: (a)
shall be absolute, irrevocable and unconditional, irrespective of (among other
things) the validity, legality, binding effect or enforceability of any of the
other terms and provisions of this Agreement or any other Loan Instrument or any
other act, event or circumstance described in this Section; (b) shall survive
the execution and delivery of this Agreement and the other Loan Instruments, and
any and all advances, repayments and readvances of any or all of the monies to
be lent hereunder and thereunder; (c) shall remain and continue in full force
and effect without regard (i) to whether the Loans or other Obligations are now
or hereafter existing, acquired or created, and irrespective of the fact that
from time to time under the terms and provisions of the Loan Instruments monies
may be advanced, repaid and readvanced and the outstanding balance of the Loans
may be zero, (ii) to any extension or change in the time, manner, place and
other terms and provisions of payment or performance of any one or more of the
Loans or other Obligations or any Surety's Obligations, (iii) to any waiver,
modification, extension, renewal, consolidation, spreading, amendment or
restatement of any other term or provision of any Loan Instrument (except as and
to the extent expressly modified by the terms and provisions of any such waiver,
modification, extension, renewal, consolidation, spreading, amendment or
restatement), (iv) to any acceptance by the Lender of (A) any partial or late
payment, which shall not constitute a satisfaction or waiver of the full amount
then due or the resulting Default or Event of Default, or (B) any payment during
the continuance of a
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Default or Event of Default, which shall not constitute a waiver or cure
thereof; and the Lender may accept or reject any such payment without affecting
any of its rights, powers, privileges, remedies and other interests under this
Agreement, the other Loan Instruments and Applicable Law; (v) to any full,
partial or non-exercise of any of the rights, powers, privileges, remedies and
interests of the Lender under any Loan Instrument or Applicable Law, against any
Loan Party, any Surety or any other Person or with respect to any of the
Obligations, any Surety's Obligations, any other obligations or any collateral
or security interest therein, which exercise or enforcement may be delayed,
discontinued or otherwise not pursued or exhausted for any or no reason
whatsoever, or which may be waived, omitted or otherwise not exercised or
enforced (whether intentionally or otherwise), (vi) to any surrender,
repossession, sequestration, foreclosure, conveyance or assignment (by deed in
lieu or otherwise), sale, lease or other realization, dealing, liquidation or
disposition respecting any collateral or setoff respecting any account or other
asset in accordance with the Loan Instruments or Applicable Law (except as and
to the extent the Obligations have been permanently reduced by the application
of the net proceeds thereof), (vii) to the perfected or non-perfected status or
priority of any mortgage or other security interest in any such collateral,
which may be held without recordation, filing or other perfection (whether
intentionally or otherwise), (viii) to any release, settlement, adjustment,
subordination or impairment of all or any part of the Obligations, any Surety's
Obligations, any other obligations or any collateral or any security interest
therein, whether intentionally or otherwise (except as and to the extent
expressly modified by the terms and provisions of any such release, settlement
or adjustment), (ix) to any extension, stay, moratorium or statute of
limitations or similar time constraint under any Applicable Law, (x) to any
investigation, analysis or evaluation by the Lender or its designees of the
assets, business, operations, properties or condition (financial or otherwise)
of any Loan Party, any Surety or any other Person, (xi) to any application to
any obligations of any Loan Party or any Surety other than any Obligations or
Surety's Obligations of (A) any payments from such Person not specifically
designated for application to the Obligations or Surety's Obligations or (B) any
proceeds of collateral from such Person other than from the Collateral, (xii) to
any sale, conveyance, assignment, participation or other transfer by the Lender
(in whole or in part) to any other Person of any one or more of this Agreement
and the other Loan Instruments or any one or more of the rights, powers,
privileges, remedies or interests of the Lender herein or therein, (xiii) to any
act or omission on the part of the Lender or any other Person or (xiv) to any
other act, event, or circumstance that otherwise might constitute a legal or
equitable counterclaim, defense or discharge of a Loan Party, co-obligor,
indemnitor, guarantor, pledgor or surety; in each case in such manner and order,
upon such terms and provisions and subject to such conditions as the Lender may
deem necessary or desirable in its sole and absolute discretion, and without
notice to or further assent from the Borrower, the Guarantor or any other Surety
(except for such notices as may be expressly required to be given to such party
under the applicable Loan Instrument); (d) shall not be subject to any defense,
counterclaim, setoff, right of recoupment, abatement, reduction or other claim
or determination that any Loan Party may have against any Surety, the Lender or
any other Person; (e) shall not be diminished or qualified by the death,
disability, dissolution, reorganization, insolvency, bankruptcy, custodianship
or receivership of any Loan Party, any Surety or any other Person, or the
inability of any of them to pay its debts or perform or otherwise satisfy its
obligations as they become due for any reason whatsoever; and (f) shall remain
and continue in full force and effect without regard to any of the foregoing
acts, events or circumstances (A) until all of the Obligations have been fully
paid and satisfied and (B) thereafter with respect to acts, events or
circumstances occurring prior to such payment and satisfaction.
Section 9.09. Counterparts. This Agreement or any other Loan Instrument
may be executed in two or more counterpart copies of the entire document or of
signature pages to the document, each of which may be executed by one or more of
the parties hereto or thereto, but all of which, when taken together, shall
constitute a single agreement binding upon all of the parties hereto or thereto
(as the case may be).
Section 9.10. Effective Date. This Agreement shall be effective on the
date (the "Effective Date") as of which (a) this Agreement shall be executed by
all the parties hereto and delivered to the Lender and (b) all the conditions
precedent required to have been satisfied on or before the Effective Date
pursuant to Article IV hereof shall have been satisfied or waived (whether
temporarily or otherwise) in writing by the Lender. The Lender shall notify the
Loan Parties of the Effective Date if other than the date of the closing of this
Agreement; provided, however, that the failure to give such notice shall not
alter the Effective Date.
Section 9.11. Successors and Assigns; Assignment. Whenever in this
Agreement or any other Loan Instrument reference is made to any party, such
reference shall be deemed to include the successors, assigns, heirs and legal
representatives of such party, and, without limiting the generality of the
foregoing, all representations, warranties, covenants and other agreements made
by or on behalf of any Loan Party in this Agreement and the other Loan
Instruments shall inure to the benefit of the successors and assigns of the
Lender; provided, however, that nothing herein shall be deemed to authorize or
permit any Loan Party to assign any of its rights or obligations under this
Agreement or any other Loan Instrument to any other Person (whether or not an
Affiliate of any Loan Party), and each Loan Party covenants and agrees that it
shall not make any such assignment. The Lender from time to time: (a) may assign
or sell a participation interest in all or any portion(s)
SPAR ESOP Revolving Credit Agreement
-67-
of the rights, powers, privileges, remedies and interests of and/or the loans
and other obligations owed to the Lender under this Agreement or any other Loan
Instrument (i) to any Affiliate of the Lender or to any Federal Reserve Lender
(as collateral or otherwise), or (ii) to any other Person; (b) may furnish and
disclose financial statements, documents and other information pertaining to any
Loan Party or any Surety to any potential assignee or participant permitted
hereunder; and (c) may take any and all other actions that the Lender may
determine (in its sole and absolute discretion) to be necessary or appropriate
in connection with any such assignment or participation; in each case without
notice to or consent of any Loan Party or any other Person. Without in any way
limiting the foregoing, each Loan Party acknowledges and agrees that (A) the
Lender may assign any and all of the rights, powers, privileges, remedies and
interests of and/or the loans and other obligations owed to the Lender under
this Agreement or any other Loan Instrument to the Senior Lender pursuant to the
Senior Loan Documents, (B) the Senior Lender shall be entitled to exercise or
enforce any of the rights, powers, privileges, remedies and interests of and/or
the loans and other obligations owed to the Lender under this Agreement or any
other Loan Instrument in accordance with the Loan Instruments, the Senior Loan
Documents and/or Applicable Law, (C) the Senior Lender shall not be responsible
or liable for any of the acts, omissions, duties, liabilities or obligations of
the Lender hereunder , including (without limitation) any application of or
failure to apply payments or proceeds as contemplated under any Loan Instrument
or Revolving Credit Document, and (D) in no event shall the Senior Lender be
obligated or liable in any manner to the Borrower or any Surety (i) to return
any cash Collateral obtained pursuant to Section 2.06(a) of this Agreement to
the Borrower to the extent received by the Senior Lender in payment of the
Lender's obligations, or (ii) for any failure by Senior Lender to make available
to Lender any requested revolving advances or letters of credit under the Senior
Loan Documents.
Section 9.12. No Third Party Rights. The representations, warranties and
other terms and provisions of this Agreement and the other Loan Instruments are
for the exclusive benefit of the parties hereto, and, except as otherwise
expressly provided herein or therein, no other Person, including creditors of
any party hereto, shall have any right or claim against any party by reason of
any of those terms and provisions or be entitled to enforce any of those terms
and provisions against any party.
Section 9.13. No Waiver by Action, Etc. Any waiver or consent respecting
any representation, warranty, covenant or other term or provision of this
Agreement or any other Loan Instrument shall be effective only in the specific
instance and for the specific purpose for which given and shall not be deemed,
regardless of frequency given, to be a further or continuing waiver or consent.
The failure or delay of a party at any time or times to require performance of,
or to exercise its rights with respect to, any representation, warranty,
covenant or other term or provision of this Agreement or other Loan Instrument
in no manner (except as otherwise expressly provided herein) shall affect its
right at a later time to enforce any such provision. No notice to or demand on
any Loan Party or any Surety in any case shall entitle such party to any other
or further notice or demand in the same, similar or other circumstances. The
acceptance by the Lender of (a) any partial or late payment shall not constitute
a satisfaction or waiver of the full amount then due or the resulting Event of
Default or (b) any payment during the continuance of an Event of Default shall
not constitute a waiver or cure thereof; and the Lender may accept or reject any
such payment without affecting any of its rights, powers, privileges, remedies
and other interests under this Agreement, the other Loan Instruments and
Applicable Law. All representations, warranties, covenants and agreements of
each Loan Party and all rights, powers, privileges, remedies and other interests
of the Lender hereunder are cumulative and not alternatives, and they are in
addition to and shall not limit (except as otherwise expressly provided herein)
any other right, power, privilege, remedy or other interest of the Lender under
this Agreement, any other Loan Instrument or Applicable Law.
[END OF PAGE]
SPAR ESOP Revolving Credit Agreement
-68-
Section 9.14. Waiver of Jury Trial. In any action, suit or proceeding in
any jurisdiction arising out of or related directly or indirectly to this
Agreement or any other Loan Instrument, whether brought by the Lender against
any Loan Party, or any Loan Party against the Lender, each Loan Party and the
Lender each hereby expressly and irrevocably waives trial by jury.
Section 9.15. Modification, Amendment, Etc. Except as otherwise
expressly provided in a particular Loan Instrument with respect thereto and
except as otherwise provided or permitted under applicable law with respect to
any UCC financing statement, modification, continuation or the like, each and
every supplement or amendment to or modification or restatement of this
Agreement or any other Loan Instrument (other than a UCC financing statement)
shall be in writing and signed by all of the parties hereto or the respective
parties thereto, as the case may be, and each and every waiver of, or consent to
any departure from, any representation, warranty, covenant or other term or
provision of this Agreement or any other Loan Instrument (other than a UCC
financing statement) shall be in writing and signed by each affected party
hereto or thereto, respectively.
Section 9.16. Entire Agreement. This Agreement and the other Loan
Instruments contain the entire agreement of the parties and supersede all other
representations, warranties, agreements and understandings (including, without
limitation, all previous discussion letters and term sheets from the Lender),
oral or otherwise, among the parties with respect to the matters contained
herein and therein.
SPAR ESOP Revolving Credit Agreement
-69-
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first written above.
SPAR PERFORMANCE GROUP, INC.
By: /s/ Thomas F. Hunter
----------------------------------
Name: Thomas P. Hunter
Title: President
PERFORMANCE HOLDINGS, INC.
By: /s/ Thomas F. Hunter
----------------------------------
Name: Thomas P. Hunter
Title: CEO
SPAR INCENTIVE MARKETING, INC.
By: /s/ Robert G. Brown
----------------------------------
Name: Robert G. Brown
Title: CEO
SPAR ESOP Revolving Credit Agreement
-70-
STATE OF NEW YORK )
: SS.:
COUNTY OF NEW YORK )
On this 30th day of June in the year 2002 before me, the undersigned, a
Notary Public in and for said State, personally appeared Thomas F. Hunter,
personally known to me or proved to me on the basis of satisfactory evidence to
be the individual whose name is subscribed to the within instrument and
acknowledged to me that he/she executed the same in his/her capacity as
President, and that by his/her signature on the instrument, the Person upon
behalf of which the individual acted (i.e., SPAR PERFORMANCE GROUP, INC.)
executed the instrument.
(Signature and office of individual taking acknowledgment.)
STATE OF NEW YORK )
: SS.:
COUNTY OF NEW YORK )
On this 30th day of June in the year 2002 before me, the undersigned, a
Notary Public in and for said State, personally appeared Thomas F. Hunter,
personally known to me or proved to me on the basis of satisfactory evidence to
be the individual whose name is subscribed to the within instrument and
acknowledged to me that he/she executed the same in his/her capacity as CEO, and
that by his/her signature on the instrument, the Person upon behalf of which the
individual acted (i.e., HOLDINGS, INC.) executed the instrument.
(Signature and office of individual taking acknowledgment.)
STATE OF NEW YORK )
: SS.:
COUNTY OF NEW YORK )
On this 30th day of June in the year 2002 before me, the undersigned, a
Notary Public in and for said State, personally appeared Robert G. Grown,
personally known to me or proved to me on the basis of satisfactory evidence to
be the individual whose name is subscribed to the within instrument and
acknowledged to me that he/she executed the same in his/her capacity as CEO, and
that by his/her signature on the instrument, the Person upon behalf of which the
individual acted (i.e., SPAR INCENTIVE MARKETING, INC.) executed the instrument.
(Signature and office of individual taking acknowledgment.)
SPAR ESOP Revolving Credit Agreement
-71-
EXHIBIT A
to
REVOLVING CREDIT, GUARANTY AND SECURITY AGREEMENT
with
SPAR PERFORMANCE GROUP, INC.
REVOLVING PROMISSORY NOTE
$2,000,000.00 Tarrytown, New York
Dated as of June 30, 2002
FOR VALUE RECEIVED, SPAR PERFORMANCE GROUP, INC. (the "Borrower"),
promises to pay to the order of SPAR INCENTIVE MARKETING, INC. (the "Lender"),
at 580 White Plains Road, Tarrytown, New York 10591, or at such other place as
may be designated in writing by the holder of this Note, the principal sum of
TWO MILLION DOLLARS ($2,000,000.00), or so much thereof as may be advanced and
outstanding, with interest thereon, to be computed on each advance from the date
of its disbursement, all as provided in that certain Revolving Credit, Guaranty
and Security Agreement among the Borrower, Performance Holdings, Inc., and the
Lender dated as of June 30, 2002 (as the same may be supplemented, modified,
amended, restated or replaced from time to time in the manner provided therein,
the "Loan Agreement"). Capitalized terms used and not otherwise defined in this
Note shall have the meanings respectively assigned to them in the Loan
Agreement.
This Note is the Revolving Credit Note and one of the Notes referred to
in the Loan Agreement. Principal and interest shall be due and payable as
provided in the Loan Agreement, and all of the terms and provisions of the Loan
Agreement, including (without limitation) provision for prepayment and
acceleration of maturity, are incorporated herein by reference and made a part
hereof. This Note is secured by certain collateral pledged by the Borrower
pursuant to the Loan Agreement and the other Loan Instruments.
Presentment for payment, notice of dishonor, protest, notice of protest
and all similar notices are hereby expressly waived by the Borrower. This Note
has been made and delivered in the County of Westchester, State of New York,
where all advances and repayments shall be made (except as otherwise provided in
the Loan Agreement). This Note shall be governed by and construed in accordance
with the Applicable Law pertaining in the State of New York (other than those
that would defer to the substantive laws of another jurisdiction). This Note is
a Loan Instrument and shall be governed by and construed in accordance with the
applicable terms and provisions of the Loan Agreement. Each and every
supplement, modification or amendment to this Note shall be in writing and
signed by the Borrower and the Lender, each and every waiver of, or consent to
any departure from, any term or provision of this Note shall be in writing and
signed by the Lender, and each and every restatement or replacement of this Note
shall be in writing, shall be signed by the Borrower and shall require the
written consent of the Lender.
SPAR PERFORMANCE GROUP, INC.
By: __________________________________
[Borrower's Signer's Name],
[Borrower's Signer's Title]
SPAR ESOP Revolving Credit Agreement
-1-
STATE OF NEW YORK )
: SS.:
COUNTY OF NEW YORK )
On this _____ day of __________ in the year ____ before me, the
undersigned, a Notary Public in and for said State, personally appeared
[BORROWER'S SIGNER'S NAME], personally known to me or proved to me on the basis
of satisfactory evidence to be the individual whose name is subscribed to the
within instrument and acknowledged to me that he/she executed the same in
his/her capacity as [BORROWER'S SIGNER'S TITLE], and that by his/her signature
on the instrument, the Person upon behalf of which the individual acted (i.e.,
SPAR PERFORMANCE GROUP, INC.) executed the instrument.
(Signature and office of individual taking acknowledgment.)
SPAR ESOP Revolving Credit Agreement
-2-
EXHIBIT B
to
REVOLVING CREDIT, GUARANTY AND SECURITY AGREEMENT
with
SPAR PERFORMANCE GROUP, INC.
[INTENTIONALLY OMITTED]
SPAR ESOP Revolving Credit Agreement
C-1
EXHIBIT C
to
REVOLVING CREDIT, GUARANTY AND SECURITY AGREEMENT
with
SPAR PERFORMANCE GROUP, INC.
ADDRESSES FOR NOTICE AND SERVICE
I. Address for Notices and Service to the Loan Parties:
SPAR PERFORMANCE GROUP, INC.
________________________________
Attention: ____________________
Telephone: ( ) ___-____
Telecopy: ( ) ___-____
E-Mail`: __________@___
With a copy of notices from the Lender under Section 7.07 or 8.02 to:
________________________________
Attention: ____________________
Telephone: ( ) ___-____
Telecopy: ( ) ___-____
E-Mail`: __________@___
II. Address for notices to the Lender:
SPAR INCENTIVE MARKETING, INC.
580 White Plains Road
Tarrytown, New York 10591
Attention: Charles Cimitile, Chief Financial Officer
Telephone: (914) 332-4100
Telecopy: (914) 332-0741
E-Mail: CCimitile@SPARinc.com
With a copy of any default notice or other notice under
Section 5.01 to:
Jenkens & Gilchrist Parker Chapin LLP
The Chrysler Building
405 Lexington Avenue
New York, New York 10174
Attention: Lawrence David Swift, Esq.
Telephone: (212) 704-6147
Telecopy: (212) 704-6159/6288
E-Mail: LDSwift@Jenkens.com
SPAR ESOP Revolving Credit Agreement
C-2
EXHIBIT D
to
REVOLVING CREDIT, GUARANTY AND SECURITY AGREEMENT
with
SPAR PERFORMANCE GROUP, INC.
BORROWING BASE CERTIFICATE
RESPECTING
SPAR PERFORMANCE GROUP, INC.
AS OF [MONTH & DATE], 200___
Pursuant to the Loan and Security Agreement dated as of June 30, 2002
(as the same may be supplemented, modified, amended, restated or replaced from
time to time in the manner provided therein, the "Loan Agreement"), I, [PRINT
NAME] , the [PRINT TITLE] , of SPAR PERFORMANCE GROUP, INC. (the "Borrower"),
hereby certify to SPAR INCENTIVE MARKETING, INC. (the "Lender"), as of the date
hereof that:
(a) The following is a true, complete and correct calculation of the
Borrowing Base as of the last day of [Month] , 200__ (the "Reporting Date"):
(i) Determination of discounted Eligible Billed Receivables amount at the
Reporting Date:
(A) Billed Accounts Receivable aging (gross book value) at the Reporting
Date $________
(B) Minus the sum of the ineligible Accounts Receivable included in (A)
at the Reporting Date included in (A), including the following items
(which are summarized from and qualified by the actual provisions of
the Loan Agreement, which shall control), without duplication:
(1) more than 90 days past due $________
(2) permits payment more than 30 days after invoice date $________
(3) no final invoice has been issued $________
(4) incomplete delivery of the product(s) or service(s) $________
(5) conditional or permits returns $________
(6) restricts collection rights or assignments $________
(7) permits payment in any foreign currency $________
(8) permits payment at any non-USA location $________
(9) evidenced by chattel paper or any note or other instrument
(unless duly endorsed and delivered to the Lender $________
(10) rejected, returned or disputed products or services, or the
attempted lowering of the invoiced price, other than because
of mistake or in accordance with the customary credit and
collection practices of the Borrower $________
(11) customer's assertion of any right or reduction, setoff,
recoupment, counterclaim or defense $________
(12) Lender does not have a perfected first priority Lien $________
(13) subject to any other financing statement or Lien $________
(14) customer and its affiliates account for more than 25% of all
of the Borrower's accounts receivable then outstanding and
Lender has given notice such concentration poses a credit risk
$________
SPAR ESOP Revolving Credit Agreement
D-1
(15) the customer or any affiliate has a history of late payments,
returns, rejections, renegotiations or disputes $________
(16) the customer is an affiliate of the Borrower or any Surety $________
(17) the customer is any governmental authority $________
(18) the customer is located outside the United States $________
(19) the customer does not meet the established credit standards of
the Borrower or the Lender $________
(20) the customer has taken or committed any of the actions
specified in Section 8.01(g) hereof in respect of itself or
all or substantially all of its assets and properties or has
had any of those actions taken against it $________
(21) the account receivable exceeds any credit limit established by
the Lender in its sole discretion for the customer's accounts
receivable with the Borrower $________
(22) the account receivable does not conform at the time to the
Borrower's representations and warranties respecting
Collateral in general or accounts receivable in particular $________
(23) the Lender has determined that the account receivable should
be excluded, whether individually, by customer, by amount or
otherwise in a reasonable manner $________
(24) Deposits accounts receivable $________
(C) Total Ineligible Accounts Receivable (the sum of (1) through (23)) $________
(D) Eligible Billed Receivables ((A) minus (C)) $________
(E) Discounted Eligible Billed Receivables (0.85 times (D)) $________
(ii) Determination of discounted Eligible Unbilled Receivables amount at the
Reporting Date:
(A) Unbilled Accounts Receivable aging (gross book value) at the
Reporting Date $________
(B) Minus the sum of the ineligible Unbilled Accounts Receivable
included in (A) at the Reporting Date included in (A), including the
following items (which are summarized from and qualified by the
actual provisions of the Loan Agreement, which shall control),
without duplication:
(1) created more than 60 days to this borrowing base certificate
date $________
(2) no final invoice has been issued $________
(3) incomplete delivery of the product(s) or service(s) $________
(4) conditional or permits returns $________
(5) restricts collection rights or assignments $________
(6) permits payment more than 30 days after invoice date $________
SPAR ESOP Revolving Credit Agreement
D-2
(7) permits payment in any foreign currency $________
(8) permits payment at any non-USA location $________
(9) evidenced by chattel paper or any note or other instrument
(unless duly endorsed and delivered to the Lender $________
(10) rejected, returned or disputed products or services, or the
attempted lowering of the invoiced price, other than because
of mistake or in accordance with the customary credit and
collection practices of the Borrower $________
(11) customer's assertion of any right or reduction, setoff,
recoupment, counterclaim or defense $________
(12) Lender does not have a perfected first priority Lien $________
(13) subject to any other financing statement or Lien $________
(14) customer and its affiliates account for more than 25% of all
of the Borrower's accounts receivable then outstanding and
Lender has given notice such concentration poses a credit risk $________
(15) the customer or any affiliate has a history of late payments,
returns, rejections, renegotiations or disputes $________
(16) the customer is an affiliate of the Borrower or any Surety $________
(17) the customer is any governmental authority $________
(18) the customer is located outside the United States $________
(19) the customer does not meet the established credit standards of
the Borrower or the Lender $________
(20) the customer has taken or committed any of the actions
specified in Section 8.01(g) hereof in respect of itself or
all or substantially all of its assets and properties or has
had any of those actions taken against it $________
(21) the account receivable exceeds any credit limit established by
the Lender in its sole discretion for the customer's accounts
receivable with the Borrower $________
(22) the account receivable does not conform at the time to the
Borrower's representations and warranties respecting
Collateral in general or accounts receivable in particular $________
(23) the Lender has determined that the account receivable should
be excluded, whether individually, by customer, by amount or
otherwise in a reasonable manner $________
(C) Total Ineligible Unbilled Accounts Receivable (the sum of (1)
through (21)) $________
(D) Eligible Unbilled Receivables ((A) minus (C)) $________
(E) Discounted Eligible Unbilled Receivables (0.60 times (D)) $________
(iii) Applicable Overadvance Amount on the Reporting Date $________
SPAR ESOP Revolving Credit Agreement
D-3
(iv) any and all reserves (whether for doubtful accounts, customer deposits or
otherwise) then maintained by the Borrower or required by the Lender in
its or their sole and absolute discretion (without duplication) $________
(v) Borrowing Base on the Reporting Date (sum of items (i)(E), (ii)(E) and
(iii), minus (iv)) $________
(vi) Gross Availability: the lesser of the Line of Credit or the Borrowing
Base (item (v)) $________
(vii) Revolving Credit Loans outstanding on the Reporting Date $________
(viii) Letters of credit outstanding on the Reporting Date $________
(ix) Other $________
(x) REMAINING AVAILABILITY (item (vi) minus items (vii), (viii) and (ix), but
not less than zero) $________
(xi) PAYMENT DUE (item (vii) minus item (vi), but not less than zero) $________
(b) Each of the representations, warranties, acknowledgements and
certifications of each of the Loan Parties and each Surety set forth in the Loan
Agreement and other Loan Instruments are true and correct in all material
respects with the same effect as though those representations and warranties had
been made on and as of the date hereof.
(c) No Default or Event of Default has occurred and is continuing,
excluding, however, those events subject to an express written waiver or consent
from the Lender, if any.
(d) No event or events have occurred that individually or in the
aggregate could have, or since the date of the Agreement has had, a Material
Adverse Effect.
(e) The information set forth in the Secretary's or Officer's
Certificate most recently delivered to the Lender respecting (among other
things) the authorizing resolutions, organizational and governing documents and
the incumbency of the officers of each of the Loan Parties and each Surety is
true and complete as if those certificates had been delivered on and as of the
date hereof.
(f) There are no actions, suits or proceedings pending or, to the best
knowledge of the undersigned, threatened or contemplated by any Person for the
liquidation or dissolution of any Loan Party or Surety or otherwise threatening
their respective existences or challenging or calling into question the power or
authority of any Loan Party or Surety to execute or deliver any Loan Instrument
to which it is or will be a party or to perform any of its obligations
thereunder.
(g) The Obligations of the Borrower under the Loan Agreement, Notes
and other Loan Instruments and the obligations of each other Loan Party and
Surety under its Loan Instruments (i) are not subject to any defense,
counterclaim, setoff, right of recoupment, abatement, reduction or other claim
or determination against the Lender or any other Person and (ii) remain and are
currently in full force and effect, enforceable against them in accordance with
their respective terms and provisions.
Capitalized terms and non-capitalized words and phrases used and not
otherwise defined in this Certificate shall have the meanings respectively
assigned to them in the Loan Agreement, except that certain terms refer to the
applicable captions or headings of the financial statements and reports of
Holdings and its subsidiaries. This Certificate may be relied upon by the
successors, assigns and participants of the Lender and by counsel to the Lender
in giving any opinion or advice requested of such counsel.
SPAR ESOP Revolving Credit Agreement
D-4
---------------------------------
(SIGNATURE)
DATE SIGNED: _________ __, 200__
SPAR ESOP Revolving Credit Agreement
D-5
EXHIBIT E
to
REVOLVING CREDIT, GUARANTY AND SECURITY AGREEMENT
with
SPAR PERFORMANCE GROUP, INC.
FINANCIAL COVENANTS COMPLIANCE CERTIFICATE
RESPECTING
SPAR PERFORMANCE GROUP, INC.
[MONTH AND DATE], 200_
Pursuant to the Revolving Credit Loan, Guaranty and Security Agreement
dated as of June 30, 2002 (as the same may be supplemented, modified, amended,
restated or replaced from time to time in the manner provided therein, the "Loan
Agreement"), I, [PRINT NAME] , the [PRINT TITLE] of SPAR PERFORMANCE GROUP, INC.
(the "Loan Party"), hereby certify to SPAR INCENTIVE MARKETING, INC. (the
"Lender"), as of the date hereof that:
(a) The Adjusted Net Worth of Holdings and its subsidiaries as at
__________ __, 200__ (the "Reporting Date"), was not less than the minimum
required for such date ($_______) by Section 6.01(b) of the Loan Agreement, with
compliance calculated as follows:
(i) Aggregate amount of all assets and properties on the Reporting Date $________
(ii) Minus the Adjusted Liabilities of the Loan Parties and their Subsidiaries
as at the Reporting Date: [$________]
(The Adjusted Debt of the Loan Parties and their Subsidiaries
as at the Reporting Date included in the above was $________)
(iii) Adjusted Net Worth (actual) as at the Reporting Date $________
(b) The Adjusted EBITDA of Holdings and its subsidiaries for the
Computation Period ending on the Reporting Date was not less than the minimum
required for such date (_________:1.00) by Section 6.01(c) of the Loan
Agreement, with compliance calculated as follows:
(i) Net Income (or Loss) of Holdings and its subsidiaries for such period $________
(ii) Plus the sum of the following adjustments to the extent included in
determining such income:
(A) Consolidated extraordinary or unusual loss(es) $_________
(B) Consolidated interest expense $_________
(C) Total federal, state, local and foreign income and
franchise taxes accrued during such period $_________
(D) Consolidated Depreciation $_________
(E) Consolidated Amortization $_________
(iii) Total Additions to Income: (the sum of items (ii)(A) through (ii)(E)) $_________
(iv) Minus: Extraordinary or unusual gain(s) included in determining such
income [$_________]
(v) Adjusted EBITDA (item (i) plus item (iii) minus item (iv)) $_________
(c) The Adjusted Debt Service Ratio of Holdings and its subsidiaries
for the Computation Period ending on the Reporting Date was not less than the
minimum required for such date ( :1.00) by Section 6.01(d) of the Loan
Agreement, with compliance calculated as follows:
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(i) Adjusted EBITDA for such period (from (b)(iv) above): $_________
(ii) Adjusted Debt Service for such period, consisting of the sum of the
following:
(A) Interest expense (from (b)(ii)(B) above): $_________
(B) Principal payments on Indebtedness for such period: $_________
(C) Consolidated capitalized lease payments for such period (to the
extent not already included in (A) or (B)) $_________
(D) All other payments with respect to Incebtedness during such period,
including (without limitation) all commissions, discounts and other
fees and charges owed with respect to any and all commitments, lines
of credit, banker's acceptances, letters of credit, and interest
rate protection, foreign currency exchange, or other interest or
exchange rate swap or hedging agreements or arrangements (to the
extent not already included in (A), (B) or (C)) $_________
(iii) Total Adjusted Debt Service (the sum of (ii)(A) through (ii)(D) $_________
(iv) Adjusted Lease Service for such period $_________
(v) Adjusted Debt Lease Service for such period (the sum of (iii) and (iv)) $_________
(vi) Adjusted Debt Service Ratio (the ratio of (i) to (v)) _____:1.00
(d) The Adjusted Debt to EBITDA Ratio of Holdings and its
subsidiaries for the Computation Period ending on the Reporting Date was not
less than the minimum required for such date (_______:1.00) by Section 6.01(e)
of the Loan Agreement, with compliance calculated as follows:
(i) Adjusted Debt at the end of such period for such period (from (a)(iii)
above): $_________
(ii) Adjusted EBITDA for such period (from (b)(v) above): $_________
(iii) Adjusted Debt to EBITDA Ratio (the ratio of (i) to (ii)) _____:1.00
(e) The Adjusted Capital Expenditures of Holdings and its
subsidiaries for the fiscal quarter ended on such Reporting Date was $_______,
which did not exceed the maximum permitted for such quarter ($ ) by Section
6.01(f) of the Loan Agreement.
(f) The Adjusted Lease Service of Holdings and its subsidiaries for
the fiscal quarter ended on such Reporting Date was $_______ ____, which did not
exceed the maximum permitted for such quarter ($ ) by Section 6.01(g) of the
Loan Agreement.
(g) The consolidated Selling, General and Administrative Expenses of
Holdings and its subsidiaries (inclusive of sales commission but excluding tax
deductible pension payments to the ESOP Trust) for the fiscal quarter ended on
such Reporting Date was ______% of their total consolidated revenue for such
quarter, which did not exceed the maximum permitted for such quarter ( %) by
Section 6.01(a) of the Loan Agreement.
(h) Holdings and its subsidiaries incurred consolidated purchase
money Indebtedness in the purchase of Equipment and capitalized leases
constituting Indebtedness that aggregated $ during the _______ month period
ended on the Reporting Date, which did not exceed the maximum permitted for such
period ($________) by Section 6.02(a)(iii) of the Loan Agreement.
(i) Each of the representations, warranties, acknowledgements and
certifications of each of the Loan Parties and each Surety set forth in the Loan
Agreement and other Loan Instruments are true and correct in all material
respects with the same effect as though those representations and warranties had
been made on and as of the date hereof.
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(j) No Default or Event of Default has occurred and is continuing,
excluding, however, those events subject to an express written waiver or consent
from the Lender, if any.
(k) No event or events have occurred that individually or in the
aggregate could have, or since the date of the Agreement has had, a Material
Adverse Effect.
(l) The information set forth in the Secretary's or Officer's
Certificate most recently delivered to the Lender respecting (among other
things) the authorizing resolutions, organizational and governing documents and
the incumbency of the officers of each of the Loan Parties and each Surety is
true and complete as if those certificates had been delivered on and as of the
date hereof.
(m) There are no actions, suits or proceedings pending or, to the
best knowledge of the undersigned, threatened or contemplated by any Person for
the liquidation or dissolution of any Loan Party or Surety or otherwise
threatening their respective existences or challenging or calling into question
the power or authority of any Loan Party or Surety to execute or deliver any
Loan Instrument to which it is or will be a party or to perform any of its
obligations thereunder.
(n) The Obligations of Holdings under the Loan Agreement, Notes and
other Loan Instruments and the obligations of each other Loan Party and Surety
under its Loan Instruments (i) are not subject to any defense, counterclaim,
setoff, right of recoupment, abatement, reduction or other claim or
determination against the Lender or any other Person and (ii) remain and are
currently in full force and effect, enforceable against them in accordance with
their respective terms and provisions.
Capitalized terms and non-capitalized words and phrases used and not
otherwise defined in this Certificate shall have the meanings respectively
assigned to them in the Loan Agreement, except that certain terms refer to the
applicable captions or headings of the financial statements and reports of
Holdings and its subsidiaries. This Certificate may be relied upon by the
successors, assigns and participants of the Lender and by counsel to the Lender
in giving any opinion or advice requested of such counsel.
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(SIGNATURE)
DATE SIGNED: ____________ __, 200__
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