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EXHIBIT 10.24
PROMISSORY NOTE
$2,030,565.67 Funding Date: October 22, 1999(year)
FOR VALUE RECEIVED, STARTEK USA, INC., a a Colorado corporation
("Maker"), promises to pay to the order of KEYCORP LEASING, A DIVISION OF KEY
CORPORATE CAPITAL INC. ("Holder"), the sum of TWO MILLION THIRTY THOUSAND FIVE
HUNDRED SIXTY FIVE DOLLARS AND SIXTY SEVEN CENTS ($2,030,565.67) in lawful money
of the United States of America (the "Principal"), with interest thereon as
hereafter provided ("Interest"), to be paid in the manner set forth herein. This
Note is executed pursuant to that certain security agreement (the "Security
Agreement") dated as of October 13, 1999 between Maker and Holder. Capitalized
terms used herein without definition shall have the meaning given them in the
Security Agreement.
1. Interest Rate; Place of Payment. Interest on the balance of the Principal
outstanding on this Note shall accrue from the Funding Date of this Note and
shall be due and payable at a fixed rate of six and sixty five hundredths
percent (6.65%) per annum (the "Interest Rate") which rate shall be immediately
and correspondingly adjusted (pursuant to 2(b) hereof) with each change in the
Actual Index (as hereinafter defined). Interest shall be calculated on the basis
of a 360-day year consisting of twelve 30-day months. Payment of the Principal
and Interest hereunder shall be made to Holder at P.O. Box 1865, Albany, New
York 12201-1865, or at such other place as Holder may designate from time to
time in writing. Holder reserves the right to require payment on this Note to be
made by wired federal funds or other immediately available funds.
2. Repayment Terms. (a) The Principal and Interest shall be due and payable in
forty-eight (48) consecutive monthly installments payable in arrears, each in an
amount equal to $48,295.38, commencing and payable on the the date which is one
(1) month after the Funding Date and on the same day of each month thereafter
(each, a "Note Payment Date"). In addition, Maker will pay a late payment charge
of five percent (5%) of any payment due hereunder that is not paid on or before
the date due hereunder.
(b) Make and Holder agree that each Note payment hereunder shall be
increased or decreased (but not below zero), as the case may be, by the Rate
Differential (as hereinafter defined) as follows: if, as of any Note Payment
Date, (i) the Rate Differential is greater than zero, the amount due on such
Note Payment Date shall be increased by such Rate Differential, and (ii) the
Rate Differential is less than zero, the amount of the Note Payment due on such
Note Payment Date shall be decreased by such Rate Differential.
(c) As used herein, the following terms shall have the respective
meanings indicated below:
(1) "Assumed Index" shall mean eight and twenty five
hundredths percent (8.25%).
(2) "Actual Index" shall mean, as of the date of
determination, the "prime rate" announced in The Wall Street
Journal, published on such day, or if The Wall Street Journal
is not published on such day, then the "prime rate" announced
in the most recently published edition of The Wall Street
Journal. If the Actual Index is no longer available, Holder
will choose a new index which is based upon comparable
information and will give Maker notice of such new "Actual
Index."
(3) "Daily Equivalent" shall mean, as of the date of
determination, the product of the following formula:
Daily Equivalent = Actual Index - Assumed Index X Net Investment Balance
----------------------------
360
(4) "Net Investment Balance" shall mean, as of the date of
determination, the outstanding balance (initially calculated
using the Assumed Index minus 160 basis points) reflected on
Holder's lease
Form No: R96-500.999 Page 1 of 4
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accounting system (which assumes a 360 day year consisting of
twelve 30 day months), for the Note Payment Date immediately
preceding such day or, if such day is a Note Payment Date, for
such Note Payment Date.
(5) "Rate Differential" shall mean, with respect to any Note
Payment Date, the sum of all Daily Equivalents (calculated on
the basis of a 360 day year consisting of twelve 30 day
months) for the 30 day month to which such Note Payment Date
relates.
3. Security. Payment of the Principal and Interest hereunder, and the
performance and observance by Maker of all agreements, covenants and provisions
contained herein, is secured by a first priority security interest in the
Collateral.
4. Prepayment. Except as contemplated by clause (3) of section 10 of the
Security Agreement, Maker may not prepay, in whole or in part, the principal
outstanding hereunder; provided, however, that commencing on the date following
the twelve month anniversary of the Funding Date, Maker may prepay, in whole but
not in part, the principal outstanding hereunder by paying to Holder such
outstanding principal, together with all accrued and unpaid interest thereon at
the Interest Rate in effect on the Funding Date, plus a prepayment premium
("Prepayment Premium") equal to a percentage of the outstanding principal
calculated as follows:
Months Prepayment Premium
------ ------------------
1-12 2%
13-24 1/2%**
25-48 0%
** Notwithstanding the foregoing, in the event Maker prepays this Note in months
13-24, and the source of the proceeds for such prepayment is a secondary public
offering, Makers Prepayment Premium for such prepayment shall be 0%.
5. Transfer or Assignment. Holder may at any time assign or otherwise transfer
or negotiate this Note in whole or in part, without any notice to Maker. The
rights and obligations of Maker may not be assigned or delegated.
6. Application of Payments. Prior to an Event of Default, each payment received
on this Note shall be applied first to all costs of collection, then to unpaid
late payment charges (if any) and Prepayment Premium (if any) hereunder, then to
Interest as of the payment due date and the balance, if any, to the outstanding
Principal as of the date received. Upon the occurrence, and during the
continuance, of an Event of Default, any payments in respect of the Secured
Obligations and any proceeds of the Collateral when received by Holder in cash
or its equivalent, will be applied first to costs of collection and, thereafter,
in reduction of the Secured Obligations in such order and manner as Holder may
direct in its sole discretion, and Maker irrevocably waives the right to direct
the application of such payments and proceeds and acknowledges and agrees that
Holder shall have the continuing and exclusive right to apply any and all such
payments and proceeds in the Holder's sole discretion, notwithstanding any entry
to the contrary upon any of its books and records.
7. Events of Default. (a) Maker shall be in default if any of the following
happens (an "Event of Default"): (1) Maker fails to make any installment of the
Principal or Interest, or any other payment due and owing, under this Note
within ten (10) days after the same becomes due and payable; or (2) Maker fails
to perform any other obligation required to be performed by Maker under this
Note, the Security Agreement or any of the other Loan Documents for thirty (30)
days after written notice from Holder of such failure; or (3) any
representation, warranty or other statement by or on behalf of Maker in
connection with this Note is false or misleading in any material respect; or (4)
an Event of Default has occurred and is continuing under the Security Agreement.
(b) Notwithstanding anything to the contrary contained herein, upon the
occurrence of an Event of Default: (i) Holder may declare the entire outstanding
balance of the Principal, together with all accrued and
Form No: R96-500.999 Page 2 of 4
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unpaid Interest thereon, immediately due and payable without notice or demand
which amounts shall, together with all other sums due hereunder, accrue interest
from such acceleration until the date of actual payment at the Default Rate
(provided, however, that should there occur an Event of Default, and if a
voluntary or involuntary petition under the United States Bankruptcy Code is
filed by or against Maker while such default remains uncured, the entire
outstanding balance of the Principal automatically shall be accelerated and due
and payable with interest thereon at the Default Rate), and Holder may exercise
any and all of its remedies hereunder, under the other Loan Documents and under
Applicable Law. The remedies of Holder provided herein, in the Security
Agreement and under Applicable Law shall be cumulative and concurrent and may be
pursued singly, successively or concurrently at the sole discretion of Holder
and may be exercised as often as occasion therefor shall occur. The failure to
exercise, or any delay in the exercise of, any right or remedy shall in no event
be construed as a waiver, release or exhaustion of any such remedies.
8. Collection Costs. In addition to the Principal, Interest, Prepayment Premium
(if any), and late payment charges (if any), Maker shall pay Holder on demand,
and Holder shall be entitled to collect all costs and expenses of collection,
including, without limitation, reasonable attorneys' fees, incurred in
connection with enforcement of its rights and remedies hereunder and under the
other Loan Documents, the protection or realization of the Collateral or in
connection with Holder's collection efforts, or in connection with any
bankruptcy or other judicial proceeding, whether or not suit on this Note or any
foreclosure proceeding is filed. All such costs and expenses shall be payable on
demand and, until paid, shall be Secured Obligations secured by the security
interest granted under the Security Agreement and all other collateral, if any,
held by Holder as security for Maker's obligations under this Note.
9. Governing Law; Binding Agreement. The provisions of this Note shall be
binding upon, and shall inure to the benefit of, the parties hereto and their
respective successors and assigns. THIS NOTE IS BEING DELIVERED IN THE STATE OF
NEW YORK AND SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF LAWS
PROVISION OR RULE (WHETHER OF THE STATE OF NEW YORK OR ANY OTHER JURISDICTION)
THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE
STATE OF NEW YORK.
10. More than One Signer. If more than one person or entity signs this Note as a
Maker, the obligations contained herein shall be deemed joint and several and
all references to "Maker" shall apply both jointly and severally.
11. General. Maker represents and warrants that this Note evidences a loan for
business or commercial purposes. Prior to signing this Note, Maker read and
understood the provisions hereof, and agrees to all terms and conditions
contained herein.
12. Waiver. MAKER AND ALL ENDORSERS, SURETIES, AND GUARANTORS HEREOF HEREBY
JOINTLY AND SEVERALLY WAIVE PRESENTMENT FOR PAYMENT, DEMAND, NOTICE OF
NON-PAYMENT OR DISHONOR, NOTICE OF INTENTION TO ACCELERATE THE MATURITY, NOTICE
OF PROTEST AND PROTEST OF THIS NOTE. HOLDER AND MAKER HEREBY EACH WAIVE THEIR
RESPECTIVE RIGHTS TO TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF OR RELATED TO THIS NOTE, THE OTHER LOAN DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION OR PROCEEDING TO
WHICH HOLDER OR MAKER MAY BE PARTIES, WHETHER WITH RESPECT TO CONTRACT CLAIMS,
TORT CLAIMS, OR OTHERWISE, INCLUDING WITHOUT LIMITATION ANY ACTION, COUNTERCLAIM
OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY
OR ENFORCEABILITY, OF THIS NOTE OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION
HEREOF OR THEREOF. THIS WAIVER IS MADE KNOWINGLY, WILLINGLY AND VOLUNTARILY BY
HOLDER AND THE MAKER WHO EACH ACKNOWLEDGE THAT NO REPRESENTATIONS HAVE BEEN MADE
BY ANY INDIVIDUAL TO INDUCE THIS WAIVER OF TRIAL
Form No: R96-500.999 Page 3 of 4
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BY JURY OR IN ANY WAY TO MODIFY OR NULLIFY ITS EFFECT. THIS WAIVER SHALL APPLY
TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS
NOTE AND THE OTHER LOAN DOCUMENTS.
13. Usury; Partial Invalidity. (a) At no time shall the Interest Rate (or the
Default Rate or other amounts paid or collected hereunder) exceed the highest
rate allowed by applicable law for this type of loan. Should Holder ever collect
interest at a rate that exceeds such applicable legal limit, such excess will be
credited to the Principal.
(b) Whenever possible, each provision of this Note shall be interpreted
in such manner as to be effective and valid under applicable law, but if any
provision of this Note shall be prohibited by or invalid under the laws of any
applicable jurisdiction, such provision, as to such jurisdiction, shall be
ineffective to the extent of such prohibition or invalidity without invalidating
the remainder of such provision or the remaining provisions of this Note in any
other jurisdiction.
14. Notices. All notices and other communications under this Note shall be in
writing and shall be addressed: (i) if to Maker, 111 Havana Street, Denver, CO
80010; and (ii) if to Holder, KeyCorp Leasing, a Division of Key Corporate
Capital Inc., 54 State Street, Albany, New York 12207, Attention: Account
Manager, or such other address as either party hereto shall communicate to the
other party at its address specified above. All such notices and other
communications shall be deemed to have been duly given if delivered by hand,
overnight courier or if sent by certified mail, return receipt requested, to the
party to whom such notice is intended to be given, and shall be effective upon
receipt.
15. Funding Date. The Funding Date for this Note shall be the date on which
Holder disburses funds hereunder. TO THE EXTENT THE FUNDING DATE IS LEFT BLANK
ABOVE, OR DOES NOT REFLECT THE ACTUAL DATE THAT HOLDER DISBURSES FUNDS
HEREUNDER, MAKER HEREBY AUTHORIZES HOLDER TO WRITE IN THE CORRECT DATE AT THE
TIME OF DISBURSEMENT.
IN WITNESS WHEREOF, Maker, intending to be legally bound, has caused
this Note to be duly executed on the day and year first above written.
MAKER:
STARTEK USA, INC.
By: /s/ Dennis M. Swenson
---------------------------------
Name: Dennis M. Swenson
Title: Executive Vice President
STATE OF )
) ss.
COUNTY OF )
On this 21 (Day) day of Oct (Month), 99 (Year), before me the
subscriber personally appeared Dennis M. Swenson who being by me duly sworn, did
depose and say that (s)he resides at _____ County, State of Colo: that (s)he is
an officer of StarTek USA, Inc., the corporation described in and which executed
the foregoing instrument; and that (s)he signed his/her name thereto by order of
the Board of Directors of said corporation.
/s/ Deborah Hickson
- --------------------------------------
NOTARY PUBLIC
SEAL
My Commission Expires: 1-12-2002
Form No: R96-500.999 Page 4 of 4
Exhibits and Schedules not filed
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SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Agreement" or "Security Agreement")
dated as of October 13, 1999 is made by and between STARTEK USA, INC., a a
Colorado corporation having its chief executive office at 111 Havana Street,
Denver, CO 80010 (the "Borrower"), and KEYCORP LEASING, A DIVISION OF KEY
CORPORATE CAPITAL INC. and assigns, having an office at 54 State Street, Albany,
New York 12207 ("KCL").
W I T N E S S E T H:
1. Grant of Security Interest in the Equipment. In consideration of one or more
loans, advances or other financial accommodations at any time before, at or
after the date hereof, made or extended by KCL to or for the account of the
Borrower, directly or indirectly, as principal, guarantor or otherwise and to
secure the prompt payment and performance in full when due, whether by lapse of
time, acceleration or otherwise, of the Secured Obligations, the Borrower hereby
pledges, assigns, transfers hypothecates to KCL and grants to KCL a security
interest in, and acknowledges and agrees that this Agreement shall create a
continuing security interest in, all of Borrower's rights, title and interest in
and to the Collateral.
The Secured Obligations of the Borrower are absolute, irrevocable and
unconditional under any and all circumstances whatsoever and shall not be
subject to any right of set-off, counterclaim, deduction, defense or other right
which the Borrower may have for any reason against any vendor, supplier,
manufacturer, KCL or any other party. All obligations of Borrower hereunder
shall survive the expiration, cancellation or other termination of this
Agreement.
2. Definitions. Unless the context otherwise requires, as used in this
Agreement, the following terms shall have the respective meanings indicated
below and shall be equally applicable to both the singular and the plural forms
thereof:
"Alteration" shall have the meaning specified in Section 6 hereof.
"Applicable Law" shall mean all applicable Federal, state, local and foreign
laws, ordinances, judgments, decrees, injunctions, writs, rules, regulations,
orders, licenses and permits of any Governmental Authority.
"Authorized Signer" shall mean any officer of Borrower, set forth on an
incumbency certificate (in form and substance satisfactory to KCL) delivered by
Borrower to KCL, who is authorized and empowered to execute the Loan Documents.
"Certificate of Acceptance" shall mean a certificate of acceptance, in form and
substance satisfactory to KCL, executed and delivered by Borrower in accordance
with Section 3 hereof.
"Collateral" shall mean the Equipment and any and all substitutions,
replacements or exchanges therefor, and any and all proceeds (both cash and
non-cash) receivable or received from the sale, lease, license, collection, use,
exchange or other disposition of the Collateral, including insurance proceeds,
thereof (including, without limitation, claims of the Borrower against third
parties for Loss or Damage to any such collateral).
"Collateral Schedule" shall mean each collateral schedule now or hereafter
attached hereto and made a part hereof, in substantially the form of Schedule 1
hereto.
"Default" shall mean any event or condition which, with the passage of time or
the giving of notice or both, would constitute an Event of Default.
"Default Rate" shall mean an annual interest rate equal to the lesser of 18% or
the maximum interest rate permitted by Applicable Law.
"Equipment" shall mean an item or items of personal property which are described
on the Collateral Schedule, together with all replacement parts, additions and
accessories incorporated therein or affixed thereto including, without
limitation, any software that is a component or integral part of, or is included
or used in connection with, any Item of Equipment, but with respect to such
software, only to the extent of Borrower's interest therein, if any.
"Equipment Location" shall mean the location of the Equipment, as set forth on
Schedule 1, or such other location (approved in writing by KCL) as Borrower
shall from time to time specify in writing.
"Event of Default" shall have the meaning specified in Section 16 hereof.
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"GAAP" shall have the meaning specified in Section 2(g) hereof.
"Governmental Action" shall mean all authorizations, consents, approvals,
waivers, filings and declarations of any Governmental Authority, including,
without limitation, those environmental and operating permits required for the
ownership, lease, use and operation of the Equipment.
"Governmental Authority" shall mean any foreign, Federal, state, county,
municipal or other governmental authority, agency, board or court.
"Guarantor" shall mean any guarantor of the Secured Obligations.
"Installment(s)" shall mean the periodic payments due to repay the Note, and,
where the context hereof requires, all such additional amounts as may from time
to time be payable under any provision of the Loan Documents.
"Item of Equipment" shall mean each item of the Equipment.
"Liability" shall have the meaning set forth in Section 18 hereof.
"Loan Documents" shall mean, collectively, this Agreement, the Note, and all
other documents prepared by KCL and now or hereafter executed in connection
therewith.
"Lien" shall mean all mortgages, pledges, security interests, liens,
encumbrances, claims or other charges of any kind whatsoever, except the
security interest of KCL crated by this Agreement.
"Loss or Damage" shall mean any loss, theft, destruction, disappearance or any
condemnation, expropriation or requisition of or damage to any Item of
Equipment.
"Note" shall mean that certain Promissory Note in the original principal amount
of $2,030,565.67 executed in connection herewith, together with any extensions,
modifications, renewals, refinancings or other restructurings thereof.
"Secured Obligations" means all of the following obligations of Borrower,
whether direct or indirect, absolute or contingent, matured or unmatured,
originally contracted with KCL or another party, and now or hereafter owing to
or acquired in any manner partially or totally by KCL or in which KCL may have
acquired a participation, contracted by Borrower alone or jointly or severally:
(1) any and all indebtedness, obligations, liabilities, contracts, indentures,
agreements, warranties, covenants, guaranties, representations, provisions,
terms, and conditions of whatever kind, now existing or hereafter arising, and
however evidenced, that are now or hereafter owed, incurred or executed by
Borrower to, in favor of, or with KCL (including, without limitation, those as
are set forth or contained in, referred to, evidenced by, or executed with
reference to the Loan Documents, any letter of credit agreements, advance
agreements, indemnity agreements, guaranties, lines of credit, mortgage deeds,
security agreements, assignments, pledge agreements, hypothecation agreements,
instruments, and acceptance financing agreements), and including any partial or
total extension, restatement, renewal, amendment, and substitution thereof or
therefor; (2) any and all claims of whatever kind of KCL against Borrower, now
existing or hereafter arising, including, without limitation, any arising out or
in any way connected with warranties made by Borrower to KCL in connection with
any instrument purchased by KCL; and (3) any and all of KCL's fees, costs and
expenses related to the foregoing.
"Supplier" shall mean the manufacturer or the vendor of the Equipment, as set
forth on each Collateral Schedule.
"Term" shall mean the term of the Note.
"UCC" shall have the meaning set forth in Section 16(b)(ii) hereof. Where
applicable and except as otherwise defined herein, terms used in this Agreement
shall have the meaning assigned to them in the UCC.
"Upgrade" shall have the meaning specified in Section 8 hereof.
3. Delivery and Acceptance. Concurrently with execution of the Collateral
Schedule hereunder, Borrower shall execute and deliver to KCL a Certificate of
Acceptance for the Equipment described on such Collateral Schedule. KCL SHALL
HAVE NO OBLIGATION TO ADVANCE ANY FUNDS TO BORROWER UNLESS AND UNTIL KCL SHALL
HAVE RECEIVED A CERTIFICATE OF ACCEPTANCE RELATING TO THE EQUIPMENT EXECUTED BY
BORROWER. Such Certificate of Acceptance shall constitute Borrower's
acknowledgment that such Equipment (a) was received by Borrower, (b) is
satisfactory to Borrower in all respects, (c) is suitable for Borrower's
purposes, (d) is in good order, repair and condition, (e) has been installed and
operates properly, and (f) is subject to all of the terms and conditions of the
Loan Documents. Borrower's execution and delivery of a Certificate of Acceptance
shall be conclusive evidence as between KCL and Borrower that the Items of
Equipment described therein are in all of the foregoing respects satisfactory to
Borrower, and Borrower shall not assert any claim of any nature whatsoever
against KCL based on any of the foregoing matters;
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provided, however, that nothing contained herein shall in any way bar, reduce or
defeat any claim that Borrower may have against the Supplier or any other person
(other than KCL).
4. Payments. Borrower shall pay the Note on the terms set forth therein. All
Installments shall be payable when due whether or not Borrower has received any
additional notice that such Installments are due. All Installments shall be paid
to KCL at P.O. Box 1865, Albany, New York 12201-1865, or as otherwise directed
by KCL in writing.
5. Location; Inspection. The Equipment shall be delivered to the Equipment
Location and shall not be removed therefrom without KCL's prior written consent.
Borrower shall maintain possession and control of the Equipment at all times.
KCL shall have the right to enter upon the Equipment Location and inspect the
Equipment at any reasonable time. Borrower will promptly give written notice to
KCL of any change in the identity or location of any Item of Equipment which
might require new filings or other action to assure continued perfection of the
security interest of KCL granted hereby. The Borrower owns, and will continue to
own, all Equipment Locations except as otherwise indicated on Schedule 1.
6. Use; Alterations. Borrower shall use the Equipment only in the course of its
business for commercial purposes (and shall not permanently discontinue use of
the Equipment), and in compliance with Applicable law and the requirements of
any applicable insurance policies, and only in the manner for which it was
designed and intended and so as to subject it only to ordinary wear and tear.
Borrower shall comply with all Applicable Law with respect to the Equipment.
Borrower shall immediately notify KCL in writing of any existing or threatened
investigation, claim or action by any Governmental Authority in connection with
any Applicable Law or Governmental Action which could adversely affect the value
of the Equipment or the perfection or priority of the security interest of KCL
in the Collateral. Borrower shall not make any material alterations, additions,
modifications or improvements (each, an "Alteration") to the Equipment without
KCL's prior written consent; provided that Borrower, at its own expense, shall
make Alterations as may be required from time to time to meet the requirements
of Applicable Law or Governmental Action. All such Alterations immediately, and
without further act, shall be deemed to constitute Items of Equipment and fully
be subject to the security interest granted to KCL hereunder.
7. Repairs and Maintenance. Borrower, at Borrower's own cost and expense, shall
(a) keep the Equipment in good repair, operating condition and working order and
in compliance with the manufacturer's specifications and Borrower's standard
practices (but with respect to the latter, in no event less than industry
practices) and (b) enter into and keep in full force and effect during the Term
hereof a maintenance agreement with the manufacturer of the Equipment, or a
manufacturer-approved maintenance organization, to maintain, service and repair
the Equipment as otherwise required herein. Upon KCL's request, Borrower shall
furnish KCL with an executed copy of any such maintenance agreement. An
alternate source of maintenance may be used by Borrower with KCL's prior written
consent. Borrower, at its own cost and expense and within a reasonable period of
time, shall replace any part of any Item of Equipment that is unfit or
unavailable for use from any cause (whether or not such replacement is covered
by the aforesaid maintenance agreement) with a replacement part of the same
manufacture, value, remaining useful life and utility as the replaced part
immediately preceding the replacement (assuming that such replaced part was in
the condition required by this Agreement). Such replacement part shall be free
and clear of all Liens and upon installation, attachment or incorporation in, on
or into such Item of Equipment, such replacement part immediately, and without
further act, shall be deemed to constitute an Item of Equipment and fully be
subject to the security interest granted to KCL hereunder. If KCL repossesses
the Equipment pursuant to its rights under this Agreement and at the time, in
the opinion of KCL, any Item of Equipment fails to meet the standards set forth
above, Borrower agrees to pay on demand all costs and expenses incurred in
connection with repairing or restoring such Item of Equipment so as to meet such
standards and/or assembling and delivering such Item of Equipment.
8. Equipment Upgrades/Attachments. In addition to the requirements of Section 6
hereof, Borrower, at its own expense, may from time to time add or install
upgrades or attachments (each, an "Upgrade") to the
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Equipment; provided, that such Upgrades are readily removable without causing
material damage to the Equipment, and do not materially adversely affect the
fair market value of the Equipment. Any such Upgrades shall be owned by
Borrower, shall become subject to the security interest crated by this Agreement
and shall be kept free and clear of all Liens so long as attached to the
Equipment.
9. Lease and Assignments. (a) WITHOUT KCL'S PRIOR WRITTEN CONSENT, BORROWER
SHALL NOT (i) ASSIGN, TRANSFER, PLEDGE, HYPOTHECATE OR OTHERWISE DISPOSE OF, THE
EQUIPMENT OR ANY INTEREST THEREIN, OR ASSIGN OR DELEGATE ITS RIGHTS OR
OBLIGATIONS UNDER THE LOAN DOCUMENTS, OR (ii) LEASE OR LEND THE EQUIPMENT TO, OR
PERMIT THE EQUIPMENT TO BE USED BY, ANYONE OTHER THAN BORROWER.
(b) KCL, at any time with or without notice to Borrower, may sell,
transfer, grant participations in, assign and/or grant a security interest in
any or all of KCL's right, title and interest in and to the Loan Documents, or
in KCL's security interest in any Item of Equipment. In any such event, any such
purchaser, transferee, assignee or secured party shall have and may exercise all
of KCL's rights hereunder or thereunder, and BORROWER SHALL NOT ASSERT AGAINST
ANY SUCH PURCHASER, TRANSFEREE, ASSIGNEE OR SECURED PARTY ANY DEFENSE,
COUNTERCLAIM OR OFFSET THAT BORROWER MAY HAVE AGAINST KCL. Borrower agrees that
upon written notice to Borrower of any such sale, transfer, assignment and/or
security interest, Borrower shall acknowledge receipt thereof in writing and
shall comply with the reasonable directions and demands of such purchaser,
transferee, assignee or secured party.
(c) Subject to the foregoing, all covenants and agreements contained
herein shall be binding upon, and inure to the benefit of, KCL and its
successors and permitted assigns and Borrower and its successors and permitted
assigns.
10. Loss of or Damage to Equipment. In the event of Loss or Damage to any Item
of Equipment, Borrower shall immediately notify KCL of same and, at the option
of KCL, as specified in a notice from KCL to Borrower, Borrower shall within
thirty (30) days following such Loss or Damage: (1) place such Item of Equipment
in good condition and repair, in accordance with the terms hereof; (2) replace
such Item of Equipment with replacement equipment (acceptable to KC) in as good
condition and repair, and with the same or better fair market value as such
replaced Item of Equipment immediately preceding the Loss or Damage (assuming
that such replaced Item of Equipment was in the condition required by this
Agreement), which replacement equipment shall immediately, and without further
act, be deemed to constitute Items of Equipment and be fully subject to this
Agreement as if originally pledged as Collateral hereunder and shall be free and
clear of all Liens; or (3) pay to KCL any unpaid Installments and other charges
due prior to the payment date specified in such notice plus an amount, with
respect to an Item of Equipment, equal to the pro rata portion of the
Installments attributable to such item of Equipment under the Loan Documents
after discounting such Installments to present worth as of the payment date
specified in such notice on the basis of a per annum rate of discount equal to
three percent (3%) from the respective dates upon which such Installments would
have been paid but for the operation of this clause, together with interest on
such amount at the Default Rate from the payment date specified in such notice
to the date of actual payment.
Upon KCL's receipt of the payment required under clause (3) above, KCL
shall release its security interest in such Item of Equipment. If Borrower
replaces the Item of Equipment pursuant to clause (2) above, such replacement
shall be deemed to constitute an Item of Equipment and be fully subject to this
Agreement and the security interest granted to KCL hereunder, as if originally
pledged hereunder. If Borrower fails to either restore or replace the Item of
Equipment pursuant to clauses (1) or (2) above, respectively, Borrower shall
make the payment under clause (3) above.
11. Insurance. (a) Borrower, at Borrower's own cost and expense, shall maintain
(1) insurance against all risks of physical loss or damage to the Equipment
(which shall include theft and collision for Equipment consisting of motor
vehicles, and shall not exclude loss resulting from flood or earthquake) in any
amount not less
Form No: 96-501.999 Page 4 of 11
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than the full replacement value thereof and (2) comprehensive public liability
insurance including blanket contractual liability for personal and bodily injury
and property damage in an amount satisfactory to KCL.
(b) All insurance policies required hereunder shall (1) require 30
days' prior written notice to KCL of cancellation or material change in coverage
(any such cancellation or change, as applicable, not being effective until the
thirtieth (30th) day after the giving of such notice); (2) name "KeyCorp and its
subsidiaries and affiliated companies, including KeyCorp Leasing, a Division of
Key Corporate Capital Inc., their successors and assigns" as sole loss payee
under the property insurance policies; (3) not require contributions from other
policies held by KCL; (4) waive any right of subrogation against KCL; (5) in
respect of any liability of KCL, except for the insurers' salvage rights in the
event of a Loss or Damage, waive the right of such insurers to set-off, to
counterclaim or to any other deduction, whether by attachment or otherwise, to
the extent of any monies due KCL under such policies; (6) not require that KCL
pay or be liable for any premiums with respect to such insurance covered
thereby; (7) be in full force and effect throughout any geographical areas at
any time traversed by any Item of Equipment; and (8) contain breach of warranty
provisions providing that, in respect of the interests of KCL in such policies,
the insurance shall not be invalidated by any action or inaction of Borrower or
any other person (other than KCL) and shall insure KCL regardless of any breach
or violation of any warranty, declaration or condition contained in such
policies by Borrower or by any other person (other than KCL). Prior to funding
the Note, and thereafter not less than 15 days prior to the expiration dates of
the expiring policies theretofore delivered pursuant to this Section, Borrower
shall deliver to KCL a duplicate original of all policies (or in the case of
blanket policies, certificates thereof issued by the insurers thereunder) for
the insurance maintained pursuant to this Section.
(c) Proceeds of insurance with respect to physical loss or damage to
the Equipment shall be applied, at the option of KCL, to repair or replace the
Equipment or to reduce or satisfy (as applicable) the Secured Obligations.
12. Taxes. Borrower shall pay when due any and all taxes, fees, levies, imposts,
duties, assessments and public and private charges levied or assessed on or with
respect to the Equipment, on the use thereof, or on this Agreement or any of the
other Loan Documents.
13. KCL's Right to Perform for Borrower. If Borrower fails to perform any of its
obligations contained in the Loan Documents, KCL may (but shall not be obligated
to) itself perform such obligations, and the amount of the reasonable costs and
expenses of KCL incurred in connection with such performance, together with
interest on such amount from the date paid by KCL until the date repaid by
Borrower to KCL, at the Default Rate, shall be payable by Borrower to KCL upon
demand. No such performance by KCL shall be deemed a waiver of any rights or
remedies of KCL, or be deemed to cure the default of Borrower hereunder. All
such sums and amounts so expended by KCL shall be repayable by the Borrower
immediately without notice or demand, shall constitute additional Secured
Obligations and shall bear interest from the date said amounts are expended at
the Default Rate.
14. Delinquent Payments; Interest. If Borrower fails to pay any of the
Installments on the date when the same becomes due, Borrower shall pay to KCL a
late charge equal to five percent (5%) of such delinquent amount. Such late
charge shall be payable by Borrower upon demand by KCL and shall be deemed part
of the Secured Obligations. In no event shall such late charge exceed the
maximum amounts permitted under Applicable Law.
15. Personal Property; Liens; Warrant of Title. The Borrower is, and will
continue to be, the sole owner of the Equipment, free from any Lien. KCL and
Borrower hereby agree that the Equipment is, and shall at all times remain,
personal property notwithstanding the fact that any Item of Equipment may now
be, or hereafter become, in any manner affixed or attached to real property or
any improvements thereon. Borrower shall at all times keep the Equipment free
and clear from all Liens, and the Borrower shall obtain and deliver to KCL (to
be recorded at the Borrower's expense) from each person having a Lien on any
Equipment Location waivers of any Lien which such person might have or hereafter
obtain or claim with respect to the Equipment. Borrower shall (i) give KCL
Form No: 96-501.999 Page 5 of 11
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immediate written notice of any Lien on the Collateral, (ii) promptly, at
Borrower's sole cost and expense, take such action as may be necessary to
discharge any such Lien, and (iii) indemnify and hold KCL, on an after-tax
basis, harmless from and against any loss or damage caused by any such Lien.
Borrower warrants that it has good, valid and marketable title to the Equipment,
and that (i) the security interest in the Collateral granted to KCL hereunder,
when properly perfected by filing, shall constitute a valid and perfected first
priority security interest in the Collateral and, (ii) the Collateral is not
subject to, and Borrower will not grant or permit to exist, any Liens or claims
on or against the Collateral, whether senior, superior, junior, subordinate or
equal to the security interest granted to KCL hereby, or otherwise.
16. Events of Default; Remedies. (a) As used herein, the term "Event of Default"
shall mean any of the following events: (1) Borrower fails to pay any
Installment within ten (10) days after the same becomes due and payable; (2)
Borrower breaches any of its other obligations under any of the Loan Documents
and fails to cure the same within thirty (30) days after written notice thereof;
(3) any dissolution, termination of existence, merger, consolidation, change in
controlling ownership of Borrower or Guarantor, or if Borrower or Guarantor is a
natural person, the death or incompetence of Borrower or Guarantor; (4) Borrower
or any Guarantor fails to pay its debts generally as they become due or becomes
insolvent or makes an assignment for the benefit of its creditors; (5) a
receiver, trustee, conservator or liquidator of Borrower or any Guarantor or of
all or a substantial part of Borrower's or such Guarantor's assets is appointed
with or without the application or consent of Borrower or such Guarantor,
respectively; (6) a petition is filed by or against Borrower or any Guarantor
under any bankruptcy, insolvency or similar legislation; (7) Borrower or any
Guarantor violates or fails to perform any provision of either the Loan
Documents or any other loan, lease or credit agreement or any acquisition or
purchase agreement with KCL or any other party; (8) Borrower violates or fails
to perform any covenant or representation made by Borrower in the Loan
Documents; (9) any representation or warranty made herein or in any of the Loan
Documents, certificates, financial statements or other statements furnished to
KCL (or KCL's parent, subsidiaries or affiliates) shall prove to be false or
misleading in any material respect as of the date on which the same was made;
(10) there is a material adverse change in Borrower's or any Guarantor's
financial condition; (11) Borrower shall fail to satisfy any final judgment
rendered against the Borrower by any court of competent jurisdiction where the
judgment is material in amount as to the Borrower or materially impairs the
financial or business condition of the Borrower; (12) any of the liens created
or granted hereby, or intended to be granted or created hereby, to KCL shall
fail to be valid, first priority perfected liens subject to no prior or equal
lien; or (13) the receipt by KCL of a notice to creditors with regard to a bulk
transfer by the Borrower pursuant to Article 6 of the Uniform Commercial Code;
or (14) an additional Lien attaches to the Equipment or the Equipment becomes
subject to risk of seizure or forfeiture.
(b) (i) Upon the occurrence of an Event of Default, KCL, at its option,
may declare any or all of the Secured Obligations, including, without
limitation, the Note, to be immediately due and payable, without demand or
notice to Borrower or any Guarantor. The obligations and liabilities accelerated
thereby shall bear interest (both before and after any judgment) until paid in
full at the Default Rate. Should there occur a Default and if a voluntary or
involuntary petition under the United States Bankruptcy Code is filed by or
against Borrower while such Default remains uncured, the Secured Obligations
automatically shall be accelerated and due and payable and interest thereon at
the Default Rate automatically shall apply as of the date of the first
occurrence of the Default, without any notice, demand or action of any type on
the part of KCL (including any action evidencing the acceleration or imposition
of the Default Rate). The fact the KCL has, prior to the filing of the voluntary
or involuntary petition under the United States Bankruptcy Code, acted in a
manner which is inconsistent with the acceleration and imposition of the Default
Rate shall not constitute a waiver of this provision or estop KCL from asserting
or enforcing KCL's rights hereunder.
(ii) Furthermore, upon the occurrence of an Event of Default, KCL shall
have, in addition to the rights and remedies provided herein, in the other Loan
Documents or bylaw, the rights and remedies of a secured party under the Uniform
Commercial Code under the laws of the State of New York (the "UCC") (regardless
of whether the UCC is the law of the jurisdiction where the rights and remedies
are asserted and regardless of whether the UCC applies to the affected
Collateral), and further KCL may do any one or more of the following as KCL in
its
Form No: 96-501.999 Page 6 of 11
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sole discretion may elect, with or without judicial process or the aid and
assistance of others: (i) enter and remain on any premises on which any of the
Equipment may be located and, without resistance or interference by the
Borrower, without liability to KCL by reason of such entry or taking possession,
take possession of the Equipment, (ii) prepare for sale and sell or otherwise
dispose of any Equipment on any such premises, (iii) require the Borrower to
assemble and make available to KCL at Borrower's expense any Equipment at any
place and time designated by KCL, (iv) remove any Equipment from any such
premises for the purpose of effecting sale or other disposition thereof, (v)
without demand and without advertisement, notice, hearing or process of law, all
of which the Borrower hereby waives, at any place and time or times, sell and
deliver any or all Equipment held by or for it at public or private sale, by one
or more contracts, in one or more parcels, for cash, upon credit or otherwise,
at such prices and upon such terms as KCL deems advisable, in its sole
discretion, or (vi) lease all or any portion of the Equipment on such terms and
conditions as KCL in it sole discretion may determine. In addition to all other
sums due KCL hereunder, the Borrower shall pay KCL all reasonable costs and
expenses incurred by KCL, including reasonable attorneys' fees and court costs,
in obtaining or liquidating the Collateral, in enforcing payment of Secured
Obligations, or in the prosecution or defense of any action or proceeding by or
against KCL or the Borrower concerning any matter arising out of or connected
with the Loan Documents, the Collateral or the Secured Obligations, including
without limitation any of the foregoing arising in, arising under or related to
a case under the United States Bankruptcy Code.
(iii) Borrower's waivers regarding disposition of the equipment. IF AN
EVENT OF DEFAULT OCCURS, BORROWER HEREBY WAIVES ANY DEFENSES, RIGHTS, OFFSETS OR
CLAIMS AGAINST KCL ARISING OUT OF THE REPOSSESSION, RETENTION, SALE, MANNER OR
METHOD OF SALE OR DISPOSITION OF ANY ITEMS OF EQUIPMENT. THE BORROWER AGREES
THAT ANY REQUIREMENT OF REASONABLE NOTICE SHALL BE MET IF SUCH NOTICE IS
PERSONALLY SERVED ON OR MAILED, POSTAGE PREPAID, TO THE BORROWER IN ACCORDANCE
WITH THE NOTICE PROVISIONS HEREOF AT LEAST 10 DAYS BEFORE THE TIME OF SALE OR
OTHER EVENT GIVING RISE TO THE REQUIREMENT OF SUCH NOTICE. KCL SHALL NOT BE
OBLIGATED TO MAKE ANY SALE OR OTHER DISPOSITION OF THE EQUIPMENT REGARDLESS OF
NOTICE HAVING BEEN GIVEN. KCL MAY BE THE PURCHASER AT ANY SUCH SALE. THE
BORROWER HEREBY WAIVES ALL OF ITS RIGHTS OF REDEMPTION FROM ANY SUCH SALE. KCL
MAY POSTPONE OR CAUSE THE POSTPONEMENT OF THE SALE OF ALL OR ANY PORTION OF THE
EQUIPMENT BY ANNOUNCEMENT AT THE TIME AND PLACE OF SUCH SALE, AND SUCH SALE MAY,
WITHOUT FURTHER NOTICE, BE MADE AT THE TIME AND PLACE TO WHICH THE SALE WAS
SCHEDULED. NONE OF KCL'S RIGHTS OR REMEDIES HEREUNDER ARE INTENDED TO BE
EXCLUSIVE OF, BUT EACH SHALL BE CUMULATIVE AND IN ADDITION TO, ANY OTHER RIGHT
OR REMEDY REFERRED TO HEREUNDER OR OTHERWISE AVAILABLE TO KCL OR ITS ASSIGNS AT
LAW OR IN EQUITY, AND MAY BE PURSUED SINGLY, SUCCESSIVELY OR CONCURRENTLY AT THE
SOLE DISCRETION OF LENDER AND MAY BE EXERCISED AS OFTEN AS OCCASION THEREFOR
SHALL OCCUR. THE FAILURE TO EXERCISE, OR ANY DELAY IN THE EXERCISE OF, ANY RIGHT
OR REMEDY SHALL IN NO EVENT BE CONSTRUED AS A WAIVER, RELEASE OR EXHAUSTION OF
ANY SUCH REMEDIES. NO EXPRESS OR IMPLIED WAIVER BY KCL OF ANY EVENT OF DEFAULT
SHALL CONSTITUTE A WAVER OF ANY OTHER EVENT OF DEFAULT OR A WAIVER OF ANY OF
KCL'S RIGHTS UPON THE REOCCURRENCE OF ANY SUCH EVENT OF DEFAULT.
(c) The Borrower hereby authorizes KCL, upon the occurrence and during
the continuation of any Event of Default hereunder, at KCL's option to adjust,
compromise and settle any losses under any insurance afforded, and the Borrower
does hereby irrevocably constitute KCL and each of its designees, as its
attorney-in-fact, with full power and authority, upon the occurrence and during
the continuation of any Event of Default hereunder, to effect such adjustment,
compromise and/or settlement and to endorse any drafts drawn by an insurer of
the Equipment or any part thereof and to do everything necessary to carry out
such purposes and to receive and receipt for any unearned premiums due under
policies of such insurance; but unless or until KCL elects to adjust, compromise
or settle losses as aforesaid, such insurance proceeds shall be subject to the
lien and security interest of KCL hereunder.
Form No: 96-501.999 Page 7 of 11
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(d) Upon the occurrence, and during the continuance, of an Event of
Default hereunder, any payments in respect of the Secured Obligations and any
proceeds of the Collateral, when received by KCL in cash or its equivalent, will
be applied first to costs of collection and, thereafter, in reduction of the
Secured Obligations in such order and manner as KCL may direct in it sole
discretion, and the Borrower irrevocably waives the right to direct the
application of such payments and proceeds and acknowledges and agrees that KCL
shall have the continuing and exclusive right to apply any and all such payments
and proceeds in KCL's sole discretion, notwithstanding any entry to the contrary
upon any of its books and records. The Borrower shall remain liable to KCL for
any deficiency. Any surplus remaining after the full payment and satisfaction of
the Secured Obligations shall be returned to the Borrower or to whomsoever a
court of competent jurisdiction shall determine to be entitled thereto.
(e) To the extent that any of the Secured Obligations are now or
hereafter secured by property other than the Collateral, or by a guarantee,
endorsement or property of any other person, then KCL also shall have the right
to proceed against such other property, guarantee or endorsement upon the
occurrence of a default hereunder, and KCL shall have the right, in its sole
discretion, to determine which rights, lines, security interests or remedies KCL
shall at any time pursue, relinquish, subordinate or modify, without in any way
affecting the Secured Obligations or any of KCL's rights under this Agreement.
17. Notices. All notices and other communications hereunder shall be in writing
and shall be transmitted by hand, overnight courier or certified mail (return
receipt requested), postage prepaid. Such notices and other communications shall
be addressed to the respective party at the address set forth above or at such
other address as any party may from time to time designate by notice duly given
in accordance with this Section. Such notices and other communications shall be
effective upon the earlier of receipt or three (3) days after mailing if mailed
in accordance with the terms of this section.
18. General Indemnification. Borrower shall pay, and shall indemnify and hold
KCL and its directors, officers, employees, counsel, agents and advisors
harmless on an after-tax basis from and against, any and all liabilities, causes
of action, claims, suits, penalties, damages, losses, costs or expenses
(including attorneys' fees), obligations, liabilities, demands and judgments,
and Liens, of any nature whatsoever (collectively, a "Liability") arising out of
or in any way related to: (a) the Loan Documents (b) a failure to comply fully
with Applicable Law and (c) Borrower's failure to perform any covenant, or
breach of any representation or warranty under the Loan Documents; provided,
that the foregoing indemnity shall not extend to the Liabilities to the extent
resulting solely from the gross negligence or willful misconduct of KCL.
Borrower shall promptly deliver to KCL (i) copies of any documents received from
the United States Environmental Protection Agency or to any state, county or
municipal environmental or health agency concerning the Equipment or its
operation and (ii) copies of any documents submitted by Borrower or any of its
subsidiaries to the United States Environmental Protection Agency or any state,
county or municipal environmental or health agency concerning the Equipment or
its operation. Borrower further agrees to indemnify KCL against and hold it
harmless from all present and future stamp, transfer, documentary and other such
taxes, levies, fees, assessments or other charges made by any jurisdiction by
reason of the execution, delivery, performance and enforcement of the Loan
Documents.
19. Severability; Captions. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
Applicable Law. If, however, any provision of this Agreement or any of the Loan
Documents shall be prohibited or unenforceable in any jurisdiction, it shall, as
to such jurisdiction, be deemed modified to conform to the minimum requirements
of such law, or if for any reason it is not deemed so modified, it shall be
ineffective only to the extent of such prohibition or unenforceability without
affecting the remaining provisions hereof, and any such prohibition or
unenforceability shall not invalidate or render unenforceable such provision in
any other jurisdiction. Captions are intended for convenience or reference only,
and shall not be construed to define, limit or describe the scope or intent of
any provisions hereof.
20. Financial and Other Data. During the Term hereof, Borrower shall furnish
KCL, as soon as available and in any event within 120 days after the last day of
each fiscal year, financial statements of Borrower and each
Form No: 96-501.999 Page 8 of 11
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Guarantor, in each case compiled, reviewed or audited by an independent
certified public accountant as required by KCL. Borrower shall also furnish such
other financial reports, information or data (including federal and state income
tax returns and quarterly or interim financial statements compiled, reviewed or
audited by an independent certified public accountant if required by KCL) as KCL
may reasonably request from time to time.
21. [RESERVED]
22. Representations and Warranties of Borrower. Borrower represents and warrants
that: (a) Borrower is a corporation duly organized and validly existing in good
standing under the laws of the state of its incorporation; (b) the execution,
delivery and performance of this Agreement and all related instruments and
documents: (1) have been duly authorized by all necessary corporate action on
the part of Borrower, (2) do not require the approval of any stockholder,
partner, trustee or holder of any obligations of Borrower except such as have
been duly obtained, and (3) do not and will not contravene any law, governmental
rule, regulation or order now binding on Borrower, or the charter or by-laws of
Borrower, or contravene the provisions of, or constitute a default under, or
result in the creation of any lien or encumbrance upon the property of Borrower
under, any indenture, mortgage, contract or other agreement to which Borrower is
a party or by which it or its property is bound; (c) the Loan Documents, when
entered into, will constitute legal, valid and binding obligations of Borrower
enforceable against Borrower in accordance with the terms thereof; (d) there are
no pending actions or proceedings to which Borrower is a party, and there are no
other pending or threatened actions or proceedings of which Borrower has
knowledge, before any court, arbitrator or administrative agency, which, either
individually or in the aggregate, would adversely affect the financial condition
of Borrower, or the ability of Borrower to perform its obligations under the
Loan Documents; (e) Borrower is not in default under any obligation for the
payment of borrowed money, for the deferred purchase price of property or for
the payment of any installments under any lease agreement which, either
individually or in the aggregate, would have the same such effect; (f) under the
laws of the state(s) in which the Equipment is to be located, the Equipment
consists solely of personal property and not fixtures; (g) the financial
statements of Borrower (copies of which have been furnished to KCL) have been
prepared in accordance with generally accepted accounting principles
consistently applied ("GAAP"), and fairly present Borrower's financial condition
and the results of its operations as of the date of and for the period covered
by such statements, and since the date of such statements there has been no
material adverse change in such conditions or operations; (h) the address stated
above is the chief place of business and chief executive office, or in the case
of individuals, the primary residence, of Borrower; (i) Borrower does not
conduct business under a trade, assumed or fictitious name, except as set forth
in Schedule 1; (j) this Agreement creates a valid first priority security
interest in the Collateral securing payment and performance of the Secured
Obligations and all filings and other action necessary to perfect such security
interest have been taken or shall be promptly taken; (k) Borrower has filed or
has caused to have been filed all Federal, state and local tax returns which, to
the knowledge of Borrower, are required to be filed, and has paid or caused to
have been paid all taxes as shown on such returns or on any assessment received
by it, to the extent that such taxes have become due, unless and to the extent
only that such taxes, assessments and governmental charges are currently
contested in good faith and by appropriate proceedings by Borrower and adequate
reserves therefor have been established as required under GAAP and, to the
extent Borrower believes it advisable to do so, Borrower has set up reserves
which are believed by Borrower to be adequate for the payment of additional
taxes for years which have not been audited by the respective tax authorities;
(l) except as previously disclosed in writing to KCL, neither Borrower nor any
of its officers or directors (if a corporation), partners (if a partnership) or
members or managers (if a limited liability corporation) has, directly or
indirectly, any financial interest in the Supplier; and (m) Borrower has
conducted comprehensive review and assessment of the Borrower's computer
applications and made inquiry of the Borrower's key suppliers, vendors and
customers with respect to the "year 2000 problem" (that is, the risk that
computer applications may not be able to properly perform date-sensitive
functions after December 31, 1999) and based on that review and inquiry, the
Borrower does not believe the year 2000 problem will result in a material
adverse change in the Borrower's business condition (financial or otherwise),
operations, properties or prospects, or ability to perform the obligations of
Borrower under this Agreement; (n) Borrower is not in violation of any
Applicable Law, the violation of which would have a material adverse effect on
the conduct of its business, and Borrower has obtained any and all licenses,
permits, franchises or other governmental authorizations
Form No: 96-501.999 Page 9 of 11
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necessary for the ownership of its properties and the conduct of its business;
and (o) none of the proceeds of the loan made by KCL will be used, directly or
indirectly, by Borrower for the purpose of purchasing or carrying, or for the
purpose of reducing or retiring any indebtedness which was originally incurred
to purchase or carry 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") or for any other purpose which might make the
transactions contemplated herein a "purpose credit" within the earning of
Regulation U or cause this Agreement to violate any other regulation of the
Board of Governors of the Federal Reserve System or the Securities Exchange Act
of 1934 or the Small Business Investment Act of 1958, as amended, or any rules
or regulations promulgated under any of such statutes.
23. Further Covenants of Borrower. The Borrower further covenants and agrees
that it will not change its legal name, be a party to a merger, consolidation or
other change in structure or use a trade name in its business without at least
30 days' prior written notice to KCL; and shall execute and deliver to KCL (to
by filed at Borrower's expense) all UCC statements as may be required by KCL in
connection with such event.
24. Miscellaneous. Time is of the essence with respect to this Agreement. ANY
FAILURE OF KCL TO REQUIRE STRICT PERFORMANCE BY BORROWER OR ANY WAIVER BY KCL OF
ANY PROVISION HEREIN SHALL NOT BE CONSTRUED AS A CONSENT OR WAIVER OF ANY
PROVISION OF THIS AGREEMENT. None of the Loan Documents may be amended except by
a writing signed by KCL and Borrower. This Agreement will be binding upon KCL
only if executed by a duly authorized officer or representative of KCL at KCL's
principal place of business as set forth above. This Agreement and all other
Loan Documents shall be executed on Borrower's behalf by Authorized Signers of
Borrower. The Borrower hereby waives presentment, notice of dishonor and protest
of all instruments included in or evidencing any Secured Obligations, and all
other notices and demands whatsoever (except as expressly provided herein). THIS
AGREEMENT IS BEING DELIVERED IN THE STATE OF NEW YORK AND SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, INCLUDING
ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE WITHOUT GIVING EFFECT TO
ANY CHOICE OF LAW OR CONFLICT OF LAWS PROVISION OR RULE (WHETHER OF THE STATE OF
NEW YORK OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS
OF ANY JURISDICTION OTHER THAN THE STATE OF NEW YORK.
25. Jury Trial Waiver. KCL AND BORROWERS HEREBY EACH WAIVE THEIR RESPECTIVE
RIGHTS TO TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING
OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION OR PROCEEDING TO
WHICH KCL OR BORROWER MAY BE PARTIES, WHETHER WITH RESPECT TO CONTRACT CLAIMS,
TORT CLAIMS, OR OTHERWISE INCLUDING WITHOUT LIMITATION ANY ACTION, COUNTERCLAIM
OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY
OR ENFORCEABILITY, OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY
PROVISION HEREOF OR THEREOF. THIS WAIVER IS MADE KNOWINGLY, WILLINGLY AND
VOLUNTARILY BY KCL AND THE BORROWER WHO EACH ACKNOWLEDGE THAT NO REPRESENTATIONS
HAVE BEEN MADE BY ANY INDIVIDUAL TO INDUCE THIS WAIVER OF TRIAL BY JURY OR IN
ANY WAY TO MODIFY OR NULLIFY ITS EFFECT. THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT
AND THE OTHER LOAN DOCUMENTS.
26. More than One Borrower. If more than one person or entity executes this
Agreement, each of the other Loan Documents, and all addenda or other documents
executed in connection herewith or therewith, as "Borrower," the obligations of
"Borrower" contained herein and therein shall be deemed joint and several and
all references to "Borrower" shall apply both individually and jointly.
27. Entire Agreement. This Agreement together with the other Loan Documents,
collectively constitute the entire understanding or agreement between KCL and
Borrower with respect to the financing of the Equipment,
Form No: 96-501.999 Page 10 of 11
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and there is no understanding or agreement, oral or written, which is not set
forth herein or therein. This Agreement shall not be modified except by the
written agreement of KCL and Borrower.
28. Execution in Counterparts. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute but one and the same instrument.
29. Power of Attorney; UCC Filings. BORROWER SHALL EXECUTE AND DELIVER TO KCL
CONCURRENTLY WITH THE EXECUTION OF THIS AGREEMENT, AND AT ANY TIME FROM TIME TO
TIME THEREAFTER, ALL FINANCING STATEMENTS, AMENDMENTS TO FINANCING STATEMENTS,
CHATTEL MORTGAGES, ASSIGNMENTS, AND ALL OTHER INSTRUMENTS, IN FORM SATISFACTORY
TO KCL, AND TAKE ALL OTHER ACTION AS KCL MAY REASONABLY REQUIRED, TO PERFECT AND
CONTINUE PERFECTED, MAINTAIN THE PRIORITY OF OR PROVIDE NOTICE OF KCL'S SECURITY
IN THE COLLATERAL BORROWER HEREBY APPOINTS KCL, OR ITS ASSIGNEE, AND ANY OF
KCL'S OR ASSIGNEE'S OFFICERS OR EMPLOYEES AS ITS TRUE AND LAWFUL ATTORNEY IN
FACT, IRREVOCABLY AND COUPLED WITH AN INTEREST, TO EXECUTE AND FILE ON BEHALF OF
BORROWER ALL UCC FINANCING STATEMENTS WHICH IN KCL'S SOLE DISCRETION ARE
NECESSARY OR PROPER TO SECURE KCL'S INTEREST IN THE EQUIPMENT IN ALL APPLICABLE
JURISDICTIONS. Borrower hereby ratifies, to the extent permitted by law, all
that KCL shall lawfully and in good faith do or cause to be done by reason of
and in compliance with this paragraph.
Lender: Borrower:
KEYCORP LEASING, STARTEK USA, INC.
A DIVISION OF KEY CORPORATE CAPITAL INC.
By: /s/ KRISTA L. SPADA By: /s/ DENNIS M. SWENSON
-------------------------------- -------------------------------
Name: Krista L. Spada Name: Dennis M. Swenson
Title: Regional Business Title: Executive Vice President
Unit Manager
Form No: 96-501.999 Page 11 of 11
Exhibits and Schedules not filed
16
AMENDMENT NO. 01
TO SECURITY AGREEMENT
THIS AMENDMENT dated as of October 13, 1999 amends that certain
Security Agreement dated as of October 13, 1999 (the "Agreement") between
KEYCORP LEASING, A DIVISION OF KEY CORPORATE CAPITAL INC., a lender, and STARTEK
USA, INC., as Borrower. Unless otherwise specified herein, all capitalized terms
shall have the meanings ascribed to them in the Agreement.
BORROWER'S FINANCIAL COVENANTS. Borrower hereby covenants with Lender as
follows:
On a continuing basis, from the date of the Promissory Note and
Security Agreement until the date on which Lessee's obligations thereunder are
fully paid and performed, Lessee hereby covenants and agrees that:
1. Current Ratio: Lessee shall maintain a ratio of current assets to
current liabilities in excess of 1.25 to 1.00; calculated at end of
each June and December. Current Ratio is defined as Current Assets less
all intercompany transactions, with the exception of StarTek, Inc.
transactions less prepaid expenses divided by Current Liabilities.
2. Operating Cash Flow to Fixed Charge Ratio: Lessee shall maintain either
of the following:
Option A:
A ratio of Operating Cash Flow to Total Fixed Charges of not less than
3.00 to 1.00; calculated semi-annually on a rolling four quarters basis
with NO proforma or other income tax (actual) subtraction. Operating
Cash flow defined as net income BEFORE taxes, and exclusive of
extraordinary gains, gains on asset sales, and other income, plus
depreciation and amortization plus interest expense, plus lease expense
less dividends, and distributions.
Option B:
A ratio of Operating Cash flow to Total Fixed Charges of not less than
2.00 to 1.00; calculated semi-annually on a rolling four quarter basis
with a proforma or other income tax (actual) subtraction. Operating
Cash flow defined as net income AFTER taxes, and exclusive of
extraordinary gains, gains on asset sales, and other income, plus
depreciation and amortization plus interest expense, plus lease expense
less dividends, and distributions.
17
EXCEPT AS EXPRESSLY MODIFIED HEREBY, ALL OF THE TERMS, COVENANTS AND
CONDITIONS OF THE AGREEMENT SHALL REMAIN IN FULL FORCE AND EFFECT AND ARE IN ALL
RESPECTS HEREBY RATIFIED AND AFFIRMED.
IN WITNESS WHEREOF, Lender and Borrower have executed this Amendment as
of the date first written above.
LENDER: BORROWER:
KEYCORP LEASING, STARTEK USA, INC.
A DIVISION OF KEY CORPORATE CAPITAL INC.
By: /s/ KRISTA L. SPADA By: /s/ DENNIS M. SWENSON
----------------------------- ----------------------------
Name: Krista L. Spada Name: Dennis M. Swenson
Title: Regional Business Title: Executive Vice President
Unit Manager
Form No.: 96-508.999 Page 2 of 2