EXHIBIT 10.14
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT entered into this 9th day of April,
2002 by and among TEAMSTAFF, INC. (the "Borrower"), a corporation incorporated
under the laws of the State of New Jersey, having its principal office at 300
Atrium Drive, Somerset, New Jersey 08873, TeamStaff Solutions, Inc, DSI Staff
Connxions Northeast, Inc., DSI Staff Connxions Southwest, Inc., TeamStaff Rx,
Inc., TeamStaff I, Inc., TeamStaff II, Inc., TeamStaff III, Inc., TeamStaff IV,
Inc., TeamStaff V, Inc., TeamStaff VI, Inc., TeamStaff VIII, Inc., TeamStaff IX,
Inc., TeamStaff Insurance Services, Inc., Employer Support Services, Inc., HR2,
Inc., BrightLane.com, Inc., Digital Insurance Services, Inc. (collectively, the
"Guarantors") with respective addresses as shown on Schedule 5.13 hereof and
FLEET NATIONAL BANK (the "Bank"), a national bank association organized under
the laws of the United States of America, having an office at 750 Walnut Avenue,
Cranford, New Jersey 07016.
SECTION 1
DEFINITIONS
1.1 As used in this Agreement, the following terms shall have the
meanings hereinafter provided (such meanings to be equally applicable to both
the singular and plural forms of the terms defined):
"Accounts": Accounts has the meaning given to it in paragraph (ii) of
the definition of the term "Collateral" provided in Subsection 1.1 hereof.
"Account Debtor": The Person obligated under any Account.
"Actual/360 Computation": The same meaning ascribed to said term in
Subsection 2.1(d)(iii) hereof.
"Advances": Extensions of credit under the Revolving Loan.
"Affiliate": Any entity which directly or indirectly controls, is
controlled by, or is under common control with, any Person. For purposes of this
definition, "control" shall mean the possession, directly or indirectly, of the
power to (i) vote five percent (5%) or more of the securities having ordinary
voting power for the election of directors of such Person, or (ii) direct or
cause the direction of management and policies of a business, whether through
the ownership of voting securities, by contract or otherwise and either alone or
in conjunction with others or any group.
"Agreement": The contents hereof and of any and all exhibits and
schedules annexed hereto, all as may be from time to time amended, restated
and/or extended and all other writings submitted by any Obligor to the Bank
pursuant hereto.
"Applicable Margin": With respect to LIBOR Loan, 300 basis points.
"Authorized Officer": The President/CEO, Vice President/CFO, and
Controller of the Borrower.
"Bank": FLEET NATIONAL BANK, a national banking association organized
under the laws of the United States of America.
"Bank's Rights and Remedies": All of the rights and remedies of the
Bank described in Section 8.
"Borrower": TeamStaff, Inc., a corporation of the State of New Jersey.
"Borrowing Base": As such term is defined in Subsection 2.1(a).
"Borrowing Base Certificate": The certificate signed by an Authorized
Officer of the Borrower mathematically computing the Borrowing Base, in form and
substance satisfactory to the Bank.
"Business Day": Any day, other than a Saturday, Sunday, or other day on
which commercial banks in the State of New Jersey are authorized or required to
close under the laws of the State of New Jersey, and, if the applicable day
relates to a LIBOR Loan or an LIBOR Period for a LIBOR Loan, a day on which
dealings in Dollar deposits are also carried on in the London interbank market
and banks are open for business in London.
"Capital Lease": Any lease of any property (whether real, personal or
mixed) by that Person as lessee which, in accordance with GAAP, is or should be
accounted for as a capital lease on the balance sheet of that Person.
"Capital Stock": (i) in the case of a corporation, capital stock, (ii)
in the case of an association or business entity, any and all shares, interests,
participations, rights or other equivalents (however designated) of capital
stock, (iii) in the case of a partnership, partnership interests (whether
general or limited), (iv) in the case of a limited liability company, membership
interests and (v) any other equity interest or participation that confers on a
Person the right to receive a share of the profits and losses of, or
distributions of assets of, the issuing Person.
"Change in Control": Any conditions or events shall occur, during the
period when any Obligations are outstanding hereunder, whereby Borrower ceases
to own 100% of each Guarantor.
"Collateral": All -
(i) inventory (as defined in the UCC) of each Obligor, wheresoever
located, whether now owned or hereafter acquired, including, without limitation,
raw materials, work in process, finished goods and materials used or consumed in
business and other goods held for sale or lease or furnished or to be furnished
under contracts of service (the "Inventory");
(ii) accounts (as defined in the UCC) of each Obligor, whether now
existing or hereafter arising, including, without limitation, all accounts
receivable and contract rights and any rights to payment for goods sold or
leased or for services rendered which are not evidenced by an
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instrument or chattel paper, whether or not such rights have been earned by
performance, (the "Accounts");
(iii) equipment (as defined in the UCC) of each Obligor, wheresoever
located, whether now owned or hereafter acquired, including, without limitation,
machinery, motor vehicles, trailers, tools, trade, sales and production
equipment, furniture, furnishings, fixtures and all other goods in which each
Obligor has rights which do not constitute inventory;
(iv) instruments (as defined in the UCC) (including, without
limitation, negotiable instruments and non-negotiable
instruments), chattel paper (as defined in the UCC), letters
of credit (as defined in the UCC), letter of credit rights (as
defined in the UCC) , deposit accounts (as defined in the UCC)
exclusive of customer deposits under their service agreements,
and documents of title (as defined in the UCC), all at each
Obligor (including, without limitation, bills of lading, dock
warrants, dock receipts and warehouse receipts);
(v) general intangibles (as defined in the UCC) (including,
without limitation, payment intangibles, income tax refunds,
copyrights, licenses, rights, patents, patent rights,
franchise rights, distributorship rights, trademarks,
trademark rights, formulae, customer lists and goodwill) of
each Obligor, whether now owned or existing or hereafter
arising or acquired;
(vi) investment property (as defined in the UCC) of each Obligor;
(vii) interests of each Obligor in Inventory, wheresoever located,
whether now owned or existing or hereafter arising or acquired, as to which an
Account, chattel paper, instrument or general intangible has arisen; and
(viii) as to all of the foregoing (i) through (vii) inclusive, cash
proceeds, non-cash proceeds and products thereof, payments under insurance
(whether or not the Bank is the loss payee thereof or additional insured),
additions and accessions thereto, replacements and substitutions therefor, rent
proceeds arising out of rental or lease agreements and all related books,
records, journals, computer print-outs and data, of each Obligor.
"Control Group": As such term is defined in the Internal Revenue Code
of 1986, as amended from time to time.
"Default": An event or condition which with the passage of time or
the giving of notice or both would constitute an Event of Default.
"Default Rate": The lesser of (i) that rate of interest per annum equal
to 4% above the rate of interest that would normally apply to a Prime Rate Loan;
or (ii) the highest rate permitted by law.
"Demand Deposit Account": The account described as such in Subsection
2.1(f).
"Earnings Before Interest and Taxes (EBIT)": For any period the sum of
(x) (i) net income (or loss), plus (ii) extraordinary expenses, minus (iii)
extraordinary income of Obligors
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for such period on a consolidated basis, plus (y) all interest expense of
Obligors for such period, plus (z) all charges against income of Obligors for
such period for federal, state and local income taxes, all determined in
accordance with GAAP and measured on a consolidated basis.
"ERISA": The Employee Retirement Income Security Act of 1974, as
amended.
"Event of Default": Any one of the occurrences described in Section 7.
"GAAP": Generally accepted accounting principles, applied on a
consistent basis.
"Guarantors": The entities listed on Schedule 1.1 hereof.
"Guaranty": The Guaranty Agreement executed by the Guarantors,
substantially in the form annexed hereto as Exhibit C.
"Interest Coverage Ratio": The ratio of (x) EBIT to (y) "interest
expense." For purposes of this definition, "interest expense" shall be
determined in accordance with GAAP.
"Internal Revenue Code": The Internal Revenue Code of 1986, as
amended.
"Indebtedness": With respect to any Person, without duplication, (a)
all obligations of such Person for borrowed money, (b) all obligations of such
Person evidenced by bonds, debentures, notes or similar instruments, or upon
which interest payments are customarily made, (c) all obligations of such Person
under conditional sale or other title retention agreements relating to property
purchased by such Person (other than customary reservations or retentions of
title under agreements with suppliers entered into in the ordinary course of
business), (d) all obligations of such Person issued or assumed as the deferred
purchase price of property or services purchased by such Person (other than
trade debt incurred in the ordinary course of business and due within six months
of the incurrence thereof) which would appear as liabilities on a balance sheet
of such Person, (e) all obligations of such Person under take-or-pay or similar
arrangements or under commodities agreements, (f) all Indebtedness of others
secured by (or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien on, or payable out of the
proceeds of production from, property owned or acquired by such Person, whether
or not the obligations secured thereby have been assumed, (g) all guaranties of
such Person with respect to Indebtedness of the type referred in this definition
of another Person, (h) the principal portion of all obligations of such Person
under Capital Leases, (i) all obligations of such Person under swap agreements,
interest rate protection agreements, foreign currency agreements, commodity
purchase or option agreements or any other form of hedging agreements, (j) the
maximum amount of all standby or commercial letters of credit issued or bankers'
acceptances facilities created for the account of such Person and, without
duplication, all drafts drawn thereunder (to the extent unreimbursed), (k) all
preferred Capital Stock issued by such Person, which by the terms thereof are
required to be redeemed, or for which mandatory sinking fund payments are due,
by a fixed date, (l) the principal portion of all obligations of such Person
under off-balance sheet financing arrangements (excluding all non-capitalized
leases) and (m) the Indebtedness of any partnership or unincorporated joint
venture in which such Person is a general
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partner or a joint venturer, to the extent by contract or applicable law, they
would have liability for the Indebtedness.
"Investment": (i) the acquisition (whether for cash, property,
services, assumption of Indebtedness, securities or otherwise, but exclusive of
the acquisition of inventory, supplies, equipment and other property or assets
used or consumed in the ordinary course of business of the Obligors and capital
expenditures (as defined in GAAP) not otherwise prohibited hereunder) of assets,
shares of Capital Stock, bonds, notes, debentures, partnership, joint ventures
or other ownership interests or other securities of such Person, or (ii) any
other capital contribution to or investment in such Person.
"Interest Rate": The same meaning ascribed to said term in Subsection
2.1(d) hereof.
"Inventory": As such term is defined in paragraph (i) of the
definition of the term "Collateral" in this Subsection 1.1.
"Landlord's Agreement": Any waiver or subordination agreement from a
landlord where any Obligor is located and/or maintains Collateral, in form and
substance satisfactory to the Bank.
"Letter of Credit": Each documentary letter of credit issued by the
Bank on behalf of the Borrower pursuant to Subsection 2.1(n) hereof, which
Letter of Credit shall be in form and substance reasonably acceptable to the
Bank.
"Letter of Credit Documentation": Any applications, reimbursement
agreements, security agreements, certificates, resolutions and/or other
documentation as executed and delivered in connection with the issuance of any
Letter of Credit, in form and substance satisfactory to the Bank.
"LIBOR Loan": Any Advance or any outstanding portion of the Revolving
Loan that is based on the LIBOR Rate.
"LIBOR Period": As to each LIBOR Loan, the period commencing on the
date specified by the Borrowers and ending on a day that is one (1) month
thereafter, as specified in the applicable Notice of Borrowing/Conversion,
provided that:
(i) The first day of any LIBOR Period shall be a Business Day;
(ii) Any LIBOR Period that would otherwise end on a day that is not
a Business Day shall be extended to the next succeeding Business Day unless such
Business Day falls in another calendar month, in which case such LIBOR Period
shall end on the next preceding Business Day; and
(iii) No LIBOR Period shall extend beyond the Termination Date.
"LIBOR Rate": As applicable to any LIBOR Loan, the rate per annum as
determined on the basis of the offered rates for deposits in U.S. Dollars, for a
period of time comparable to such LIBOR Loan for the LIBOR Period which appears
on the Telerate page 3750 as of 11:00 a.m. London time on the day that is two
(2) Business Days preceding the first day of such LIBOR Loan;
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provided, however, if the rate described above does not appear on the Telerate
System on any applicable interest determination date, the LIBOR rate shall be
the rate (rounded upward, if necessary, to the nearest one hundred-thousandths
of a percentage point), determined on the basis of the offered rates for
deposits in U.S. dollars for a period of time comparable to such LIBOR Loan
which are offered by four major banks in the London interbank market at
approximately 11:00 a.m. London time, on the day that is two (2) Business Days
preceding the first day of such LIBOR Loan as selected by Bank. The principal
London office of each of the four major London banks will be requested to
provide a quotation of its U.S. Dollar deposit offered rate. If at least two
such quotations are provided, the rate for that date will be the arithmetic mean
of the quotations. If fewer than two quotations are provided as requested, the
rate for that date will be determined on the basis of the rates quoted for loans
in U.S. dollars to leading European banks for a period of time comparable to
such LIBOR Loan offered by major banks in New York City at approximately 11:00
a.m. New York City time, on the day that is two (2) Business Days preceding the
first day of such LIBOR Loan. In the event that Bank is unable to obtain any
such quotation as provided above, it will be deemed that LIBOR pursuant to a
LIBOR Loan cannot be determined. In the event that the Board of Governors of the
Federal Reserve System shall impose a Reserve Percentage with respect to LIBOR
deposits of Bank, then for any period during which such Reserve Percentage shall
apply, LIBOR shall be equal to the amount determined above divided by an amount
equal to 1 minus the Reserve Percentage. "Reserve Percentage" shall mean the
maximum aggregate reserve requirements (including all basis, supplemental,
marginal and other reserves) which is imposed on member banks of the Federal
Reserve System against "Euro-currency Liabilities" as defined in Regulation D."
"Lien": Any mortgage, lien, judicial lien, encumbrance, security
interest, charge, pledge, hypothecation, assignment, conditional sale or other
title retention agreement, and the like, relating to any real or personal
property interest of any Obligor, whether legal or equitable.
"Loan Documents": This Agreement, the Master Note, the Guaranty, the
Power of Attorney, any Swap Agreement, each Landlord's Agreement, the UCC-1
Financing Statements, and any other document, instrument or writing executed and
delivered pursuant hereto or thereto, and all as amended, restated and/or
extended from time to time.
"London Banking Day": Any day on which banks in London are open for
general banking business, including dealings in foreign currency and exchange.
"Loan": The Revolving Loan.
"Master Note": The Master Note described in Subsection 2.1(h) hereof,
as may be amended, restated, substituted for and/or extended from time to
time.
"Material Adverse Change": A material adverse change in (a) the
business, prospects, operations, results of operations, assets, liabilities or
condition (financial or otherwise) of any Obligor, (b) the Collateral, (c) any
Obligor's ability to perform its respective obligations under the Loan
Documents, or (d) the validity, enforceability or availability of rights and
remedies of the Bank hereunder or any other Loan Document, in each case as
determined by the Bank in its reasonable discretion.
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"Material Adverse Effect": A material adverse effect on (a) the
business prospects, operations, results of operations, assets, liabilities or
condition (financial or otherwise) of any Obligor, (b) the Collateral, (c) any
Obligor's ability to perform its respective obligations under the Loan
Documents, or (d) the validity, enforceability or availability of rights and
remedies of the Bank hereunder or any other Loan Documents, in each case as
determined by the Bank in its reasonable discretion.
"Note": The Master Note.
"Notice of Borrowing/Conversion": A notice signed by an Authorized
Officer of the Obligors requesting an Advance or a conversion of interest rate
or LIBOR Period and setting forth the information required pursuant to
Subsections 2.1(c).
"Obligations": (i) Any and all indebtedness, obligations, letters of
credit, including, without limitation, liabilities and agreements of every kind
and nature of the Borrower to or with the Bank, or to or with any affiliate of
the Bank, which affiliate has issued or extended credit to the Borrower on
behalf of or at the direction of the Bank, now existing or hereafter arising,
pursuant to this Agreement, or otherwise, whether in the form of refinancing,
loans, guarantees, bankers' acceptances, Swap Agreements, letters of credit,
interest, charges, expenses, fees (including, without limitation reasonable
attorneys' fees) or otherwise, direct or indirect, (including, without
limitation, any participation or interest of the Bank in any obligation of the
Borrower to others) acquired outright, conditionally or as collateral security
from another, absolute or contingent, joint and/or several, liquidated or
unliquidated, due or not due, contractual or tortious, secured or unsecured,
arising by operation of law or otherwise, including, but without limiting the
generality of the foregoing, indebtedness, obligations or liabilities to the
Bank by the Borrower as a member of any partnership, syndicate, association or
other group, and whether incurred by the Borrower as principal, surety,
endorser, guarantor, accommodation party or otherwise, together with any
extensions, renewals or modifications thereof; (ii) all obligations of the
Borrower for any future advances made by the Bank to the Borrower whether or not
evidenced by a promissory note and all obligations under any renewals,
extensions or changes in form of, or substitutions for, any of said
indebtedness, obligations or liabilities; (iii) all sums and charges to be paid
to the Bank pursuant to this Agreement; (iv) all interest and late charges on
any of the foregoing; and (v) all obligations of the Borrower now or hereafter
existing under this Agreement.
"Obligors": The Borrower, each Guarantor and any and all other Persons
liable, either absolutely or contingently in connection with this Agreement not
named herein, including endorsers, sureties, guarantors and owner's of any
property securing any sums due in connection with this Agreement (all
representatives, covenants and restrictions applying both the singular and
plural form of the term)..
"PBGC": The Pension Benefit Guaranty Corporation or any successor
thereto.
"Permitted Indebtedness":
(i) Indebtedness to the Bank with respect to the Loan or
otherwise, pursuant to the Loan Documents;
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(ii) Trade payables incurred in the ordinary course of the
Obligors' business;
(iii) Existing Indebtedness described on Schedule 1.1(a)
attached hereto and any refinancings of such
Indebtedness; provided that the aggregate principal
amount of such Indebtedness is not increased, the
scheduled maturity dates of such Indebtedness are not
shortened and such refinancing is on terms and
conditions no more restrictive than the terms and
conditions of the Indebtedness being refinanced; and
(iv) Purchase money financing incurred to purchase
equipment and software, including any licensing fees,
provided that the aggregate outstanding amount
thereof does not anytime exceed $3,000,000.00.
"Permitted Liens": shall mean
(i) Liens granted to the Bank by the Obligors pursuant to
any Loan Document;
(ii) Existing Liens listed on Schedule 1.1(b) attached
hereto;
(iii) Liens of warehousemen, mechanics, materialmen,
workers, repairmen, fillers, packagers, processors,
common carriers, landlords and other similar Liens
arising by operation of law or otherwise, not waived
in connection herewith, for amounts that are not yet
due and payable or which are being diligently
contested in good faith by the Obligors by
appropriate proceedings, provided that in any such
case an adequate reserve is being maintained by the
Obligors for the payment of same in accordance with
GAAP;
(iv) Liens for taxes, assessments or other governmental
charges not yet due and payable or which are being
diligently contested in good faith by the Obligors by
appropriate proceedings, provided that in any such
case an adequate reserve is being maintained by the
Obligors for the payment of same in accordance with
GAAP;
(v) deposits or pledges to secure obligations under
workers' compensation, social security or similar
laws, or under unemployment insurance; and
(vi) deposits or pledges to secure bids, tenders,
contracts (other than contracts for the payment of
money), leases, regulatory or statutory obligations
and other obligations of like nature arising in the
ordinary course of business; and
(vii) Liens placed upon fixed assets hereafter acquired to
secure a portion of the purchase price thereof;
provided that any such Lien shall not encumber any
other property of the Obligors, and the aggregate of
Indebtedness secured by such Liens incurred as a
result of such purchases shall exceed the amount
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permitted under Subparagraph (iv) of the definition
of Permitted Indebtedness.
"Person": An individual, or partnership, limited liability company,
corporation (including a business trust), joint stock company, trust,
unincorporated association, joint venture or other entity or a governmental or
any political subdivision or agency thereof.
"Plan": Any plan subject to the minimum funding requirements of
Section 412 of the Internal Revenue Code.
"Power of Attorney": The Power of Attorney executed by each Obligor,
substantially in the form annexed hereto as Exhibit B.
"Prime Rate": The variable per annum rate of interest so designated
from time to time by the Bank as its prime rate. The Prime Rate is a reference
rate and does not necessarily represent the lowest or best rate being charged to
any customer. Changes in the rate of interest resulting from changes in the
Prime Rate shall take place immediately without notice or demand of any kind.
"Prime Rate Loan": Any Advance or any outstanding portion of the Loan
that is based on the Prime Rate.
"Qualified Account": An Account which meets all of the following
requirements from the time it comes into existence until it is collected
in full:
(i) The Account is a domestic account, and is not more than sixty
(60) days from the invoice date of the invoice evidencing the Account; the
Account is for services performed and billed by TeamStaff Rx, Inc., TeamStaff
Solutions, Inc. or TeamStaff, Inc.; the Account is not a contra account; the
Account is with an Account Debtor which is a Person having its principal place
of business in the United States; the Account is payable in lawful currency of
the United States of America; the Account is not an account, contract right,
chattel paper, general intangible or instrument arising out of contracts with
the United States or any of its departments, agencies or instrumentalities or
any state of the United States or any of its departments, agencies or
instrumentalities; and at least seventy five percent (75%) of the total amount
of all Accounts with the applicable Account Debtor is less than sixty (60) days
from the invoice date on said Accounts;
(ii) The Account arose out of an enforceable order or contract for
the performance of services provided by TeamStaff Rx, Inc., TeamStaff Solutions,
Inc. or TeamStaff, Inc., which has been fully and satisfactorily performed;
(iii) The title of the respective Obligor to the Account is
absolute; the Account is not subject to any Lien other than a Lien in favor of
the Bank, and does not arise out of an order or contract which, by its terms,
forbids or makes void or unenforceable the Bank's Lien thereon;
(iv) The respective Obligor has not received any note, trade
acceptance, draft or other instrument with respect to or in payment for the
Account;
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(v) The Account is not subject to any setoff, counterclaim,
defense, allowance or adjustment other than discounts for prompt payment shown
on the invoice, or to dispute, objection or complaint by the Account Debtor
concerning its liability on the Account; the amount of the Account shown on the
books of the respective Obligor or on any invoice or statement delivered to the
Bank is owing to the respective Obligor and no partial payment has been made on
account by anyone;
(vi) The Account arose in the ordinary course of the business of
the respective Obligor and no notice of bankruptcy, receivership, insolvency,
dissolution, termination of existence, credit impairment, or the like, of the
Account Debtor, or notice of death of the Account Debtor or of any partner of
the Account Debtor has been received by said Obligor or by the Bank;
(vii) The Account Debtor obligated on the Account is not an
Affiliate or a Subsidiary of an Obligor; and
(viii) The Bank has not notified a respective Obligor that the
Account or Account Debtor is unsatisfactory in its sole discretion.
"Restricted Payment": Any cash dividend or other cash distribution,
direct or indirect, on account of any shares of any class of Capital Stock of
any Obligor now or hereafter outstanding, or apply any of its funds, property or
assets to the purchase, redemption or other retirement of any class of Capital
Stock.
"Reportable Event": As such term is defined in Title IV of ERISA.
"Revolving Loan": The loan described in Section 2.1(a).
"Subsidiary": As to any Person (a) any corporation more than fifty
percent (50%) of whose Capital Stock of any class or classes having by the terms
thereof ordinary voting power to elect a majority of the directors of such
corporation (irrespective of whether or not at the time, any class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time owned by such Person directly or
indirectly through Subsidiaries, (b) any partnership, association, joint venture
or of the entity in which such Person directly or indirectly through
Subsidiaries has more than a fifty percent (50%) interest in the total capital,
total income and/or total ownership interests of such entity at any time and (c)
any partnership in which such Person is a general partner.
"Swap Agreement": Any swap agreement (as defined in 11 U.S.C.
Section 101), interest protection agreement, foreign currency exchange
agreement, commodity purchase or option agreement or other form of hedging
agreement with the Bank (or with any of its Affiliates).
"Tangible Net Worth": Tangible Net Worth shall mean (x) total "assets"
less (y) total "liabilities". For purposes of this definition "assets" and
"liabilities" shall be determined in accordance with GAAP, except that there
shall be excluded from the definition of "assets" all intangible assets
including organizational expenses, patents, trademarks, service marks,
copyrights, goodwill, covenants not to compete, research and development costs,
treasury stock, and monies due from principals of the Obligors, Subsidiaries or
Affiliates and all unamortized debt discounts.
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"Termination Date": April 8, 2003 or such other date as the Bank may
agree in writing to extend the Termination Date until, without there being any
obligation on the part of the Bank to extend the Termination Date.
"Total Liabilities": All "liabilities" as determined in accordance with
GAAP and reflected on the balance sheets of the Obligors.
"UCC": Uniform Commercial Code in force and effect in the State of New
Jersey from time to time.
"Voting Stock": With respect to any Person, Capital Stock issue by such
Person the holders of which are ordinarily in the absence of contingencies,
entitled to vote for the election of the directors (or Persons performing
similar functions) of such Person, even though the right so to vote has been
suspended by the happening of any such contingency.
"Working Capital": Working Capital shall mean (x) total "current
assets" less (y) total "current liabilities". For purposes of this definition
"current assets" and "current liabilities" shall be determined in accordance
with GAAP, except that there shall be excluded from the definition of "current
assets" all intangible assets including organizational expenses, patents,
trademarks, service marks, copyrights, goodwill, covenants not to compete,
research and development costs, treasury stock, and monies due from principals
of the Obligors, Subsidiaries or Affiliates and all unamortized debt discounts.
1.2 Accounting Terms and Calculations. Unless otherwise defined or
specified herein to the contrary, all accounting terms used herein shall be
construed and all accounting determinations hereunder shall be made in
accordance with GAAP.
1.3 Other Terms. Terms such as "accounts", "accounts receivable",
"contract rights", "letters of credit", "letter of credit rights," "payment
intangibles," "deposit accounts," "investment property", "advices",
"confirmations", "equipment", "instruments", "chattel paper", "documents of
title", "goods", "general intangibles", "account debtors", "proceeds",
"products", and the like, shall, unless otherwise specifically defined herein,
have the meanings applicable to them for the purposes of Article 9 (Secured
Transactions) of the UCC.
SECTION 2
LOAN
2.1 Subject to the terms and conditions of this Agreement, and
provided no event or condition constituting a Default or an Event of Default has
occurred:
(a) Revolving Loan. The Bank agrees to lend and make Advances under the
Revolving Loan to the Borrower from time to time until the
Termination Date in amounts which shall not exceed in the
aggregate, at any one time outstanding, the lesser of (i) SEVEN
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MILLION AND 00/00 DOLLARS ($7,000,000) or (ii) the sum of the 85%
of the Qualified Accounts less an amount reserved by the Bank, in
its sole discretion, to support ACH processing exposure (the
reserved amount shall be known as the 'ACH Sublimit'). The ACH
Sublimit shall be disclosed in writing to the Borrower by the Bank,
from time to time as necessary, and shall not exceed $2,000,000 at
any given time (the lesser of (i) or (ii) above shall be referred
to as the "Borrowing Base"). The Bank has the right to, from time
to time, in its reasonable discretion, establish reserves against
the Borrowing Base.
(b) Advances, Interest Rate Conversions. Extensions of credit shall be
made to the Borrower pursuant to the Revolving Loan (in the form of
Advances) to any general deposit account maintained by the Borrower
with the Bank. The Borrower shall give the Bank irrevocable
telephonic notice (confirmed in writing) of each proposed Advance
or rate conversion with respect to the Loan not later than 1:00
p.m. local time at the office of the Bank first shown above (a) on
the same Business Day as each proposed Advance or rate conversion
to a Prime Rate Loan and (b) at least three (3) Business Days
before each proposed Advance or rate conversion to a LIBOR Loan.
Each such notice (a "Notice of Borrowing/Conversion") shall specify
(i) the date of such Advance or rate conversion, which shall be a
Business Day, and, in the case of a conversion from a LIBOR Loan,
the last day of a LIBOR Period, (ii) the amount of each Advance or
the amount to be converted, and (iii) the Interest Rate selected by
the Borrower.
(c) Interest Rate. (i) At the election of the Borrower, the unpaid
principal balance of each Advance shall bear interest from the date
such Advance is made available to the Borrower at the LIBOR Rate
plus the Applicable Margin or the Prime Rate, as selected by the
Borrower in accordance herewith (each, an "Interest Rate"). There
shall be no more than one Interest Rate for an Advance in effect at
any time. LIBOR Loans shall be in minimum amounts of $100,000 and
there shall be no greater than four (4) LIBOR Loan outstanding
under the Revolving Loan at any one time.
(ii) When the Prime Rate Loan is selected for an Advance
it shall be adjusted daily as applicable to reflect the Bank's Prime Rate and
the Prime Rate shall continue to apply until another Interest Rate option for
that Advance is selected pursuant to Subsection 2.1(c) hereof. When a LIBOR
Loan is selected for an Advance, such rate shall be fixed for the LIBOR
Period and shall apply for that Advance for successive LIBOR Periods at the then
prevailing successive rate until another Interest Rate option for that Advance
is selected pursuant to Subsection 2.1(c) hereof. Until the Borrower selects an
initial Interest Rate as provided herein, Advances hereunder shall bear interest
at the Prime Rate.
(iii) All computations of interest shall be made on the
basis of a three hundred sixty (360) day year and the actual number of days
elapsed ("Actual/360 Computation"). The Actual/360 Computation determines the
annual effective yield by taking the stated (nominal) rate for a year's period
and then dividing said rate by 360 to determine the daily periodic rate
to be applied for each day in the applicable period. Application of the
Actual/360 Computation produces an annualized effective rate exceeding that of
the nominal rate.
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(iv) Upon default (whether or not the Bank has
accelerated payment of the Loan) or after maturity or after judgment has been
rendered on the Loan, the Borrower's right to select Interest Rate options shall
cease and the unpaid principal of all Advances shall, at the option of the Bank,
bear interest at the Default rate.
(d) Payments of Principal and Interest. The unpaid principal balance of
all Advances made under the Revolving Loan shall be payable by the
Borrower to the Bank on the Termination Date at which time
outstanding principal, accrued interest, fees, expenses and/or
charges, if any, shall be due and payable. Payment of interest on
all outstanding amounts under the Loan shall occur monthly, in
arrears, in immediately available funds, on the first Business Day
of each month beginning on the first Business Day in the month next
succeeding the date of this Agreement. However, and notwithstanding
anything to the contrary contained herein, interest on LIBOR Loans
shall be payable on the last day of each LIBOR Period.
(e) Manner of Payment. All payments shall be made by the Borrower to
the Bank at Fleet National Bank, P.O. Box 5093, Hartford,
Connecticut 06102 or such other place as the Bank may from time to
time specify in writing, in lawful currency of the United States of
America, in immediately available funds, without counterclaim or
setoff and free and clear of, and without any deduction or
withholding for, any taxes or other payments. The Borrower hereby
directs the Bank to debit Demand Deposit Account #0967703980 (the
"Demand Deposit Account"), which shall be maintained by the
Borrower with the Bank for so long as any Obligations remain
outstanding, on any date on which payment of interest, principal
and/or any fees, expenses and/or charges are due under the Loan, in
an amount equal to the amount of such payment. Inadequate funds in
the Demand Deposit Account or the failure of the Bank to debit the
Demand Deposit Account shall not relieve the Borrower from its
obligation to pay said amounts due hereunder.
(f) Statement of Account. At least once each month, the Bank shall
render and send to the Borrower a statement of account showing
amounts loaned, all other charges, expenses and items chargeable to
the Borrower, payments made by the Borrower against the unpaid
principal balance on the Loan, other appropriate debits and credits
and the balance of the unpaid principal amount as of the date of
such statement of account for the Loan. The statement of account
shall be presumed to be correct in all respects, except for
specific objections which the Borrower makes in writing within
forty-five (45) days from the date upon which the statement of
account is sent. In the event that the Borrower makes an objection,
such objection shall contain evidence of the alleged error, which
evidence shall be reviewed by the Bank.
(g) Master Note; Loss, Theft, Destruction or Mutilation. The principal
amount of the Revolving Loan shall be evidenced by the Master Note,
substantially in the form of Exhibit A-1 annexed hereto. The
balances due from time to time on the Note shall be conclusively
evidenced by the Bank's records of disbursements and repayments,
subject to Subsection 2.1(g). Upon receipt of an affidavit of an
officer of the Bank as to the loss, theft, destruction or
mutilation any Note or any other Loan Document which is not of
public record, and, in the case of any such loss, theft,
destruction or mutilation,
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upon cancellation of such Note or other Loan Document, the Borrower
will issue, in lieu thereof, a replacement Note, or other Loan
Document in the same principal amount thereof and otherwise of like
tenor.
(h) Excess Advances. If at any time the aggregate outstanding principal
amount of Advances under the Revolving Loan exceeds the Borrowing
Base, the Borrower shall immediately pay to the Bank, in
immediately available funds, the amount of such excess.
(i) Prepayment of LIBOR Loan; Indemnification. The Borrower may prepay
a LIBOR Loan only upon at least three (3) Business Days prior
written notice to the Bank (which notice shall be irrevocable), and
any such prepayment shall occur only on the last day of the LIBOR
Period for such LIBOR Loan. The Borrower shall pay to the Bank,
upon request of the Bank, such amount or amounts as shall be
sufficient (in the reasonable opinion of the Bank) to compensate it
for any loss, cost, or expense incurred as a result of: (i) any
payment of a LIBOR Loan on a date other than the last day of the
LIBOR Period for such LIBOR Loan; (ii) any failure by the Borrower
to borrow a LIBOR Loan on the date specified by the Borrower's
Notice of Borrowing/Conversion; (iii) any failure by the Borrower
to pay a LIBOR Loan on the date for payment specified in the
Borrower's Notice of Borrowing/Conversion. Without limiting the
foregoing, the Borrower shall pay to the Bank a "yield maintenance
fee" in an amount computed as follows: The current rate for United
States Treasury securities (bills on a discounted basis shall be
converted to a bond equivalent) with a maturity date closest to the
term chosen pursuant to the LIBOR Rate Election as to which the
prepayment is made, shall be subtracted from the LIBOR Rate in
effect at the time of prepayment. If the result is zero or a
negative number, there shall be no yield maintenance fee. If the
result is a positive number, then the resulting percentage shall be
multiplied by the amount of the principal balance being prepaid.
The resulting amount shall be divided by 360 and multiplied by the
number of days remaining in the term chosen pursuant to the LIBOR
Rate Election as to which the prepayment is made. Said amount shall
be reduced to present value calculated by using the above
referenced United States Treasury securities rate and the number of
days remaining in the term chosen pursuant to the LIBOR Rate
Election as to which prepayment is made. The resulting amount shall
be in the yield maintenance fee due to the Bank upon the prepayment
of a LIBOR Loan. Each reference in this paragraph to "LIBOR Rate
Election" shall mean the election by the Borrower of the LIBOR
Rate. If by reason of an Event of Default, the Bank elects to
declare any Note to be immediately due and payable, then any yield
maintenance fee with respect to a LIBOR Loan shall become due and
payable in the same manner as though the Borrower had exercised
such right of prepayment.
(j) Provisions regarding LIBOR Loan. The following shall apply with
respect to LIBOR Loan provided for herein:
(i) If on or prior to the first day of any LIBOR Period
with respect to a LIBOR Loan, deposits in dollars (in the applicable amounts)
are not being offered to the Bank in the relevant market for such LIBOR Period,
or the rate being offered does not adequately reflect the cost of funds to the
Bank, the Bank shall forthwith give notice thereof to the Borrower, whereupon
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until the Bank notifies the Borrower that the circumstances giving rise to such
suspension no longer exist, the obligations of the Bank to make LIBOR Loan shall
be suspended. During any such suspension, unless the Borrower shall notify the
Bank at least three (3) Business Days before the date of any LIBOR Loan for
which a Notice of Borrowing/Conversion has previously been given that it elects
not to borrow on such date, the Borrower shall instead borrow a Prime Rate Loan.
(ii) If, after the date of this Agreement, the adoption of
or any change in any applicable law, rule or regulation, or any change in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by the Bank with any request or directive (whether or not
having the force of law) of any such authority, central bank or comparable
agency shall make it unlawful or impossible for the Bank to make, maintain or
fund its LIBOR Loan, whereupon until the Bank notifies the Borrower that the
circumstances giving rise to such suspension no longer exist, the obligation of
the Bank to make LIBOR Loan shall be suspended. If the Bank shall determine that
it may not lawfully continue to maintain and fund any of its outstanding LIBOR
Loan to maturity and shall so specify in such notice, the Borrower shall either
convert said LIBOR Loan to a Prime Loan or immediately prepay in full the then
outstanding principal amount of each such LIBOR Loan, together with accrued
interest thereon, and if said LIBOR Loan is converted or prepaid prior to the
end of its LIBOR Period, the Borrower shall also pay all other amounts to be
paid pursuant to Subsection 2.1(j).
(iii) If after the date hereof, the adoption of, or any
change in, any applicable law, rule or regulation, or any change in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by the Bank with any request or directive (whether or not
having the force of law) of any such authority, central bank or comparable
agency: (A) shall subject the Bank to any tax, duty or other charge with respect
to its LIBOR Loan or its obligation to make LIBOR Loan, or shall change the
basis of taxation of payments to the Bank of the principal of or interest on its
LIBOR Loan or any other amounts due under this Agreement in respect of its LIBOR
Loan or its obligation to make LIBOR Loan (except for changes in the rate of tax
on the overall net income of the Bank imposed by the jurisdiction in which the
Bank's principal executive office is located); or (B) shall impose, modify or
deem applicable any reserve, special deposit, capital adequacy requirement or
similar requirement (including, without limitation, any such requirement imposed
by the Board of Governors of the Federal Reserve System, but excluding, with
respect to any LIBOR Loan, any such requirement included in an applicable LIBOR
Reserve Percentage) against assets of, deposits with or for the account of, or
credit extended by, the Bank; or (C) shall impose on the Bank or on the London
interbank market any other condition affecting its LIBOR Loan or its obligation
to make LIBOR Loan; and the result of any of the foregoing is to increase the
cost to the Bank of making or maintaining any LIBOR Loan, or to reduce any
amount received or receivable by the Bank under this Agreement by an amount
deemed by the Bank to be material, then the Borrower shall immediately pay to
the Bank such additional amount or amounts as will compensate such the Bank for
such increased cost or reduction. A certificate of the Bank claiming
compensation under Subsection 2.1(k)(iii) and setting forth in reasonable detail
the computation of the additional amount or amounts to be paid to it hereunder
shall be presumed correct, in the absence of clear evidence presented by the
Borrower to the contrary.
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(k) Application of Payments. All payments shall be applied first to the
payment of all fees, expenses and other amounts due to the Bank
(excluding principal and interest), then to accrued interest due to
the Bank under the Revolving Loan, and then to the balance on
account of outstanding principal of the Revolving Loan; provided,
however, that after a Default or Event of Default, payments will be
applied to the Obligations of the Borrower to the Bank as the Bank
determines in its sole discretion.
(l) Late Fee. If the entire amount of any required principal and/or
interest payment with respect to the Loan is not paid in full
within (10) days after the same is due, the Borrower shall pay to
the Bank a late fee equal to five percent (5%) of the required
payment.
(m) Payment Date Adjustment for Non-Business Days. The Following
Business Day Convention shall be used with respect to all Loan(s)
to adjust any relevant date if that date would otherwise fall on a
day that is not a Business Day. For the purposes herein, the term
Following Business Day Convention shall mean that an adjustment
will be made if any relevant date would otherwise fall on a day
that is not a Business Day so that the date will be the first
following day that is a Business Day.
(n) Letters of Credit. Subject to the terms hereof, Advances under the
Revolving Loan may be, if requested by the Borrower, in the form of
Letters of Credit. In the event the Borrower desires to obtain an
Advance in the form of a Letter of Credit the Borrower shall (i)
provide the Bank with at least three (3) Business Days prior
written notice, (ii) complete, execute and deliver to the Bank such
Letter of Credit Documentation as required by the Bank, (iii) pay
to the Bank a commission in the amount of one and one-half of one
percent (1 1/2%) of the stated amount of each Letter of Credit and
such other standard fees and expenses as required by the Bank in
connection with Letters of Credit, and (iv) take such other actions
as required by the Bank. Notwithstanding anything contained herein
to the contrary (i) no Letter of Credit shall have an expiry date
after the Termination Date and (ii) the maximum aggregate amount of
all Letters of Credit outstanding hereunder shall be limited to
amount available under the Revolving Loan in accordance with 2.1(a)
hereof less any outstanding direct borrowings. All Letters of
Credit issued hereunder shall be subject to the terms and
conditions set forth in any Letter of Credit Documentation.
(1) Reimbursement. Upon a drawing with respect to any
Letter of Credit, the Borrower shall be irrevocably and unconditionally
obligated forthwith without presentment, demand, protest or other formalities of
any kind, to reimburse Bank for any amounts paid with respect to a Letter of
Credit, which reimbursement may at the request of the Borrower in accordance
with the terms hereof be in the form of a loan under Revolving Loan to the
extent there is availability.
(2) Obligations Absolute. The obligation of Borrower to
reimburse Bank for payments made under, and other amounts payable in connection
with, any Letter of Credit shall be unconditional and irrevocable and shall be
paid strictly in accordance with the terms of this Agreement, including, without
limitation, the following circumstances:
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(A) any lack of validity or enforceability of
any Letter of Credit or any agreement;
(B) the existence of any claim, set-off, defense
or other right which any Obligor, any of its Affiliates, or the Bank, on the one
hand, may at any time have against any beneficiary or transferee of any Letter
of Credit (or any Persons for whom any such transferee may be acting), or any
other Person, on the other hand, whether in connection with this Agreement, the
transactions contemplated herein or any unrelated transaction (including any
underlying transaction between Borrower or any of its Affiliates and the
beneficiary of the Letter of Credit);
(C) any draft, demand, certificate or any other
document presented under any Letter of Credit is alleged to be forged,
fraudulent, invalid or insufficient in any respect or any statement therein
being untrue or inaccurate in any respect;
(D) payment under a Letter of Credit against
presentation of a demand, draft or certificate or other document which does not
comply with the terms of such Letter of Credit; provided that, in the case of
any payment by Bank under any Letter of Credit, the Bank has not acted with
gross negligence or willful misconduct in determining that the demand for
payment under such Letter of Credit complies on its face with any applicable
requirements for a demand under such Letter of Credit;
(E) any other circumstance or happening
whatsoever, which is similar to any of the foregoing; or
(F) the fact that a Default or an Event of
Default shall have occurred and be continuing.
SECTION 3
COLLATERAL
3.1 In consideration of the Bank's making the Loan in accordance
with the terms and conditions of this Agreement, and to secure payment and
performance of all of the Obligations to the Bank:
(a) Grant of Security Interest. Each Obligor hereby grants to the
Bank a security interest in the Collateral which security interest shall remain
in full force and effect until all of the Obligations to the Bank are fully paid
and satisfied.
(b) Right of Setoff. Each Obligor grants to the Bank, a continuing
lien, security interest and right of setoff for all liabilities and obligations
to the Bank, whether now existing or hereafter arising, upon and against all
deposits, credits, collateral and property, now or hereafter in the possession,
custody, safekeeping or control of the Bank or any entity under the control of
FleetBoston Financial Corporation and its successors and assigns or in transit
to any of them. At any time, without demand or notice (any such notice being
expressly waived by each Obligor), the Bank may setoff the same or any part
thereof and apply the same to any Obligation even though
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unmatured and regardless of the adequacy of any other Collateral securing the
Loan. ANY AND ALL RIGHTS TO REQUIRE THE BANK TO EXERCISE ITS RIGHTS OR REMEDIES
WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE LOAN, PRIOR TO EXERCISING
ITS RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF
THE OBLIGORS, ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.
SECTION 4
CONDITIONS PRECEDENT
4.1 The duty of the Bank to make the Loan is conditioned upon
prior delivery by the Obligors to the Bank of the following, each dated the date
of this Agreement (unless noted to the contrary) and in form and substance
satisfactory to the Bank:
(a) Agreement. This Agreement, properly executed.
(b) Master Note. The Master Note, properly executed.
(c) Power of Attorney. The Power of Attorney, properly executed.
(d) Resolution of the Obligors. A certified copy of a resolution
of each Obligor, in form and substance satisfactory to the Bank, authorizing the
execution, delivery and performance of the appropriate Loan Documents,
authorizing the granting of the security interest in the Collateral, and
authorizing the transactions contemplated by all of the Loan Documents and all
such other and further actions in connection with this Agreement and the other
Loan Documents as designated officers of the Obligors may deem necessary and
proper.
(e) Certificate of Incumbency. A certificate by the Secretary of
each Obligor certifying the names and true signatures and incumbency of each of
the duly elected officers signing the documents described in Subsection 4.1(d).
(f) Certificate of Incorporation of the Obligors. A copy,
certified (within thirty (30) days prior to the date of this Agreement) by the
Secretary of State of the state of incorporation, of the Certificate of
Incorporation each Obligor, along with any amendments thereto.
(g) Good Standing. Certificate of the Secretary of State of each
state where each Obligor is qualified to do business, dated within thirty (30)
days prior to the date of this Agreement, as to the good standing of such
Obligor in each such jurisdiction except where not being so qualified would not
have a Material Adverse Affect.
(h) By-Laws. A copy, certified by the Secretary, of the By-Laws
of each Obligor.
(i) Insurance. An endorsement satisfactory to the Bank in form
and substance, of a reputable insurance company, licensed to conduct business
in the States where each Obligor maintain locations or Collateral, of
appropriate insurance as required by Subsection 6.6, including evidence of
workers' compensation insurance as set forth therein.
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(j) UCC, Federal Tax Lien, State Tax Lien, Judgment Searches and
Franchise Tax Lien Search. UCC, litigation, bankruptcy, Federal tax lien, state
tax lien, franchise tax lien and judgment searches against each Obligor
conducted where each Obligor is located, formed, or maintains any of its real or
personal property, all said searches to be conducted against the legal names and
any other trade or alternative name of the Obligors.
(k) Terminations and Discharges. Proof satisfactory to the Bank in
form and substance of the satisfaction, termination and discharge of any Liens
other than Permitted Liens.
(l) Financing Statements. Proof in form satisfactory to the Bank,
of the filing of UCC-1 financing statements covering the Collateral.
(m) Opinion. The opinion of counsel to the Obligors, in form and
substance satisfactory to the Bank's counsel.
(n) Landlord's Agreements. A Landlord's Agreement, properly
executed for each location leased by any Obligor.
(o) Closing Fee. Payment of the remaining portion of the $50,000
closing fee, and expenses of Bank $25,000 of which has been received to date.
(p) [Intentionally Deleted]
(q) Leases. Copies of all leases where any Obligor leases space.
(r) Field Examination, Account Review. Payment of the $12,000 to
Withum, Smith & Brown for the field examination performed by them of the
Obligors' books and records, and satisfactory independent review by the Bank of
the Obligors' Accounts supporting the Borrowing Book.
(s) Operating Accounts. Establishment and maintenance by Borrower
of its operating accounts with Bank.
(t) Other. Such other requirements as requested by the Bank.
4.2 Conditions Precedent to All Advances. The making by the Bank
of any Advance subsequent to the date of this Agreement is subject to the
satisfaction of the following conditions precedent:
(a) Compliance with this Agreement and other Loan Documents. The
Obligors shall have complied and shall then be in compliance with of the terms,
covenants and conditions of this Agreement and other Loan Documents.
(b) No Default or Event of Default. There shall exist no Default
or Event of Default.
(c) Representations and Warranties. The representations and
warranties contained in Section 5 hereof shall be true and with the same effect
as through such representations and warranties had been made at the time of the
making of each Advance.
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(d) Approvals or Documents. The Bank shall have received such
other approvals or documents as the Bank may reasonable require or request.
4.3 Reaffirmation of Representations, Warranties and Other
Conditions. Any request for an Advance subsequent to the date of this Agreement
shall constitute a reaffirmation by the Obligors of the items set forth above
under Subsections 4.2(a), (b), (c) and (d).
SECTION 5
REPRESENTATIONS AND WARRANTIES
5.1 Legal Existence. The Obligors are corporations duly
incorporated, validly existing and in good standing under the laws of the states
where incorporated and are qualified to conduct business in each jurisdiction
where required to be so qualified, except where not being so qualified would not
have any Material Adverse Effect.
5.2 Legal Power. The Obligors have the legal power to execute,
deliver and perform this Agreement and the other Loan Documents and to borrow
hereunder and under the Notes, and have taken all necessary legal action to
authorize (i) the borrowing hereunder on the terms and conditions of this
Agreement and the other Loan Documents and (ii) the execution, delivery and
performance of this Agreement and other Loan Documents. The Obligors have the
legal power to own, pledge and operate their properties and to conduct their
business.
5.3 Necessary Franchises, Patents, etc. The Obligors possess,
either by direct ownership or as licensee, in full force and effect, all
necessary franchises, patents, licenses, trademarks, trademark rights, trade
names, trade name rights, fictitious name authorizations or certificates and
copyrights to conduct their businesses as now conducted, all of which is
described on Schedule 5.3 attached hereto, without any conflict with the
franchises, patents, licenses, trademarks, trademark rights, trade name, trade
name rights, fictitious name authorizations or certificate and copyrights of
others. The Obligors have not within the last 5 years, and do not, transact any
business utilizing any trade names, fictitious names, assumed names and/or
alternate names other than on Schedule 5.3 attached hereto.
5.4 Subsidiaries. Except as disclosed on Schedule 5.4 attached
hereto, the Obligors have no Subsidiaries.
5.5 Line of Business. The Obligors are currently engaged in the
lines of businesses described on Schedule 5.5 attached hereto.
5.6 Financial Condition. The Obligors have furnished to the Bank,
audited financial statements of TeamStaff, Inc. audited by Arthur Anderson as of
September 30, 2001 and unaudited statements for December 31, 2001 (the
"Financial Statements"). The Financial Statements are complete and correct in
all material respects, have been prepared in accordance with GAAP, and fairly
present the condition and results of operations of Obligors for the period
involved. Since the date of the Financial Statements, there has been no material
and adverse change in the financial condition of any Obligor not reflected in
the Financial Statements, and since such date neither the business of nor the
financial condition of any Obligor has been materially and adversely affected by
any occurrence, whether or not insured against.
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5.7 Taxes. All tax returns of the Obligors which are due have been
duly filed and are, to the best of their knowledge, correct and all taxes,
assessments and other governmental charges upon the Obligors which are shown to
be due and payable thereon have been paid except where (i) they are diligently
being contested in good faith and for which adequate reserves as determined for
same have been established in accordance with GAAP, or (ii) where said
non-payment will not have any Material Adverse Effect, all as shown on Schedule
5.7 attached hereto. The Obligors do not know of any proposed tax deficiency,
assessment, charge or levy against them, the payment of which is not adequately
provided for on the books of the Obligors.
5.8 Judgments, No Material Litigation. Except as disclosed on
Schedule 5.8 hereof, there are no outstanding judgments against any Obligor; nor
are there any actions, proceedings, claims or investigations, pending or
threatened, before any court or governmental body which, if adversely
determined, could reasonably be expected to have a Material Adverse Effect.
5.9 Title to Properties, First Priority Lien. The Obligors have
good and marketable title in all of their properties and assets which they
purport to own, free of all Liens except for Permitted Liens and the Obligors
have granted to the Bank in Subsection 3.1, subject to Permitted Liens, valid
perfected first priority security interests in the Collateral.
5.10 No Consent or Approval. No consent or approval of any Person,
no waiver of any Lien or right of distraint or other similar right, and no
consent, license, approval or authorization of or registration, qualification,
designation, declaration or filing with any governmental authority (other than
the filing of financing statements in accordance with the UCC) is required in
connection with the validity, enforceability, execution, delivery and
performance of this Agreement or any of the other Loan Documents or the
consummation of any other transactions contemplated hereby.
5.11 No Burdensome Restriction, No Violations. There is no term of
any contract, bond, note, indenture or other agreement or of any charter or
other restriction or of any judgment, decree, order, statute, rule or regulation
which could reasonably be expected to have a Material Adverse Effect and the
Obligors are not in violation of their respective Certificates of Incorporation
or By-Laws; nor are the Obligors in default under, or in violation of, any term
of, any agreement, ordinance, resolution, decree, burden, note, indenture, order
or judgment to which they are a party or by which their properties are bound,
and the execution, delivery and performance of, and compliance with, this
Agreement and the other Loan Documents will not (with or without the giving of
notice or lapse of time, or both) result in any violation of, or be in conflict
with, or constitute a default under, where such violation, conflict or default
could reasonably be expected to have a Material Adverse Effect, any provision of
federal, state or local law, regulations or ordinances, or result in the
creation of any Lien upon any of the assets of any Obligor, except for the Lien
created by this Agreement and the other Loan Documents.
5.12 Changed Name, Merger, Acquisition. Since May 1, 2000, no
Obligor has (i) changed its name or been known by any other name, (ii) been the
surviving legal entity of a merger or consolidation, or (iii) acquired all or
substantially all of the assets of any Person.
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5.13 Place of Business. The chief executive office and principal
place of business of each Obligor and all other places of business of each
Obligor and locations where Collateral is stored or maintained is identified on
Schedule 5.13 attached hereto.
5.14 Location of Collateral and Records. All of the Collateral, and
the Obligors' books, records, journals, orders, receipts and correspondence are
located only at the Obligors' places of business set forth in Subsection 5.13,
except as to certain records not relating to Collateral which may be maintained
at the offices of the Obligors' counsel.
5.15 No Reportable Event. No Reportable Event has occurred with
respect to any Plan maintained for employees of: (i) any Obligor; or (ii) any
member of a Control Group of which any Obligor is a part. As of this date,
neither any Obligor nor any member of a Control Group of which any Obligor is a
part maintains any Plan.
5.16 Ownership. All of the authorized, issued and outstanding stock
interests of the Obligors are owned by the Persons and in the percentages
described on Schedule 5.16 attached hereto.
5.17 No Default. No event or condition which constitutes a Default
or an Event of Default has occurred.
5.18 Binding Obligations. This Agreement and the other Loan
Documents have been duly executed and delivered and constitute the valid and
legally binding obligations of the Obligors, enforceable in accordance with
their terms, except as may be limited by bankruptcy, insolvency or other similar
laws affecting the enforcement of creditor's rights.
5.19 Accounts. The most recent list of Accounts as of March 11,
2002, delivered to the Bank is true and complete, and contains an accurate aging
thereof. To the best of the Obligors' knowledge, none of such Accounts are
subject to counterclaims, defenses, claims for adjustments or setoffs of any
nature whatsoever, and require no further act by the Obligors to make such
Accounts owing by the Account Debtors. None of the Accounts include any
conditional sales, consignments or sales on any basis other than that of
absolute sale in the ordinary and usual course of business. No agreement has
been made under which any deductions or discounts may be claimed as to any such
Account except regular discounts in the usual course of business.
5.20 Compliance with Regulations and Laws. The Obligors have
materially complied with, and their facilities, business, assets, property,
leaseholds and equipment are in compliance in all material respects with, the
provisions of all regulations or law applicable to them including, without
limitation, the Fair Labor Standards Act, the Federal Occupational, Safety and
Health Act and the Environmental Protection Act, and all rules and regulations
thereunder and all similar state and local laws, rules and regulations, the
violation of which could reasonably be expected to have a Material Adverse
Effect, and there have been no outstanding citations, notices or orders of
noncompliance issued to any Obligor or relating to any of their business,
assets, property, leaseholds or equipment under any such laws, rules or
regulations.
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5.21 Licenses and Permits. The Obligors have been issued all
required federal, state and local licenses, certificates or permits relating to,
and the Obligors and their facilities, business, assets, property, leaseholds
and equipment are in compliance in all material respects with, all applicable
federal, state and local laws, rules and regulations relating to, air emissions,
water discharge, noise emissions, solid or liquid disposal, hazardous waste or
materials, or other environmental health or safety matters, where the failure to
so comply could reasonably be expected to have a Material Adverse Effect.
5.22 Solvency of the Obligors. Each Obligor is solvent on the date
hereof. For the purpose of this Agreement, the term "solvent" shall mean: (a)
the fair salable value of each Obligor's property is in excess of the total
amount of its debts; (b) each Obligor is able to pay its debts as they mature;
and (c) each Obligor has adequate capital to conduct its business in the
ordinary course.
5.23 Labor Matters. (i) No Obligor has experienced any strike,
labor dispute, slowdown or work stoppage due to labor disagreements and (ii) to
Obligor's knowledge, there is no such strike, dispute, slowdown or work stoppage
threatened against any Obligor.
SECTION 6
COVENANTS BY OBLIGORS
The Obligors covenant and agree that:
6.1 Preservation of Legal existence and Franchises. The Obligors
shall preserve and keep in full force and effect their legal existence and all
franchises, rights and privileges necessary to the proper conduct of their
business, including, without limitation, all necessary franchises, patents,
licenses, trademarks, trademark rights, trade name rights, fictitious name
authorizations or certificates and copyrights without any unlawful conflict with
such franchises, patents, licenses, trademarks, trademark rights, fictitious
name authorizations or certificates and copyrights of others except where the
failure to so would have no Material Adverse Effect.
6.2 Amendments. The Obligors shall promptly deliver to the Bank
copies of any amendments or modifications to their certificates of incorporation
or bylaws, certified with respect to said certificate of incorporation by the
Secretary of State of the appropriate Obligor's state of incorporation, and,
with respect to said bylaws by the appropriate Obligor's corporate secretary.
6.3 Compliance with Laws. The Obligors shall comply with all
applicable laws, ordinances, rules and regulations of any Federal, state or
local government or any instrumentality or agency thereof now or hereafter in
effect, the failure of which to comply with could reasonably be expected to have
a Material Adverse Effect.
6.4 Taxes. The Obligors shall pay and discharge, as they become
due, all taxes, assessments, claims and other governmental or non-governmental
charges lawfully imposed upon them or incurred by them or their properties and
assets, except taxes, assessments, claims and charges contested in good faith in
appropriate proceedings and in respect of which the Obligors shall have set
aside adequate reserves for the payment of such tax, assessment, claim or charge
in
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conformity with GAAP. The Obligors shall provide to the Bank, upon the Bank's
request, evidence of payment of such taxes, assessments, claims and charges
satisfactory to the Bank.
6.5 Maintenance of Property. The Obligors shall maintain, preserve
and keep all their properties, equipment and assets in good repair, working
order and condition, and make, or cause to be made, all necessary or appropriate
repairs, renewals, replacements, substitutions, additions, betterments and
improvements thereto so that efficiency of all such properties and assets shall
at all times be properly preserved and maintained.
6.6 Insurance. The Obligors shall maintain such insurance on their
properties and assets, including, without limitation, the Collateral, with
responsible insurance companies, against such casualties and in such amounts as
is from time to time reasonably required by the Bank. The insurance policies
shall name the Bank as additional insured and lender loss payee, as its interest
may appear and the proceeds of any such insurance shall be payable to the Bank
unless the Bank, in its sole discretion, directs otherwise. The insurance
policies shall be on a full replacement cost basis of the value of the
Collateral. All such policies of insurance shall provide for at least thirty
(30) days advance notice in writing to the Bank of any cancellation or
modification thereof. If the Obligors fail to pay the premiums on any such
insurance, the Bank shall have the right (but shall be under no duty) to pay
such premiums for the Obligors' account. The Obligors shall repay to the Bank
any sums which the Bank shall have so paid, together with interest thereon at
the Default Rate. The Obligors shall (a) deliver to the Bank, upon the request
of the Bank, a detailed list of insurance then in effect, stating (i) the names
of the insurance companies, (ii) the amounts and rates of the insurance, (iii)
the dates of expiration thereof and the properties and risks covered thereby;
(b) within fifteen (15) days after notice from the Bank, obtain such additional
insurance as the Bank may reasonably request; (c) provide to the Bank copies of
all insurance policies; and (d) assign to the Bank all rights to receive
proceeds of all insurance. The Obligors hereby authorize the Bank to endorse any
draft for such proceeds and to use the proceeds thereof to reduce the Loan. The
Obligors shall (a) deliver to Bank, upon request of the Bank, a detailed list of
their workers' compensation insurance then in effect, stating (i) the names of
the insurance companies, (ii) the amounts and rates of the insurance, (iii) the
dates of expiration thereof and the risks covered thereby; (b) within fifteen
(15) days after notice from the Bank, obtain such additional insurance as the
Bank may reasonably request; and (c) provide to the Bank copies of all insurance
policies.
6.7 No Other Liens. The Obligors shall not directly or indirectly
permit to exist any Lien on the Collateral except Permitted Liens.
6.8 Litigation Notice. The Obligors shall promptly notify the Bank
of (i) any litigation, actions, proceedings, claims or investigations pending or
threatened against any Obligor wherein the claimant seeks to recover in excess
of $100,000 (or its equivalent in another currency or currencies) per claim or
$100,000 in the aggregate and (ii) of the entry of any judgment against any
Obligor or the entry of any Lien, other than a Permitted Lien, against any of
the Collateral.
6.9 Location of Collateral and Records. The Obligors shall keep
the Collateral, their records relating to the Collateral, and their other books,
records, journals, orders, receipts and correspondence at only those locations
set forth in Subsection 5.13, unless notice is given to the Bank at least thirty
(30) days in advance of the removal of the Collateral, and the books, records,
journals, orders, receipts and correspondence, to another location, provided,
however, that no such
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removal may be effected before all filings required to be made to preserve the
perfected first priority security interest of the Bank in the Collateral shall
have been made and the Obligors shall deliver to the Bank a new Landlord's
Agreement, in form and substance satisfactory to the Bank, with respect to the
new location.
6.10 Conduct of Business. The Obligors shall not engage in any
business other than the businesses specified in Section 5.5 without the prior
written permission of the Bank, not to be unreasonably withheld.
6.11 Change of State of Formation or Location. The Obligors shall
not (i) change their state of formation, (ii) change the location of their chief
executive office and principal place of business, (iii) create any new place(s)
of business, or (iv) eliminate any existing place of business, unless the
Obligors notify the Bank in writing thirty (30) days in advance thereof and
further provided that no change in their state of formation or in location or
creation of a new location may be effected before all filings required to be
made to preserve the first priority security interest of the Bank in the
Collateral shall have been made and no change in location or creation of a new
location may be effected before the Obligors shall deliver to the Bank a new
Landlord's Agreement, in form and substance satisfactory to the Bank, with
respect to the new location.
6.12 Financial Statements. The Obligors shall deliver, or cause to
be delivered, to the Bank in form and substance satisfactory to the Bank the
following:
(a) Within fifty-five (55) days after the end of each fiscal
quarter, financial statements of the Obligors, on a consolidated basis,
consisting of a balance sheet of the Obligors as at the end of such month, and a
statement of cash flows and a statement of income for such quarter, all for the
period from the beginning of the current fiscal year to the end of such quarter,
all prepared in accordance with GAAP, in reasonable detail by the Obligors,
together with a certificate of the Chief Financial Officer or Controller of each
Obligor certifying that said financial statements accurately represent in all
material respects the financial condition and results of operations of the
Obligors, subject to year-end adjustments, calculating all financial covenants
required to be complied with hereunder, stating whether the Obligors are in
compliance with all said financial covenants and stating whether his examination
has disclosed the existence of any condition or event which constitutes (or
would, after notice or lapse of time, or both, constitute) an Event of Default
or Default and, if so, specifying the nature and period of existence thereof and
setting forth any actions which the Obligors are taking or have taken in respect
of such condition or event, and further certifying that such financial
statements constitute a fair presentation of the Obligors and their financial
condition and results of operations;
(b) Within one hundred twenty (120) days after the end of each
fiscal year of the Obligors, financial statements of the Obligors, on a
consolidated basis, consisting of a balance sheet of the Obligors as at the end
of such year and a statement of income for such year and a statement of cash
flows for such year, all in reasonable detail and audited by independent
certified public accountants acceptable to the Bank, accompanied by an
unqualified opinion and a management letter, if any, prepared by such
accountants, and which audit shall be performed in accordance with GAAP,
together with a certificate of the Chief Financial Officer or Controller of each
Obligor certifying that said financial statements accurately represent in all
material respects the financial condition and results of operations of the
Obligors, calculating all financial covenants
-25-
required to be complied with hereunder, stating whether the Obligors are in
compliance with all said financial covenants and stating whether his examination
has disclosed the existence of any condition or event which constitutes (or
would, after notice or lapse of time, or both, constitute) an Event of Default
or a Default and, if so, specifying the nature and period of existence thereof
and setting forth any actions which the Obligors are taking or have taken in
respect of such condition or event, and further certifying that the financial
statements constitute a fair presentation of the Obligors and their financial
condition and results of operations;
(c) A Borrowing Base Certificate to be submitted by the 15th day
of each month, as of the end of the immediately preceding month;
(d) By the 15th day of each month, the Obligors shall provide the
Bank with an accounts receivable aging report as of the end of the immediately
preceding month, in form and substance satisfactory to the Bank; and
(f) Such additional financial information of any Obligor as the
Bank shall reasonably require.
6.13 Costs, Expenses and Attorney's Fees.
The Obligors shall pay on demand all expenses of the Bank in connection
with the preparation, default, collection, waiver or amendment of any Loan
Document terms, or in connection with the Bank's exercise, preservation or
enforcement of any of its rights, remedies or options hereunder or any other
Loan Document, including, without limitation, reasonable fees of outside legal
counsel or the allocated costs of in-house legal counsel, accounting,
consulting, brokerage or other similar professional fees or expenses, and any
reasonable fees or expenses associated with travel or other costs relating to
any appraisals or examinations (including field examinations) conducted in
connection with the Loan or the Collateral therefor, and the amount of all such
expenses shall, until paid, bear interest at the rate applicable to principal
hereunder (including any Default Rate) and be an Obligation secured by the
Collateral. The Bank may, at its discretion and at any time when due, after
notifying the Obligors, charge any account maintained by the Obligors with the
Bank, in an amount equal to the sums due hereunder, and all such sums to the
extent not paid shall be added to the outstanding Obligations to the Bank.
6.14 Book and Records. The Obligors shall, at all times and in
accordance with GAAP, keep complete and accurate books and records concerning
their business, affairs and operations and concerning their properties and
assets, including without limitation, the Collateral.
6.15 Instrument and Documents. Upon the Bank's request, the
Obligors shall deliver to the Bank (i) all instruments and chattel paper
(including all executed copies thereof, except such executed copies retained by
the obligors thereunder) representing proceeds of the Collateral duly endorsed
and accompanied by duly executed instruments of assignment in form and substance
satisfactory to the Bank, and (ii) promptly at the Bank's request, all invoices,
original bills of lading, documents of title, original contracts, chattel paper,
instruments and any other writings relating thereto, and other writings or
evidence of performance of contracts or evidence of shipment or delivery of the
merchandise sold or services rendered in connection therewith. The Obligors
shall deliver to the Bank, promptly at the Bank's request, from time to time,
additional
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copies of any or all of such papers or writings, and such other
information with respect to any of the Collateral including such schedules of
accounts receivables and other writings as the Bank may, in its sole discretion,
deem to be necessary or effectual to evidence any Advance made pursuant to this
Agreement or to evidence, enforce or perfect the Bank's security interest in the
Collateral, to facilitate collection of the Collateral, or to carry into effect
the provisions and intent of this Agreement, all at the sole expense of the
Obligors.
6.16 Field Exam/Inspection. The Obligors shall from time to time,
without hindrance or delay, and during normal business hours, permit the Bank,
its representatives, agents and/or designees, to inspect or examine the
properties and assets of the Obligors, including, without limitation, the
Collateral, and to examine, check, audit, conduct a field examination, and make
copies of or abstracts from any of the Obligors' books, records, journals,
receipts, orders, correspondence or other data, and to verify independently the
orders of the Obligors and Accounts, limited to not more often than on a
quarterly basis unless a Default or Event of Default shall exist at the time, in
which case there shall be no such limitations. All fees and expenses associated
with the foregoing shall be paid by the Obligors.
6.17 ERISA, SEC Filings. The Obligors shall furnish to the Bank:
(i) as soon as possible and in any event within thirty (30) days after any
Obligor or a duly appointed administrator of a Plan knows or has reason to know
that any Reportable Event has occurred with respect to any Plan, a statement of
the Obligors setting forth details as to such Reportable Event and the action
which the Obligors propose to take with respect thereto, together with a copy of
the notice of such Reportable Event given to the PBGC or a statement that the
notice will be filed with the annual report to the United States Department of
Labor with respect to the Plan if required under applicable regulations; (ii)
promptly after the filing thereof with the United States Department of Labor,
the Internal Revenue Service or the PBGC, copies of each annual and other report
with respect to each Plan; (iii) promptly after receipt thereof, a copy of any
notice any Obligor or any other member of a Controlled Group may receive from
the United States Department of Labor, the Internal Revenue Service or the PBGC
with respect to any Plan; and (iv) promptly after the sending of, making
available or filing of the same, copies of any proxy statements and financial
statements which any Obligor, if any, shall send or make available to all of its
stockholders or members, and any registration statements and any reports which
any Obligor shall file with the Securities and Exchange Commission; and (v)
promptly after receipt thereof, a copy of any notice any Obligor may receive
indicating an actual or potential violation of any material law or regulation.
6.18 Use of Proceeds. The Borrower shall use the proceeds of the
Revolving Loan only to finance working capital and the issuance of letters of
credit.
6.19 Loss or Damage to Collateral. The Obligors shall immediately
notify the Bank of any material loss or damage to, or material diminution in, or
any occurrence which would materially adversely affect, the value of any of the
Collateral.
6.20 Default Notice. Upon having knowledge of the following, the
Obligors shall immediately notify the Bank of the occurrence of any Default or
Event of Default accompanied by a certificate of the Obligors specifying the
nature and period of existence thereof and stating what action the Obligors are
taking in respect of such Default or Event of Default. If the Obligors
-27-
receive a notice of a default from any creditor other than the Bank, the
Obligors shall deliver to the Bank a copy of such notice of default immediately
upon receipt thereof.
6.21 Compliance with Agreement. The Obligors shall observe, perform
and comply with, and shall continue, until all Obligations to the Bank are fully
paid and satisfied, to observe, perform and comply with, all of the terms,
agreements, and covenants contained in this Agreement and the other Loan
Documents.
6.22 Government Accounts. If any of the Accounts, contract rights,
chattel paper, general intangibles or instruments arise out of contracts with
the United States or any of its departments, agencies or instrumentalities or
any state of the United States or any of its departments, agencies or
instrumentalities and if requested by the Bank, the Obligors shall execute any
necessary writings in order that all money due or to become due under such
contracts shall be assigned to the Bank and proper notice of the assignment
given under the Federal Assignment of Claims Act and/or such other similar type
law applicable to said Collateral.
6.23 Negative Covenants. No Obligors shall without the Bank's prior
written consent:
(a) Indebtedness. Create, incur or assume any Indebtedness, except
for Permitted Indebtedness.
(b) Contingent Liabilities. Assume, guarantee, endorse or
otherwise become liable, in connection with the obligations of any Person
except:
(i) Liabilities of the Obligor resulting from product or
service warranties made by the Obligor in the ordinary course of its business;
and
(ii) Liabilities of the Obligor resulting from its
endorsement of items or instruments for deposit or collection in the ordinary
course of its business.
(c) Sale or Other Disposition of Assets. Sell, lease, abandon, or
otherwise dispose of its properties or assets or any part thereof, except in the
ordinary course of its business in commercially reasonable and bona fide arm's
length transactions for fair consideration.
(d) Acquisition of Assets. Purchase, lease, or otherwise acquire,
the properties, assets or real estate, or any interest therein, of any Person
except the purchasing, leasing or otherwise acquiring of assets by the Obligor
in the ordinary course of its business in bona fide arm's length transactions.
(e) Mergers, Joint Ventures. Consolidate with, merge into, or
participate in any joint venture with any Person or permit any Person to
consolidate with, merge into or participate in any joint venture with any
Obligor.
(f) Subsidiaries. Create or acquire, or permit the creation or
acquisition of, any Subsidiary, provided that Borrower may create subsidiaries
upon prior notice to Bank (i) so long as no Default or Event of Default shall
exist at the time or result therefrom, and (ii) provided said Subsidiary becomes
an Obligor and grants a first priority security interest in favor of the Bank
with respect to all of its assets.
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(g) Investments. Purchase, acquire or make any Investments,
except:
(i) Marketable direct obligations of the United States of
America;
(ii) Bonds, bills or notes of any state, county, or
municipality of the United States of America, which are not in default as to
principal or interest, and which are rated Aa, or better, by Moody's Investors
Service; and
(iii) Certificates of Deposit and Repurchase Agreements of
the Bank.
(h) Restricted Payment. Make any Restricted Payment, provided
Restricted Payments up to $300,000 in the aggregate during any fiscal year shall
be permitted so long as no Default or Event of Default shall exist at the time
of said Restricted Payment or will result therefrom.
(i) Change in Control. Cause, suffer or permit any Change in
Control.
(j) Loans to Other Persons. Make loans or advances to any of its
officers, shareholders, or directors, or to any other Person in excess of
$250,000.00 outstanding at any time in the aggregate.
(k) Liens. Create, assume or suffer to exist any Lien on any of
its properties or assets whether now owned or hereafter acquired, except for
Permitted Liens.
(l) Assignment of Accounts. Create, assume or suffer to exist any
assignment of Accounts.
(m) Change of Name. Change it's legal name or utilize a
fictitious, assumed or alternate name.
(n) Interest Coverage Ratio. Cause, suffer or permit the Obligors'
Interest Coverage Ratio to be less than 2.0 to 1.0, measured on a consolidated
basis and tested quarterly on a rolling four (4) quarter basis.
(o) Total Liabilities to Tangible Net Worth Ratio. Cause, suffer
or permit the Obligors' ratio of Total Liabilities to Tangible Net Worth to
exceed 2.0 to 1.0, measured on a consolidated basis and tested quarterly.
(p) Minimum Working Capital. Cause, suffer or permit the Obligors'
Working Capital to be less than $10,000,000, measured on a consolidated basis
and tested quarterly.
6.24 Bank Account. The Obligors shall maintain their current
accounts, including its primary business operating account with the Bank until
such time as all Obligations to the Bank are fully satisfied.
6.25 Margin Stock. The Obligors do not own, or have any present
intention of acquiring, any "Margin Stock" within the meaning of Regulation U
(12 CFR Part 221) of the Board of Governors of the Federal Reserve System
(herein called "margin stock"). None of the proceeds of the Loan made hereunder
shall be used, directly or indirectly, for the purposes of
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purchasing or carrying, or for the purpose of reducing or retiring any
indebtedness which was originally incurred for the purposes of purchasing or
carrying, any margin stock or for any other purpose which might cause the
transactions contemplated hereby to be considered a "purpose credit" with the
meaning of said Regulation U, or which might cause this Agreement to violate
Regulation U, Regulation T, Regulation X, or any other regulation of the Board
of Governors of the Federal Reserve System or the Securities Exchange Act of
1934, as amended. If requested by the Bank, Obligors will promptly furnish the
Bank with a statement or statements in conformity with the requirements of
Federal Reserve Form U-1 referred to in said Regulation U.
6.26 Further Assurances, Warranty of Title. The Obligors shall
procure and deliver to the Bank or execute and deliver any mortgage, security
agreement, financing statement or amendments thereto, or other writing necessary
to evidence, preserve, protect or enforce the Bank's rights and interests to or
in the Collateral. The Obligors will defend the Collateral at their own expense
from all claims and defenses of all other Persons.
6.27 Qualified Accounts. The Obligors shall not knowingly submit or
represent to the Bank any Account as a Qualified Account, which does not meet
all requirements in every respect of Qualified Account, and the Obligors shall,
after becoming aware, notify the Bank promptly, in writing, when any Account
against which an Advance had been made or may be made ceases to meet any of such
requirements.
SECTION 7
EVENTS OF DEFAULT
There shall be an Event of Default under this Agreement upon the
occurrence of any one of the following:
7.1 Non-Payment. The Borrower's failure to pay when due or at
maturity (whether as stated or by acceleration), as the case may be, any payment
of principal, interest or other charges due and owing to the Bank pursuant to
any Obligations, including, without limitation, those Obligations arising
pursuant to this Agreement; or
7.2 Specific Defaults. Any Obligor shall fail to perform or
observe any term or agreement contained in Subsection 6.1,6.9, 6.10, 6.11, 6.12,
6.14, 6.16, 6.23, 6.24, 6.25, 6.26 and 6.27; or
7.3 Other Defaults. A breach by any Obligors of any other term,
agreement or covenant contained in this Agreement, which breach remains uncured
for a period of thirty (30) days from the earlier of (a) the date upon which
notice thereof shall be given to the appropriate Obligor by the Bank or (b) the
date upon which the Bank should have been notified pursuant to Subsection 6.20
hereof; or
7.4 Warranties and Representations. If any warranty or
representation or signatures contained in this Agreement or the other Loan
Documents, including without limitation, the warranties and representations
contained in Section 5, shall be false or incorrect in any material respect when
made or deemed reaffirmed, or if any financial statement given by or on behalf
of
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any Obligor to the Bank shall be false, incorrect, incomplete or misleading in
any material respect; or
7.5 Bankruptcy or Insolvency. (i) Any resolution shall be passed
or any action shall be taken by any Obligor for the termination, winding up,
liquidation or dissolution of any Obligor or its debts, or any Obligor shall
make an assignment for the benefit of creditors, become insolvent or be unable
to pay (or admit in writing its inability to pay) any of its debts as they
mature, or any Obligor shall file a petition in voluntary liquidation or
bankruptcy, or any Obligor shall file a petition or answer or consent seeking
reorganization or the readjustment of any of its debt under applicable
insolvency or bankruptcy laws now or hereafter existing, or any Obligor shall
consent to the appointment of any receiver, administrator, liquidator, custodian
or trustee of all or any part of its property or assets, or legal action shall
be taken by any Obligor for the purpose of effecting any of the foregoing; or
(ii) By order or decree of any court of competent jurisdiction,
any Obligor shall be adjudicated a bankrupt or insolvent, or a petition for
proceedings in bankruptcy or liquidation or for the reorganization or the
readjustment of its debt under applicable bankruptcy or insolvency laws now or
hereafter existing shall be filed against any Obligor, and any Obligor shall
admit the material allegations thereof, or shall not cause such petition to be
discharged within thirty (30) days, or any order judgment or decree shall be
made approving such petition and such order, judgment or decree shall not be
vacated, set aside or stayed within thirty (30) days of their issuance or any
receiver, administrator, liquidator or trustee shall be appointed for any
Obligor or for all or any part of its property and such receiver, administrator,
liquidator or trustee shall not be discharged or his jurisdiction shall not be
relinquished, vacated or stayed, on appeal or otherwise, within thirty (30) days
after his appointment; or
7.6 Cross-Default. The occurrence of any default by any Obligor in
connection with (i) any loans, advances or other extensions of credit by the
Bank to any Obligor other than the Loan made pursuant to this Agreement; (ii)
any Indebtedness of any Obligor under any agreement or instrument relating to
such Indebtedness, which Indebtedness together with all such other Indebtedness
exceeds in the aggregate $250,000.00, if the effect of such default is to
accelerate, or to permit the acceleration of, the maturity of such Indebtedness,
or any such Indebtedness shall be declared to be due and payable or required to
be prepaid other than by a regularly scheduled required payment, prior to its
stated maturity thereof; or
7.7 Other Warranties or Representations. If any warranty or
representation whether past, contemporaneous or future made in writing by any
Obligor or on behalf of any Obligor to the Bank, other than any warranty or
representation set forth in this Agreement, shall prove to be false, incorrect,
incomplete or misleading in any material respect, when made, or when deemed
made; or
7.8 Other Loan Documents. A default occurs under any of the other
Loan Documents, and such default is not cured within the applicable grace period
provided therein, if any; or
7.9 ERISA. A Reportable Event shall have occurred which the Bank,
in its sole discretion, shall determine in good faith constitutes grounds for
the termination by the PBGC of any Plan or for the appointment by the
appropriate United States district court of a trustee for any Plan, or if any
Plan shall be terminated or any such trustee shall be requested or appointed, or
if
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any Obligor is in "default" (as defined in Section 4219(c)(5) of ERISA) with
respect to payments to a Multiemployer Plan resulting from the Obligor's
complete or partial withdrawal from such Plan; or
7.10 Execution; Attachment. Any execution or attachment shall be
levied against the Collateral, if the cost or market value of said Collateral in
the aggregate exceeds $250,000.00; or
7.11 Judgment. The entry of a final judgment in excess of
$250,000.00 (or $400,000.00 in the aggregate) against any Obligor and the
failure of any Obligor to discharge the same within sixty days (60) from the
date of the order, decree or process under which or pursuant to which judgment
was entered, or to secure a stay of execution pending appeal of such judgment
unless such judgment is fully covered by insurance and the insurer has
acknowledged liability or unless a bond for the full amount of said judgment is
presented to the entity responsible for the enforcement of said judgment; or
6.12 Deny or Disaffirm Obligations. Any Obligor to any Loan
Document shall deny or disaffirm its obligations under any of
the Loan Documents, or any Loan Document shall be canceled,
terminated, revoked or rescinded without the express prior
written consent of the Bank, or any action or proceeding shall
have been commenced by any Person (other than the Bank)
seeking to invalidate, declare unenforceable cancel, revoke,
rescind or disaffirm the obligations of any party to any Loan
Document; or
6.13 Crime, Fraud or Forfeiture of Assets. Any Obligor is indicated
or convicted of a commission of (i) a crime, (ii) fraudulent
activity or (iii) any proceeding of any kind is pending or
threatened which would reasonably be likely to result in the
forfeiture of any material portion of any assets of any
Obligor to any governmental entity or authority; or
6.14 Material Adverse Change. The occurrence of any Material
Adverse Change; or.
6.15 Swap Agreement. Any default, after the expiration of
any applicable grace period, under any Swap Agreement with the
Bank or any Affiliate of the Bank.
SECTION 8
BANK'S RIGHTS AND REMEDIES
8.1 Bank's Rights Exercisable at any Time. Exclusive of the
occurrence of an Event of Default or Default, the Bank may:
(a) Receive from all or any accountants and auditors employed by
any Obligor (which accountants and auditors the Obligors hereby authorize and
direct to deliver to the Bank), at any time during the term of this Agreement,
copies of any of the financial statements, trial balances or other accounting
records of any sort of any Obligor which are in the possession of such
accountants and auditors to the extent that same will be released;
(b) Receive and have access to printouts and all other information
respecting financial records of any Obligor maintained by external computer
service companies (which the Obligors
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hereby authorize and direct to deliver or give access to the Bank of the same)
to the extent that same will be released;
(c) File financing statements without the Obligors' signature or
file carbon, photographic or other reproductions of financing statements, where
permitted by law, in any relevant state to perfect or maintain the Bank's
security interest in any or all of the Collateral.
(d) Communicate with customers and Account Debtors to verify
(including phone verifications) independently orders and Accounts (and the
Obligors agree to furnish all such assistance and information as the Bank may
require in connection therewith); and
(e) Take any and all action which in its reasonable discretion is
necessary and proper to preserve its interest in the Collateral, including,
without limitation, paying debts of the Obligors which might, in the Bank's sole
discretion, impair the Collateral, or the Bank's security interest therein or
Lien thereon, including without limitation, paying taxes or assessments imposed
on the Collateral, and the sums so expended by the Bank shall be secured by the
Collateral, shall be added to the amount of the Obligations and shall be payable
on demand with interest at the Default Rate.
8.2 Bank's Rights and Remedies Upon an Event of Default. Upon the
occurrence of an Event of Default the Bank shall have the following rights and
remedies to be exercised within its discretion, without further demand,
presentment, protest, advertisement, or notice of any kind, all of which are
hereby expressly waived by the Obligors except as specified below:
(a) The Bank may exercise any and all of the rights and remedies
provided in this Agreement, the other Loan Documents, the Uniform Commercial
Code and other applicable law in force and effect in the State of New Jersey and
in any other jurisdiction where the Obligors maintain property or assets;
(b) The Bank may elect (i) not to make any further Advances under
and pursuant to this Agreement or otherwise and all of the Obligations shall
immediately become due and payable and (ii) to increase the rate of interest
with respect to all Obligations to the Default Rate;
(c) The Bank may receive, open and dispose of mail addressed to
the Obligors and notify the Post Office authorities to change the address for
delivery of mail addressed to the Obligors to such address as the Bank may
designate;
(d) The Bank may require the Obligors (and the Obligors hereby
agree), at the Obligors' own expense, to assemble or to cause to be assembled
the Collateral and make it available at places which the Bank may designate,
whether at the Obligors' premises or elsewhere, and to allow the Bank to take
possession or dispose of the Collateral;
(e) The Bank may forthwith collect, receive, appropriate and
realize upon the Collateral or any part thereof, and/or, forthwith, without
advertisement, sell, lease, assign, give an option or options to purchase, or
sell or otherwise dispose of, the Collateral (or contract to do so), or any part
thereof or any interest which the Obligors may have therein, in one or more
parcels at public or private sale or sales, at any exchange or broker's board or
at any of the Bank's offices or elsewhere at such prices as they may deem best
in their discretion exercised in a commercially reasonable manner, for cash or
on credit or for future delivery without assumption of any credit
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risk, and if notice of such sale or of other action by the Bank is required by
applicable law, the Obligors agree that ten (10) days' notice (which
notification shall be deemed given when mailed, postage prepaid, addressed to
the Obligors at their principal place of business set forth in Subsection 5.13)
of the time and place of any public sale or of the time after which a private
sale may take place shall be sufficient, which the Bank and the Obligors hereby
agree to be commercially reasonable;
(f) The Bank shall have the right upon any such public sale or
sales, and, to the extent permitted by law, upon any such private sale or sales,
to purchase the whole or any part of the Collateral so sold, free of any right
or equity of redemption, which right or equity of redemption the Obligors hereby
waive and release;
(g) The Bank may enter upon any and all places of business of the
Obligors, take possession and remove therefrom any and all of the Collateral and
the Obligors' books, records, ledger sheets, correspondence, invoices and
documents, relating to or evidencing any of the Collateral, and/or without cost
or expense to the Bank, make such use of any or all of the Obligors' places of
business as may be reasonably necessary to administer, control and collect the
Collateral, either personally or through any agent, or by means of a receiver
appointed by a court of competent jurisdiction;
(h) The Bank may settle, renew, extend, compromise, compound,
exchange or adjust claims in respect of any of the Collateral or any legal
proceedings brought in respect thereof;
(i) The Bank may subrogate to all of the Obligors' interests,
rights and remedies in respect of the Collateral including the right to stop
delivery, and to reclaim Inventory which any Account Debtor has returned,
rejected, revoked acceptance of and/or failed to return, and which has been
consigned or diverted, and to take possession of and sell or dispose of
Inventory;
(j) The Bank may demand, sue for, collect or receive any money or
property, at any time payable or receivable on account of or in exchange for, or
make any compromises it deems desirable, including, without limitation,
extending the time of payment, arranging for payment in installments, or
otherwise modifying the terms or rights with respect to any of the Collateral,
all of which may be without notice to or consent by any Obligor and without
otherwise discharging or affecting the Obligations, the Collateral or the
security interest therein or Lien thereon;
(k) The Bank may set off and apply to all or any part of the
Obligations, all the Collateral described in Section 3, and the Bank shall be
deemed to have exercised such right of set off and to have made a charge against
any such Collateral immediately upon the occurrence of such Event of Default,
even though the actual book entries may be made at some time subsequent thereto;
(l) Institute and maintain foreclosure proceedings against the
Collateral in accordance with the laws of the State of New Jersey, and any other
jurisdiction where the Collateral is located;
(m) To notify the customers and Account Debtors to make payment
directly to the Bank or its designee and endorse the name of the Obligors upon
any and all checks, drafts, money
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orders, and other instruments for the payment of monies which are payable to the
Obligors and constitute proceeds of the Collateral; and
(n) The Bank may do such other and further acts and deeds in the
name of the Obligors which the Bank may deem necessary or advisable to the
extent necessary for the Bank to realize upon the Collateral.
SECTION 9
OBLIGORS' RIGHTS AND REMEDIES
9.1 The Obligors shall have all of the rights and remedies
provided in this Agreement, the other Loan Documents and by the UCC and other
applicable law in force in New Jersey.
SECTION 10
MISCELLANEOUS PROVISIONS
10.1 No Liability; Indemnification.
(a) The Bank shall not be deemed to have assumed any liability or
responsibility to the Obligors or any Person for the correctness, validity or
genuineness of any instruments or documents that may be released or endorsed to
any Obligor by the Bank (which shall automatically be deemed to be without
recourse to the Bank in any event), or for the existence, character, quantity,
quality, condition, value or delivery of any goods purporting to be represented
by any such documents; and the Bank shall not be deemed to have assumed any
obligation or liability to any supplier or Account Debtor or to any other
Person. The Obligors hereby agree to indemnify and defend the Bank and hold it
harmless in respect to any claim or proceeding arising out of any matter
referred to in this Subsection 10.1(a), except to the extent attributable to the
gross negligence or willful misconduct of the Bank.
(b) The Obligors hereby agree to indemnify and to hold harmless
the Bank and each of its respective officers, directors, agents, employees and
counsel harmless from and against any and all claims, damages, liabilities,
costs and expenses (including, without limitation, reasonable fees, expenses and
disbursements of counsel) in connection with or arising out of any
investigation, litigation or proceeding (except to the extent attributable to
the gross negligence or willful misconduct of the Bank), including without
limitation, those related to violation(s) involving any environmental laws,
which may be incurred by or asserted against the Bank or any such other
indemnified Person arising by virtue of the Bank's relationship with the
Obligors as anticipated by this Agreement or the other Loan Documents, whether
or not the Bank is a party thereto.
(c) The Obligors agree to indemnify and hold the Bank harmless
from and against any taxes, liabilities, claims and damages, including
attorneys' fees and disbursements and other expenses incurred or arising by
reason of the taking or the failure to take action by the Bank in respect of any
transaction effected under this Agreement or in connection with the Lien
provided for herein (except to the extent attributable to the gross negligence
or willful misconduct of the Bank), including, without limitation, any taxes
payable in connection with the delivery or registration of any of the Collateral
as provided herein.
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(d) The obligations of the Obligors under this Subsection 10.1
shall survive the termination of this Agreement.
10.2 Waivers.
(a) Notice of default and presentment, demand, protest and notice
of protest and of dishonor as to any provision of this Agreement or any other
Loan Document is hereby expressly waived by the Obligors, except as may be
otherwise specifically provided in this Agreement or in the other Loan
Documents.
(b) To the extent it may be lawful to do so, the Obligors for
themselves and for any Person who may claim through or under them hereby:
(1) agree that none of them nor any such Person will set
up, plead, claim or in any manner whatsoever take advantage of, any
appraisement, valuation, stay, extension or redemption laws, now or hereafter in
force in any jurisdiction, which may delay, prevent or otherwise hinder (i) the
performance or enforcement of, or foreclosure under, this Agreement or the other
Loan Documents, (ii) the sale of any of the Collateral or (iii) the putting of
the purchaser or purchasers thereof into possession of such property immediately
after the sale thereof;
(2) waive all benefit or advantage of any such laws;
(3) waive and release all rights to have the
Collateral marshaled upon any foreclosure, sale or other enforcement of this
Agreement; and
(4) waive all claims, damages and demands against the
Bank's repossession, retention or sale of the Collateral.
9.3 Successors and Assigns, Assignments. The "Bank," the
"Borrower," the "Guarantors," and the "Obligors" as used in
this Agreement shall include the successors, representatives
and assigns of those parties, provided, however, that the
Borrower, the Guarantors and the Obligors shall not assign or
delegate any of their rights, remedies, warranties,
representations or covenants arising under this Agreement or
any other Loan Document without the prior written consent of
the Bank, and any purported assignment or delegation without
such consent shall be void.
9.4 Choice of Law. This Agreement and the other Loan Documents and
the rights and obligations of the parties hereunder and
thereunder shall be construed and interpreted in accordance
with the laws of the State of New Jersey (the "Governing
State") (excluding the laws applicable to conflicts or choice
of law).
THE OBLIGORS AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS AGREEMENT
OR ANY OF THE OTHER LOAN DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE STATE OF
NEW JERSEY OR ANY FEDERAL COURT SITTING THEREIN AND CONSENT TO THE NONEXCLUSIVE
JURISDICTION OF SUCH COURT AND SERVICE OF PROCESS IN ANY SUCH SUIT BEING MADE
UPON THE OBLIGORS BY MAIL AT THE ADDRESS DESCRIBED IN SUBSECTION 10.9. THE
OBLIGORS
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HEREBY WAIVE ANY OBJECTION THAT THEY MAY NOW OR HEREAFTER HAVE TO THE
VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN
INCONVENIENT FORUM.
9.5 Severability. If any of the provisions of this Agreement or
any other Loan Document shall contravene or be held invalid
under the laws of any jurisdiction, this Agreement or any
other Loan Document shall be construed as if not containing
such provisions and the rights, remedies, warranties,
representations, covenants and provisions hereof shall be
construed and enforced accordingly in such jurisdiction and
shall not in any manner affect such provision in any other
jurisdiction, or any other provisions in this Agreement, or in
any other Loan Documents, as the case may be, in any
jurisdiction.
10.6 Remedies Cumulative. The Defaults, Events of Default, rights,
remedies, covenants and provisions set forth in this Agreement and any other
Loan Document or as may be provided by applicable law, shall be cumulative and
not alternative or exclusive, and the Bank's Rights and Remedies may be
exercised by the Bank at such time or times, in such order of preference, as the
Bank in its sole discretion may determine.
10.7 Entire Agreement, Survival of Representations, Warranties and
Modifications. This Agreement and the other Loan Documents embody the entire
agreement and understanding among the Obligors and the Bank and supersede all
prior agreements and understandings relating to the subject matter hereof. All
warranties, representations and covenants imposed or made herein, or in the
other Loan Documents shall survive the execution and delivery of this Agreement
and the other Loan Documents. No delay or omission of the Bank in exercising or
enforcing any of the Bank's Rights and Remedies hereunder shall constitute a
waiver thereof; nor shall any single or partial exercise by the Bank of any
right hereunder preclude any other or further exercise thereof or the exercise
of any other right; and no waiver by the Bank of any Default or Event of Default
shall operate as a waiver of any other Default or Event of Default. No term or
provision of this Agreement, or any other Loan Document shall be waived, altered
or modified except with the prior written consent of the Bank, which consent
makes explicit reference hereto or thereto. Except as provided in the preceding
sentence, no other agreement or transaction, of whatsoever nature, entered into
between the Bank and any Obligor at any time (whether before, during or after
the effective date or terms of this Agreement), shall be construed in any
particular as a waiver, modification or limitation of any of the Bank's Rights
and Remedies under this Agreement, or the other Loan Documents nor shall
anything in this Agreement, or in the other Loan Documents be construed as a
waiver, modification or limitation of any of the Bank's Rights and Remedies, not
only under the provisions of this Agreement or the other Loan Documents but also
of any such other agreement or transaction.
10.8 Days. Any and all references to "days" in this Agreement shall
mean "calendar days" except as otherwise specifically provided in this Agreement
and by law.
10.9 Notices. All notices, requests and other communications
pursuant to this Agreement shall be in writing, either by (i) letter (delivered
by hand or sent certified mail, return receipt requested), (ii) by overnight
courier service, or (iii) by telecopy (if followed by delivery in accordance
with (i) and (ii) above) addressed to the Bank at 750 Walnut Avenue, Cranford,
New
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Jersey 07016, Attention: Craig W. Heal, Senior Vice President Telecopy
Number (908) 653-1680 (except with respect to borrowing notices, which shall be
faxed to Attn: Ann Platek, Telecopy Number (908) 709-6433) or to the Obligors at
300 Atrium Drive, Somerset, New Jersey 08873, Attention: Donald T. Kelly, Chief
Financial Officer or at such other address as either may give notice to the
other as herein provided. Any notice, request or communication hereunder shall
be deemed to have been given in the case of mailing, three (3) Business Days
after being deposited in the mails, in the case of overnight delivery, the day
following the date on which such notice was delivered to such overnight delivery
service, or in the case of facsimile, when sent, or in the case of hand
delivery, when delivered, addressed as aforesaid except where otherwise provided
in this Agreement, provided, however, that notice of a change of address, as
hereinabove provided, shall be deemed to have been given only when actually
received by the party to which it is addressed.
10.10 Agreement and Other Loan Documents Complementary. The
provisions of this Agreement shall be in addition to those of any guaranty,
security agreement, note or other evidence of liability held by the Bank, all of
which shall be construed as complementary to each other. In the event of
ambiguity or inconsistency between this Agreement and any other Loan Document,
the terms of this Agreement will govern.
10.11 Bank's Relationship. The Bank and the Obligors expressly agree
that the relationship of the Bank to the Obligors is that of a lender only, the
intent of this provision being to clarify and stipulate that the Bank is not a
partner or a co-venturer of the Obligors and that the Bank's sole interest in
the Collateral is for the purpose of security for repayment of the Obligations
of the Obligors.
10.12 Power of Attorney. The Obligors hereby appoint any officer or
agent of the Bank as their true and lawful attorney-in-fact, with power to
endorse the name of the Obligors upon any notes, checks, drafts, money orders,
or other instruments or demands of payment of the Collateral that may come into
possession of the Bank, to sign or endorse the name of the Obligors upon any
invoices, freight or express bills, bills of lading, storage or warehouse
receipts, drafts against Account Debtors, assignments, verifications and notices
in connection with Accounts, letters of credit or advices or confirmations
thereof, any instruments or documents relating thereto or to the Obligors'
rights therein; and sign and deliver, on behalf of the Obligors any and all
notices direct to any issuer, advising bank or confirming bank, wherein such
issuer or bank is informed of the Bank's security interest in, or the assignment
of any letters of credit or advices or confirmations thereof; and, upon an Event
of Default, to give written notice to such office and officials of the United
States Postal Service to effect such change or changes of address so that all
mail addressed to the Obligors may be delivered directly to the Bank or a place
where the Bank shall designate, granting unto the Obligors' said attorney full
power to do any and all things necessary to be done with respect to the above
transactions as fully and effectually as the Obligors might or could do, and
hereby ratifying all that said attorney shall lawfully do or cause to be done by
virtue hereof.. Notwithstanding anything contained herein to the contrary, the
Bank shall not utilize the Power of Attorney until an Event of Default has
occurred.
10.13 Right of Setoff. Each Borrower grants to the Bank, a
continuing lien, security interest and right of setoff for all liabilities and
obligations to the Bank, whether now existing or hereafter arising, upon and
against all deposits, credits, collateral and property, now or hereafter in the
possession, custody, safekeeping or control of the Bank or any entity under the
control of
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FleetBoston Financial Corporation and its successors and assigns or in transit
to any of them. At any time, without demand or notice (any such notice being
expressly waived by the Borrowers), the Bank may setoff the same or any part
thereof and apply the same to any Obligation of the Borrowers even though
unmatured and regardless of the adequacy of any other collateral securing the
Revolving Loan. ANY AND ALL RIGHTS TO REQUIRE THE BANK TO EXERCISE ITS RIGHTS OR
REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE REVOLVING LOAN,
PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS
OR OTHER PROPERTY OF THE BORROWERS, ARE HEREBY KNOWINGLY, VOLUNTARILY AND
IRREVOCABLY WAIVED.
10.14. Section Headings. Article and Section headings are for
reference only and shall not affect the interpretation or meaning of any
provision of this Agreement.
10.15 No Duty to Preserve Collateral. The Bank shall be under no
duty or obligation to: (i) preserve, protect or marshal any Collateral; (ii)
preserve or protect the rights of any Person against any other Person claiming
an interest in any Collateral; (iii) realize upon any Collateral in any
particular order or manner or seek repayment of any Obligation from any
particular source; or (iv) permit any substitution or exchange of all or any
part of any Collateral or release any part of any Collateral from any Lien, even
if that substitution or release would leave the Bank adequately secured.
9.16 Participation. The Bank shall have the unrestricted right at
any time and from time to time, and without the consent of or
notice to any Obligor, to grant to one or more banks or other
financial institutions (each, a "Participant") participating
interests in the Bank's obligation to lend hereunder and/or
any or all of the loans held by the Bank hereunder. In the
event of any such grant by the Bank of a participating
interest to a Participant, whether or not upon notice to the
Obligors, the Bank shall remain responsible for the
performance of its obligations hereunder and the Obligors
shall continue to deal solely and directly with the Bank in
connection with the Bank's rights and obligations hereunder.
The Bank may furnish any information concerning the Obligors
in its possession from time to time to prospective
Participants, provided that the Bank shall require any such
prospective Participant to agree in writing to maintain the
confidentiality of such information.
9.17 Usury Limitation: If, at any time, the rate of interest,
together with all amounts which constitute interest and which
are reserved, charged or taken by the Bank as compensation for
fees, services or expenses incidental to the making,
negotiating or collection of the Loan evidenced hereby, shall
be deemed by any competent court of law, governmental agency
or tribunal to exceed the maximum rate of interest permitted
to be charged by the Bank to the Obligors under applicable
law, then, during such time as such rate of interest would be
deemed excessive, that portion of each sum paid attributable
to that portion of such interest rate that exceeds the maximum
rate of interest so permitted shall be deemed a voluntary
prepayment of principal. As used herein, the term "applicable
law" shall mean the law in effect as of the date hereof;
provided, however, that in the event there is a change in the
law
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which results in a higher permissible rate of interest, then
this Agreement shall be governed by such new law as of its
effective date.
9.18 JURY TRIAL WAIVER. THE OBLIGORS AND THE BANK (BY ACCEPTANCE OF
THIS AGREEMENT) MUTUALLY HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF
ANY CLAIM BASED HEREON, ARISING OUT OF, UNDER OR IN CONNECTION
WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENTS CONTEMPLATED
TO BE EXECUTED IN CONNECTION HEREWITH OR ANY COURSE OF
CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER VERBAL OR
WRITTEN) OR ACTIONS OF ANY PARTY, INCLUDING, WITHOUT
LIMITATION, ANY COURSE OF CONDUCT, COURSE OF DEALINGS,
STATEMENTS OR ACTIONS OF THE BANK RELATING TO THE
ADMINISTRATION OF THE LOAN OR ENFORCEMENT OF THE LOAN
DOCUMENTS AND AGREE THAT NO PARTY WILL SEEK TO CONSOLIDATE ANY
SUCH ACTION WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT
BE OR HAS NOT BEEN WAIVED. EXCEPT AS PROHIBITED BY LAW, THE
OBLIGORS HEREBY WAIVE ANY RIGHT THEY MAY HAVE TO CLAIM OR
RECOVER IN ANY LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR
CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN
ADDITION TO, ACTUAL DAMAGES. THE OBLIGORS CERTIFY THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF THE BANK HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT THE BANK WOULD NOT, IN THE EVENT
OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER. THIS
WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR THE BANK TO
ACCEPT THIS AGREEMENT AND MAKE THE LOAN.
9.19 Pledge to Federal Reserve. The Bank may at any time pledge or
assign all or any portion of its rights under the Loan
Documents, including any portion of the promissory note, to
any of the twelve (12) Federal Reserve Banks organized under
Section 4 of the Federal Reserve Act, 12 U.S.C. Section 341.
No such pledge or assignment or enforcement thereof shall
release the Bank from its obligations under any of the Loan
Documents.
9.20 Collateral Transfer. The Bank may transfer Collateral into its
name or that of its nominee and may receive the income and any
distributions thereon and hold the same as Collateral for the
Obligations, or apply the same to any Obligation, whether or
not a default or an Event of Default has occurred.
9.21 Right to Sell Loan: The Bank shall have the unrestricted right
at any time or from time to time, and without any Obligor's
consent, to assign all or any portion of its rights and
obligations hereunder to one or more banks or other financial
institutions (each, an "Assignee"), and each Obligor agrees
that it shall execute, or cause to be executed, such
documents, including without limitation, amendments to this
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Agreement and to any other documents, instruments and
agreements executed in connection herewith as Bank shall deem
necessary to effect the foregoing. In addition, at the request
of Bank and any such Assignee, Borrower shall issue one or
more new promissory notes, as applicable, to any such Assignee
and, if Bank has retained any of its rights and obligations
hereunder following such assignment, to Bank, which new
promissory notes shall be issued in replacement of, but not in
discharge of, the liability evidenced by the promissory note
held by Bank prior to such assignment and shall reflect the
amount of the respective commitments and loans held by such
Assignee and Bank after giving effect to such assignment. Upon
the execution and delivery of appropriate assignment
documentation, amendments and any other documentation required
by Bank in connection with such assignment, and the payment by
Assignee of the purchase price agreed to by Bank, and such
Assignee, such Assignee shall be a party to this Agreement and
shall have all of the rights and obligations of Bank hereunder
(and under any and all other guaranties, documents,
instruments and agreements executed in connection herewith) to
the extent that such rights and obligations have been assigned
by Bank pursuant to the assignment documentation between Bank
and such Assignee, and Banks hall be released from its
obligations hereunder and thereunder to a corresponding
extent. Borrower may furnish any information concerning
Borrower in its possession from time to time to prospective
Assignees, provided that Banks hall require any such
prospective Assignees to agree in writing to maintain the
confidentiality of such information.
9.22 Confidential Nature of Information to Obligor. The Bank hereby
acknowledges and agrees that certain information provided to
the Bank by the Obligors pursuant to the terms of this
Agreement may be deemed material non-public information within
the meaning and scope of the United States' securities laws,
and therefore may not be disclosed by the Bank to Persons
other than (i) the Bank's officers, employees, directors,
counsel or agents with a need to know such information in
connection with the performance of their duties, (ii) Bank
regulators or other governmental authorities with jurisdiction
over the Bank or (iii) by court order.
IN WITNESS WHEREOF, the parties on the date first above
written have caused this Agreement to be properly executed.
ATTEST: TEAMSTAFF, INC.
_________________________________ By:___________________________________
DONALD T. KELLY, Chief Financial DONALD W. KAPPAUF, Chief
OFFICER AND SECRETARY EXECUTIVE OFFICER
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ATTEST: TEAMSTAFF SOLUTIONS, INC
________________________________ By:___________________________________
DONALD T. KELLY, Chief Financial DONALD W. KAPPAUF, Chief
OFFICER AND SECRETARY EXECUTIVE OFFICER
ATTEST: DSI STAFF CONNXIONS NORTHEAST, INC.
_________________________________ By:___________________________________
DONALD T. KELLY, Chief Financial DONALD W. KAPPAUF, Chief
OFFICER AND SECRETARY EXECUTIVE OFFICER
ATTEST: DSI STAFF CONNXIONS SOUTHWEST, INC.
_________________________________ By:___________________________________
DONALD T. KELLY, Chief Financial DONALD W. KAPPAUF, Chief
OFFICER AND SECRETARY EXECUTIVE OFFICER
ATTEST: TEAMSTAFF RX, INC.
_________________________________ By:___________________________________
DONALD T. KELLY, Chief Financial DONALD W. KAPPAUF, Chief
OFFICER AND SECRETARY EXECUTIVE OFFICER
ATTEST: TEAMSTAFF I, INC.
_________________________________ By:___________________________________
DONALD T. KELLY, Chief Financial DONALD W. KAPPAUF, Chief
OFFICER AND SECRETARY EXECUTIVE OFFICER
ATTEST: TEAMSTAFF II, INC.
_________________________________ By:___________________________________
DONALD T. KELLY, Chief Financial DONALD W. KAPPAUF, Chief
OFFICER AND SECRETARY EXECUTIVE OFFICER
ATTEST: TEAMSTAFF III, INC.
_________________________________ By:___________________________________
DONALD T. KELLY, Chief Financial DONALD W. KAPPAUF, Chief
OFFICER AND SECRETARY EXECUTIVE OFFICER
-42-
ATTEST: TEAMSTAFF IV, INC.
_________________________________ By:___________________________________
DONALD T. KELLY, Chief Financial DONALD W. KAPPAUF, Chief
OFFICER AND SECRETARY EXECUTIVE OFFICER
ATTEST: TEAMSTAFF V, INC.
_________________________________ By:___________________________________
DONALD T. KELLY, Chief Financial DONALD W. KAPPAUF, Chief
OFFICER AND SECRETARY EXECUTIVE OFFICER
ATTEST: TEAMSTAFF VI, INC.
_________________________________ By:___________________________________
DONALD T. KELLY, Chief Financial DONALD W. KAPPAUF, Chief
OFFICER AND SECRETARY EXECUTIVE OFFICER
ATTEST: TEAMSTAFF VIII, INC.
_________________________________ By:___________________________________
DONALD T. KELLY, Chief Financial DONALD W. KAPPAUF, Chief
OFFICER AND SECRETARY EXECUTIVE OFFICER
ATTEST: TEAMSTAFF IX, INC.
_________________________________ By:___________________________________
DONALD T. KELLY, Chief Financial DONALD W. KAPPAUF, Chief
OFFICER AND SECRETARY EXECUTIVE OFFICER
ATTEST: TEAMSTAFF INSURANCE SERVICES, INC.
_________________________________ By:___________________________________
DONALD T. KELLY, Chief Financial DONALD W. KAPPAUF, Chief
OFFICER AND SECRETARY EXECUTIVE OFFICER
ATTEST: EMPLOYER SUPPORT SERVICES, INC.
_________________________________ By:___________________________________
DONALD T. KELLY, Chief Financial DONALD W. KAPPAUF, Chief
OFFICER AND SECRETARY EXECUTIVE OFFICER
-43-
ATTEST: HR2, INC.
_________________________________ By:___________________________________
DONALD T. KELLY, Chief Financial DONALD W. KAPPAUF, Chief
OFFICER AND SECRETARY EXECUTIVE OFFICER
ATTEST: BRIGHTLANE.COM, INC.
_________________________________ By:___________________________________
DONALD T. KELLY, Chief Financial DONALD W. KAPPAUF, Chief
OFFICER AND SECRETARY EXECUTIVE OFFICER
ATTEST: DIGITAL INSURANCE SERVICES, INC.
_________________________________ By:___________________________________
DONALD T. KELLY, Chief Financial DONALD W. KAPPAUF, Chief
OFFICER AND SECRETARY EXECUTIVE OFFICER
FLEET NATIONAL BANK
By:___________________________________
CRAIG W. HEAL, Senior Vice President
-44-
FLEET NATIONAL BANK,
TO
TEAMSTAFF, INC.
LOAN AND SECURITY AGREEMENT
April 9, 2002
INDEX
PAGE
----
SECTION 1
DEFINITIONS................................................... 1
SECTION 2
LOAN.......................................................... 11
SECTION 3
COLLATERAL.................................................... 17
SECTION 4
CONDITIONS PRECEDENT.......................................... 17
SECTION 5
REPRESENTATIONS AND WARRANTIES................................ 19
SECTION 6
COVENANTS BY OBLIGORS......................................... 23
SECTION 7
EVENTS OF DEFAULT............................................. 30
SECTION 8
BANK'S RIGHTS AND REMEDIES.................................... 32
SECTION 9
OBLIGORS' RIGHTS AND REMEDIES................................. 35
SECTION 10
MISCELLANEOUS PROVISIONS...................................... 35
TABLE OF EXHIBITS
EXHIBITS
--------
Master Note.................................................................. A
Power of Attorney............................................................ B
Continuing Unlimited and Collateralized Guaranty............................. C
TABLE OF SCHEDULES
SCHEDULES
---------
Schedule of Guarantors and jurisdiction of Incorporation..................... 1.1
Schedule of Existing Indebtedness............................................ 1.1(a)
Schedule of Existing Liens................................................... 1.1(b)
Schedule of Intellectual Property............................................ 5.3
Schedule of Subsidiaries and Affiliates...................................... 5.4
Schedule of the Obligors' Line of Business................................... 5.5
Schedule of Taxes............................................................ 5.7
Schedule of Judgments........................................................ 5.8
Schedule of Locations........................................................ 5.13
Schedule of Ownership........................................................ 5.16
GUARANTORS AND JURISDICTION OF INCORPORATION
SCHEDULE 1.1
GUARANTORS STATE OF INCORPORATION
- ----------
TEAMSTAFF SOLUTIONS, INC NEW YORK
DSI STAFF CONNXIONS NORTHEAST, INC. NEW JERSEY
DSI STAFF CONNXIONS SOUTHWEST, INC. TEXAS
TEAMSTAFF RX, INC. TEXAS
TEAMSTAFF I, INC. FLORIDA
TEAMSTAFF II, INC. FLORIDA
TEAMSTAFF III, INC FLORIDA
TEAMSTAFF IV, INC. FLORIDA
TEAMSTAFF V, INC. FLORIDA
TEAMSTAFF VI, INC. FLORIDA
TEAMSTAFF VIII, INC. FLORIDA
TEAMSTAFF IX, INC. FLORIDA
TEAMSTAFF INSURANCE SERVICES, INC. FLORIDA
EMPLOYER SUPPORT SERVICES, INC. FLORIDA
HR2, INC DELAWARE
BRIGHTLANE.COM, INC. GEORGIA
DIGITAL INSURANCE SERVICES, INC. NEW JERSEY
EXISTING INDEBTEDNESS
SCHEDULE 1.1(a)
- ----------------------------------------------------------------------------------------------
Schedule 1.1(a)
- ----------------------------------------------------------------------------------------------
A. Real Propoerty and Equipment leaes
- ----------------------------------------------------------------------------------------------
EXP
- ----------------------------------------------------------------------------------------------
VENDOR AMOUNT DESCRIP. M/YR
------ ------ ------- ----
- ----------------------------------------------------------------------------------------------
CLEARWATER RX
- -------------
- ----------------------------------------------------------------------------------------------
THE TIDES $ 41,290.76 LOCATION RENT 08-05
- ----------------------------------------------------------------------------------------------
KBS REALTY ADVISORS $ 12,163.33 LOCATION RENT 04-01
- ----------------------------------------------------------------------------------------------
LEASING PARTNERS $ 5,174.52 CLEARWATER FURNITURE 07-05
- ----------------------------------------------------------------------------------------------
AVAYA $ 878.54 OFFICE EQUIP-HSTN 03-02
- ----------------------------------------------------------------------------------------------
AVAYA $ 450.14 OFFICE EQUIP-CLRWTR 12-02
- ----------------------------------------------------------------------------------------------
ADVANTA $ 73.83 OFFICE EQUIP 03-01
- ----------------------------------------------------------------------------------------------
IOS CAPITAL $ 440.58 OFFICE EQUIP 01-03
- ----------------------------------------------------------------------------------------------
LEASING PARTNERS $ 1,263.23 CLEARWATER FURNITURE
- ----------------------------------------------------------------------------------------------
EXTRA CLOSET-CLEARWATER $ 108.07 STORAGE UNIT 0E37
- ----------------------------------------------------------------------------------------------
ADVANTA $ 67.14 OFFICE EQUIP
- ----------------------------------------------------------------------------------------------
IKON OFFICE $ 415.16 OFFICE EQUIP 06-02
- ----------------------------------------------------------------------------------------------
IKON OFFICE $ 356.60 CANON COPIER/MAINT MNT
- ----------------------------------------------------------------------------------------------
PANASONIC $ 271.71 COPIER 03-02
==============================================================================================
SOMERSET
- --------
==============================================================================================
INFINITI FINANCIAL SERV $ 899.00 CAR 11-03
- ----------------------------------------------------------------------------------------------
WELLSFORD/WHITEHALL $ 27,685.89 LOCATION RENT
- ----------------------------------------------------------------------------------------------
TOWN EXECUTIVE SUITES $ 535.00 LOCATION RENT
- ----------------------------------------------------------------------------------------------
XEROX CORPORATION $ 4,851.93 XEROX COPIER 04-04
- ----------------------------------------------------------------------------------------------
CITICORP VENDOR $ 170.28 CANON FAX 11-04
- ----------------------------------------------------------------------------------------------
STEELCASE FINANCIAL $ 3,310.91 SOMERSET FURNITURE 11-01
- ----------------------------------------------------------------------------------------------
STATEWIDE $ 230.00 STORAGE SPACE 4432
- ----------------------------------------------------------------------------------------------
CITICORP VENDOR $ 284.77 CANON COPIER 11-05
- ----------------------------------------------------------------------------------------------
CITICORP VENDOR $ 183.24 CANON FAX 02-02
- ----------------------------------------------------------------------------------------------
CITICORP VENDOR $ 176.70 CANON FAX 10-01
- ----------------------------------------------------------------------------------------------
CITICORP VENDOR $ 298.92 CANON COPIER 03-01
- ----------------------------------------------------------------------------------------------
AVAYA $ 1,590.27 OFFICE EQUIP/SOM 12-02
- ----------------------------------------------------------------------------------------------
AVAYA $ 51.90 OFFICE EQUIP/MAINT MNT
==============================================================================================
BOSTON
- ------
==============================================================================================
CUMMINGS PROPERTIES $ 4,845.33 LOCATION RENT
- ----------------------------------------------------------------------------------------------
THE STORAGE DEPOT $ 113.50 STORAGE BOSTON
==============================================================================================
HOUSTON/ELPASO
- --------------
==============================================================================================
CMD REALTY $ 7,757.24 LOCATION RENT
- ----------------------------------------------------------------------------------------------
ICC TEXAS HOLDINGS LP $ 4,299.00
- ----------------------------------------------------------------------------------------------
AVAYA $ 591.96 OFFICE EQUIP/ELPASO
- ----------------------------------------------------------------------------------------------
GE CAPITAL $ 149.80 KONICA COPIER ADD
- ----------------------------------------------------------------------------------------------
CITICORP VENDOR $ 136.42 SAVIN FAX 11-01
- ----------------------------------------------------------------------------------------------
AVAYA $ 811.30 OFFICE EQUIP/MAINT MNT
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
CITICORP VENDOR $ 409.06 MINOLTA COPIER 04-03
- ----------------------------------------------------------------------------------------------
NEOPOST *LEASE 872.27* $ 508.74 POSTAGE MACHINE 09-02
- ----------------------------------------------------------------------------------------------
INTERNEED $ 4,500.00 SERVICE AGREEMENT 1-Oct
==============================================================================================
DELRAY
- ------
==============================================================================================
TANDEM $ 19,905.63
- ----------------------------------------------------------------------------------------------
GE CAPITAL $ 131.78
- ----------------------------------------------------------------------------------------------
IOS CAPITAL $ 97.14 KONICA
==============================================================================================
CLEARWATER
- ----------
==============================================================================================
HYDE PARK STORAGE $ 247.59 STORAGE UNIT 00007
- ----------------------------------------------------------------------------------------------
HYDE PARK STORAGE $ 121.00 SEE ABOVE
- ----------------------------------------------------------------------------------------------
NEOPOST $ 929.89 POSTAGE MACHINE
==============================================================================================
BRIGHTLANE
- ----------
==============================================================================================
IOS CAPITAL $ 422.48 EQUIPMENT LEASE
- ----------------------------------------------------------------------------------------------
SCOTT & ASSOCIATES $ 22,623.33 OFFICE RENT
==============================================================================================
CSC
- ---
==============================================================================================
VARESOURCES $ 99.31 EQUIPMENT LEASE
- ----------------------------------------------------------------------------------------------
NORTH HAMPTON PROPERTIES $ 2,890.00 OFFICE RENT
- ----------------------------------------------------------------------------------------------
B. Other Indebtedness
1. Lawson Software License Agreement dated as of August 14, 2001 and related
Agreements for Implementation Services
2. Payroll and related Taxes incurred in the normal course of business
3. Premiums and related payments which are payable under workers' compensation
and general liability insurance policies. TeamStaff finances a portion of its
insurance policies.
4. Payroll obligations for "in house" employees and worksite employees incurred
in the normal course of business
5. Premiums due under other insurance policies
6. Premium Liabilities related to Employee Welfare Benefit Programs
7. Accrued Liabilities for Employee Benefit Plan contributions
EXISTING LIENS
SCHEDULE 1.1(b)
1. See Schedule 1.1 (a) related to real property and equipment leases.
2. The following tax liens:
a. TeamStaff Inc.
i. New Jersey State Tax lien in the amount of approximately
$28,000.
b. DSI Staff Connxions Southwest
i. Texas State Employment Commission Lien in the amount of
approximately $55,000.
ii Federal Tax Lien filed December 1995 in the amount of
approximately $17,000.
TRADE/FICTITIOUS NAMES
SCHEDULE 5.3
INTELLECTUAL PROPERTY
1. CORPORATE NAMES/TRADENAMES
OLD CORPORATE NAME NEW CORPORATE NAME
Digital Solutions, Inc. TeamStaff, Inc.
DSI Contract Staffing, Inc. Teamstaff Solutions, Inc.
DSI Staff Rx, Inc. Teamstaff Rx, Inc.
The Teamstaff Companies, Inc. Teamstaff VI, Inc.
Teamstaff USA, Inc. Teamstaff IX, Inc.
Teamstaff, Inc. (pre January 1999 acquisition) Teamstaff I, Inc.
Teamstaff Holding Company, Inc. Teamstafaf VIII, Inc.
DSI Staff Connxions Northeast, Inc. Same
DSI Staff Connxions Southeast, Inc. Same
Bize.com, Inc. BrightLane.com, Inc.
Biz E Buy, Inc. BrightLane.com, Inc.
In connection with the acquisition in January 1999 of 10 entities operating
under the trade name The TeamStaff Companies, we created 10 merger shells, DGAC
I through DGAC X. The merger shells existed solely for the merger, no business
operations were conducted in them.
2. TRADENAMES
DSI CORPORATE STAFFING CONCEPTS
TEAMSTAFF DSI
SYNADYNE
3. TRADEMARKS
SIMPLY A BETTER WAY TO EMPLOY PEOPLE (REG # 2,135,726)
TEAMSTAFF (REG # 1,871,518)
TeamStaff Circles Design (REG # 1,910,383)
4. SERVICE MARK
The People People
LIST OF SUBSIDIARIES
SCHEDULE 5.4
TEAMSTAFF SOLUTIONS, INC
DSI STAFF CONNXIONS NORTHEAST, INC.
DSI STAFF CONNXIONS SOUTHWEST, INC.
TEAMSTAFF RX, INC.
TEAMSTAFF I, INC.
TEAMSTAFF II, INC.
TEAMSTAFF III, INC.
TEAMSTAFF IV, INC.
TEAMSTAFF V, INC.
TEAMSTAFF VI, INC.
TEAMSTAFF VIII, INC.
TEAMSTAFF IX, INC.
TEAMSTAFF INSURANCE SERVICES, INC.
EMPLOYER SUPPORT SERVICES, INC.
HR2, INC.
BRIGHTLANE.COM, INC.
DIGITAL INSURANCE SERVICES, INC.
LINES OF BUSINESS
SCHEDULE 5.5
TeamStaff, Inc. (referred to as the "Company"), a New Jersey Corporation,
was founded in 1969 as a payroll service company and has evolved into a
leading provider of human resource management and professional employer
organization ("PEO") services to a wide variety of industries in 50 states.
TeamStaff's wholly-owned subsidiaries include TeamStaff Solutions, Inc., DSI
Staff ConnXions-Northeast Inc., DSI Staff ConnXions-Southwest Inc.,
TeamStaff Rx, Inc., TeamStaff I, Inc., TeamStaff II, Inc., TeamStaff III,
Inc., TeamStaff IV, Inc., TeamStaff V, Inc., TeamStaff VI, Inc., TeamStaff
Insurance Services, Inc., TeamStaff VIII, Inc., Employee Support Services,
Inc., TeamStaff IX, Inc., Digital Insurance Services, Inc., HR2, Inc., and
BrightLane.com, Inc. ("BrightLane") (collectively referred to, with
TeamStaff, as the "Company").
The Company currently provides five types of services related to the employee
leasing, temporary staffing and payroll service businesses: (1) professional
employer organization services, such as payroll processing, personnel and
administration, benefits administration, workers' compensation administration
and tax filing; (2) employer human resource services, such as payroll processing
and tax filing; (3) contract staffing, or the placement of temporary and
permanent employees; (4) temporary staffing for medical profession; and (5)
voucher processing services. TeamStaff currently furnishes PEO employees,
payroll and contract staffing services to over 3,700 client organizations with
approximately 21,000 worksite employees, 750 staffing employees and processing
for approximately 33,000 payroll service employees and believes that it
currently ranks, in terms of revenues and worksite employees, as one of the top
professional employer organizations in the United States. The Company's contract
staffing business mainly places temporary help in hospitals and clinics
throughout the United States through its Clearwater, Florida and Houston, Texas
offices. BrightLane, a recently acquired business unit, provides an online
business center and technology group providing Internet-based solutions for
growing businesses.
TAXES
SCHEDULE 5.7
None.
JUDGMENTS
SCHEDULE 5.8
None.
PLACES OF BUSINESS
SCHEDULE 5.13
CHIEF EXECUTIVE OFFICE:
TEAMSTAFF, INC.
300 ATRIUM DRIVE
SOMERSET, NJ 08873
OTHER LOCATIONS:
TEAMSTAFF, INC.
300 ATRIUM DRIVE
SOMERSET, NJ 08873
TEAMSTAFF SOLUTIONS, INC,
245 FIFTH AVENUE
NEW YORK, NY
DSI STAFF CONNXIONS NORTHEAST, INC.
300 ATRIUM DRIVE
SOMERSET, NEW JERSEY 08873
DSI STAFF CONNXIONS SOUTHWEST, INC.
2 NORTHPOINT DRIVE
HOUSTON, TX
TEAMSTAFF RX, INC.
1901 ULMERTON ROAD
CLEARWATER, FL
TEAMSTAFF I, INC.
1901 ULMERTON ROAD
CLEARWATER, FL
TEAMSTAFF II, INC.
1901 ULMERTON ROAD
CLEARWATER, FL
TEAMSTAFF III, INC.
1901 ULMERTON ROAD
CLEARWATER, FL
TEAMSTAFF IV, INC.
1901 ULMERTON ROAD
CLEARWATER, FL
TEAMSTAFF V, INC.
1901 ULMERTON ROAD
CLEARWATER, FL
TEAMSTAFF VI, INC.
1901 ULMERTON ROAD
CLEARWATER, FL
TEAMSTAFF VIII, INC.
1901 ULMERTON ROAD
CLEARWATER, FL
TEAMSTAFF IX, INC.
1901 ULMERTON ROAD
CLEARWATER, FL
TEAMSTAFF INSURANCE SERVICES, INC.
1901 ULMERTON ROAD
CLEARWATER, FL
EMPLOYER SUPPORT SERVICES, INC.
1901 ULMERTON ROAD
CLEARWATER, FL
HR2, INC.
800 WEST CUMMINGS PARK
WOBURN, MA 01801
BRIGHTLANE.COM, INC.
3650 MANSELL ROAD
ALPHARETTA, GA 30022
DIGITAL INSURANCE SERVICES, INC.
300 ATRIUM DRIVE
SOMERSET, NEW JERSEY 08873
ADDITIONAL P.E.O. SITE
1690 SOUTH CONGRESS AVENUE
SUITE 108
DELRAY BEACH, FLORIDA 33445
OWNERSHIP
SCHEDULE OF OWNERSHIP 5.16
TeamStaff, Inc. is the parent entity and all of the outstanding capital stock
of each of the following entities:
Name Shares Owned
- ---- ------------
TeamStaff Solutions, Inc. 200
DSI Staff Connxions Northeast, Inc. 100
DSI Staff Connxions Southwest, Inc. 100
Teamstaff VI, Inc. 100
Teamstaff I, Inc. 100
Teamstaff II, Inc. 100
Teamstaff III, Inc. 100
Teamstaff IV, Inc. 100
Teamstaff V, Inc. 100
Teamstaff IX, Inc. 100
Teamstaff Insurance Services, Inc. 100
Teamstaff VIII, Inc. 100
Employer Support Services, Inc. 100
HR2, Inc. 100
BrightLane.com, Inc. 100
Digital Insurance Services, Inc. 100
TeamStaff Solutions owns all of the outstanding capital stock of the following
entities:
Name Shares Owned
- ---- ------------
Teamstaff Rx, Inc 100