CREDIT AND SECURITY AGREEMENT
SM&A CORPORATION
EACH OF THE FINANCIAL INSTITUTIONS INITIALLY A SIGNATORY
HERETO, TOGETHER WITH THOSE ASSIGNEES
PURSUANT TO SECTION 10.6
HEREOF, AS LENDERS,
AND
MELLON BANK, N.A., AS AGENT
SEPTEMBER 11, 1998
TABLE OF CONTENTS
PAGE
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Article I DEFINITIONS..........................................................1
SECTION 1.1 Defined Terms....................................................1
SECTION 1.2 Other Definitional Provisions...................................12
Article II THE CREDIT.........................................................12
SECTION 2.1 The Revolving Loans.............................................12
SECTION 2.2 Making the Revolving Loans......................................13
SECTION 2.3 Repayment.......................................................16
SECTION 2.4 Interest Rate and Payment Dates.................................16
SECTION 2.5 Fees. ........................................................18
Article III GENERAL PROVISIONS CONCERNING THE LOANS...........................18
SECTION 3.1 Use of Proceeds.................................................18
SECTION 3.2 Computation of Interest and Fees................................18
SECTION 3.3 Payments........................................................18
SECTION 3.4 Apportionment, Application, and Reversal of Payments............19
SECTION 3.5 Reduced Return..................................................19
SECTION 3.6 Indemnities and Losses..........................................20
SECTION 3.7 Requirements of Law.............................................21
Article IV CONDITIONS OF LENDING..............................................22
SECTION 4.1 Conditions Precedent to Initial Loans...........................22
SECTION 4.2 Conditions Precedent to Each Borrowing..........................23
Article V REPRESENTATIONS AND WARRANTIES......................................24
i.
SECTION 5.1 Representations and Warranties..................................24
Article VI COVENANTS..........................................................27
SECTION 6.1 Affirmative Covenants...........................................27
SECTION 6.2 Negative Covenants..............................................31
Article VII EVENTS OF DEFAULT.................................................34
SECTION 7.1 Events of Default...............................................34
SECTION 7.2 Remedies Cumulative.............................................38
Article VIII CREATION OF SECURITY INTEREST....................................38
SECTION 8.1 Grant of Security Interest......................................38
SECTION 8.2 Negotiable Collateral...........................................38
SECTION 8.3 Collection of Accounts, General Intangibles, and Negotiable
Collateral......................................................38
SECTION 8.4 Delivery of Additional Documentation Required...................38
SECTION 8.5 Power of Attorney...............................................39
SECTION 8.6 Right to Inspect................................................39
SECTION 8.7 Liability for Collateral........................................39
Article IX the AGENT; THE LENDER GROUP........................................40
SECTION 9.1 Appointment and Authorization of Agent..........................40
SECTION 9.2 Delegation of Duties............................................40
SECTION 9.3 Liability of Agent..............................................41
SECTION 9.4 Reliance by Agent...............................................41
SECTION 9.5 Notice of Default or Event of Default...........................41
SECTION 9.6 Credit Decision.................................................42
SECTION 9.7 Costs and Expenses; Indemnification.............................42
SECTION 9.8 Agent in Individual Capacity....................................43
ii
SECTION 9.9 Successor Agent.................................................43
SECTION 9.10 Withholding Tax.................................................43
SECTION 9.11 Collateral Matters..............................................45
SECTION 9.12 Restrictions on Actions by Lenders; Sharing of Payments.........45
SECTION 9.13 Agency for Perfection...........................................46
SECTION 9.14 Payments by Agent to the Lenders................................46
SECTION 9.15 Concerning the Collateral and Related Loan Documents............46
SECTION 9.16 Several Obligations; No Liability...............................47
SECTION 9.17 Holders of Notes................................................47
SECTION 9.18 Calculations....................................................47
Article X MISCELLANEOUS.......................................................47
SECTION 10.1 Amendments, Etc.................................................47
SECTION 10.2 Notices, Etc....................................................48
SECTION 10.3 Right of Setoff.................................................49
SECTION 10.4 No Waiver; Remedies.............................................49
SECTION 10.5 Costs and Expenses..............................................49
SECTION 10.6 Assignments and Participations..................................49
SECTION 10.7 Effectiveness: Binding Effect...................................52
SECTION 10.8 Governing Law; Choice of Forum; Service of Process; Jury
Trial Waiver....................................................52
SECTION 10.9 Waiver of Notices...............................................53
SECTION 10.10 Destruction of Borrower's Documents.............................53
SECTION 10.11 Entire Agreement................................................53
SECTION 10.12 Severability of Provisions......................................53
SECTION 10.13 Execution in Counterparts.......................................53
iii
SCHEDULES AND EXHIBITS
Exhibit A-1 Form of Assignment and Acceptance
Exhibit RN-1 Form of Promissory Note
Schedule C-1 Lenders and Commitment Amounts
Schedule 5.1(f) Litigation
Schedule 5.1(i) Environmental Matters
Schedule 6.1(j) Location of Inventory and Equipment
Schedule 6.2(e) Permitted Liens
iv
CREDIT AND SECURITY AGREEMENT
THIS CREDIT AND SECURITY AGREEMENT dated as of September 11, 1998 is
entered into between SM&A CORPORATION, a California corporation (the
"BORROWER"), the financial institutions listed on the signature pages hereof
(such financial institutions, together with their respective successors and
assigns, are referred to herein each individually as a "LENDER" and collectively
as the "LENDERS"), and MELLON BANK, N.A., as agent for the Lenders (in such
capacity, the "AGENT"). The Borrower , the Lenders, and the Agent agree as
follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 DEFINED TERMS.
As used in this Agreement, the following terms have the following
meanings:
"ACCOUNT DEBTOR" means any Person who is or who may become obligated
under, with respect to, or on account of, an Account, General Intangible, or
Negotiable Collateral.
"ACCOUNTS" means all currently existing and hereafter arising accounts,
contract rights, and all other forms of obligations owing to the Borrower
arising out of the sale, license, or lease of goods or General Intangibles or
the rendition of services by the Borrower, irrespective of whether earned by
performance, and any and all credit insurance, guaranties, or security therefor.
"ACQUISITION": Any transaction or series of transactions by which the
Borrower acquires, either directly or through an Affiliate or Subsidiary or
otherwise, (a) any or all of the stock or other securities of any class of any
Person or (b) a substantial portion of the assets, or a division or line of
business or any Person.
"ACQUISITION PURCHASE PRICE": The sum of (without duplication) (a) the
outstanding principal of all Indebtedness incurred, (b) all obligations assumed
or incurred (including, without limitation, payments paid or to be paid under
non-competition agreements in connection with the Acquisition, and obligations
with respect to Indebtedness assumed by operation of law pursuant to a merger or
business combination, but excluding contingent indemnity obligations and
obligations related to the breach of representations, warranties or agreements),
and (c) all amounts paid and the fair market value of any securities or other
property transferred or to be transferred or services rendered or to be rendered
in connection with the Acquisition; and in the case of clause (a) the proceeds
of such Indebtedness (whether incurred as debt or a contingent obligation) are
used directly in connection with the Acquisition or indirectly (by way of loans
or advances to a Subsidiary or Affiliate or capital contribution to a Subsidiary
or Affiliate or otherwise) to fund any costs (including without limitation, the
payment of purchase price) incurred in connection therewith; and in the case of
clause (b) such obligations are assumed directly or indirectly with respect to
the Acquisition. The determination of the Acquisition Purchase Price of a
specific transaction shall not include that portion of the consideration paid or
to be paid in connection with the Acquisition in the common stock or common
stock equivalents of the Borrower.
1.
"AFFILIATE": As applied to any Person, any other Person who, directly
or indirectly, controls, is controlled by, is under common control with, or is a
director or officer of such Person.
"AGENT": As set forth in the introductory paragraph of this Agreement.
"AGENT'S LIENS": The Liens on the Collateral granted by the Borrower to
the Agent for the benefit of the Lender Group under this Agreement pursuant to
SECTION 8.1 and the other Loan Documents.
"AGENT-RELATED PERSONS": The Agent and any successor agent together
with their respective Affiliates, and the officers, directors, employees,
counsel, agents, and attorneys-in-fact of such Persons and their Affiliates.
"AGREEMENT": This Credit Agreement, as amended, supplemented or
modified from time to time.
"APPLICABLE MARGIN": With respect to each Prime Rate Portion, the
Applicable Margin set forth in the applicable table below as in effect from time
to time, and with respect to each Libor Rate Portion, the Applicable Margin set
forth in the applicable table below as in effect on the first day of each Rate
Period for such Libor Rate Portions for such Rate Period; in each case,
determined based on the ratio of Indebtedness to EBIT as of the end of each
fiscal quarter of the Borrower for the period of the four consecutive fiscal
quarters of the Borrower ending on that date:
LEVEL I LEVEL II LEVEL III LEVEL IV
------- -------- --------- --------
Indebtedness/EBIT less than/equal to greater than greater than greater than
1.00:1.00 1.00:1.00 and 1.50:1.00 and 2.00:1.00
less than/equal to less than/equal to
1.50:1.00 2.00:1.00
Libor Rate Portion 125 bps 150 bps 175 bps 200 bps
Prime Rate Portion 0 bps 0 bps 0 bps 0 bps
Notwithstanding the foregoing, the Applicable Margin shall not be
adjusted for any quarter until up to five Business Days (as determined by the
Agent in its sole discretion) after receipt by the Agent of the financial
statements and certificates required to be delivered to it under SUBSECTIONS
6.1(a)(ii) and 6.1(a)(iii) for the prior fiscal quarter. If the Borrower has not
furnished the financial statements and certificates required under SUBSECTIONS
6.1(a)(ii) and 6.1(a)(iii) for any fiscal quarter, the Applicable Margin shall
be calculated as if the Indebtedness/EBIT ratio as of the last day of such
fiscal quarter was the same as the Indebtedness/EBIT ratio was for the
immediately preceding fiscal quarter; PROVIDED, that upon delivery to the Agent
of the required financial statements and certificates, the Applicable Margin
shall be adjusted as of the day that it should have been adjusted had the
2.
Borrower complied with the requirements of SUBSECTIONS 6.1(a)(ii) and
6.1(a)(iii). During the period from the date hereof through the date that is
five Business Days following receipt by the Agent of the first quarterly
financial statements delivered to the Agent after the date hereof in which the
Indebtedness/EBIT ratio is reported the Level I Applicable Margin shall apply
irrespective of the Indebtedness/EBIT ratio. Thereafter, the Applicable Margin
shall be determined as set forth above.
"APPLICABLE UNUSED LINE RATE": As of any date for which the Unused Line
Fee is being determined, the Unused Line Rate set forth in the table below for
the corresponding Indebtedness/EBIT Ratio for the period of four consecutive
fiscal quarters of the Borrower ending as of the last day of the fiscal quarter
immediately preceding such date of determination:
LEVEL I LEVEL II LEVEL III
------- -------- ---------
Indebtedness/EBIT less than/equal to greater than greater than
Ratio 1.00:1.00 1.00:1.00 and 2.00:1.00
less than/equal to
2.00:1.00
Unused Line Rate 20 bps 25 bps 30 bps
Notwithstanding the foregoing, the Applicable Unused Line Rate shall not be
adjusted for any quarter until up to five Business Days (as determined by the
Agent in its sole discretion) after receipt by the Agent of the financial
statements and certificates required to be delivered to it under SUBSECTIONS
6.1(a)(ii) and 6.1(a)(iii) for the prior fiscal quarter. If the Borrower has not
furnished the financial statements and certificates required under SUBSECTIONS
6.1(a)(ii) and 6.1(a)(iii) for any fiscal quarter, the Unused Line Rate shall be
calculated as if the Indebtedness/EBIT ratio as of the last day of such fiscal
quarter was the same as the Indebtedness/EBIT ratio was for the immediately
preceding fiscal quarter; PROVIDED, that upon delivery to the Agent of the
required financial statements and certificates, the Applicable Unused Line Rate
shall be adjusted as of the day that it should have been adjusted had the
Borrower complied with the requirements of SUBSECTIONS 6.1(a)(ii) and
6.1(a)(iii). During the period from the date hereof through the date that is
five Business Days following receipt by the Agent of the first quarterly
financial statements delivered to the Agent after the date hereof in which the
Indebtedness/EBIT ratio is reported the Level I Unused Line Rate shall apply
irrespective of the Indebtedness/EBIT ratio. Thereafter, the Applicable Unused
Line Rate shall be determined as set forth above.
"ASSIGNEE": As defined in SECTION 10.6.
"ASSIGNMENT AND ACCEPTANCE": An Assignment and Acceptance in the form
of EXHIBIT A-1 attached hereto.
"BANKRUPTCY CODE" means the United States Bankruptcy Code (11 U.S.C.
ss. 101 et seq.), as amended, and any successor statute.
"BORROWER": As set forth in the introductory paragraph of this
Agreement.
"BORROWER'S BOOKS" means all of the Borrower's books and records
including: ledgers; records indicating, summarizing, or evidencing the
Borrower's properties or assets (including the Collateral) or liabilities; all
information relating to the Borrower's business operations or financial
condition; and all computer programs, disk or tape files, printouts, runs, or
other computer prepared information.
3.
"BORROWING": As defined in SECTION 2.1.
"BUSINESS DAY": Any day on which the Agent is open for business at the
location where the Note is payable unless otherwise stated.
"CAPITAL EXPENDITURES": As applied to any Person, all expenditures made
and liabilities incurred for the acquisition of any fixed asset or improvement,
replacement, substitution or addition thereto which has a useful life of more
than one year and including, without limitation, those arising in connection
with Capital Leases.
"CAPITAL LEASES": As applied to any Person, any lease of any property
(whether real, personal or mixed) by that Person as lessee which would, in
accordance with GAAP, be required to be accounted for as a capital lease on the
balance sheet of that Person.
"CHANGE OF CONTROL": Shall be deemed to have occurred at such times as:
(a) a "person" or "group" (within the meaning of SECTIONS 13(d) and 14(d)(2) of
the Securities Exchange Act of 1934), becomes the "beneficial owner" (as defined
in Rule 13d-3 under the Securities Exchange Act of 1934), directly or
indirectly, of more than thirty percent (30%) of the total voting power of all
classes of stock then outstanding of Borrower normally entitled to vote in the
election of directors; or (b) the Borrower shall fail to own directly one
hundred percent (100%) or more of the issued and outstanding common stock of any
Guarantor or shall lose voting control of the issued and outstanding common
stock of any Guarantor.
"CODE": The California Uniform Commercial Code.
"COLLATERAL" means all of Borrower's right, title, and interest in and
to each of the following:
(a) the Accounts,
(b) Borrower's Books,
(c) the Equipment,
(d) the General Intangibles,
(e) the Inventory,
(f) the Negotiable Collateral,
(g) Investment Property,
(h) any money, or other assets of the Borrower that now or hereafter
come into the possession, custody, or control of any member of the Lender Group,
and
4.
(i) the proceeds and products, whether tangible or intangible, of
any of the foregoing, including proceeds of insurance covering any or all of the
Collateral, and any and all Accounts, Borrower's Books, Equipment, General
Intangibles, Inventory, Negotiable Collateral, money, deposit accounts, or other
tangible or intangible property resulting from the sale, exchange, collection,
or other disposition of any of the foregoing, or any portion thereof or interest
therein, and the proceeds thereof.
"COLLECTIONS" means all cash, checks, notes, instruments, and other
items of payment (including, insurance proceeds, proceeds of cash sales, rental
proceeds, and tax refunds).
"COMMITMENT": At any time with respect to a Lender, the principal
amount set forth beside such Lender's name under the heading "Commitment" on
SCHEDULE C-1 attached hereto or on the signature page of the Assignment and
Acceptance pursuant to which such Lender became a Lender hereunder in accordance
with the provisions of SECTION 10.6, and "COMMITMENTS" means, collectively, the
aggregate amount of the commitments of all of the Lenders.
"CONSOLIDATED INTEREST EXPENSE": For any period shall mean total
interest expense (including amounts properly attributable to Capital Leases in
accordance with GAAP) of Borrower and its Subsidiaries on a consolidated basis
for such period determined in conformity with GAAP.
"CONSOLIDATED TANGIBLE NET WORTH": At any date of determination, the
sum of the capital stock, additional paid-in capital and any indebtedness of the
Borrower or its Subsidiaries subordinated as to payment and performance to the
obligations of Borrower to the Lender Group hereunder on terms and conditions
acceptable to the Agent, plus retained earnings (or minus accumulated deficit)
of the Borrower and its consolidated Subsidiaries, MINUS (i) treasury stock,
(ii) intangible assets (including, without limitation, franchises, patents,
patent applications, trademarks, brand names, goodwill, purchased contracts and
deferred charges (including unammortized debt discount and expense and
organization costs) and (iii) receivables, advances, loans and all other amounts
due from employees, officers, shareholders, non-consolidated Subsidiaries and/or
affiliates, on a consolidated basis determined in conformity with GAAP.
"DAILY BALANCE": The amount of Loans owed at the end of a given day.
"DOLLARS AND $": Dollars in lawful currency of the United States of
America.
"EBIT": For any period, the consolidated net income of Borrower and its
Subsidiaries before interest expense and provision for income taxes and without
giving effect to any extraordinary gains and gains from sales of assets (other
than sales of inventory in the ordinary course of business), for such period.
"EQUIPMENT" means all of the Borrower's present and hereafter acquired
machinery, machine tools, motors, equipment, furniture, furnishings, fixtures,
vehicles (including motor vehicles and trailers), tools, parts, goods (other
than consumer goods, farm products, or Inventory), wherever located, including,
(a) any interest of the Borrower in any of the foregoing, and (b) all
attachments, accessories, accessions, replacements, substitutions, additions,
and improvements to any of the foregoing.
5.
"ERISA": The Employee Retirement Income Security Act of 1974, as
amended to the date hereof and from time to time hereafter and any successor
statute.
"ERISA AFFILIATE": As applied to any Person, any trade or business
(whether or not incorporated) which is a member of a group of which that Person
is a member and which is under common control within the meaning of SECTION
414(b) and (c) of the Internal Revenue Code.
"EVENTS OF DEFAULT": Has the meaning set forth in SECTION 7.1.
"FEDERAL FUNDS RATE": For any day, the rate set forth in the weekly
statistical release designated as H.15(519), or any successor publication,
published by the Federal Reserve Bank of New York (including any such successor,
"H.15(519)") on the preceding Business Day opposite the caption "Federal Funds
(Effective)"; or, if for any relevant day such rate is not so published on any
such preceding Business Day, the rate for such day will be the arithmetic mean
as determined by the Agent of the rates for the last transaction in overnight
Federal funds arranged prior to 9:00 a.m. (New York City time) on that day by
each of three leading brokers of Federal funds transactions in New York City
selected by the Agent.
"FEE LETTER": The letter dated September 11, 1998 between the Borrower
and Mellon providing for the payment of certain fees in connection with this
Agreement.
"FUNDING DATE": The date on which a Borrowing occurs.
"GAAP": Generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession or any public commission having regulatory responsibility over the
Borrower or any Subsidiary.
"GENERAL INTANGIBLES": means all of the Borrower's present and future
general intangibles and other personal property (including contract rights,
rights arising under common law, statutes, or regulations, choses or things in
action, goodwill, patents, trade names, trademarks, servicemarks, copyrights,
blueprints, drawings, purchase orders, customer lists, monies due or recoverable
from pension funds, route lists, rights to payment and other rights under any
royalty or licensing agreements, infringement claims, computer programs,
information contained on computer disks or tapes, literature, reports, catalogs,
deposit accounts, insurance premium rebates, tax refunds, and tax refund
claims), other than goods, Accounts, and Negotiable Collateral.
"GUARANTORS": Any Material Subsidiary of the Borrower, as determined by
the Agent, organized under the laws of the United States of America or any
political subdivision thereof.
6.
"INDEBTEDNESS": With respect to the Borrower, all obligations,
contingent or otherwise, that in accordance with GAAP should be classified upon
the Borrower's balance sheet as liabilities, including in any event and whether
so classified: (a) all obligations for borrowed money, (b) all obligations
evidenced by bonds, debentures, notes, or other similar instruments and all
reimbursement or other obligations in respect of letters of credit, bankers
acceptances, interest rate swaps, or other financial products, (c) all
obligations under capital leases or with respect to the deferred purchase price
for goods and services, (d) all obligations or liabilities of others secured by
a Lien on any property or asset of the Borrower, irrespective of whether such
obligation or liability is assumed, and (e) any obligation of the Borrower
guaranteeing or intended to guarantee (whether guaranteed, endorsed, co-made,
discounted, or sold with recourse to the Borrower) any indebtedness, lease,
dividend, letter of credit, or other obligation of any other Person.
"INDEMNIFIED LIABILITIES": Has the meaning set forth in SECTION 3.6.
"INDEMNIFIED PERSON": Has the meaning set forth in SECTION 3.6.
"INTEREST COVERAGE RATIO": For any period of determination, the ratio
of (a) EBIT, to (b) Interest Expense, in each case determined for said period in
accordance with GAAP.
"INTEREST EXPENSE": For any period of determination, the aggregate
consolidated amount, without duplication, of interest paid, accrued or scheduled
to be paid in respect of any Indebtedness of the Borrower, including (a) all but
the principal component of payments in respect of conditional sale contracts,
Capital Leases and other title retention agreements, (b) commissions, discounts
and other fees and charges with respect to letters of credit and bankers'
acceptance financings and (c) net costs under interest rate protection
agreements, in each case determined in accordance with GAAP.
"INTEREST RATE OPTIONS": Has the meaning set forth in SECTION 2.4(b).
"INTERNAL REVENUE CODE": The Internal Revenue Code of 1986, as amended
to the date hereof and from time to time hereafter and any successor statute.
"INVENTORY" means all present and future inventory in which the
Borrower has any interest, including goods held for sale or lease or to be
furnished under a contract of service, wherever located.
"INVESTMENT PROPERTY" means "investment property" as that term is
defined in Section 9115 of the Code.
"LENDER" and "LENDERS": As set forth in the introductory paragraph of
this Agreement.
"LENDER GROUP": Individually and collectively, each of the Lenders and
the Agent.
"LENDER GROUP EXPENSES": Has the meaning set forth in SECTION 10.5.
7.
"LIEN": Any lien, mortgage, deed of trust, pledge, security interest,
charge or encumbrance of any kind (including any conditional sale or other title
retention agreement, any lease in the nature thereof, and any agreement to give
any security interest).
"LIBOR RATE": For any day for any proposed or existing Rate Segment
corresponding to a Rate Period shall mean the rate per annum determined by the
Agent to be the rate per annum obtained by dividing (the resulting quotient to
be rounded upward to the nearest 1/16 of 1%) (A) the rate of interest (which
shall be the same for each day in such Rate Period) estimated in good faith by
the Agent in accordance with its usual procedures (which determination shall be
conclusive) to be the average of the rates per annum for deposits in United
States dollars offered to major money center banks in the London interbank
market at approximately 11:00 a.m., London time, two London Business Days prior
to the first day of such Rate Period for delivery on the first day of such Rate
Period in amounts comparable to such Rate Segment (or, if there are no such
comparable amounts actively traded, the smallest amounts actively traded) and
have maturities comparable to such Rate Period by (B) a number equal to 1.00
minus the Libor Rate Reserve Percentage for such day.
The "LIBOR RATE" may also be expressed by the following formula:
[average of rates offered to major
money banks in the London inter-
Libor Rate = bank market estimated by the Bank]
----------------------------------
[1.00 - Libor Rate Reserve Percentage]
"LIBOR RATE OPTION": Has the meaning set forth in SECTION 2.4(b).
"LIBOR RATE RESERVE PERCENTAGE": For any day shall mean the percentage
(rounded upward to the nearest 1/16 of 1%), as determined in good faith by the
Agent (which determination shall be conclusive) as representing for such day the
maximum effective reserve requirement (including, without limitation,
supplemental, marginal and emergency requirements) for member banks of the
Federal Reserve System with respect to eurocurrency funding (currently referred
to as "EUROCURRENCY LIABILITIES") of any maturity. Each Libor Rate shall be
adjusted automatically as of the effective date of any change in the Libor Rate
Reserve Percentage.
"LOAN ACCOUNT": An account maintained by the Agent on its books in the
name of Borrower on which Borrower will be charged with all advances made by
Agent or the Lenders to Borrower or for Borrower's account, including, accrued
interest, Lender Group Expenses, and any other payment Obligations of Borrower.
"LOANS": Loans made to the Borrower pursuant to SECTION 2.1.
"LOAN DOCUMENTS": This Agreement, the Note(s) and each guarantee,
including, but not limited to, the guaranties of the Guarantors, the Fee Letter,
and other document required by the Lender Group in connection with this
Agreement and/or the credit extended hereunder.
8.
"LONDON BUSINESS DAY": A day for dealing in deposits in Dollars by and
among banks in the London interbank market.
"MATERIAL SUBSIDIARY": means, (a) Science Applications Corporation, a
California corporation, (b) Decision-Science Applications, Inc., a California
corporation, and (c) any other Subsidiary of the Borrower (i) which has an
individual net worth which equals or exceeds, at the relevant time period, ten
percent (10%) of the net worth of Borrower and all of its Subsidiaries on a
consolidated basis (including such Subsidiary), (ii) which has a pre-tax income
which equals or exceeds, as of the relevant time period, ten percent (10%) of
the pre-tax income of Borrower and all of its Subsidiaries on a consolidated
basis (including such Subsidiary) or (iii) the divestiture of which by Borrower
otherwise could reasonably be expected to have a material adverse effect on the
business, operations, assets or financial condition of the Borrower or of the
Borrower and its Subsidiaries taken as a whole (regardless of its relative net
worth).
"MATURITY DATE": September 10, 2001.
"MELLON": Mellon Bank, N.A., a national banking association.
"NEGOTIABLE COLLATERAL" means all of a Person's present and future
letters of credit, notes, drafts, instruments, Investment Property, documents,
personal property leases (wherein such Person is the lessor), chattel paper, and
books or records relating to any of the foregoing.
"NOTES": The Revolving Notes.
"OBLIGATIONS": All loans, Revolving Loans, debts, principal, interest
(including any interest that, but for the provisions of the Bankruptcy Code,
would have accrued), premiums, liabilities (including all amounts charged to the
Borrower's Loan Account pursuant hereto), obligations, fees, charges, costs, or
Lender Group Expenses (including any fees or expenses that, but for the
provisions of the Bankruptcy Code, would have accrued), lease payments,
guaranties, covenants, and duties owing by the Borrower to the Lender Group of
any kind and description (whether pursuant to or evidenced by the Loan Documents
or pursuant to any other agreement between the Lender Group and the Borrower,
and irrespective of whether for the payment of money), whether direct or
indirect, absolute or contingent, due or to become due, now existing or
hereafter arising, and including any debt, liability, or obligation owing from
the Borrower to others that the Lender Group may have obtained by assignment or
otherwise, and further including all interest not paid when due and all Lender
Group Expenses that the Borrower is required to pay or reimburse by the Loan
Documents, by law, or otherwise.
"PARTICIPANT": As defined in SECTION 10.6(e).
"PBGC": The Pension Benefit Guaranty Corporation established pursuant
to Subtitle A of Title IV of ERISA.
"PERMITTED ACQUISITIONS": Permitted Acquisitions shall mean (a) an
Acquisition for an Acquisition Purchase Price in an amount not to exceed
$13,000,000 with respect to any specific Acquisition (whether in a single
transaction or in a series of related transactions); PROVIDED, HOWEVER, that the
aggregate Acquisition Purchase Price paid with respect to all Permitted
Acquisitions during any 12 month period shall not exceed $20,000,000; and
PROVIDED FURTHER, HOWEVER, that each Acquisition to be a Permitted Acquisition
shall satisfy the following requirements: (i) no Potential Event of Default or
Event of Default shall be outstanding at the time of the Acquisition or would
occur on the consummation thereof; (ii) the Person which is the subject of the
Acquisition shall have been engaged in a line or lines of business which are the
same, or substantially similar to or complementary with the lines of business
conducted at the time of the Acquisition by the Borrower; (iii) the Borrower
shall have demonstrated to the reasonable satisfaction of the Agent, that the
Borrower, on a consolidated basis going forward and after giving effect to the
Acquisition, will be in compliance on a pro forma basis, with the financial
covenants set forth in SECTION 6.2 hereof; and (iv) the Acquisition shall not
9.
have been the result of a hostile tender offer or other action contrary to the
decisions of the board of directors or shareholders of the Person that is the
subject of the Acquisition; (b) the Acquisition, effective as of August 20,
1998, by the Borrower of all of the issued and outstanding capital stock of
Decision - Science Applications, Inc., a Virginia corporation, for an aggregate
Acquisition Purchase Price not to exceed $30,900,000; and (c) Acquisitions that
do not satisfy clause (a) or (b) hereof but are approved by the Required
Lenders.
"PERSON": An individual, partnership, corporation, limited liability
company, business trust, joint stock company, trust, unincorporated association,
joint venture, governmental authority or other entity of whatever nature.
"PLAN": Any employee pension benefit plan maintained or contributed to
by the Borrower or any ERISA Affiliate of the Borrower and insured by the
Pension Benefit Guaranty Corporation under Title IV of ERISA.
"PORTION": "PRIME RATE PORTION" shall mean at any time, the part,
including the whole, of the unpaid principal amount of the Note bearing interest
at such time under the Prime Rate Option, in accordance with the first sentence
of SECTION 2.4(b) hereof, or in accordance with SECTION 2.f(f) hereof. "LIBOR
RATE PORTION" shall mean at any time, the part, including the whole, of the
unpaid principal amount of the Note bearing interest at such time under the
Libor Rate Option, in accordance with the second sentence of SECTION 2.4(b)
hereof.
"POTENTIAL EVENT OF DEFAULT": A condition or event which, after notice
or lapse of time or both, would constitute an Event of Default if that condition
or event were not cured or removed within any applicable grace or cure period.
"PRIME RATE": The interest rate per annum announced from time to time
by the Agent as its Prime Rate. The Prime Rate may be greater or less than other
interest rates charged by the Agent to other borrowers and is not solely based
or dependent upon the interest rate which the Agent may charge any particular
borrower or class of borrowers. Information concerning the Prime Rate may be
obtained from the Agent.
"PRIME RATE OPTION": Has the meaning set forth in SECTION 2.4(b).
"PRO RATA SHARE" means: the percentage obtained by dividing (i) such
Lender's Commitment to make Revolving Loans, as set forth on SCHEDULE C-1, by
(ii) all such Commitments of all Lenders to make Revolving Loans, as set forth
on SCHEDULE C-1;
"RATE PERIOD": As defined in SECTION 2.4(c).
"RATE SEGMENT": Of the Libor Rate Portion at any time shall mean the
entire principal amount of such Portion to which at such time there is
applicable a particular Rate Period beginning on a particular day and ending on
another particular day. (By definition, each Portion is at all times composed of
an integral number of discrete Rate Segments, each corresponding to a particular
Rate Period, and the sum of the principal amounts of all Rate Segments of a
particular Portion at any time equals the principal amount of such Portion at
such time).
10.
"REAL PROPERTY" means any estates or interests in real property now
owned or hereafter acquired by Borrower.
"REGULATION T, U AND X": Regulations T, U and X, respectively,
promulgated by the Board of Governors of the Federal Reserve System, as amended
from time to time, and any successors thereto.
"REQUIRED LENDERS" means, at any time, Lenders whose Pro Rata Shares
aggregate 66.67% of the Commitment, or if the Commitments have been terminated
irrevocably, 66.67% of the Obligations then outstanding.
"REVOLVING COMMITMENT": The amount of $25,000,000, as such amount may
be reduced pursuant to SECTION 2.1(b).
"REVOLVING FACILITY USAGE" means, as of any date of determination, the
sum of the aggregate amount of Revolving Loans outstanding.
"REVOLVING LOANS": As defined in SECTION 2.1(a).
"REVOLVING NOTE": As defined in SECTION 2.1(d).
"S.E.C.": The United States Securities and Exchange Commission and any
successor institution or body which performs the functions or substantially all
of the functions thereof.
"SETTLEMENT DATE" has the meaning set forth in SECTION 2.2(c)(ii).
"SOLVENT": When used with respect to any Person, that as of the date as
to which the Person's solvency is to be measured:
(i) the fair saleable value of its assets is in excess of
the total amount of its liabilities (including
contingent liabilities) as they become absolute and
matured;
(ii) it has sufficient capital to conduct its business; and
(iii) it is able to meet its debts as they mature.
"STANDARD NOTICE": An irrevocable notice provided by the Borrower to
the Agent on a Business Day which is:
(i) at least one Business Day in advance in the case of
selection of, conversion to or renewal of the Prime
Rate Option or prepayment of any Prime Rate Portion;
and
(ii) at least three London Business Days in advance in the
case of selection of, conversion to or renewal of the
Libor Rate Option or prepayment of any Libor Rate
Portion.
11.
Standard Notice must be provided no later than 12:00 p.m., Los Angeles time, on
the last day permitted for such notice.
"SUBSIDIARY": A corporation, partnership, limited liability company or
other entity of which shares of stock, or any other "equity security", having
ordinary voting power (other than stock having such power only by reason of the
happening of a contingency) to elect a majority of the board of directors or
other managers of such entity are at the time owned, directly, or indirectly
through one or more intermediaries, or both, by the Borrower.
"UNUSED LINE FEE": As defined in SECTION 2.5(b).
"YEAR 2000 COMPLIANT": With regard to any Person, that all software in
goods produced or sold by, or utilized by and material to the business
operations or financial condition of, such entity are able to interpret and
manipulate data on and involving all calendar dates correctly and without
causing any abnormal ending scenario, including in relation to dates in and
after the Year 2000.
SECTION 1.2 OTHER DEFINITIONAL PROVISIONS.
(a) All terms defined in this Agreement shall have the defined meanings
when used in the Notes or any certificate or other document made or delivered
pursuant hereto.
(b) As used herein and in the Notes, and any certificate or other
document made or delivered pursuant hereto, accounting terms not defined in
SUBSECTION 1.1, and accounting terms partly defined in SUBSECTION 1.1 to the
extent not defined, shall have the respective meanings given to them under GAAP.
(c) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and section, subsection,
schedule and exhibit references are to this Agreement unless otherwise
specified.
ARTICLE II
THE CREDIT
SECTION 2.1 THE REVOLVING LOANS.
(a) THE REVOLVING COMMITMENT. Each Lender agrees, severally and not
jointly, on the terms and conditions hereinafter set forth, to make loans
("REVOLVING LOANS") to the Borrower from time to time during the period from the
date hereof to and including the Maturity Date in an aggregate amount not to
exceed such Lender's Pro Rata Share of the Revolving Commitment, as such amount
may be reduced pursuant to SECTION 2.1(b). Each borrowing under this SECTION
2.1(a) shall be in a minimum amount of $1.00; provided that every selection of,
conversion to or renewal of the Libor Rate Option shall be in a minimum
principal amount of $500,000 or an integral multiple of $100,000 above such
amount. Within the limits of the Revolving Commitment and prior to the Maturity
Date, the Borrower may borrow, repay pursuant to SECTION 2.2(b) and reborrow
under this Section.
12.
(b) REDUCTION OF THE REVOLVING COMMITMENT. The Borrower shall have the
right, upon at least two Business Days' notice to the Agent, to terminate in
whole or reduce permanently in part the unused portion of the Revolving
Commitment, without premium or penalty, provided that each partial reduction
shall be in the aggregate amount of $100,000 or an integral multiple thereof and
that such reduction shall not reduce the Revolving Commitment to an amount less
than the amount outstanding hereunder on the effective date of the reduction.
Such notice shall be irrevocable and such reduction shall not be reinstated.
Upon the effectiveness of such reduction in the Revolving Commitment, each
Lender's Commitment shall be reduced ratably.
(c) REVOLVING NOTES. The Loans made by the Lender Group pursuant hereto
shall be evidenced by one or more promissory notes of the Borrower,
substantially in the form of EXHIBIT RN-1, with any appropriate insertions (the
"REVOLVING NOTES"), payable to the order of each Lender and representing the
obligation of the Borrower to pay the aggregate unpaid principal amount of all
Revolving Loans made by such Lender, with interest thereon as prescribed in
SECTION 2.4. Each Lender is hereby authorized to record in its books and records
and on any schedule annexed to the Revolving Notes, the date and amount of each
Revolving Loan made by such Lender, and the date and amount of each payment of
principal thereof, and in the case of Libor Rate Option Loans, the Libor Rate,
the Libor Rate Portion, and the Rate Period with respect thereto, and any such
recordation shall constitute PRIMA FACIE evidence of the accuracy of the
information so recorded; provided that failure by such Lender to effect such
recordation shall not affect the Borrower's obligations hereunder.
(d) LIMITATION ON REVOLVING LOANS. The Lenders shall have no obligation
to make Revolving Loans hereunder to the extent they would cause the outstanding
amount of Revolving Loans to exceed the Revolving Commitment.
SECTION 2.2 MAKING THE REVOLVING LOANS.
(a) NOTICE TO AGENT. The Borrower may borrow under the Revolving
Commitment on any Business Day, provided that the Borrower shall give the Agent
Standard Notice specifying (i) the amount of the proposed Borrowing and (ii) the
requested date of the Borrowing. The Standard Notice may be given in writing
(including facsimile transmission) signed by one (1) authorized officer of the
Borrower or orally, but if the Standard Notice is provided orally, the Standard
Notice shall be given by 11:00 a.m. and the Borrower shall confirm the oral
Standard Notice on the same day in writing (including facsimile transmission) no
later than 12:00 noon, Los Angeles time, and any conflict regarding a written or
oral notice and the Agent's books and records applicable to the same Borrowing
shall be conclusively determined by the Agent's books and records. Neither the
Agent nor the Lenders shall incur any liability to the Borrower in acting upon
any oral or written notice of Borrowing which the Agent believes in good faith
to have been given by a Person duly authorized to borrow on behalf of the
Borrower.
(b) DISBURSEMENT OF FUNDS. The Agent may, on behalf of the Lenders,
disburse funds to the Borrower for Loans requested. Each Lender shall reimburse
the Agent on demand for all funds disbursed on its behalf by the Agent, or if
the Agent so requests, each Lender will remit to the Agent its Pro Rata Share of
any Loan before the Agent disburses same to Borrower. If the Agent elects to
require that each Lender make funds available to the Agent, prior to a
13.
disbursement by the Agent to Borrower, the Agent shall advise each Lender by
telephone or telecopy of the amount of such Lender's Pro Rata Share of the Loan
requested by Borrower no later than 1:00 p.m. (Los Angeles time) on the Business
Day immediately preceding the requested Funding Date applicable thereto, and
each such Lender shall pay the Agent such Lender's Pro Rata Share of such
requested Loan, in same day funds, by wire transfer to the Agent's account on
such Funding Date. If any Lender fails to pay the amount of its Pro Rata Share
within 1 Business Day after the Agent's demand, the Agent shall promptly notify
the Borrower, and the Borrower shall immediately repay such amount to the Agent.
Any repayment required pursuant to this SECTION 2.2(b) shall be without premium
or penalty. Nothing in this SECTION 2.2(b) or elsewhere in this Agreement or the
other Loan Documents, including the provisions of SECTION 2.2(c), shall be
deemed to require the Agent to advance funds on behalf of any Lender or to
relieve any Lender from its obligation to fulfill its Commitments hereunder or
to prejudice any rights that the Agent or the Borrower may have against any
Lender as a result of any default by such Lender hereunder.
(c) SETTLEMENTS.
(i) The Revolving Facility Usage may fluctuate from day to day
through the Agent's disbursement of funds to, and receipt of funds from, the
Borrower. In order to minimize the frequency of transfers of funds between the
Agent and each Lender notwithstanding terms to the contrary set forth herein,
Revolving Loans and payments will be settled among the Agent and the Lenders
according to the procedures described in this SECTION 2.2(c). These procedures
notwithstanding, each Lender's obligation to fund its portion of any Revolving
Loans made by the Agent to the Borrower will commence on the date such Revolving
Loans are made by the Agent. Such payments will be made by such Lender without
set-off, counterclaim or reduction of any kind.
(ii) On the first Business Day of each week, or more frequently
(including daily), either at the discretion of Agent or in the event that funds
disbursed by the Agent to the Borrower for Loans equals or exceeds $100,000
(each such day being a "SETTLEMENT DATE"), the Agent will advise each Lender by
telephone or telecopy of the amount of each such Lender's Pro Rata Share of the
Revolving Facility Usage as of the close of business of the second Business Day
immediately preceding the Settlement Date. In the event that payments are
necessary to adjust such Lender's actual Pro Rata Share of the Revolving
Facility Usage as of any Settlement Date to equal the amount of such Lender's
required Pro Rata Share of the Revolving Facility Usage, the party from which
such payment is due will pay the other, in same day funds, by wire transfer to
the other's account not later than 12:00 noon. (Los Angeles time) on the
Business Day immediately following the Settlement Date.
(d) AVAILABILITY OF LENDER'S PRO RATA SHARE.
(i) Unless the Agent shall have received notice from a Lender prior
to a Funding Date that such Lender will not make available its Pro Rata Share of
a Loan requested by the Borrower, the Agent may assume that such Lender has made
such amount available to the Agent on the Business Day following the next
Settlement Date. If a Lender has not in fact made its Pro Rata Share available
to the Agent on such date, then such Lender and the Borrower severally agree to
pay to the Agent forthwith on demand such amount without set-off, counterclaim
14.
or deduction of any kind, together with interest thereon, for each day from and
including the date such amount was to have been made available to the Agent by
such Lender to, but excluding, the date of payment to the Agent, at (a) in the
case of such Lender, the Federal Funds Rate, or (b) in the case of the Borrower,
the interest rate applicable under this Agreement with respect to such Loan.
Until any such amount is paid to the Agent, the Agent shall not be obligated to
submit to such Lender any payment made by the Borrower to the Agent with respect
to any Loan or any fees or other payments with respect thereto.
(ii) Nothing contained in this SECTION 2.2(d) will be deemed to
relieve a Lender of its obligation to fulfill its Commitments or to prejudice
any rights the Agent or the Borrower may have against such Lender as a result of
any such default by such Lender under this Agreement.
(e) RETURN OF PAYMENTS.
(i) If the Agent pays an amount to a Lender under this Agreement in
the belief or expectation that a related payment has been or will be received by
the Agent from the Borrower and such related payment is not received by the
Agent, then the Agent will be entitled to recover such amount from such Lender
without set-off, counterclaim or deduction of any kind together with interest
thereon, for each day from and including the date such amount is made available
by the Agent to such Lender to, but excluding, the date of repayment to the
Agent, at the Federal Funds Rate, and such payment to such Lender shall be
deemed to not have been made.
(ii) If the Agent determines at any time that any amount received
by the Agent under this Agreement must be returned to the Borrower or paid to
any other person pursuant to any requirement at law, court order or otherwise,
then, notwithstanding any other term or condition of this Agreement, the Agent
will not be required to distribute any portion thereof to any Lender. In
addition, each Lender will repay to the Agent on demand any portion of such
amount that the Agent has distributed to such Lender, together with interest at
such rate, if any, as the Agent is required to pay to the Borrower or such other
Person, without set-off, counterclaim or deduction of any kind.
(f) LENDERS' FAILURE TO PERFORM. It is understood that (i) no Lender
shall be responsible for any failure by any other Lender to perform its
obligation to make any Revolving Loans hereunder, nor shall any Commitment of
any Lender be increased or decreased as a result of any failure by any other
Lender to perform its obligation to make any Revolving Loans hereunder, and (ii)
no failure by any Lender to perform its obligation to make any Revolving Loans
hereunder shall excuse any other Lender from its obligation to make any
Revolving Loans hereunder.
(g) EFFECT OF BANKRUPTCY. If a case is commenced by or against the
Borrower under the Bankruptcy Code, or other statute providing for debtor
relief, then, unless otherwise agreed by all the Lenders, the Lender Group shall
not make additional loans or provide additional financial accommodations under
the Loan Documents to the Borrower as debtor or debtor-in-possession, or to any
trustee for the Borrower, nor consent to the use of cash collateral (provided
that the Loan Account shall continue to be charged, to the fullest extent
permitted by law, for accruing interest, fees, and Lender Group Expenses).
15.
SECTION 2.3 REPAYMENT.
(a) MANDATORY REPAYMENTS. The aggregate principal amount of the
Revolving Loans outstanding on the Maturity Date, together with accrued interest
thereon, shall be due and payable in full on the Maturity Date. If at any time
the Aggregate outstanding Borrowings exceed the Revolving Commitment then in
effect, the Borrower shall immediately repay the excess to the Agent for the
ratable benefit of the Lender Group.
(b) OPTIONAL PAYMENT. The Borrower shall have the right at its option
from time to time to prepay the Prime Rate Portion in whole or in part without
premium or penalty. The Borrower shall have the right at its option from time to
time to prepay the Libor Rate Portion in whole or in part subject to Borrower's
reimbursement of the Lender Group's funding losses, if any, resulting from such
prepayment pursuant to SECTION 3.6(b) hereof. Prepayments shall be made by
giving the Agent Standard Notice thereof (which shall be irrevocable),
specifying the date, and amount and type of prepayment, and upon such date the
amount so specified, accrued interest thereon, and any amounts payable under
SECTION 3.6(b) hereof shall be due and payable.
SECTION 2.4 INTEREST RATE AND PAYMENT DATES.
(a) PAYMENT. The principal balance of the Notes shall be paid in
accordance with the terms set forth in the Notes. Accrued interest on the Prime
Rate Portion shall be due and payable on the last Business Day of each month
commencing on September 30, 1998. Interest on each Rate Segment of the Libor
Rate Portion shall be due and payable on the last day of the corresponding Rate
Period. Interest on each Rate Segment of the Libor Rate Portion which has a Rate
Period equal to or less than three months shall be due and payable on the last
day of the corresponding Rate Period. Interest on each Rate Segment of the Libor
Rate Portion which has a Rate Period greater than three months shall be due and
payable on the third and sixth month anniversary date of the first day of the
corresponding Rate Period, if any, and on the last day of the corresponding Rate
Period. After maturity of any part of a Note (by acceleration or otherwise),
interest on such part of such Note shall be due and payable ON DEMAND.
(b) INTEREST RATE. The unpaid principal amount of the Note shall bear
interest for each day until due on one or more bases selected by the Borrower
from among the interest rate options (the "INTEREST RATE OPTIONS") set forth
below. The Borrower understands and agrees that, subject to the provisions
hereof, the Borrower may select any number of Interest Rate Options to apply
simultaneously to different parts of the unpaid principal amount of the Notes
and may select any number of Rate Segments to apply simultaneously to different
parts of the Libor Rate Portion.
Available Interest Rate Options
PRIME RATE OPTION: A rate per annum for each day equal to the Prime Rate for
such day PLUS the Applicable Margin.
16.
LIBOR RATE OPTION: A rate per annum for each day equal to the Libor Rate for
such day PLUS the Applicable Margin.
(c) RATE PERIODS. At any time the Borrower selects, converts to or
renews the Libor Rate Option, the Borrower shall fix a period (the "RATE
PERIOD") which shall be one, two, three or six months, which shall be acceptable
to the Agent in the Agent's commercially reasonable judgment, during which the
Libor Rate Option shall apply to the corresponding Rate Segment; PROVIDED, that
the Borrower may not elect a Rate Period which will end after the Maturity Date.
Each Lender's right to payment of principal and interest under the Notes shall
in no way be affected by the fact that one or more Rate Periods may be in
effect.
(d) DEFAULT RATE OF INTEREST. All Loans hereunder with accrued interest
thereon, regardless of the Rate Option, and all other amounts owing under the
Loan Documents shall bear interest at a rate equal to 2% above the Prime Rate
from and after the occurrence and during the continuance of an Event of Default.
(e) SELECTION, CONVERSION OR RENEWAL OF RATE OPTIONS. Subject to the
other provisions hereof, the Borrower may select any Interest Rate Option to
apply to the borrowings evidenced by the Notes. Subject to the other provisions
hereof, the Borrower may convert any part of the unpaid principal amount of the
Notes from any Interest Rate Option to the other Interest Rate Option: (a) at
any time with respect to the conversion from the Prime Rate Option to the Libor
Rate Option and (b) at the expiration of any Rate Period with respect to
conversion from or renewals of the Libor Rate Option as to the Rate Segment
corresponding to such expiring Rate Period. Whenever the Borrower desires to
select, convert or renew the Libor Rate Option, the Borrower shall give the
Agent Standard Notice thereof (which shall be irrevocable), specifying the date,
amount and type of the proposed new Rate Option. If such notice has been duly
given, and if the Agent in its commercially reasonable judgment approves the
proposed selection, conversion or renewal, on and after the date specified in
such notice, interest shall be calculated upon the unpaid principal amount of
the Notes taking into account such selection, conversion or renewal.
(f) PRIME RATE FALLBACK. If any Rate Period expires, any part of the
Rate Segment corresponding to such Rate Period which has not been converted or
renewed in accordance with SECTION 2.4(e) hereof automatically shall be
converted to the Prime Rate Option. If the Borrower fails to select, or if the
Agent fails to approve an Interest Rate Option to apply to the borrowings
evidenced by the Notes, such borrowings shall be deemed to be at the Prime Rate
Option. If at any time the Agent shall have determined in good faith (which
determination shall be conclusive) that the accrual of interest at the Libor
Rate Option has been made unascertainable, impractical or unlawful by compliance
by the Lender Group in good faith with any law (including common law),
constitution, statute, treaty, regulation, rule, ordinance, order, injunction,
writ, decree or award of any government or political subdivision or any agency,
authority, bureau, central bank, commission, department or instrumentality of
either, or any court, tribunal, grand jury or arbitrator, in each case whether
foreign or domestic, or administration thereof by any official body charged with
the interpretation or administration thereof or with any request or directive of
any such event, the outstanding principal amount of the Notes subject to the
Libor Rate Option shall accrue interest at the Prime Rate Option and the
Borrower shall not have the right to select the Libor Rate Option.
17.
SECTION 2.5 FEES. Borrower shall pay to Agent for the ratable
benefit of the Lender Group (except as otherwise indicated) the following:
(a) LOAN FEE. Upon the execution of this Agreement, a loan fee (the
"Loan Fee") of $50,000, such Loan Fee to be earned in full upon payment;
(b) UNUSED LINE FEE. The Borrower shall pay to the Agent for the
ratable benefit of the Lender Group, a fee (the "Unused Line Fee").in an amount
equal to the Applicable Unused Line Rate times the daily unused amount of the
Revolving Commitment. The Unused Line Fee shall be payable in arrears,
commencing on the first Business Day of January 1, 1999, and thereafter (i) on
the first Business Day of each three-month period during the term of this
Agreement, (ii) on the date of any reduction of the Revolving Commitment (to the
extent accrued and unpaid on the amount of such reduction), and (iii) on the
Maturity Date; and
(c) ANNUAL ADMINISTRATION FEE. As set forth in the Fee Letter.
ARTICLE III
GENERAL PROVISIONS CONCERNING THE LOANS
SECTION 3.1 USE OF PROCEEDS. The proceeds of the Loans hereunder
shall be used by the Borrower for general corporate purposes, working capital,
Permitted Acquisitions, and to repay existing indebtedness.
SECTION 3.2 COMPUTATION OF INTEREST AND FEES.
(a) CALCULATIONS. Interest in respect of the Prime Rate Option Loans
shall be calculated on the basis of a 360 day year for the actual days elapsed.
Any change in the interest rate on a Prime Rate Loan resulting from a change in
the Prime Rate shall become effective as of the opening of business on the day
on which such change in the Prime Rate shall become effective. Interest in
respect of the Libor Rate Option Loans, and any fees payable hereunder, shall be
calculated on the basis of a 360 day year for the actual days elapsed.
(b) DETERMINATION BY AGENT. Each determination of an interest rate or
fee by the Agent pursuant to any provision of this Agreement shall be conclusive
and binding on the Borrower in the absence of manifest error.
SECTION 3.3 PAYMENTS. The Borrower shall make each payment of
principal, interest and fees hereunder and under the Notes, without setoff or
counterclaim, not later than 12:00 p.m. (Los Angeles time) on the day when due
in lawful money of the United States of America to the Agent for the account of
the Lenders at the office of the Agent designated in writing in immediately
available funds. Any interest not paid when due shall be compounded and shall
thereafter accrue interest at the rate then applicable to the Prime Rate Portion
of Borrowings hereunder (and if no Prime Rate Portion of Borrowings is
outstanding, then at the rate applicable to such Borrowings as if outstanding
under the Prime Rate Option).
18.
(b) Whenever any payment to be made hereunder or under the Notes shall
be stated to be due on a day which is not a Business Day, such payment may be
made on the next succeeding Business Day, and with respect to payments of
principal, interest thereon shall be payable at the then applicable rate during
such extension.
(c) Unless the Agent receives notice from the Borrower prior to the
date on which any payment is due to the Lenders that the Borrower will not make
such payment in full as and when required, the Agent may assume that the
Borrower has made such payment in full to the Agent on such date in immediately
available funds and the Agent may (but shall not be so required), in reliance
upon such assumption, distribute to each Lender on such due date an amount equal
to the amount then due such Lender. If and to the extent the Borrower has not
made such payment in full to the Agent, each Lender shall repay to the Agent on
demand such amount distributed to such Lender, together with interest thereon at
the rate then applicable to the Prime Rate Portion of Borrowings hereunder (and
if no Prime Rate Portion of Borrowings is outstanding, then at the rate
applicable to such Borrowings as if outstanding under the Prime Rate Option) for
each day from the date such amount is distributed to such Lender until the date
repaid.
SECTION 3.4 APPORTIONMENT, APPLICATION, AND REVERSAL OF PAYMENTS.
Except as otherwise provided with respect to defaulting Lenders, aggregate
principal and interest payments shall be apportioned ratably among the Lenders
(according to the unpaid principal balance of the Revolving Loans to which such
payments relate held by each Lender) and payments of the fees (other than fees
designated for the Agent's sole and separate account) shall, as applicable, be
apportioned ratably among the Lenders. All payments shall be remitted to the
Agent and all such payments not relating to principal or interest of specific
Revolving Loans, or not constituting payment of specific fees, and all proceeds
of Accounts or other Collateral received by the Agent, shall be applied as in
the following order:
(i) to pay any fees, or expense reimbursements then due to the
Agent from the Borrower;
(ii) to pay any fees or expense reimbursements then due to the
Lenders from the Borrower;
(iii) to pay interest due in respect of all outstanding Revolving
Loans;
(iv) ratably to pay principal of all outstanding Revolving Loans;
(v) ratably to pay any other obligations due to the Agent or any
Lender by the Borrower.
SECTION 3.5 REDUCED RETURN. If the Agent shall have determined that
any applicable law, regulation, rule or regulatory requirement generally
applicable to banks located in California, Pennsylvania, or such other state as
any Lender shall be located (collectively in this SECTION 3.5, "REQUIREMENT")
regarding capital adequacy, or any change therein, or any change in the
interpretation or administration thereof by any United States federal or state
governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any Lender with any
19.
request or directive regarding capital adequacy (whether or not having the force
of law) of any such authority, central bank or comparable agency, has or would
have the effect of reducing the rate of return on such Lender's capital as a
consequence of its Commitments and obligations hereunder to a level below that
which would have been achieved but for such Requirement, change or compliance
(taking into consideration such Lender's policies with respect to capital
adequacy) by an amount deemed by such Lender to be material (which amount shall
be determined by such Lender's reasonable allocation of the aggregate of such
reductions resulting from such events), then from time to time, within five (5)
Business Days after demand by the Agent on behalf of such Lender, the Borrower
shall pay to the Agent for the benefit of such Lender such additional amount or
amounts as will compensate such Lender for such reduction. Neither the Agent nor
any Lender presently has knowledge of any new Requirement or any pending change
in any existing Requirement which would result in such additional amounts being
owed. Notwithstanding any other provision of this SECTION 3.5, no Lender shall
demand compensation for any increased cost or reduction referred to in this
SECTION 3.5 if it shall not at the time be the general policy of such Lender to
demand such compensation in similar circumstances under comparable provisions of
other credit agreements, and such Lender shall in good faith endeavor to
allocate increased costs or reductions fairly among all of its affected
commitments and credit extensions (whether or not it seeks compensation from all
affected borrowers).
SECTION 3.6 INDEMNITIES AND LOSSES.
(a) INDEMNITIES. Whether or not the transactions contemplated hereby
shall be consummated, the Borrower agrees to indemnify, pay and hold the Lender
Group, and the shareholders, officers, directors, employees and agents of the
Lender Group (each, an "INDEMNIFIED PERSON"), harmless from and against any and
all claims, liabilities, losses, damages, costs and expenses (whether or not any
of the foregoing Indemnified Persons is a party to any litigation), including,
without limitation, reasonable attorneys' fees and costs (including, without
limitation, the reasonable estimate of the allocated cost of in-house legal
counsel and staff) and costs of investigation, document production, attendance
at a deposition, or other discovery, prior to the assumption of defense by the
Borrower, with respect to or arising out of any proposed acquisition by the
Borrower or any of its Subsidiaries of any Person or any securities (including a
self-tender), this Agreement or any use of proceeds hereunder, or any claim,
demand, action or cause of action being asserted against the Borrower or any of
its Subsidiaries (collectively, the "INDEMNIFIED LIABILITIES"), provided that
the Borrower shall have no obligation hereunder with respect to Indemnified
Liabilities arising from the gross negligence or willful misconduct of any such
Indemnified Persons. If any claim is made, or any action, suit or proceeding is
brought, against any Indemnified Person pursuant to this Section, such
Indemnified Person shall notify the Borrower within thirty (30) days of such
Indemnified Person's being notified in writing of the commencement of such
action, suit or proceeding, and the Borrower will assume the defense of such
action, suit or proceeding, employing counsel selected by the Borrower and
reasonably satisfactory to such Indemnified Person, and pay the fees and
expenses of such counsel. This covenant shall survive termination of this
Agreement and payment of the outstanding Notes for a period of six (6) years.
20.
(b) FUNDING LOSSES. The Borrower agrees to indemnify the Lender Group
and to hold the Lender Group harmless from any loss or expense, including, but
not limited to, any such loss or expense arising from interest or fees payable
by the Lender Group to lenders of funds obtained by it in order to maintain its
Libor Rate Option Loans hereunder, which the Lender Group may sustain or incur
as a consequence of (i) payment, prepayment or conversion of any part of any
Rate Segment of the Libor Rate Portion on a day other than the last day of the
corresponding Rate Period (whether or not any such payment is pursuant to demand
by the Lender Group under the Notes and whether or not any such payment,
prepayment or conversion is consented to by the Lender Group, unless the Lender
Group shall have expressly waived such indemnity in writing); (ii) default by
the Borrower in making a conversion or continuation after the Borrower has given
a notice thereof, (iii) default by the Borrower in making any payment after the
Borrower has given a notice of payment, (iv) attempt by Borrower to revoke in
whole or part any irrevocable notice given pursuant to SECTION 2.4(e) hereof; or
(v) breach of or default by any obligor in the performance or observance of any
covenant or condition in the Notes, any separate security, guarantee or
suretyship agreement between the Lender Group and any obligor, or any other
document executed and delivered to the Lender Group by any obligor in connection
with the indebtedness evidenced by the Notes. If the Lender Group sustains any
such loss or expense, the Agent shall from time to time notify the Borrower of
the amount determined in good faith by the Lender Group (which determination
shall be conclusive) to be necessary to indemnify the Lender Group for such loss
or expense. Such amount shall be due and payable by the Borrower ON DEMAND. This
covenant shall survive termination of this Agreement and payment of the
outstanding Notes.
SECTION 3.7 REQUIREMENTS OF LAW. In the event that any law,
regulation or directive generally applicable to financial institutions located
in California, Pennsylvania, or such other state as a Lender shall be located or
any change therein or in the interpretation or application thereof or compliance
by any Lender with any request or directive (whether or not having the force of
law) from any United States federal or state central bank or other governmental
authority, agency or instrumentality:
(a) does or shall impose, modify or hold applicable any reserve,
assessment rate, special deposit, compulsory loan or other requirement
(collectively in this SECTION 3.7 "REQUIREMENTS") against assets held by, or
deposits or other liabilities in or for the account of, advances or loans by, or
other credit extended by, or any other acquisition of funds by, any office of a
Lender which are not otherwise included in the determination of any Libor Rate
at the last Borrowing, conversion or continuation date of a Loan;
(b) does or shall impose, modify or hold applicable any of the
Requirements against Commitments to extend credit;
(c) does or shall impose on any Lender any other condition;
and the result of any of the foregoing is to increase the cost to any Lender of
making, renewing or maintaining its Revolving Commitment, or the Libor Rate
Option Loans or to reduce any amount receivable thereunder (which increase or
reduction shall be determined by such Lender's reasonable allocation of the
aggregate of such cost increases or reduced amounts receivable resulting from
such events), then, in any such case, the Borrower shall pay to the Agent for
the benefit of such Lender, within five (5) Business Days of the Agent's demand
on behalf of such Lender, any additional amounts necessary to compensate such
21.
Lender for such additional cost or reduced amount receivable as determined by
such Lender with respect to SECTIONS 3.5 and 3.7 of this Agreement. If any
Lender becomes entitled to claim any additional amounts pursuant to this
subsection, the Agent on behalf of such Lender shall notify the Borrower of the
event by reason of which it has become so entitled. Such notice shall contain a
statement incorporating the calculation as to any additional amounts payable
pursuant to the foregoing sentence, and such statement submitted by the Agent to
the Borrower shall be conclusive in the absence of manifest error. Neither the
Agent nor any Lender presently has knowledge of any new Requirement or any
pending change in any existing Requirement which would result in such additional
amounts being owed. Notwithstanding any other provision of this SECTION 3.7, no
Lender shall demand compensation for any increased cost or reduction referred to
in this SECTION 3.7 if it shall not at the time be the general policy of such
Lender to demand such compensation in similar circumstances under comparable
provisions of other credit agreements, and such Lender shall in good faith
endeavor to allocate increased costs or reductions fairly among all of its
affected commitments and credit extensions (whether or not it seeks compensation
from all affected borrowers).
ARTICLE IV
CONDITIONS OF LENDING
SECTION 4.1 CONDITIONS PRECEDENT TO INITIAL LOANS. The obligation of
the Lender Group (or any member thereof) to make the initial Loan is subject to
the conditions precedent that:
(a) The Agent shall have received on or before the day of the initial
Borrowing the following, each dated prior to or as of such day, in form and
substance satisfactory to the Agent:
(i) The Notes issued by the Borrower to the order of each Lender;
(ii) Copies of the Articles of Incorporation, partnership agreement
or other organizational document of the Borrower, certified as of a recent date
by the Secretary of State of its state of formation or incorporation;
(iii) Copies of the Bylaws, if any, of the Borrower, certified by
the Secretary or an Assistant Secretary of the Borrower;
(iv) Copies of resolutions of the Board of Directors or other
authorizing documents of the Borrower, in form and substance satisfactory to the
Lender, approving the Loan Documents and the Borrowings hereunder;
(v) An incumbency certificate executed by the Secretary or an
Assistant Secretary of the Borrower, or equivalent document, certifying the
names and signatures of the officers of the Borrower or other Persons authorized
to sign the Loan Documents and the other documents to be delivered hereunder;
(vi) An executed original of all Loan Documents;
22.
(vii) General Continuing Guaranties of the Guarantors, if any, in
form and substance satisfactory to the Agent and its counsel;
(b) All fees required to be paid at closing shall have been paid;
(c) The Agent shall have received an opinion of counsel to the Borrower
and the Guarantors in form and substance acceptable to the Agent and its
counsel;
(d) No material adverse change shall have occurred since March 31, 1998
in the business, assets, operations, condition (financial or otherwise) or
prospects of the Borrower and its Subsidiaries, taken as a whole, or in the
facts and information regarding such entities represented by the Borrower to the
Agent as of such date;
(e) No action, suit, investigation or proceeding shall have been
pending or threatened in any court or before any arbitration or governmental
authority that purports to affect the Borrower, any of its Subsidiaries or the
Loans contemplated hereby, or that could have a material adverse effect on the
Borrower or any of its Subsidiaries or the Loans contemplated hereby, or on the
ability of the Borrower and its Subsidiaries to perform their obligations under
the Loan Documents;
(f) The Borrower and its Subsidiaries shall have been in compliance
with all of their existing material financial obligations;
(g) All information previously furnished by the Borrower to the Lender
Group shall be true and correct in all material respects;
(h) The Agent shall have reviewed and found satisfactory Borrower's
financial statements for its quarter ending March 31, 1998; and
(i) All corporate and legal proceedings and all instruments and
documents in connection with the transactions contemplated by this Agreement
shall be reasonably satisfactory in content, form and substance to the Agent and
its counsel, and the Agent and such counsel shall have received any and all
further information and documents which the Agent or such counsel may reasonably
have requested in connection therewith, such documents where appropriate to be
certified by proper corporate or governmental authorities.
SECTION 4.2 CONDITIONS PRECEDENT TO EACH BORROWING. The obligation
of the Lender Group (or any member thereof) to make a Loan on the occasion of
each Borrowing (including the initial Borrowing) shall be subject to the further
conditions precedent that on the date of such Borrowing (a) the following
statements shall be true and the Agent shall have received the notice required
by SECTION 2.1(b), which notice shall be deemed to be a certification by the
Borrower that:
(i) The representations and warranties contained in SECTION 5.1 are
correct on and as of the date of such Borrowing as though made on
and as of such date;
23.
(ii) No event has occurred and is continuing, or would result from
such Borrowing, which constitutes an Event of Default or Potential
Event of Default;
(iii) Nothing shall have occurred and the Agent shall not have
become aware of any fact or condition not previously known, which
the Agent shall determine has, or could reasonably be expected to
have, a material adverse effect on the rights or remedies of the
Lender Group, or on the ability of the Borrower to perform its
obligations to the Lender Group or which has, or could reasonably
be expected to have, a materially adverse effect on the
performance, business, property, assets, condition (financial or
otherwise) or prospects of the Borrower and its Subsidiaries taken
as a whole; and
(iv) The security interests and liens in favor of the Lender Group
are valid, enforceable, and prior to all others' rights and
interests, except those the Agent consents to in writing; and
(v) All Loan Documents are in full force and effect;
and (b) the Agent shall have received such other approvals, opinions or
documents as the Agent may reasonably request.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
SECTION 5.1 REPRESENTATIONS AND WARRANTIES. The Borrower represents
and warrants as follows:
(a) ORGANIZATION. The Borrower and each of its Material Subsidiaries is
duly organized, validly existing and in good standing under the laws of the
state of its incorporation. The Borrower and each of its Material Subsidiaries
is also duly authorized, qualified and licensed in all applicable jurisdictions,
and under all applicable laws, regulations, ordinances or orders of public
authorities, to carry on its business in the locations and in the manner
presently conducted in which the failure to be so authorized, qualified or
licensed would have a materially adverse effect on the Borrower and its Material
Subsidiaries taken as a whole.
(b) AUTHORIZATION. The execution, delivery and performance by the
Borrower of the Loan Documents, and the making of Borrowings hereunder, are
within the Borrower's corporate powers, have been duly authorized by all
necessary corporate action, do not contravene (i) the Borrower's charter,
by-laws or other organizational document or (ii) any law or regulation
(including Regulations T, U and X) binding on or affecting the Borrower or its
properties, and will not constitute an event of default under any material
agreement to which the Borrower is a party or by which its assets or properties
may be bound.
24.
(c) GOVERNMENTAL CONSENTS. No authorization or approval or other action
by, and no notice to or filing with, any governmental authority or regulatory
body (except routine reports required pursuant to the Securities Exchange Act of
1934, as amended (if such act is applicable to the Borrower), which reports will
be made in the ordinary course of business) is required for the due execution,
delivery and performance by the Borrower of the Loan Documents.
(d) VALIDITY. The Loan Documents are the binding obligations of the
Borrower or other executing Person, if any, enforceable in accordance with their
respective terms.
(e) FINANCIAL CONDITION. The balance sheets of the Borrower and its
consolidated Subsidiaries as of March 31, 1998, and the related statements of
income and retained earnings of the Borrower and its consolidated Subsidiaries
for the fiscal quarter then ended, copies of which have been furnished to the
Agent, fairly present the financial condition of the Borrower and its
consolidated Subsidiaries as at such date and the results of the operations of
the Borrower and its consolidated Subsidiaries for the periods ended on such
date, all in accordance with GAAP, consistently applied, and since March 31,
1998, there has been no material adverse change in the business, operations,
properties, assets or condition (financial or otherwise) of the Borrower and its
Subsidiaries, taken as a whole.
(f) LITIGATION. Except as set forth on SCHEDULE 5.1(f) hereto, there is
no known pending or threatened action or proceeding affecting the Borrower or
any of its Subsidiaries before any court, governmental agency or arbitrator,
which may materially and adversely affect the consolidated financial condition
or operations of the Borrower or which may have a material adverse effect on the
Borrower's ability to perform its obligations under the Loan Documents, having
regard for its other financial obligations.
(g) EMPLOYEE BENEFIT PLANS. The Borrower and each of its ERISA
Affiliates has fulfilled its obligations, if any, under the minimum funding
standards of ERISA and the Internal Revenue Code with respect to each Plan and
is in compliance in all material respects with the applicable provisions of
ERISA and the Internal Revenue Code, and has not incurred any liability with
respect to any Plan under Title IV of ERISA. No reportable event has occurred
under Section 4043(b) of ERISA for which the PBGC requires 30 day notice. No
action by the Borrower or of any ERISA Affiliate of the Borrower to terminate or
withdraw from any Plan has been taken and no notice of intent to terminate a
Plan has been filed under Section 4041 of ERISA. No proceeding has been
commenced with respect to a Plan under Section 4042 of ERISA, and no event has
occurred or condition exists which might constitute grounds for the commencement
of such a proceeding.
(h) DISCLOSURE. No representation or warranty of the Borrower contained
in this Agreement or any other document, certificate or written statement
furnished to the Agent or any Lender by or on behalf of the Borrower for use in
connection with the transactions contemplated by this Agreement contains any
known untrue statement of a material fact or omits to state a known material
fact (known to the Borrower in the case of any document not furnished by it)
necessary in order to make the statements contained herein or therein not
misleading. There is no fact known to the Borrower (other than matters of a
general economic nature) which materially and adversely affects the business,
operations, property, assets or condition (financial or otherwise) of the
Borrower and its Subsidiaries, taken as a whole, which has not been disclosed
herein or in such other documents, certificates and statements furnished to the
Agent for use in connection with the transactions contemplated hereby.
25.
(i) ENVIRONMENTAL MATTERS. Except as set forth in SCHEDULE 5.1(i)
hereto, neither the Borrower nor any Subsidiary, nor any of their respective
officers, employees, representatives or agents, nor, to the best of their
knowledge, any other person, has treated, stored, processed, discharged,
spilled, or otherwise disposed of any substance defined as hazardous or toxic by
any applicable federal, state or local law, rule, regulation, order or
directive, or any waste or by-product thereof, at any real property or any other
facility owned, leased or used by the Borrower or any Subsidiary, in violation
of any applicable statutes, regulations, ordinances or directives of any
governmental authority or court, which violations may result in liability to the
Borrower or any Subsidiary or any of their respective officers, employees,
representatives, agents or shareholders in an amount exceeding $100,000 for all
such violations; and the unresolved violations set forth in said SCHEDULE 5.1(i)
will not result in liability to the Borrower or any Subsidiary or any of their
respective officers, employees, representatives, agents or shareholders in an
amount exceeding $100,000 for all such unresolved violations. Except as set
forth in said SCHEDULE 5.1(i), no employee or other person has made a claim or
demand against the Borrower or any Subsidiary based on alleged damage to health
caused by any such hazardous or toxic substance or by any waste or by-product
thereof; and the unsatisfied claims or demands against the Borrower or any
Subsidiary set forth in said SCHEDULE 5.1(i) will not result in uninsured
liability to the Borrower or any Subsidiary or any of their respective officers,
employees, representatives, agents or shareholders in an amount exceeding
$100,000 in excess of reserves on the books of the Borrower for all such
unsatisfied claims or demands. Except as set forth in said SCHEDULE 5.1(i),
neither the Borrower nor any Subsidiary has been charged by any governmental
authority with improperly using, handling, storing, discharging or disposing of
any such hazardous or toxic substance or waste or by-product thereof or with
causing or permitting any pollution of any body of water; and the outstanding
related charges set forth in said SCHEDULE 5.1(i) will not result in liability
to the Borrower or any Subsidiary or any of their respective officers,
employees, representatives, agents or shareholders in an amount exceeding
$100,000 for all such outstanding charges.
(j) EMPLOYEE MATTERS. There is no known strike or work stoppage in
existence or threatened involving the Borrower or its Subsidiaries that may
materially and adversely affect the consolidated financial condition or
operations of the Borrower or that may have a material adverse effect on the
Borrower's ability to perform its obligations under the Loan Documents, having
regard for its other financial obligations.
(k) SOLVENCY. The Borrower and each of its Subsidiaries is Solvent.
(l) TITLE TO PROPERTIES. The Borrower and each of its Subsidiaries has
good and marketable title to all of its properties and assets subject to no
liens, mortgages, pledges, security interests, encumbrances or charges of any
kind except those permitted under SECTION 6.2(f) hereof.
(m) TAX RETURNS. The Borrower and each of its Subsidiaries has filed,
or caused to be filed, in a timely manner all tax returns, reports and
declarations which are required to be filed by it (without requests for
extension except as previously disclosed in writing to the Agent). All
26.
information in such tax returns, reports and declarations is complete and
accurate in all material respects. The Borrower and each of its Subsidiaries has
paid or caused to be paid all taxes due and payable or claimed due and payable
in any assessment received by it, except taxes the validity of which are being
contested in good faith by appropriate proceedings diligently pursued and
available to the Borrower or its Subsidiary and with respect to which adequate
reserves have been set aside on its books. Adequate provision has been made for
the payment of all accrued and unpaid Federal, State, county, local, foreign and
other taxes whether or not yet due and payable and whether or not disputed.
(n) COMPLIANCE WITH OTHER AGREEMENTS AND APPLICABLE LAWS. Neither
Borrower nor any of its Subsidiaries is in default in any material respect
under, or in violation in any material respect of any of the terms of, any
agreement, contract, instrument, lease or other commitment to which it is a
party or by which it or any of its assets are bound and Borrower and each of its
Subsidiaries is in compliance in all material respects with all applicable
provisions of laws, rules, regulations, licenses, permits, approvals and orders
of any foreign, Federal, state or local governmental authority.
(o) YEAR 2000 COMPLIANCE. On the basis of a comprehensive inventory,
review and assessment currently being undertaken by Borrower of Borrower's
computer applications utilized by Borrower or contained in products produced or
sold by Borrower, and upon inquiry made of Borrower's material suppliers and
vendors, Borrower's management is of the considered view that Borrower, its
products, and all such suppliers and vendors will be Year 2000 Compliant on a
timely basis.
ARTICLE VI
COVENANTS
SECTION 6.1 AFFIRMATIVE COVENANTS. So long as any Note shall remain
unpaid or the Lender Group shall have any Commitment hereunder, the Borrower
will, unless the Agent shall otherwise consent in writing:
(a) FINANCIAL INFORMATION. Furnish to the Agent:
(i) as soon as available, but in any event within 90 days after the
end of each fiscal year of the Borrower, (A) a copy of the Borrower's audited
consolidated balance sheet of itself and its consolidated Subsidiaries as at the
end of each fiscal year and the related audited consolidated statements of
income and retained earnings (or comparable statement) employed in the business
and changes in financial position and cash flow for such year, setting forth in
each case in comparative form the figures for the previous year, accompanied by
an unqualified report and opinion thereon of independent certified public
accountants acceptable to the Agent, and, if prepared, such accountants' letter
to management, and (B) a copy of the Borrower-prepared consolidating balance
sheet and income statements prepared in connection with the statement provided
in subpart (A) above;
27.
(ii) as soon as available, but in any event within 45 days after
the end of each fiscal quarter, the Borrower's unaudited consolidated balance
sheet of itself and its consolidated Subsidiaries as at the end of such period
and the related unaudited consolidated statement of income and retained earnings
(or comparable statement) and changes in financial position and cash flow for
such period and year to date, setting forth in each case in comparative form, if
available, the figures as at the end of the previous fiscal year as to the
balance sheet and the figures for the previous corresponding period as to the
other statements, certified by the Chief Financial Officer of the Borrower as
being fairly stated in all material respects subject to year end adjustments;
all such financial statements to be complete and correct in all material
respects and to be prepared in reasonable detail acceptable to the Agent and in
accordance with GAAP applied consistently throughout the periods reflected
therein (except as approved by such accountants and disclosed therein);
(iii) (a) together with each delivery of financial statements of
Borrower and its Subsidiaries pursuant to subdivision (i) and (ii) above, a
certificate, executed by the Chief Financial Officer of the Borrower stating
that such officer has reviewed the terms of this Agreement and has made, or
caused to be made under his supervision, a review in reasonable detail of the
transactions and condition of the Borrower and its Subsidiaries during the
accounting period covered by such financial statements and that such review has
not disclosed the existence during or at the end of such accounting period, and
that such officer does not have knowledge of the existence as at the date of
such certificate, of any condition or event that constitutes an Event of Default
or Potential Event of Default, or, if any such condition or event existed or
exists, specifying the nature and period of existence thereof and what action
the Borrower has taken, is taking and proposes to take with respect thereto; and
(b) together with each delivery of financial statements of the Borrower and its
Subsidiaries pursuant to subdivision (i) and (ii) above, a certificate
demonstrating in reasonable detail compliance during and at the end of the
applicable accounting periods with the restrictions contained in SECTION 6.2
hereof; and
(iv) any other report as Agent may reasonably request from time to
time.
(b) NOTICES AND INFORMATION. Deliver to the Agent:
(i) promptly upon any officer of the Borrower obtaining knowledge
(a) of any condition or event which constitutes an Event of Default or Potential
Event of Default, (b) that any Person has given any notice to the Borrower or
any Subsidiary of the Borrower or taken any other action with respect to a
claimed default or event or condition of the type referred to in SECTION 7.1(e),
(c) of the institution of any litigation involving an alleged liability
(including possible forfeiture of property) of the Borrower or any of its
Subsidiaries equal to or greater than $1,000,000 or any adverse determination in
any litigation involving a potential liability of the Borrower or any of its
Subsidiaries equal to or greater than $1,000,000, or (d) of a material adverse
change in the business, operations, properties, assets or condition (financial
or otherwise) of the Borrower and its Subsidiaries, taken as a whole, an
officer's certificate specifying the nature and period of existence of any such
condition or event, or specifying the notice given or action taken by such
holder or Person and the nature of such claimed default, Event of Default,
Potential Event of Default, event or condition, and what action the Borrower has
taken, is taking and proposes to take with respect thereto;
28.
(ii) promptly upon becoming aware of the occurrence of or
forthcoming occurrence of (a) any reportable event under Section 4043(b) of
ERISA for which the PBGC requires 30 day notice, (b) any action by the Borrower
or any ERISA Affiliate of the Borrower to terminate or withdraw from a Plan or
the filing of any notice of intent to terminate under Section 4041 of ERISA, (c)
any notice of noncompliance made with respect to a Plan under Section 4041(b) of
ERISA, and (d) the commencement of any proceeding with respect to a Plan under
Section 4042 of ERISA;
(iii) promptly, and in any event within 30 days after receipt
thereof, a copy of any notice, summons, citation, directive, letter or other
form of communication from any governmental authority or court in any way
concerning any action or omission on the part of the Borrower or any of its
Subsidiaries in connection with any substance defined as toxic or hazardous by
any applicable federal, state or local law, rule, regulation, order or directive
or any waste or byproduct thereof, or concerning the filing of a lien upon,
against or in connection with the Borrower, its Subsidiaries, or any of their
leased or owned real or personal property, in connection with a Hazardous
Substance Superfund or a Post-Closure Liability Fund as maintained pursuant to
ss. 9507 of the Internal Revenue Code;
(iv) promptly upon becoming aware of the occurrence of or
forthcoming occurrence of a Change of Control, an officer's certificate
describing, in reasonable detail, the specifics of the Change of Control; and
(v) promptly upon the Agent's request, such other statements, lists
of property and accounts, budgets, forecasts or reports as to the Borrower and
its Subsidiaries as the Agent may reasonably request.
(c) CORPORATE EXISTENCE, ETC. At all times preserve and keep in full
force and effect its and its Material Subsidiaries' corporate existence and
rights and franchises material to its business as a whole and those of each of
its Material Subsidiaries.
(d) PAYMENT OF TAXES AND CLAIMS. Pay, and cause each of its
Subsidiaries to pay, all taxes, assessments and other governmental charges
imposed upon it or any of its properties or assets or in respect of any of its
franchises, business, income or property before any penalty or interest accrues
thereon, and all claims (including, without limitation, claims for labor,
services, materials and supplies) for sums which have become due and payable and
which by law have or may become a lien upon any of its properties or assets,
prior to the time when any penalty or fine shall be incurred with respect
thereto; provided that no such charge or claim need be paid if being contested
in good faith by appropriate proceedings promptly instituted and diligently
conducted and if such reserve or other appropriate provision, if any, as shall
be required in conformity with GAAP shall have been made therefor.
(e) MAINTENANCE OF PROPERTIES; INSURANCE. Maintain or cause to be
maintained in good repair, working order and condition all material properties
used or useful in the business of the Borrower and its Subsidiaries and from
time to time will make or cause to be made all appropriate repairs, renewals and
replacements thereof. The Borrower will maintain or cause to be maintained, with
financially sound and reputable insurers, insurance with respect to its
properties and business and the properties and business of its Subsidiaries
against loss or damage of the kinds customarily insured against by corporations
of established reputation engaged in the same or similar businesses and
similarly situated, of such types and in such amounts as are customarily carried
29.
under similar circumstances by such other corporations. All hazard insurance and
such other insurance as Agent shall specify, shall contain a Form 438BFU (NS)
mortgagee endorsement, or an equivalent endorsement satisfactory to Agent,
showing Agent as the loss payee thereof, as its interests may appear, and shall
contain a waiver of warranties. Every policy of insurance referred to in this
SECTION 6.1(e) shall contain an agreement by the insurer that it will not cancel
such policy except after 30 days prior written notice to Agent and that any loss
payable thereunder shall be payable notwithstanding any act or negligence of the
Borrower which might, absent such agreement, result in a forfeiture of all or a
part of such insurance payment. The Borrower will, upon the request of the
Agent, deliver to the Agent a copy of each insurance policy, or, if permitted by
the Agent, a certificate of insurance listing all insurance in force.
(f) INSPECTION. Permit any authorized representatives designated by the
Agent to visit and inspect any of the properties of the Borrower or any of its
Subsidiaries, including its and their financial and accounting records, and to
make copies and take extracts therefrom, and to discuss its and their affairs,
finances and accounts with its and their officers and independent public
accountants, all at such reasonable times during normal business hours and as
often as may be reasonably requested. Agent's access to Borrower's Books shall
not include access to matters which are classified or deemed secretly
appropriate governmental authority.
(g) COMPLIANCE WITH LAWS ETC. Exercise, and cause each of its
Subsidiaries to exercise, all due diligence in order to comply with the
requirements of all applicable laws, rules, regulations and orders of any
governmental authority, including, without limitation, all rules and regulations
of public utility commissions or similar regulatory authorities, and all
environmental laws, rules, regulations and orders, noncompliance with which
would materially and adversely affect the business, properties, assets,
operations or condition (financial or otherwise) of the Borrower and its
Subsidiaries, taken as a whole.
(h) HAZARDOUS WASTE STUDIES. Promptly, and in any event within thirty
(30) days after submission, provide the Agent with copies of all such
investigations, studies, samplings and testings as may be requested by any
governmental or regulatory authority relative to any substance defined as
hazardous or toxic by any applicable federal, state or local law, rule,
regulation, order or directive, or any waste or by-product thereof, at or
affecting any real property or any facility owned, leased or used by the
Borrower or any Subsidiary.
(i) ACCOUNTING SYSTEM. Maintain a standard and modern system of
accounting that enables Borrower to produce financial statements in accordance
with GAAP, and maintain records pertaining to the Collateral that contain
information as from time to time may be requested by the Lender Group.
(j) LOCATION OF INVENTORY AND EQUIPMENT. Keep its Inventory and
Equipment only at the locations identified on Schedule 6.1(j); provided,
however, that Borrower may amend Schedule 6.1(j) so long as such amendment
occurs by written notice to Agent not less than 30 days prior to the date on
which the Inventory or Equipment is moved to such new location, so long as such
new location is within the continental United States, and so long as, at the
time of such written notification, Borrower provides any financing statements or
fixture filings necessary or advisable to perfect and continue perfected Agent's
Liens and also provide to Agent a collateral access agreement in form and
substance satisfactory to Agent.
30.
(k) YEAR 2000 COMPLIANCE. Borrower will be Year 2000 Compliant on a
timely basis.
SECTION 6.2 NEGATIVE COVENANTS. So long as any Note shall remain
unpaid or the Lender Group shall have any Commitment hereunder, the Borrower
will not, without the written consent of the Agent:
(a) CONSOLIDATED TANGIBLE NET WORTH. At any time, permit Consolidated
Tangible Net Worth to be less than $35,000,000; which such minimum amount of
Consolidated Tangible Net Worth shall be increased (i) at the end of each fiscal
quarter of the Borrower, commencing with Borrower's fiscal quarter ending June
30, 1998, by an amount equal to 75% of the consolidated net income of Borrower
for such fiscal quarter, determined in accordance with GAAP, PROVIDED, HOWEVER,
that if Borrower's net income for any fiscal quarter, determined in accordance
with GAAP, shall be less than zero, then no adjustment to such minimum amount of
Consolidate Tangible Net Worth shall be made; and (ii) at such time Borrower
shall issue equity securities, by an amount equal to 100% of the issuance
proceeds (net of ordinary and customary underwriters' discounts and commissions,
and costs, fees, and expenses incurred in connection with such issuance).
(b) INDEBTEDNESS. The Borrower will not permit the Indebtedness/EBIT
ratio, as of the last day of any fiscal quarter, for the four consecutive fiscal
quarters ending on that date to be greater than 2.50:1.00.
(c) INTEREST COVERAGE RATIO. The Borrower will not permit the Interest
Coverage Ratio, as of the last day of any fiscal quarter, for the four
consecutive fiscal quarters ending on that date to be less than 5.00:1.00.
(d) NET PROFITABILITY. At the end of any fiscal quarter of the
Borrower, commencing with the Borrower's fiscal quarter ending September 30,
1998, permit the net income of the Borrower and its Subsidiaries on a
consolidated basis, for such fiscal quarter to be less than $1.00.
(e) LIENS ETC. Create or suffer to exist, or permit any of its
Subsidiaries to create or suffer to exist, any Lien upon or with respect to any
of its properties, whether now owned or hereafter acquired, or assign, or permit
any of its Subsidiaries to assign, any right to receive income, in each case to
secure any indebtedness of any Person other than (i) Liens reflected on SCHEDULE
6.2(e) hereto; (ii) purchase money Liens upon or in any property acquired or
held by the Borrower or any Subsidiary in the ordinary course of business to
secure the purchase price of such property or to secure indebtedness incurred
solely for the purpose of financing the acquisition of such property as
permitted by SECTION 6.2(h)(v) hereof; (iii) Liens for taxes not yet due; and
(iv) Liens associated with any operating leases.
(f) DEBT. Create, incur, assume or permit to exist, or permit any
Subsidiary, to create, incur, assume or permit to exist, any direct or
contingent indebtedness, liabilities or lease obligations (other than those to
the Lender Group), or become liable for the debts of others without the Agent's
31.
written consent, except for (i) acquiring goods, supplies or merchandise on
normal trade credit; (ii) endorsing negotiable instruments received in the usual
course of business; (iii) obtaining surety bonds in the usual course of
business, (iv) the indebtedness of the Borrower and its Subsidiaries existing as
of, and disclosed to the Agent prior to the date of this Agreement; (v) secured
indebtedness, in the aggregate, for purchase money financing of equipment which
is permitted under SECTION 6.2(e)(ii) hereof and obligations under Capital
Leases not to exceed $1,000,000 outstanding at any time; and (vi) operating
leases.
(g) CONSOLIDATION, MERGER OR DISSOLUTION. Except for Permitted
Acquisitions, consolidate with or merge into any other corporation or entity;
PROVIDED, HOWEVER, any Solvent Subsidiary may be merged with or liquidated into
the Borrower or any wholly-owned Subsidiary (if the Borrower or such
wholly-owned Subsidiary is the surviving corporation).
(h) LOANS, INVESTMENTS, SECONDARY LIABILITIES. With the exception of
Permitted Acquisitions, make or permit to remain outstanding, or permit any
Subsidiary to make or permit to remain outstanding, any loan or advance to, or
guarantee, induce or otherwise become contingently liable, directly or
indirectly, in connection with the obligations, stock or dividends of, or own,
purchase or acquire any stock, obligations or securities of or any other
interest in, or make any capital contribution to, any other Person, in an
aggregate amount at any time, collectively among the Borrower and its
Subsidiaries, in excess of $1,000,000 except that the Borrower and its
Subsidiaries may, without limitation as to the dollar amount of any such
transactions (except as expressly provided below):
(i) own, purchase or acquire certificates of deposit issued by the
Agent, commercial paper rated Moody's P-1, municipal bonds rated Moody's AA or
better, direct obligations of the United States of America or its agencies, and
obligations guaranteed by the United States of America;
(ii) continue to own the existing capital stock of the Borrower's
Subsidiaries;
(iii) endorse negotiable instruments for deposit or collection or
similar transactions in the ordinary course of business;
(iv) allow the Borrower's Subsidiaries to make or permit to remain
outstanding advances from the Borrower's Subsidiaries to the Borrower;
(v) make or permit to remain outstanding loans or advances to any
of Borrower's Subsidiaries not guaranteeing the repayment of the Loans or the
performance of Borrower hereunder (a "NON-GUARANTEEING Subsidiary") or enter
into or permit to remain outstanding guarantees in connection with the
obligations of the Borrower's Non-guaranteeing Subsidiaries, provided that such
loans and advances shall be limited to those arising in the ordinary course of
Borrower's business and the aggregate amount of such loans or guarantees by the
Borrower outstanding at any time shall not exceed $500,000; and
(vi) make or permit to remain outstanding loans and advances to any
of its officers, directors and shareholders or enter into or permit to remain
outstanding guarantees in connection with the obligations of any of its
officers, directors and shareholders, in an aggregate amount for all such loans,
advances and guarantees not exceeding $500,000 outstanding at any one time.
32.
(i) ASSET SALES. Convey, sell, lease, transfer or otherwise dispose of,
or permit any Subsidiary to convey, sell, lease, transfer or otherwise dispose
of, during any fiscal year of the Borrower, in one transaction or a series of
transactions, outside the ordinary course of business, assets of the Borrower or
of any of its Subsidiaries, whether now owned or hereafter acquired, having an
aggregate value in excess of $500,000.
(j) DIVIDENDS. Authorize, declare or pay any dividends, except that for
so long as no Event of Default or Potential Event of Default has occurred and is
continuing or would result from any such payment, the Borrower may declare and
pay dividends on its equity securities during any fiscal year or an amount not
to exceed twenty-five percent (25%) of Borrower's consolidated net income for
the immediately preceding fiscal year.
(k) LIMITATION ON GRANTING OF LIENS AND ON RESTRICTIONS ON SUBSIDIARY
DIVIDENDS AND OTHER TRANSFERS. Borrower will not, and it will not permit any of
its Subsidiaries to, directly or indirectly, create or otherwise cause or suffer
to exist or become effective any encumbrance or restriction on the ability of
(i) any Subsidiary to (A) pay dividends or make any other distribution on its
capital stock or any other equity interest or participation in its profits owned
by Borrower or any Subsidiary, or pay or repay any indebtedness owed to Borrower
or a Subsidiary, (B) make loans or advances to Borrower or (C) transfer any of
its properties or assets to the Borrower or any Subsidiary or (ii) Borrower or
any Subsidiary to grant Liens or security interests on the assets of such Person
in favor of the Lender Group, except for such encumbrances or restrictions
existing under or by reason of (A) applicable law, (B) this Agreement, (C)
customary provisions restricting subletting or assignment of any lease governing
a leasehold interest of Borrower or any Subsidiary, and (D) customary
restrictions on dispositions of real property interests found in reciprocal
easement agreements of Borrower or any Subsidiary.
(l) TRANSACTIONS WITH AFFILIATES. Neither the Borrower nor any of its
Subsidiaries shall enter into any transaction for the purchase, sale or exchange
of property or the rendering of any service to or by any affiliate, except in
the ordinary course of and pursuant to the reasonable requirements of the
Borrower's or its Subsidiary's business and upon fair and reasonable terms no
less favorable to the Borrower or its Subsidiary than the Borrower or its
Subsidiary would obtain in a comparable arm's length transaction with an
unaffiliated person.
(m) BOOKS AND RECORDS. The Borrower will, and will cause each of the
Guarantors to, keep proper books of record and account in which full, true and
correct entries in conformity with GAAP and all requirements of applicable law
shall be made of all dealings and transactions in relation to their businesses
and activities.
(n) RESTRUCTURE. Make any material change in the Borrower's financial
structure, the principal nature of the Borrower's business operations (taken as
a whole), or the date of its fiscal year.
33.
(o) CHANGE IN LOCATION OF CHIEF EXECUTIVE OFFICE; INVENTORY AND
EQUIPMENT WITH BAILEES. The Borrower shall not relocate its chief executive
office to a new location without providing 30 days prior written notification
thereof to Agent and so long as, at the time of such written notification, the
Borrower provides any financing statements or fixture filings necessary or
advisable to perfect and continue perfected Agent's Liens.
(p) SECURITIES ACCOUNTS. The Borrower shall not establish or maintain
any Securities Account (as defined in Section 8501 of the Code) unless Agent
shall have received a control agreement in form and substance satisfactory to
Agent, duly executed and in full force and effect, in respect of such Securities
Account. The Borrower agrees that it will not transfer assets out of any
Securities Accounts; provided, however, that, so long as no Event of Default has
occurred and is continuing or would result therefrom, the Borrower may use such
assets to the extent permitted by this Agreement.
ARTICLE VII
EVENTS OF DEFAULT
SECTION 7.1 EVENTS OF DEFAULT. If any of the following events
("EVENTS OF DEFAULT") shall occur and be continuing:
(a) The Borrower shall fail to pay any installment of principal or
interest or any other amount payable hereunder within five (5) days of the due
date thereof; or
(b) Any representation or warranty made by the Borrower herein or by
the Borrower (or any of its officers) in connection with the Loan Documents
shall prove to have been incorrect in any material respect when made; or
(c) The Borrower shall fail to perform or observe any term, covenant or
agreement contained in this Agreement on its part to be performed or observed
other than as described in SECTION 7.1(a) above and such failure shall continue
for ten (10) consecutive days; PROVIDED, THAT such ten (10) day period shall not
apply in the case of: (i) any failure to observe any such term, covenant,
condition or provision which is not capable of being cured at all or within such
ten (10) day period or which has been the subject of a prior failure within a
six (6) month period, or (ii) an intentional breach by Borrower of any such
term, covenant, condition or provision; or
(d) The Borrower or any of its Subsidiaries shall default in the
performance of or compliance with any term contained in any Loan Document other
than this Agreement and such default shall not have been remedied or waived
within any applicable grace period; or
(e) The Borrower or any of its Subsidiaries shall (i) fail to pay any
principal of, or premium or interest on, any indebtedness when due (whether by
scheduled maturity, required prepayment, acceleration, demand or otherwise) and
such failure shall continue after the applicable grace period, if any, specified
in the agreement or instrument relating to such indebtedness, or (ii) fail to
perform or observe any term, covenant or condition on its part to be performed
or observed under any agreement or instrument relating to any such indebtedness
or material to the performance, business, property, assets, condition (financing
or otherwise) or prospects of the Borrower and its Subsidiaries taken as a
whole, when required to be performed or observed, and such failure shall
continue after the applicable grace period, if any, specified in such agreement
or instrument; or
34.
(f) (i) The Borrower or any of its Subsidiaries shall commence any
case, proceeding or other action (A) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for relief entered
with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or
seeking reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to it or its debts, or (B)
seeking appointment of a receiver, trustee, custodian or other similar official
for it or for all or any substantial part of its assets, or the Borrower or any
of its Subsidiaries shall make a general assignment for the benefit of its
creditors; or (ii) there shall be commenced against the Borrower or any of its
Subsidiaries any case, proceeding or other action of a nature referred to in
clause (i) above which (A) results in the entry of an order for relief or any
such adjudication or appointment or (B) remains undismissed, undischarged or
unhanded for a period of sixty (60) days; or (iii) there shall be commenced
against the Borrower or any of its Subsidiaries any case, proceeding or other
action seeking issuance of a warrant of attachment, execution, restraint or
similar process against all or any substantial part of its assets which results
in the entry of an order for any such relief which shall not have been vacated,
discharged, or stayed or bonded pending appeal within thirty (30) days from the
entry thereof; or (iv) the Borrower or any of its Subsidiaries shall take any
action in furtherance of, or indicating its consent to, approval of, or
acquiescence in, any of the acts set forth in clause (i), (ii) and (iii) above;
or (v) the Borrower or any of its Subsidiaries shall generally not, or shall be
unable to, or shall admit in writing its inability to, pay its debts as they
become due; or
(g) One or more judgments or decrees shall be entered against the
Borrower or any of its Subsidiaries involving in the aggregate a liability (not
paid or fully covered by insurance or reserves) equal to or greater than
$1,000,000 and all such judgments or decrees shall not have been vacated,
discharged, or stayed or bonded pending appeal within thirty (30) days from the
entry thereof; or
(h) Any guaranty for any reason other than satisfaction in full of all
obligations of the Borrower under the Loan Documents, ceases to be in full force
and effect or is declared null and void, or any Guarantor denies that it has any
further liability under such guaranty or gives notice to such effect and any
such cessation, declaration or denial shall not have been rescinded, and such
guarantee reaffirmed, to the satisfaction of the Agent within thirty (30) days
after the Borrower knows of such development; or
(i) The occurrence of any one or more of the following events with
respect to the Borrower or any ERISA Affiliate of the Borrower provided such
event or events could reasonably be expected, in the judgment of the Agent, to
subject the Borrower or any ERISA Affiliate of the Borrower to any tax, penalty
or liability (or any combination of the foregoing) which, in the aggregate,
could have a material adverse effect on the financial condition of the Borrower
or any ERISA Affiliate of the Borrower with respect to a Plan: (A) a reportable
event shall occur with respect to a Plan which is, in the reasonable judgment of
the Agent, likely to result in the termination of such Plan for purposes of
Title IV of ERISA, or (B) any Plan termination (or commencement of proceedings
to terminate a Plan) or the full or partial withdrawal from a Plan by the
Borrower or any ERISA Affiliate of the Borrower; or
35.
(j) There shall be instituted against the Borrower or any Material
Subsidiary, or against any Guarantor, any proceeding for which forfeiture of any
property is a potential penalty and such proceeding remains undismissed,
undischarged or unbonded for a period of thirty (30) days from the date the
Borrower knows of such proceeding; or
(k) A Change of Control under clause (b) of the definition thereof
shall have occurred.
Then, upon the occurrence, and during the continuation, of an Event of Default,
the Required Lenders (at their election but without notice of its election and
without demand) may, except to the extent otherwise expressly provided or
required below, authorize and instruct Agent to do any one or more of the
following on behalf of the Lender Group (and Agent, acting upon the instructions
of the Required Lenders, shall do the same on behalf of the Lender Group), all
of which are authorized by the Borrower:
(a) Declare all Obligations, whether evidenced by this Agreement, by
any of the other Loan Documents, or otherwise, immediately due and payable;
(b) Cease advancing money or extending credit to or for the benefit of
Borrower under this Agreement, under any of the Loan Documents;
(c) Terminate this Agreement and any of the other Loan Documents as to
any future liability or obligation of the Lender Group, but without affecting
Agent's rights and security interests, for the benefit of the Lender Group, in
the Collateral and without affecting the Obligations;
(d) Settle or adjust disputes and claims directly with Account Debtors
for amounts and upon terms which Agent considers advisable, and in such cases,
Agent will credit Borrower's Loan Account with only the net amounts received by
Agent in payment of such disputed Accounts after deducting all Lender Group
Expenses incurred or expended in connection therewith;
(e) Without notice to or demand upon the Borrower, make such payments
and do such acts as Agent considers necessary or reasonable to protect its
security interests for the benefit of the Lender Group in the Collateral.
Borrower agrees to assemble the Collateral if Agent so requires, and to make the
Collateral available to Agent as Agent may designate. The Borrower authorizes
Agent to enter the premises where the Collateral is located, to take and
maintain possession of the Collateral, or any part of it, and to pay, purchase,
contest, or compromise any encumbrance, charge, or Lien that in Agent's
determination appears to conflict with Agent's Liens and to pay all expenses
incurred in connection therewith. With respect to any owned or leased premises
of the Borrower, the Borrower hereby grants Agent a license to enter into
possession of such premises and to occupy the same, without charge, for up to
120 days in order to exercise any of the Lender Group's rights or remedies
provided herein, at law, in equity, or otherwise;
36.
(f) Without notice to the Borrower (such notice being expressly
waived), and without constituting a retention of any Collateral in satisfaction
of an obligation (within the meaning of Section 9505 of the Code), set off and
apply to the Obligations any and all (i) balances and deposits of the Borrower
held by the Lender Group, or (ii) indebtedness at any time owing to or for the
credit or the account of the Borrower held by the Lender Group;
(g) Hold, as cash collateral, any and all balances and deposits of the
Borrower held by the Lender Group, to secure the full and final repayment of all
of the Obligations;
(h) Ship, reclaim, recover, store, finish, maintain, repair, prepare
for sale, advertise for sale, and sell (in the manner provided for herein) the
Collateral. The Borrower hereby grants to Agent a license or other right to use,
without charge, the Borrower's labels, patents, copyrights, rights of use of any
name, trade secrets, trade names, trademarks, service marks, and advertising
matter, or any property of a similar nature, as it pertains to the Collateral,
in completing production of, advertising for sale, and selling any Collateral
and Borrower's rights under all licenses and all franchise agreements shall
inure to the Lender Group's benefit;
(i) Sell the Collateral at either a public or private sale, or both, by
way of one or more contracts or transactions, for cash or on terms, in such
manner and at such places (including any of the Borrower's premises) as Agent
determines is commercially reasonable. It is not necessary that the Collateral
be present at any such sale;
(j) Agent shall give notice of the disposition of the Collateral as
follows:
(1) to the Borrower and each holder of a security interest in the
Collateral who has filed with Agent a written request for notice, a notice in
writing of the time and place of public sale, or, if the sale is a private sale
or some other disposition other than a public sale is to be made of the
Collateral, then the time on or after which the private sale or other
disposition is to be made;
(2) The notice shall be personally delivered or mailed, postage
prepaid, to the Borrower as provided in SECTION 10.2 and at least 10 days before
the date fixed for the sale, or at least 10 days before the date on or after
which the private sale or other disposition is to be made; no notice needs to be
given prior to the disposition of any portion of the Collateral that is
perishable or threatens to decline speedily in value or that is of a type
customarily sold on a recognized market. Notice to Persons other than Borrower
claiming an interest in the Collateral shall be sent to such addresses as they
have furnished to Agent;
(3) If the sale is to be a public sale, Agent also shall give
notice of the time and place by publishing a notice one time at least 5 days
before the date of the sale in a newspaper of general circulation in the county
in which the sale is to be held;
(k) Any one or more members of the Lender Group may credit bid and
purchase at any public sale;
(l) The Lender Group shall have all other rights and remedies available
to it at law or in equity pursuant to any other Loan Documents; and
37.
(m) Any deficiency that exists after disposition of the Collateral as
provided above will be paid immediately by the Borrower. Any excess will be
returned, without interest and subject to the rights of third Persons, by Agent
to the Borrower.
SECTION 7.2 REMEDIES CUMULATIVE. The rights and remedies of the
Lender Group under this Agreement, the other Loan Documents, and all other
agreements shall be cumulative. The Lender Group shall have all other rights and
remedies not inconsistent herewith as provided under the Code, by law, or in
equity. No exercise by the Lender Group of one right or remedy shall be deemed
an election, and no waiver by the Lender Group of any Event of Default shall be
deemed a continuing waiver. No delay by the Lender Group shall constitute a
waiver, election, or acquiescence by it.
ARTICLE VIII
CREATION OF SECURITY INTEREST.
SECTION 8.1 GRANT OF SECURITY INTEREST. The Borrower hereby grants
to the Agent, for the benefit of the Lender Group a continuing security interest
in all currently existing and hereafter acquired or arising Collateral in order
to secure prompt repayment of any and all Obligations and in order to secure
prompt performance by Borrower of each of its covenants and duties under the
Loan Documents ("AGENT'S LIENS"). The Agent's Liens in and to the Collateral
shall attach to all Collateral without further act on the part of the Lender
Group or the Borrower. Anything contained in this Agreement or any other Loan
Document to the contrary notwithstanding, except for the sale of Inventory to
buyers in the ordinary course of business, the Borrower has no authority,
express or implied, to dispose of any item or portion of the Collateral.
SECTION 8.2 NEGOTIABLE COLLATERAL. In the event that any Collateral,
including proceeds, is evidenced by or consists of Negotiable Collateral, the
Borrower, immediately upon the request of the Agent, shall endorse and deliver
physical possession of such Negotiable Collateral to the Agent.
SECTION 8.3 COLLECTION OF ACCOUNTS, GENERAL INTANGIBLES, AND
NEGOTIABLE COLLATERAL. At any time, the Agent or the Agent's designee may (a)
notify customers or Account Debtors of the Borrower that the Accounts, General
Intangibles, or Negotiable Collateral have been assigned to the Agent for the
benefit of the Lender Group or that the Agent for the benefit of the Lender
Group or that the Agent for the benefit of the Lender Group has a security
interest therein, and (b) after the occurrence and during the continuance of an
Event of Default, collect the Accounts, General Intangibles, and Negotiable
Collateral directly and charge the collection costs and expenses to the Loan
Account. The Borrower agrees that it will hold in trust for the Lender Group, as
the Lender Group's trustee, any Collections that it receives and immediately
will deliver said Collections to the Agent in their original form as received by
the Borrower.
SECTION 8.4 DELIVERY OF ADDITIONAL DOCUMENTATION REQUIRED. At any
time upon the request of the Agent, the Borrower shall execute and deliver to
the Agent, all financing statements, continuation financing statements, fixture
filings, security agreements, pledges, assignments, endorsements of certificates
of title, applications for title, affidavits, reports, notices, schedules of
38.
accounts, letters of authority, and all other documents that the Agent
reasonably may request, in form satisfactory to the Agent, to perfect and
continue perfected the Agent's Liens on the Collateral (whether now owned or
hereafter arising or acquired), and in order to fully consummate all of the
transactions contemplated hereby and under the other the Loan Documents.
SECTION 8.5 POWER OF ATTORNEY. The Borrower hereby irrevocably
makes, constitutes, and appoints the Agent(and any of the Agent's officers,
employees, or agents designated by the Agent) as the Borrower's true and lawful
attorney, with power to (a) if the Borrower refuses to, or fails timely to
execute and deliver any of the documents described in SECTION 8.4, sign the name
of the Borrower on any of the documents described in SECTION 8.4, (b) at any
time that an Event of Default has occurred and is continuing or the Agent deems
itself insecure, sign the Borrower's name on any invoice or bill of lading
relating to any Account, drafts against Account Debtors, schedules and
assignments of Accounts, verifications of Accounts, and notices to Account
Debtors, (c) send requests for verification of Accounts, (d) endorse the
Borrower's name on any Collection item that may come into the Lender Group's
possession, (e) at any time that an Event of Default has occurred and is
continuing or the Agent deems itself insecure, notify the post office
authorities to change the address for delivery of the Borrower's mail to an
address designated by the Agent, to receive and open all mail addressed to the
Borrower, and to retain all mail relating to the Collateral and forward all
other mail to Borrower, (f) at any time that an Event of Default has occurred
and is continuing or the Agent deems itself insecure, make, settle, and adjust
all claims under the Borrower's policies of insurance and make all
determinations and decisions with respect to such policies of insurance, and (g)
at any time that an Event of Default has occurred and is continuing or the Agent
deems itself insecure, settle and adjust disputes and claims respecting the
Accounts directly with Account Debtors, for amounts and upon terms that the
Agent determines to be reasonable, and the Agent may cause to be executed and
delivered any documents and releases that the Agent determines to be necessary.
The appointment of the Agent as the Borrower's attorney, and each and every one
of Agent's rights and powers, being coupled with an interest, is irrevocable
until all of the Obligations have been fully and finally repaid and performed
and the Lender Group's obligations to extend credit hereunder are terminated.
SECTION 8.6 RIGHT TO INSPECT. The Agent and each Lender (through any
of their respective officers, employees, or agents) shall have the right, from
time to time hereafter to inspect the Borrower's Books and to check, test, and
appraise the Collateral in order to verify the Borrower's financial condition or
the amount, quality, value, condition of, or any other matter relating to, the
Collateral.
SECTION 8.7 LIABILITY FOR COLLATERAL. The Borrower hereby agrees
that: (a) so long as the Lender Group complies with its obligations, if any,
under Section 9207 of the Code, the Lender Group shall not in any way or manner
be liable or responsible for: (i) the safekeeping of the Collateral; (ii) any
loss or damage thereto occurring or arising in any manner or fashion from any
cause; (iii) any diminution in the value thereof; or (iv) any act or default of
any carrier, warehouseman, bailee, forwarding agency, or other Person; and (b)
all risk of loss, damage, or destruction of the Collateral shall be borne by the
Borrower.
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ARTICLE IX
THE AGENT; THE LENDER GROUP.
SECTION 9.1 APPOINTMENT AND AUTHORIZATION OF AGENT. Each Lender
hereby designates and appoints Mellon Bank, N.A. as its agent under this
Agreement and the other Loan Documents and each Lender hereby irrevocably
authorizes the Agent to take such action on its behalf under the provisions of
this Agreement and each other Loan Document and to exercise such powers and
perform such duties as are expressly delegated to it by the terms of this
Agreement or any other Loan Document, together with such powers as are
reasonably incidental thereto. The Agent agrees to act as such on the express
conditions contained in this ARTICLE IX. The provisions of this ARTICLE IX are
solely for the benefit of the Agent, the Agent-Related Persons, and the Lenders;
the Borrower shall have no rights as a third party beneficiary of any of the
provisions contained herein; provided, however, that certain of the provisions
of SECTION 9.10 hereof also shall be for the benefit of the Borrower. Any
provision to the contrary contained elsewhere in this Agreement or in any other
Loan Document notwithstanding, the Agent shall not have any duties or
responsibilities, except those expressly set forth herein, nor shall the Agent
have or be deemed to have any fiduciary relationship with any Lender, and no
implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or any other Loan Document or
otherwise exist against the Agent; it being expressly understood and agreed that
the use of the word "Agent" is for convenience only, that the Bank. is merely
the representative of the Lenders, and has only the contractual duties set forth
herein. Except as expressly otherwise provided in this Agreement, the Agent
shall have and may use its sole discretion with respect to exercising or
refraining from exercising any discretionary rights or taking or refraining from
taking any actions which the Agent is expressly entitled to take or assert under
or pursuant to this Agreement and the other Loan Documents. Without limiting the
generality of the foregoing, or of any other provision of the Loan Documents
that provides rights or powers to the Agent, the Lenders agree that the Agent
shall have the right to exercise the following powers as long as this Agreement
remains in effect: (a) maintain, in accordance with its customary business
practices, ledgers and records reflecting the status of the Revolving Loans, the
Collateral, the Collections, and related matters; (b) execute or file any and
all financing or similar statements or notices, amendments, renewals,
supplements, documents, instruments, proofs of claim, notices and other written
agreements with respect to the Loan Documents; (c) make Revolving Loans, for
itself or on behalf of the Lenders as provided in the Loan Documents; (d)
exclusively receive, apply, and distribute the Collections as provided in the
Loan Documents; (e) open and maintain such bank accounts and lock boxes as the
Agent deems necessary and appropriate in accordance with the Loan Documents for
the foregoing purposes with respect to the Collateral and the Collections; (f)
perform, exercise, and enforce any and all other rights and remedies of the
Lender Group with respect to the Borrower, the Revolving Loans, the Collateral,
the Collections, or otherwise related to any of same as provided in the Loan
Documents; and (g) incur and pay such Lender Group Expenses as the Agent may
deem necessary or appropriate for the performance and fulfillment of its
functions and powers pursuant to the Loan Documents.
SECTION 9.2 DELEGATION OF DUTIES. Except as otherwise provided in
this section, the Agent may execute any of its duties under this Agreement or
any other Loan Document by or through agents, employees or attorneys-in-fact and
shall be entitled to advice of counsel concerning all matters pertaining to such
duties. The Agent shall not be responsible for the negligence or misconduct of
any agent or attorney-in-fact that it selects as long as such selection was made
in compliance with this section and without gross negligence or willful
misconduct.
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SECTION 9.3 LIABILITY OF AGENT. None of the Agent-Related Persons
shall (i) be liable for any action taken or omitted to be taken by any of them
under or in connection with this Agreement or any other Loan Document or the
transactions contemplated hereby (except for its own gross negligence or willful
misconduct), or (ii) be responsible in any manner to any of the Lenders for any
recital, statement, representation or warranty made by the Borrower or any
Subsidiary or Affiliate of the Borrower, or any officer or director thereof,
contained in this Agreement or in any other Loan Document, or in any
certificate, report, statement or other document referred to or provided for in,
or received by the Agent under or in connection with, this Agreement or any
other Loan Document, or the validity, effectiveness, genuineness, enforceability
or sufficiency of this Agreement or any other Loan Document, or for any failure
of the Borrower or any other party to any Loan Document to perform its
obligations hereunder or thereunder. No Agent-Related Person shall be under any
obligation to any Lender to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, this
Agreement or any other Loan Document, or to inspect the properties, books or
records of the Borrower or any of the Borrower's Subsidiaries or Affiliates.
SECTION 9.4 RELIANCE BY AGENT. The Agent shall be entitled to rely,
and shall be fully protected in relying, upon any writing, resolution, notice,
consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone
message, statement or other document or conversation believed by it to be
genuine and correct and to have been signed, sent, or made by the proper Person
or Persons, and upon advice and statements of legal counsel (including counsel
to the Borrower or counsel to any Lender), independent accountants and other
experts selected by the Agent. The Agent shall be fully justified in failing or
refusing to take any action under this Agreement or any other Loan Document
unless it shall first receive such advice or concurrence of the Lenders as it
deems appropriate and until such instructions are received, the Agent shall act,
or refrain from acting, as it deems advisable. If the Agent so requests, it
shall first be indemnified to its reasonable satisfaction by the Lenders against
any and all liability and expense that may be incurred by it by reason of taking
or continuing to take any such action. The Agent shall in all cases be fully
protected in acting, or in refraining from acting, under this Agreement or any
other Loan Document in accordance with a request or consent of the Lenders and
such request and any action taken or failure to act pursuant thereto shall be
binding upon all of the Lenders.
SECTION 9.5 NOTICE OF DEFAULT OR EVENT OF DEFAULT. The Agent shall
not be deemed to have knowledge or notice of the occurrence of any Default or
Event of Default unless the Agent shall have received written notice from a
Lender or the Borrower referring to this Agreement, describing such Default or
Event of Default, and stating that such notice is a "notice of default." The
Agent promptly will notify the Lenders of its receipt of any such notice or of
any Event of Default of which the Agent has actual knowledge. If any Lender
obtains actual knowledge of any Event of Default, such Lender promptly shall
notify the other Lenders and the Agent of such Event of Default. Each Lender
shall be solely responsible for giving any notices to its Participants, if any.
Subject to SECTION 9.4, the Agent shall take such action with respect to such
Default or Event of Default as may be requested by the Required Lenders in
accordance with SECTION 7.1; provided, however, that unless and until the Agent
has received any such request, the Agent may (but shall not be obligated to)
take such action, or refrain from taking such action, with respect to such
Default or Event of Default as it shall deem advisable.
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SECTION 9.6 CREDIT DECISION. Each Lender acknowledges that none of
the Agent-Related Persons has made any representation or warranty to it, and
that no act by the Agent hereinafter taken, including any review of the affairs
of the Borrower and its Subsidiaries or Affiliates, shall be deemed to
constitute any representation or warranty by any Agent-Related Person to any
Lender. Each Lender represents to the Agent that it has, independently and
without reliance upon any Agent-Related Person and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, prospects, operations, property, financial and
other condition and creditworthiness of the Borrower and any other Person (other
than the Lender Group) party to a Loan Document, and all applicable bank
regulatory laws relating to the transactions contemplated hereby, and made its
own decision to enter into this Agreement and to extend credit to the Borrower.
Each Lender also represents that it will, independently and without reliance
upon any Agent-Related Person and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit analysis,
appraisals and decisions in taking or not taking action under this Agreement and
the other Loan Documents, and to make such investigations as it deems necessary
to inform itself as to the business, prospects, operations, property, financial
and other condition and creditworthiness of the Borrower and any other Person
(other than the Lender Group) party to a Loan Document. Except for notices,
reports and other documents expressly herein required to be furnished to the
Lenders by the Agent, the Agent shall not have any duty or responsibility to
provide any Lender with any credit or other information concerning the business,
prospects, operations, property, financial and other condition or
creditworthiness of the Borrower and any other Person party to a Loan Document
that may come into the possession of any of the Agent-Related Persons.
SECTION 9.7 COSTS AND EXPENSES; INDEMNIFICATION. The Agent may incur
and pay Lender Group Expenses to the extent the Agent deems reasonably necessary
or appropriate for the performance and fulfillment of its functions, powers, and
obligations pursuant to the Loan Documents, including without limiting the
generality of the foregoing, court costs, reasonable attorneys fees and
expenses, costs of collection by outside collection agencies and auctioneer fees
and costs of security guards or insurance premiums paid to maintain the
Collateral, whether or not the Borrower is obligated to reimburse the Agent or
the Lenders for such expenses pursuant to the Loan Agreement or otherwise. The
Agent is authorized and directed to deduct and retain sufficient amounts from
Collections to reimburse the Agent for such out-of-pocket costs and expenses
prior to the distribution of any amounts to the Lenders. In the event the Agent
is not reimbursed for such costs and expenses from Collections, each Lender
hereby agrees that it is and shall be obligated to pay to or reimburse the Agent
for the amount of such Lender's Pro Rata Share thereof. Whether or not the
transactions contemplated hereby are consummated, the Lenders shall indemnify
upon demand the Agent-Related Persons (to the extent not reimbursed by or on
behalf of the Borrower and without limiting the obligation of the Borrower to do
so), according to their Pro Rata Shares, from and against any and all
Indemnified Liabilities; provided, however, that no Lender shall be liable for
the payment to the Agent-Related Persons of any portion of such Indemnified
Liabilities resulting solely from such Person's gross negligence or willful
misconduct. Without limitation of the foregoing, each Lender shall reimburse the
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Agent upon demand for its ratable share of any costs or out-of-pocket expenses
(including attorneys fees and expenses) incurred by the Agent in connection with
the preparation, execution, delivery, administration, modification, amendment or
enforcement (whether through negotiations, legal proceedings or otherwise) of,
or legal advice in respect of rights or responsibilities under, this Agreement,
any other Loan Document, or any document contemplated by or referred to herein,
to the extent that the Agent is not reimbursed for such expenses by or on behalf
of the Borrower. The undertaking in this section shall survive the payment of
all obligations hereunder and the resignation or replacement of the Agent.
SECTION 9.8 AGENT IN INDIVIDUAL CAPACITY. Mellon and its Affiliates
may make loans to, issue letters of credit for the account of, accept deposits
from, acquire equity interests in and generally engage in any kind of banking,
trust, financial advisory, underwriting or other business with the Borrower and
its Subsidiaries and Affiliates and any other Person (other than the Lender
Group) party to any Loan Documents as though Mellon were not Agent hereunder and
without notice to or consent of the Lenders. The Lenders acknowledge that,
pursuant to such activities, Mellon or its Affiliates may receive information
regarding the Borrower or its Affiliates and any other Person (other than the
Lender Group) party to any Loan Documents that is subject to confidentiality
obligations in favor of the Borrower or such other Person and that prohibit the
disclosure of such information to the Lenders, and the Lenders acknowledge that,
in such circumstances (and in the absence of a waiver of such confidentiality
obligations), the Agent shall be under no obligation to provide such information
to them. With respect to Mellon Loans, Mellon shall have the same rights and
powers under this Agreement as any other Lender and may exercise the same as
though it were not Agent, and the terms "Lender" and "Lenders" include Mellon in
its individual capacity.
SECTION 9.9 SUCCESSOR AGENT. The Agent may resign as Agent upon 45
days notice to the Lenders. If the Agent resigns under this Agreement, the
Required Lenders shall appoint a successor Agent for the Lenders. If no
successor Agent is appointed prior to the effective date of the resignation of
the Agent, the Agent may appoint, after consulting with the Lenders, a successor
Agent. If the Agent has materially breached or failed to perform any material
provision of this Agreement or of applicable law, the Required Lenders may agree
in writing to remove and replace the Agent with a successor Agent from among the
Lenders. In any such event, upon the acceptance of its appointment as successor
Agent hereunder, such successor Agent shall succeed to all the rights, powers
and duties of the retiring Agent and the term "Agent" shall mean such successor
Agent. After any retiring Agent's resignation or replacement hereunder as Agent,
the provisions of this ARTICLE IX shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was Agent under this Agreement and
the retiring Agent's appointment, powers and duties as Agent shall be
terminated.. If no successor Agent has accepted appointment as Agent by the date
which is 45 days following a retiring Agent's notice of resignation, the
retiring Agent's resignation shall nevertheless thereupon become effective and
the Lenders shall perform all of the duties of Agent hereunder until such time,
if any, as the Lenders appoint a successor Agent as provided for above.
SECTION 9.10 WITHHOLDING TAX. If any Lender is a "foreign
corporation, partnership or trust" within the meaning of the IRC and such Lender
claims exemption from, or a reduction of, U.S. withholding tax under Sections
1441 or 1442 of the IRC, such Lender agrees with and in favor of the Agent and
the Borrower, to deliver to Agent and Borrower:
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(i) if such Lender claims an exemption from, or a reduction of,
withholding tax under a United States tax treaty, properly completed IRS Forms
1001 and W-8 before the payment of any interest in the first calendar year and
before the payment of any interest in each third succeeding calendar year during
which interest may be paid under this Agreement;
(ii) if such Lender claims that interest paid under this Agreement
is exempt from United States withholding tax because it is effectively connected
with a United States trade or business of such Lender, two properly completed
and executed copies of IRS Form 4224 before the payment of any interest is due
in the first taxable year of such Lender and in each succeeding taxable year of
such Lender during which interest may be paid under this Agreement, and IRS Form
W-9; and
(iii) such other form or forms as may be required under the IRC or
other laws of the United States as a condition to exemption from, or reduction
of, United States withholding tax.
Such Lender agrees promptly to notify the Agent and the Borrower of any change
in circumstances which would modify or render invalid any claimed exemption or
reduction.
(b) If any Lender claims exemption from, or reduction of, withholding
tax under a United States tax treaty by providing IRS Form 1001 and such Lender
sells, assigns, grants a participation in, or otherwise transfers all or part of
the obligations of the Borrower to such Lender, such Lender agrees to notify the
Agent of the percentage amount in which it is no longer the beneficial owner of
obligations of the Borrower to such Lender. To the extent of such percentage
amount, the Agent will treat such Lender's IRS Form 1001 as no longer valid.
(c) If any Lender claiming exemption from United States withholding tax
by filing IRS Form 4224 with the Agent sells, assigns, grants a participation
in, or otherwise transfers all or part of the obligations of the Borrower to
such Lender, such Lender agrees to undertake sole responsibility for complying
with the withholding tax requirements imposed by Sections 1441 and 1442 of the
IRC.
(d) If any Lender is entitled to a reduction in the applicable
withholding tax, the Agent may withhold from any interest payment to such Lender
an amount equivalent to the applicable withholding tax after taking into account
such reduction. If the forms or other documentation required by subsection (a)
of this Section are not delivered to the Agent, then the Agent may withhold from
any interest payment to such Lender not providing such forms or other
documentation an amount equivalent to the applicable withholding tax.
(e) If the IRS or any other Governmental Authority of the United States
or other jurisdiction asserts a claim that the Agent did not properly withhold
tax from amounts paid to or for the account of any Lender (because the
appropriate form was not delivered, was not properly executed, or because such
Lender failed to notify the Agent of a change in circumstances which rendered
the exemption from, or reduction of, withholding tax ineffective, or for any
other reason) such Lender shall indemnify the Agent fully for all amounts paid,
directly or indirectly, by the Agent as tax or otherwise, including penalties
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and interest, and including any taxes imposed by any jurisdiction on the amounts
payable to the Agent under this Section, together with all costs and expenses
(including attorneys fees and expenses). The obligation of the Lenders under
this subsection shall survive the payment of all obligations of the Borrower and
the resignation or replacement of the Agent.
SECTION 9.11 Collateral Matters. The Lenders hereby irrevocably
authorize the Agent, at its option and in its sole discretion, to release any
Lien on any Collateral (i) upon the termination of the Commitments and payment
and satisfaction in full by Borrower of all obligations; (ii) constituting
property being sold or disposed of if a release is required or desirable in
connection therewith and if the Borrower certifies to the Agent that the sale or
disposition is permitted under this Agreement or the other Loan Documents (and
the Agent may rely conclusively on any such certificate, without further
inquiry); (iii) constituting property in which the Borrower owned no interest at
the time the security interest was granted or at any time thereafter; or (iv)
constituting property leased to the Borrower under a lease that has expired or
is terminated in a transaction permitted under this Agreement. Except as
provided above, the Agent will not execute and deliver a release of any Lien on
any Collateral without the prior written authorization of (y) if the release is
of all or substantially all of the Collateral, all of the Lenders, or (z)
otherwise, the Required Lenders. Upon request by the Agent or the Borrower at
any time, the Lenders will confirm in writing the Agent's authority to release
any such Liens on particular types or items of Collateral pursuant to this
Section; provided, however, that (1) the Agent shall not be required to execute
any document necessary to evidence such release on terms that, in the Agent's
opinion, would expose the Agent to liability or create any obligation or entail
any consequence other than the release of such Lien without recourse,
representation, or warranty, and (2) such release shall not in any manner
discharge, affect, or impair the obligations of the Borrower or any Liens (other
than those expressly being released) upon (or obligations of the Borrower in
respect of) all interests retained by the Borrower, including, the proceeds of
any sale, all of which shall continue to constitute part of the Collateral.
(b) The Agent shall have no obligation whatsoever to any of the Lenders
to assure that the Collateral exists or is owned by the Borrower or is cared
for, protected, or insured or has been encumbered, or that the Agent's Liens
have been properly or sufficiently or lawfully created, perfected, protected, or
enforced or are entitled to any particular priority, or to exercise at all or in
any particular manner or under any duty of care, disclosure or fidelity, or to
continue exercising, any of the rights, authorities and powers granted or
available to the Agent pursuant to any of the Loan Documents, it being
understood and agreed that in respect of the Collateral, or any act, omission or
event related thereto, subject to the terms and conditions contained herein, the
Agent may act in any manner it may deem appropriate, in its sole discretion
given the Agent's own interest in the Collateral in its capacity as one of the
Lenders and that the Agent shall have no other duty or liability whatsoever to
any Lender as to any of the foregoing, except as otherwise provided herein.
SECTION 9.12 Restrictions on Actions by Lenders; Sharing of
Payments. Each of the Lenders agrees that it shall not, without the express
consent of the Agent, and that it shall, to the extent it is lawfully entitled
to do so, upon the request of the Agent, set off against the obligations of the
Borrower, any amounts owing by such Lender to the Borrower or any accounts of
the Borrower now or hereafter maintained with such Lender. Each of the Lenders
further agrees that it shall not, unless specifically requested to do so by the
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Agent, take or cause to be taken any action, including, the commencement of any
legal or equitable proceedings, to foreclose any Lien on, or otherwise enforce
any security interest in, any of the Collateral the purpose of which is, or
could be, to give such Lender any preference or priority against the other
Lenders with respect to the Collateral.
(b) Subject to Section 9.8, if, at any time or times any Lender shall
receive (i) by payment, foreclosure, setoff or otherwise, any proceeds of
Collateral or any payments with respect to the obligations of the Borrower
arising under, or relating to, this Agreement or the other Loan Documents,
except for any such proceeds or payments received by such Lender from the Agent
pursuant to the terms of this Agreement, or (ii) payments from the Agent in
excess of such Lender's ratable portion of all such distributions by the Agent,
such Lender promptly shall (1) turn the same over to the Agent, in kind, and
with such endorsements as may be required to negotiate the same to the Agent, or
in same day funds, as applicable, for the account of all of the Lenders and for
application to the obligations of the Borrower in accordance with the applicable
provisions of this Agreement, or (2) purchase, without recourse or warranty, an
undivided interest and participation in the obligations of the Borrower owed to
the other Lenders so that such excess payment received shall be applied ratably
as among the Lenders in accordance with their Pro Rata Shares; provided,
however, that if all or part of such excess payment received by the purchasing
party is thereafter recovered from it, those purchases of participations shall
be rescinded in whole or in part, as applicable, and the applicable portion of
the purchase price paid therefor shall be returned to such purchasing party, but
without interest except to the extent that such purchasing party is required to
pay interest in connection with the recovery of the excess payment.
SECTION 9.13 AGENCY FOR PERFECTION. The Agent and each Lender hereby
appoints each other Lender as agent for the purpose of perfecting the Agent's
Liens in assets which, in accordance with Article 9 of the UCC can be perfected
only by possession. Should any Lender obtain possession of any such Collateral,
such Lender shall notify Agent thereof, and, promptly upon the Agent's request
therefor shall deliver such Collateral to the Agent or in accordance with the
Agent's instructions.
SECTION 9.14 PAYMENTS BY AGENT TO THE LENDERS. All payments to be
made by the Agent to the Lenders shall be made by bank wire transfer or internal
transfer of immediately available funds pursuant to such wire transfer
instructions as each party may designate for itself by written notice to the
Agent.
SECTION 9.15 CONCERNING THE COLLATERAL AND RELATED LOAN DOCUMENTS.
Each member of the Lender Group authorizes and directs the Agent to enter into
this Agreement and the other Loan Documents relating to the Collateral, for the
benefit of the Lender Group. Each member of the Lender Group agrees that any
action taken by the Agent or all Lenders, as applicable, in accordance with the
terms of this Agreement or the other Loan Documents relating to the Collateral
and the exercise by the Agent or all Lenders, as applicable, of their respective
powers set forth therein or herein, together with such other powers that are
reasonably incidental thereto, shall be binding upon all of the Lenders.
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SECTION 9.16 SEVERAL OBLIGATIONS; NO LIABILITY. Notwithstanding that
certain of the Loan Documents now or hereafter may have been or will be executed
only by or in favor of the Agent in its capacity as such, and not by or in favor
of the Lenders, any and all obligations on the part of the Agent (if any) to
make any credit available hereunder shall constitute the several (and not joint)
obligations of the respective Lenders on a ratable basis, according to their
respective Commitments, to make an amount of such credit not to exceed, in
principal amount, at any one time outstanding, the amount of their respective
Commitments. Nothing contained herein shall confer upon any Lender any interest
in, or subject any Lender to any liability for, or in respect of, the business,
assets, profits, losses, or liabilities of any other Lender. Each Lender shall
be solely responsible for notifying its Participants of any matters relating to
the Loan Documents to the extent any such notice may be required, and no Lender
shall have any obligation, duty, or liability to any Participant of any other
Lender. Except as provided in SECTION 9.7, no member of the Lender Group shall
have any liability for the acts of any other member of the Lender Group. No
Lender shall be responsible to the Borrower or any other Person for any failure
by any other Lender to fulfill its obligations to make credit available
hereunder, nor to advance for it or on its behalf in connection with its
Commitment, nor to take any other action on its behalf hereunder or in
connection with the financing contemplated herein.
SECTION 9.17 HOLDERS OF NOTES. The Agent may deem and treat the
Lender which is payee of a Note as the owner and holder of such Note for all
purposes hereof unless and until an Assignment and Acceptance with respect to
the assignment or transfer thereof shall have been filed with the Agent in
accordance with SECTION 10.6. Any authority, direction or consent of any Person
who at the time of giving such authority, direction or consent is shown in the
records of the Agent as being a Lender shall be conclusive and binding on each
present and subsequent holder, transferee or assignee of any Note or Notes
payable to such Lender or of any Note or Notes issued in exchange therefor.
SECTION 9.18 CALCULATIONS. The Agent shall not be liable for any
calculation, apportionment or distribution of payments made by it in good faith.
If such calculation, apportionment or distribution is subsequently determined to
have been made in error, the sole recourse of any Lender to whom payment was due
but not made shall be to recover from the other Lenders any payment in excess of
the amount to which they are determined to be entitled or, if the amount due was
not paid by the Borrower, to recover such amount from the Borrower.
ARTICLE X
MISCELLANEOUS
SECTION 10.1 AMENDMENTS, ETC. No amendment or waiver of any
provision of the Loan Documents nor consent to any departure by the Borrower
therefrom, shall in any event be effective unless the same shall be in writing
and signed by the Required Lenders (or by the Agent at the written request of
the Required Lenders), and then such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given; PROVIDED,
HOWEVER, that no such waiver, amendment, or consent shall, unless in writing and
signed by all the Lenders and the Borrower and acknowledged by the Agent, do any
of the following:
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(a) increase or extend the Commitment of any Lender;
(b) postpone or delay any date fixed by this Agreement or any other
Loan Document for any payment of principal, interest, fees or other amounts due
to the Lenders (or any of them) hereunder or under any other Loan Document;
(c) reduce the outstanding principal of, or the rate of interest
specified herein on the Revolving Loans (except for pricing adjustments
resulting from the application of the appropriate Applicable Margin), or any
fees or other amounts payable hereunder or under any other Loan Document;
(d) change the percentage of the Commitments that is required for the
Lenders or any of them to take any action hereunder;
(e) amend this Section or any provision of the Agreement providing for
consent or other action by all the Lenders;
(f) release Collateral other than as permitted by Section 8.11;
(g) change the definition of "Required Lenders";
(h) release the Borrower from any obligation for the payment of money;
or
(i) amend any of the provisions of Article IX.
and, provided further, however, that no amendment, waiver or consent shall,
unless in writing and signed by the Agent, affect the rights or duties of the
Agent under this Agreement or any other Loan Document. The foregoing
notwithstanding, any amendment, modification, waiver, consent, termination, or
release of or with respect to any provision of this Agreement or any other Loan
Document that relates only to the relationship of the Lender Group among
themselves, and that does not affect the rights or obligations of the Borrower,
shall not require consent by or the agreement of the Borrower.
SECTION 10.2 NOTICES, ETC. Except as otherwise set forth in this
Agreement, all notices and other communications provided for hereunder shall be
in writing (including facsimile communication) and mailed or sent by facsimile
or delivered, if to the Borrower, at its address set forth on the signature page
hereof; if to the Agent, at its address set forth on the signature page hereof;
if to any Lender, at such Lender's address set forth on the signature page
hereof or on such Assignment and Acceptance by which such Lender became a party
hereto, or, as to each party, at such other address as shall be designated by
such party in a written notice to the other party. All such notices and
communications shall be effective when sent by facsimile, or three days after
such notice or communication is deposited in the mails, except that notices and
communications to the Agent pursuant to ARTICLE II or VII shall not be effective
until received by the Agent.
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SECTION 10.3 RIGHT OF SETOFF. Upon and only after the occurrence of
any uncured Event of Default, the Agent and each Lender is hereby authorized by
the Borrower, at any time and from time to time, without notice, (a) to set off
against, and to appropriate and apply to the payment of, the obligations and
liabilities of the Borrower under the Loan Documents (whether matured or
unmatured, fixed or contingent or liquidated or unliquidated) any and all
amounts owing by any member of the Lender Group to the Borrower (whether payable
in Dollars or any other currency, whether matured or unmatured, and, in the case
of deposits, whether general or special, time or demand and however evidenced)
and (b) pending any such action, to the extent necessary, to hold such amounts
as collateral to secure such obligations and liabilities and to return as unpaid
for insufficient funds any and all checks and other items drawn against any
deposits so held as the Agent or any Lender in its sole discretion may elect.
Each member of the Lender Group is authorized to debit any account maintained
with it by the Borrower for any amount of principal, interest or fees which are
then due and owing to the Lender Group.
SECTION 10.4 NO WAIVER; REMEDIES. No failure on the part of either
party hereto to exercise, and no delay in exercising, any right under any of the
Loan Documents shall operate as a waiver thereof; nor shall any single or
partial exercise of any right under any of the Loan Documents preclude any other
or further exercise thereof or the exercise of any other right. The remedies
herein provided are cumulative and not exclusive of any remedies provided by
law.
SECTION 10.5 COSTS AND EXPENSES. The Borrower shall pay to the Agent
promptly after receipt of notice the full amount of all costs and expenses
("LENDER GROUP EXPENSES"), including reasonable attorneys' fees (to include
outside counsel fees and all allocated costs of the Agent's in-house counsel),
incurred by the Agent in connection with the negotiation, syndication,
preparation, execution and administration of any commitment letter or this
Agreement and each other of the Loan Documents, and the preparation of any
amendments and waivers hereto and thereto; or incurred by the Agent or the
Lender Group in connection with (a) the enforcement of the Lender Group's rights
and/or the collection of any amounts which become due to the Lender Group under
any of the Loan Documents (including, without limitation, in appellate,
bankruptcy, insolvency, liquidation, reorganization, moratorium or other similar
proceedings) or the restructuring of the Loan Documents, and (b) the prosecution
or defense of any action in any way related to any of the Loan Documents,
including, without limitation, any action for declaratory relief.
SECTION 10.6 ASSIGNMENTS AND PARTICIPATIONS. Any Lender may, with
the written consent of the Agent, and, prior to the occurrence and continuance
of an Event of Default, consent of the Borrower, which consent shall not be
unreasonably withheld, conditioned or delayed, assign and delegate to one or
more assignees (each an "Assignee") all, or any ratable part of all, of the
Revolving Loans, the Commitments and the other rights and obligations of such
Lender hereunder and under the other Loan Documents, in a minimum amount of
$5,000,000; provided, however, that the Borrower and the Agent may continue to
deal solely and directly with such Lender in connection with the interest so
assigned to an Assignee until (i) written notice of such assignment, together
with payment instructions, addresses and related information with respect to the
Assignee, shall have been given to the Borrower and the Agent by such Lender and
the Assignee; (ii) such Lender and its Assignee shall have delivered to the
Borrower and the Agent an Assignment and Acceptance; and (iii) the assignor
Lender or Assignee has paid to the Agent for the Agent's sole and separate
account a processing fee in the amount of $3,500. Anything contained herein to
the contrary notwithstanding, the consent of the Agent or the Borrower shall not
be required (and payment of any fees shall not be required) if such assignment
is in connection with any merger, consolidation, sale, transfer, or other
disposition of all or any substantial portion of the business or loan portfolio
of such Lender.
49.
(b) From and after the date that the Agent notifies the assignor Lender
that it has received an executed Assignment and Acceptance and payment of the
above-referenced processing fee, (i) the Assignee thereunder shall be a party
hereto and, to the extent that rights and obligations hereunder have been
assigned to it pursuant to such Assignment and Acceptance, shall have the rights
and obligations of a Lender under the Loan Documents, and (ii) the assignor
Lender shall, to the extent that rights and obligations hereunder and under the
other Loan Documents have been assigned by it pursuant to such Assignment and
Acceptance, relinquish its rights (except with respect to Section 9.7 hereof)
and be released from its obligations under this Agreement (and in the case of an
Assignment and Acceptance covering all or the remaining portion of an assigning
Lender's rights and obligations under this Agreement and the other Loan
Documents, such Lender shall cease to be a party hereto and thereto), and such
assignment shall effect a novation between the Borrower and the Assignee.
(c) By executing and delivering an Assignment and Acceptance, the
assigning Lender thereunder and the Assignee thereunder confirm to and agree
with each other and the other parties hereto as follows: (1) other than as
provided in such Assignment and Acceptance, such assigning Lender makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement or any other Loan Document furnished
pursuant hereto; (2) such assigning Lender makes no representation or warranty
and assumes no responsibility with respect to the financial condition of the
Borrower or the performance or observance by the Borrower of any of its
obligations under this Agreement or any other Loan Document furnished pursuant
hereto; (3) such Assignee confirms that it has received a copy of this
Agreement, together with such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such
Assignment and Acceptance; (4) such Assignee will, independently and without
reliance upon the Agent, such assigning Lender or any other Lender, and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement; (5) such Assignee appoints and authorizes the Agent to take such
action as agent on its behalf and to exercise such powers under this Agreement
as are delegated to the Agent by the terms hereof, together with such powers as
are reasonably incidental thereto; and (6) such Assignee agrees that it will
perform in accordance with their terms all of the obligations which by the terms
of this Agreement are required to be performed by it as a Lender.
(d) Immediately upon each Assignee's making its processing fee payment
under the Assignment and Acceptance, this Agreement shall be deemed to be
amended to the extent, but only to the extent, necessary to reflect the addition
of the Assignee and the resulting adjustment of the Commitments arising
therefrom. The Commitment allocated to each Assignee shall reduce such
Commitments of the assigning Lender pro tanto.
50.
(e) Any Lender may at any time, with the written consent of the Agent,
and, prior to the occurrence and continuance of an Event of default, consent of
the Borrower, which consent shall not be unreasonably withheld, conditioned or
delayed, sell to one or more commercial banks, financial institutions, or other
Persons not Affiliates of such Lender (a "Participant") participating interests
in the Revolving Loans, the Commitment, and the other rights and interests of
that Lender (the "originating Lender") hereunder and under the other Loan
Documents; provided, however, that (i) the originating Lender's obligations
under this Agreement shall remain unchanged, (ii) the originating Lender shall
remain solely responsible for the performance of such obligations, (iii) the
Borrower and the Agent shall continue to deal solely and directly with the
originating Lender in connection with the originating Lender's rights and
obligations under this Agreement and the other Loan Documents, (iv) no Lender
shall transfer or grant any participating interest under which the Participant
has the sole and exclusive right to approve any amendment to, or any consent or
waiver with respect to, this Agreement or any other Loan Document, except to the
extent such amendment to, or consent or waiver with respect to this Agreement or
of any other Loan Document would (A) extend the final maturity date of the
Revolving Loans hereunder in which such Participant is participating; (B) reduce
the interest rate applicable to the Revolving Loans hereunder in which such
Participant is participating; (C) release all or a material portion of the
Collateral or guaranties (except to the extent expressly provided herein or in
any of the Loan Documents) supporting the Obligations hereunder in which such
Participant is participating; (D) postpone the payment of, or reduce the amount
of, the interest or fees payable to such Participant through such Lender; or (E)
change the amount or due dates of scheduled principal repayments or prepayments
or premiums; and (v) all amounts payable by the Borrower hereunder shall be
determined as if such Lender had not sold such participation; except that, if
amounts outstanding under this Agreement are due and unpaid, or shall have been
declared or shall have become due and payable upon the occurrence of an Event of
Default, each Participant shall be deemed to have the right of set-off in
respect of its participating interest in amounts owing under this Agreement to
the same extent as if the amount of its participating interest were owing
directly to it as a Lender under this Agreement. The rights of any Participant
only shall be derivative through the originating Lender with whom such
Participant participates and no Participant shall have any direct rights as to
the other Lenders, the Agent, the Borrower, the Collections, the Collateral, or
otherwise in respect of the Revolving Loans. No Participant shall have the right
to participate directly in the making of decisions by the Lenders among
themselves.
(f) In connection with any such assignment or participation or proposed
assignment or participation, a Lender may disclose all documents and information
which it now or hereafter may have relating to the Borrower or the Borrower's
business.
(g) Any other provision in this Agreement notwithstanding, any Lender
may at any time create a security interest in, or pledge, all or any portion of
its rights under and interest in this Agreement in favor of any Federal Reserve
Bank in accordance with Regulation A of the Federal Reserve Bank or U.S.
Treasury Regulation 31 CFR ss.203.14, and such Federal Reserve Bank may enforce
such pledge or security interest in any manner permitted under applicable law.
51.
SECTION 10.7 EFFECTIVENESS: BINDING EFFECT. This Agreement shall
become effective when it shall have been executed by the Borrower, each member
of the Lender Group whose signature is provided for on the signature page
hereof, and the Agent and thereafter shall be binding upon and inure to the
benefit of the Borrower, each Lender, the Agent, and their respective successors
and assigns, except that the Borrower shall not have the right to assign its
rights hereunder or any interest herein without the prior written consent of the
Lenders.
SECTION 10.8 GOVERNING LAW; CHOICE OF FORUM; SERVICE OF PROCESS;
JURY TRIAL WAIVER.
(a) The validity, interpretation and enforcement of this Agreement and
the other Loan Documents and any dispute arising out of the relationship between
the parties hereto, whether in contract, tort, equity or otherwise, shall be
governed by the internal laws of the State of California (without giving effect
to principles of conflicts of law).
(b) The Borrower, each Lender, and the Agent irrevocably consent and
submit to the non-exclusive jurisdiction of the state courts of the County of
Los Angeles and the United States District Court for the Central District of
California and waive any objection based on venue or FORUM NON CONVENIENS with
respect to any action instituted therein arising under this Agreement or any of
the other Loan Documents or in any way connected with or related or incidental
to the dealings of the parties hereto in respect of this Agreement or any of the
other Loan Documents or the transactions related hereto or thereto, in each case
whether now existing or hereafter arising, and whether in contract, tort, equity
or otherwise, and agree that any dispute with respect to any such matters shall
be heard only in the courts described above.
(c) The Borrower hereby waives personal service of any and all process
upon it and consents that all such service of process may be made by certified
mail (return receipt requested) directed to its address set forth on the
signature pages hereof and service so made shall be deemed to be completed five
(5) days after the same shall have been so deposited in the U.S. mails, or, at
the Agent's option, by service upon the Borrower in any other manner provided
under the rules of any such courts.
(d) THE BORROWER, EACH LENDER, AND THE AGENT EACH HEREBY WAIVES ANY
RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (1)
ARISING UNDER THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR (2) IN ANY
WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES
HERETO IN RESPECT OF THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR THE
TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR
HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. THE
BORROWER, EACH LENDER, AND THE AGENT EACH HEREBY AGREES AND CONSENTS THAT ANY
SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL
WITHOUT A JURY AND THAT THE BORROWER, EACH LENDER, OR THE AGENT MAY FILE AN
ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO
TRIAL BY JURY.
52.
(e) The Lender Group shall not have any liability to the Borrower
(whether in tort, contract, equity or otherwise) for losses suffered by the
Borrower in connection with, arising out of, or in any way related to the
transactions or relationships contemplated by this Agreement, or any act,
omission or event occurring in connection herewith, unless it is determined by a
final and non-appealable judgment or court order binding on the Lender Group,
that the losses were the result of acts or omissions constituting gross
negligence or willful misconduct. In any such litigation, the Lender Group shall
be entitled to the benefit of the rebuttable presumption that it acted in good
faith and with the exercise of ordinary care in the performance by it of the
terms of this Agreement.
SECTION 10.9 WAIVER OF NOTICES. The Borrower hereby expressly waives
demand, presentment, protest and notice of protest and notice of dishonor with
respect to any and all instruments and commercial paper, included in or
evidencing any of the obligations, and any and all other demands and notices of
any kind or nature whatsoever with respect to the obligations and this
Agreement, except such as are expressly provided for herein. No notice to or
demand on the Borrower which the Agent may elect to give shall entitle the
Borrower to any other or further notice or demand in the same, similar or other
circumstances.
SECTION 10.10 DESTRUCTION OF BORROWER'S DOCUMENTS. The Lender Group
will not be obligated to return any schedules, invoices, statements, budgets,
forecasts, reports or other papers delivered by the Borrower. The Lender Group
will destroy or otherwise dispose of such materials at such time as each member
of the Lender Group, in its discretion, deems appropriate.
SECTION 10.11 ENTIRE AGREEMENT. This Agreement with Exhibits and
Schedules and the other Loan Documents embody the entire agreement and
understanding between the parties hereto and supersede all prior agreements and
understandings relating to the subject matter hereof.
SECTION 10.12 SEVERABILITY OF PROVISIONS. In case any one or more of
the provisions contained in this Agreement should be invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected or
impaired thereby.
SECTION 10.13 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 one and the same
agreement.
53.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
AGENT: BORROWER:
- ------ ----------
MELLON BANK, N.A., as Agent SM & A CORPORATION
By: /S/ Richard M. McNiven By: /S/ Ronald A. Hunn
---------------------------- ----------------------------
Name: Richard M. McNiven Name: Ronald A. Hunn
Title: Assistant Vice President Title: VP, CFO & Sec.
Address: Address:
Mellon Bank SM & A Corporation
Mellon Bank Center 4695 Mac Arthur Court
400 South Hope Street 8th Floor
5th Floor Newport Beach, California 92660
Los Angeles, California 90071 Attention: CFO
Attention: Richard M. McNiven, ---------------------
Assistant Vice President
LENDERS:
--------
MELLON BANK, N.A.
By: /S/ Richard M. McNiven
----------------------------
Name: Richard M. McNiven
Title: Assistant Vice President
Address:
Mellon Bank
Mellon Bank Center
400 South Hope Street
5th Floor
Los Angeles, California 90071
Attention: Richard M. McNiven,
Assistant Vice President
54.
IMPERIAL BANK
By: /S/ Denise D. Pardue
----------------------------
Name: Denise D. Pardue
Title: Vice President
Address:
Imperial Bank
695 Town Center Drive
Costa Mesa, California 92626
Attention: Denise D. Pardue
Vice President
55.
SCHEDULE C-1
LENDERS AND COMMITMENT AMOUNTS
NAME OF LENDER REVOLVING COMMITMENT
-------------- --------------------
Mellon Bank, N.A. $15,000,000
Imperial Bank $10,000,000
i
SCHEDULE 5.1(f)
ARTICLE I LITIGATION
ii
SCHEDULE 5.1(i)
ENVIRONMENTAL MATTERS
iii
SCHEDULE 6.1(j)
LOCATION OF INVENTORY AND EQUIPMENT
iv
SCHEDULE 6.2(e)
PERMITTED LIENS
v
AMENDMENT NUMBER ONE TO
CREDIT AND SECURITY AGREEMENT
(SM&A CORPORATION)
THIS AMENDMENT NUMBER ONE TO CREDIT AND SECURITY AGREEMENT
(this "Amendment Number One"), dated as of December 4, 1998, is entered into
between SM&A CORPORATION, a California corporation (the "Borrower"), the
Lenders, and MELLON BANK, N.A., as agent for the Lenders, (in such capacity, the
"Agent"), in light of the following:
WHEREAS, Borrower, Lenders and Agent are parties to that
certain Credit and Security Agreement, dated as of September 11, 1998 (as from
time to time amended, modified, supplemented, renewed, extended, or restated,
including without limitation, by this Amendment Number One, the "Agreement");
and
WHEREAS, Borrower has requested that Agent and the Lenders
amend the Agreement to provide Borrower with a letter of credit facility; and
WHEREAS, the Agent and the Lenders are in agreement to provide
a letter of credit facility to the Borrower as provided in this Amendment;
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. Initially capitalized terms used herein have the meanings
defined in the Agreement unless otherwise defined herein.
2. Section 1.1 of the Agreement hereby is amended by adding or
modifying, as the case may be, the following definitions:
"AMENDMENT NUMBER ONE" means that certain Amendment Number One
to Credit and Security Agreement dated as of December 4, 1998, between the
Borrower, the Lenders and the Agent, including any attachments thereto.
"AVERAGE UNUSED PORTION OF THE REVOLVING COMMITMENT": The
Revolving Commitment LESS the sum of (i) the average daily balance of the
Revolving Facility Usage for the immediately preceding three-month period, PLUS
(ii) the average daily balance of the L/C Usage for the immediately preceding
three-month period.
"CONSOLIDATED NET WORTH": At any date of determination, the
sum of the capital stock, additional paid-in capital and any indebtedness of the
Borrower or its Subsidiaries subordinated as to payment and performance to the
obligations of Borrower to the Lender Group hereunder on terms and conditions
acceptable to the Agent, plus retained earnings (or minus accumulated deficit)
of the Borrower and its consolidated Subsidiaries, on a consolidated basis
determined in conformity with GAAP.
1
"ISSUING BANK" means Mellon Bank, N.A.., or any Lender,
Affiliate of any Lender or, if none of the foregoing are capable of issuing
L/Cs, such other financial institution acceptable to the Agent and the Borrower
which may at any time issue or be requested to issue an L/C for the account of
the Borrower under this Agreement. If there is more than one Issuing Bank, all
references to "the Issuing Bank" shall be deemed to refer to each Issuing Bank
or to all Issuing Banks, as the context requires.
"L/C": Has the meaning set forth in Section 2.4A.
"L/C USAGE": As of the date of determination, the sum of (i)
the undrawn amount of outstanding L/Cs, PLUS (ii) the amount of unreimbursed
drawings under L/Cs.
"LETTER OF CREDIT REQUEST": Has the meaning set forth in
Section 2.4A.
"OBLIGATIONS": All loans, Revolving Loans, debts, principal,
interest (including any interest that, but for the provisions of the Bankruptcy
Code, would have accrued), premiums, liabilities (including all amounts charged
to the Borrower's Loan Account pursuant hereto), obligations, fees, charges,
costs, or Lender Group Expenses (including any fees or expenses that, but for
the provisions of the Bankruptcy Code, would have accrued), lease payments,
guaranties, covenants, and duties owing by the Borrower to the Lender Group or
the Issuing Bank of any kind and description (whether pursuant to or evidenced
by the Loan Documents or pursuant to any other agreement between the Lender
Group or the Issuing Bank and the Borrower, and irrespective of whether for the
payment of money), whether direct or indirect, absolute or contingent, due or to
become due, now existing or hereafter arising, and including any debt,
liability, or obligation owing from the Borrower to others that the Lender Group
or the Issuing Bank may have obtained by assignment or otherwise, and further
including all interest not paid when due and all Lender Group Expenses that the
Borrower is required to pay or reimburse by the Loan Documents, by law, or
otherwise.
3. SECTION 1.1 of the Agreement is amended by deleting
therefrom the defined term "Consolidated Tangible Net Worth".
4. SECTION 2.1(a) of the Agreement is amended to read in its
entirety as follows:
(a) THE REVOLVING COMMITMENT. Each Lender agrees,
severally and not jointly, on the terms and conditions
hereinafter set forth, to make loans ("REVOLVING LOANS") to
the Borrower from time to time during the period from the date
hereof to and including the Maturity Date in an aggregate
amount not to exceed such Lender's Pro Rata Share of the
Revolving Commitment, less the undrawn and unreimbursed amount
of L/Cs, as such amount may be reduced pursuant to SECTION
2.1(b). Each borrowing under this SECTION 2.4(a) shall be in a
minimum amount of $1.00; provided that every selection of,
conversion to or renewal of the Libor Rate Option shall be in
a minimum principal amount of $500,000 or an integral multiple
of $100,000 above such amount. Within the limits of the
Revolving Commitment and prior to the Maturity Date, the
Borrower may borrow, repay pursuant to Section 2.3(b) and
reborrow under this Section.
2
5. SECTION 2.1(d) of the Agreement is amended to read in its
entirety as follows:
(d) LIMITATION ON REVOLVING LOANS. The Lenders shall
have no obligation to make Revolving Loans hereunder to the
extent they would cause the outstanding amount of Revolving
Loans plus the L/C Usage to exceed the Revolving Commitment.
6. The Agreement is hereby amended to add the following as a
new Section 2.4A.
SECTION 2.4A LETTERS OF CREDIT.
(a) ISSUANCE OF LETTERS OF CREDIT. Subject to the
terms and conditions set forth in this Agreement, the Agent
may from time to time cause the Issuing Bank to issue Letters
of Credit (each, an "L/C") hereunder at the request of the
Borrower and for the Borrower's account, as more specifically
described below. The L/C's issued under the SECTION 2.4A shall
be used by the Borrower consistent with this Agreement, for
its general working capital purposes or other ordinary course
business purposes. The Agent shall not be obligated to cause
the Issuing Bank to issue any L/C for the account of any
Borrower if:
(i) Issuance of the requested L/C (i) would
cause the L/C Usage to exceed $2,000,000 or (ii)
would cause the sum of the Revolving Facility Usage
PLUS the L/C Usage to exceed the total Revolving
Commitment then in effect; or
(ii) Issuance of the L/C is enjoined,
restrained or prohibited by any governmental
authority, requirement of any applicable law, rule or
regulation or any request or directive of any
governmental authority (whether or not having the
force of law) or would impose upon the Agent or the
Issuing Bank any material restriction, reserve,
capital requirement, loss, cost or expense (for which
the Agent or the Issuing Bank is not otherwise
compensated); or
(iii) A default of any Lender's obligations
to fund under SUBSECTION 2.4A(f) exists, unless the
Agent and the Issuing Bank have entered into
satisfactory arrangements with the Borrower to
eliminate the Issuing Bank's risk with respect to
such Lender, including cash collateralization of such
Lender's Pro Rata Share of the L/C Usage.
(b) TERMS OF LETTERS OF CREDIT. The proposed amount,
terms and conditions, and form of each L/C (and of any drafts
or acceptances thereunder) shall be subject to approval by the
Agent and the Issuing Bank. The term of each standby L/C shall
not exceed 360 days, but may be subject to annual renewal. No
L/C shall have an expiry date later than the Maturity Date.
3
(c) REQUEST FOR ISSUANCE. A request for issuance of
an L/C in the form of Exhibit LCR (a "LETTER OF CREDIT
REQUEST") may be given in writing or electronically and, if
requested by the Agent, promptly confirmed in writing. A
Letter of Credit Request must be received by the Agent no
later than 9:00 A.M. Los Angeles time at least three (3)
Business Days (or such shorter period as may be agreed to by
the Issuing Bank) in advance of the proposed date of issuance.
(d) LENDER'S PARTICIPATION. Immediately upon issuance
or amendment of any L/C, each Lender shall be deemed to have
irrevocably and unconditionally purchased and received from
the Issuing Bank, without recourse or warranty, an undivided
interest and participation in all rights and obligations under
such L/C (other than fees and other amounts owing to the
Issuing Bank) in accordance with such Lender's Pro Rata Share.
(e) PAYMENT OF AMOUNTS DRAWN UNDER L/Cs. Upon notice
from the Issuing Bank of any drawing under any L/C, the Agent
which shall notify the Borrower of such drawing not later than
12:00 P.M. Los Angeles time on the Business Day immediately
prior to the date on which the Issuing Bank intends to honor
such drawing. The Borrower will be deemed to have concurrently
given a Standard Notice to the Agent for Revolving Loans to be
made as Prime Rate Loans in the amount of and at the time of
such drawing. The proceeds of such Revolving Loans shall be
applied directly by the Agent to reimburse the Issuing Bank
for the amount of such drawing.
(f) PAYMENT BY LENDERS. If Revolving Loans are not
made in an amount sufficient to reimburse the Issuing Bank in
full for the amount of any draw, the Agent shall promptly
notify each Lender of the unreimbursed amount of such drawing
and of such Lender's respective participation therein. Each
Lender shall make available to the Agent, for the account of
the Issuing Bank, the amount of its participation in
immediately available funds not later than 12:00 P.M. Los
Angeles time on the next Business Day. If any Lender fails to
make available to the Agent the amount of such Lender's
participation, the Issuing Bank shall be entitled to recover
such amount on demand from such Lender together with interest
at the Federal Funds Rate for the first three Business Days
and thereafter at the Prime Rate. For each L/C, the Agent
shall promptly distribute to each Lender which has funded the
amount of its participation its Pro Rata Share of all payments
subsequently received by the Agent from the Borrower in
reimbursement of honored drawings thereunder.
4
(g) NATURE OF ISSUING BANK'S DUTIES. In determining
whether to pay under any L/C, the Issuing Bank shall be
responsible only to determine that the documents and
certificates required to be delivered under that L/C have been
delivered and that they comply on their face with the
requirements of that L/C. As among the Borrower, the Issuing
Bank and each other Lender, the Borrower assumes all risks of
the acts and omissions of the Issuing Bank, or misuse of the
L/C by the respective beneficiaries of such L/C. Any action
taken or omitted to be taken by the Issuing Bank under or in
connection with any L/C, if taken or omitted in the absence of
gross negligence or willful misconduct, shall not create for
the Issuing Bank any liability to any Borrower, the Agent or
any Lender.
(h) OBLIGATIONS ABSOLUTE. The obligations of the
Borrower to reimburse the Issuing Bank for drawings honored
under the L/Cs issued for the account of the Borrower and the
obligations of the Lenders under SUBSECTION 2.4A(f) shall be
unconditional and irrevocable and shall be paid strictly in
accordance with the terms of this Agreement under all
circumstances including, without limitation, the fact that an
Event of Default shall have occurred and be continuing.
(i) AGENT'S EXECUTION OF APPLICATIONS AND OTHER
ISSUING BANK DOCUMENTATION; RELIANCE ON AGREEMENT BY ISSUING
BANK. The Agent shall be authorized to execute, deliver and
perform on behalf of the Lenders such letter of credit
applications, shipping indemnities, letter of credit
modifications and consents and other undertakings for the
benefit of the Issuing Bank as may be reasonably necessary or
appropriate in connection with the issuance or modification of
L/Cs requested by the Borrower hereunder. The Lenders, the
Agent and the Borrower all expressly agree that the terms of
this Section 2.4A and various other provisions of this
Agreement identifying the Issuing Bank are also intended to
benefit the Issuing Bank and the Issuing Bank shall be
entitled to enforce the provisions hereof which are for its
benefit.
(j) ADDITIONAL PAYMENTS. If by reason of (a) any
change in any legal requirement or any change in the
interpretation or application by any governmental authority of
any legal requirement or (b) compliance by the Issuing Bank or
any Lender with any direction, request or requirement (whether
or not having the force of law) of any governmental authority
or monetary authority including, without limitation,
Regulation D of the Board of Governors of the Federal Reserve
System as from time to time in effect (and any successor
thereto):
(i) any reserve, deposit or similar
requirement is or shall be applicable, imposed or
modified in respect of any L/Cs issued by the Issuing
Bank or participations therein purchased by any
Lender; or
(ii) there shall be imposed on the Issuing
Bank or any Lender any other condition regarding this
SUBSECTION 2.4A(j), any L/C or any participation
therein;
5
and the result of the foregoing is to directly or indirectly
increase the cost to the Issuing Bank or any Lender of
issuing, making or maintaining any L/C or of purchasing or
maintaining any participation therein, or to reduce the amount
receivable in respect thereof by such Issuing Bank or any
Lender, then, and in any such case, the Issuing Bank or such
Lender may, at any time within a reasonable period after the
additional cost is incurred or the amount received is reduced,
notify the Borrower, and the Borrower shall pay on demand such
amounts as the Issuing Bank or such Lender may specify to be
necessary to compensate the Issuing Bank or such Lender for
such additional cost or reduced receipt, together with
interest on such amount from the date of such demand until
payment in full thereof at a rate equal at all times to the
Prime Rate PER ANNUM. The determination by the Issuing Bank or
any Lender, as the case may be, of any amount due pursuant to
this subsection, as set forth in a certificate setting forth
the calculation thereof in reasonable detail, shall, in the
absence of manifest or demonstrable error, be final and
conclusive and binding on all of the parties hereto.
(k) Immediately upon the termination of this
Agreement, Borrower agrees to either: (i) provide cash
collateral, if requested by the Agent, to be held by Agent in
an amount equal to one hundred percent (100%) of the maximum
amount of the Lender Group's obligations under outstanding
L/Cs, or (ii) cause to be delivered to the Agent releases of
all of the Lender Group's obligations under outstanding L/Cs.
At the Agent's discretion, any proceeds of collateral received
by any Lender or the Issuing Bank after the occurrence and
during the continuation of an Event of Default may be held as
the cash collateral required by this SECTION 2.4A(k). Any cash
collateral received by any Lender or the Issuing Bank pursuant
to this SECTION 2.4A(k) shall be held by such Lender or the
Issuing Bank in an interest bearing account selected by the
Agent in its reasonable credit judgment, and interest earned
on deposits in such account, if any, shall be for the account
of the Borrower subject to the provisions of this Agreement.
The provisions of this SECTION 2.4A shall survive the
termination of this Agreement with respect to any L/Cs then
outstanding.
7. SECTION 2.5(b) of the Agreement is amended to read in its
entirety as follows:
(b) UNUSED LINE FEE. The Borrower shall pay to the
Agent for the ratable benefit of the Lender Group, a fee (the
"Unused Line Fee") in an amount equal to the Applicable Unused
Line Rate times the Average Unused Portion of the Revolving
Commitment. The Unused Line Fee shall be payable in arrears,
commencing on the first Business Day of January 1, 1999, and
thereafter (i) on the first Business Day of each three-month
period during the term of this Agreement, (ii) on the date of
any reduction of the Revolving Commitment (to the extent
accrued and unpaid on the amount of such reduction), and (iii)
on the Maturity Date; and
6
8. The Agreement is hereby amended to add the following as a
new subsection (d) to SECTION 2.5.
(d) LETTER OF CREDIT FEES
(i) Borrower shall pay to the Agent for the
ratable benefit of the Lenders on the first Business
Day of each month a fee (the "LETTER OF CREDIT
FEES"), in an amount equal to (i) the rate PER ANNUM
equal to the Applicable Libor Rate Margin of the
daily weighted average amount of undrawn and
unreimbursed standby L/Cs outstanding for the account
of the Borrower during the immediately preceding
month, with a minimum charge of $250 per standby L/C,
subject to change in the future in accordance with
Issuing Bank's standard fee schedule, (ii) the
Issuing Bank's customary opening fee for each
documentary L/C issued for the account of the
Borrower during the immediately preceding month,
(iii) the Issuing Bank's customary negotiation fee
for amounts drawn under each documentary L/C issued
for the account of the Borrower during the
immediately preceding month, and (iv) the Issuing
Bank's customary guaranty fee on the maximum amount
available to be drawn under each documentary L/C
guaranteed for the account of the Borrower hereunder
and outstanding during the immediately preceding
month. The rate applicable pursuant to this
SUBSECTION 2.5(d)(i) shall change each day the
Applicable Libor Rate Margin changes. Notwithstanding
the foregoing, Letter of Credit Fees on undrawn and
unencumbered L/Cs outstanding after the occurrence
and during the continuance of an Event of Default
shall be payable on demand at a rate equal to the
rate at which the Letter of Credit Fees are charged
pursuant to the first sentence of this SUBSECTION
2.5(d)(i), PLUS 2% PER ANNUM.
(ii) The Borrower shall also pay the
customary charges, fees and expenses of the Issuing
Bank for the issuance, administration and negotiation
of each L/C for the account of the Borrower and the
Agent shall be entitled to charge to the Loan Account
such fees, charges and expenses of the Issuing Bank
(in each case, the "Issuing Bank Fees"). Each
determination by the Agent of Letter of Credit Fees,
Issuing Bank Fees and other fees, charges and
expenses under this Section shall be conclusive and
binding for all purposes, absent manifest or
demonstrable error.
9. The first sentence of SECTION 3.6 of the Agreement is
amended to read in its entirety as follows:
Whether or not the transactions contemplated hereby shall be
consummated, the Borrower agrees to indemnify, pay and hold the Lender Group and
the Issuing Bank, and the shareholders, officers, directors, employees and
7
agents of the Lender Group and the Issuing Bank (each, an "INDEMNIFIED PERSON"),
harmless from and against any and all claims, liabilities, losses, damages,
costs and expenses (whether or not any of the foregoing Indemnified Persons is a
party to any litigation), including, without limitation, reasonable attorneys'
fees and costs (including, without limitation, the reasonable estimate of the
allocated cost of in-house legal counsel and staff) and costs of investigation,
document production, attendance at a deposition, or other discovery, prior to
the assumption of defense by the Borrower, with respect to or arising out of any
proposed acquisition by the Borrower or any of its Subsidiaries of any Person or
any securities (including a self-tender), this Agreement or any use of proceeds
hereunder, or any claim, demand, action or cause of action being asserted
against the Borrower or any of its Subsidiaries (collectively, the "INDEMNIFIED
LIABILITIES"), provided that the Borrower shall have no obligation hereunder
with respect to Indemnified Liabilities arising from the gross negligence or
willful misconduct of any such Indemnified Persons.
10. SECTION 4.2 of the Agreement is amended to read in its
entirety as follows:
SECTION 4.2 CONDITIONS PRECEDENT TO EACH BORROWING. The
obligation of the Lender Group (or any member thereof) to make a Loan on the
occasion of each Borrowing (including the initial Borrowing) or of the Agent to
cause the Issuing Bank to issue any requested L/C shall be subject to the
further conditions precedent that on the date of such Borrowing, or Letter of
Credit Request, the following statements shall be true and the Agent shall have
received the notice required by SECTION 2.1(b), which notice shall be deemed to
be a certification by the Borrower that:
(i) The representations and warranties contained in Section
5.1 are correct on and as of the date of such Borrowing, or
Letter of Credit Request, as though made on and as of such
date;
(ii) No event has occurred and is continuing, or would result
from such Borrowing, or Letter of Credit Request, which
constitutes an Event of Default or Potential Event of Default;
(iii) Nothing shall have occurred and the Agent shall not have
become aware of any fact or condition not previously known,
which the Agent shall determine has, or could reasonably be
expected to have, a material adverse effect on the rights or
remedies of the Lender Group, or on the ability of the
Borrower to perform its obligations to the Lender Group or
which has, or could reasonably be expected to have, a
materially adverse effect on the performance, business,
property, assets, condition (financial or otherwise) or
prospects of the Borrower and its Subsidiaries taken as a
whole; and
(iv) The security interests and liens in favor of the Lender
Group are valid, enforceable, and prior to all others' rights
and interests, except those the Agent consents to in writing;
and
8
(v) All Loan Documents are in full force and effect;
and (b) the Agent shall have received such other approvals, opinions or
documents as the Agent may reasonably request.
11. Subsection 6.2(a) of the Agreement is hereby amended to
read in its entirety as follows:
(a) (a) CONSOLIDATED NET WORTH. At any time, permit
Consolidated Net Worth to be less than $35,000,000; which such minimum amount of
Consolidated Net Worth shall be increased (i) at the end of each fiscal quarter
of the Borrower, commencing with Borrower's fiscal quarter ending June 30, 1998,
by an amount equal to 75% of the consolidated net income of Borrower for such
fiscal quarter, determined in accordance with GAAP, PROVIDED, HOWEVER, that if
Borrower's net income for any fiscal quarter, determined in accordance with
GAAP, shall be less than zero, then no adjustment to such minimum amount of
Consolidate Net Worth shall be made; and (ii) at such time Borrower shall issue
equity securities, by an amount equal to 100% of the issuance proceeds (net of
ordinary and customary underwriters' discounts and commissions, and costs, fees,
and expenses incurred in connection with such issuance).
12. SUBSECTION 6.2(f) of the Agreement is hereby amended to
read in its entirety as follows:
(f) DEBT. Create, incur, assume or permit to exist, or permit
any Subsidiary, to create, incur, assume or permit to exist, any direct or
contingent indebtedness, liabilities or lease obligations (other than those to
the Lender Group or the Issuing Bank), or become liable for the debts of others
without the Agent's written consent, except for (i) acquiring goods, supplies or
merchandise on normal trade credit; (ii) endorsing negotiable instruments
received in the usual course of business; (iii) obtaining surety bonds in the
usual course of business, (iv) the indebtedness of the Borrower and its
Subsidiaries existing as of, and disclosed to the Agent prior to the date of
this Agreement; (v) secured indebtedness, in the aggregate, for purchase money
financing of equipment which is permitted under SECTION 6.2(e)(ii) hereof and
obligations under Capital Leases not to exceed $1,000,000 outstanding at any
time; and (vi) operating leases.
13. The first three (3) sentences of SECTION 9.1 of the
Agreement are hereby amended to read in their entirety as follows:
Each Lender hereby designates and appoints Mellon Bank, N.A.
as its agent under this Agreement and the other Loan Documents and each Lender
and the Issuing Bank (by its acceptance of the benefits hereof) hereby
irrevocably authorizes the Agent to take such action on its behalf under the
provisions of this Agreement and each other Loan Document and to exercise such
powers and perform such duties as are expressly delegated to it by the terms of
this Agreement or any other Loan Document, together with such powers as are
reasonably incidental thereto. The Agent agrees to act as such on the express
conditions contained in this ARTICLE IX. The provisions of this ARTICLE IX are
solely for the benefit of the Agent, the Agent-Related Persons, the Lenders and
the Issuing Bank; the Borrower shall have no rights as a third party beneficiary
of any of the provisions contained herein; provided, however, that certain of
the provisions of SECTION 9.10 hereof also shall be for the benefit of the
Borrower.
9
14. SECTION 10.1 of the Agreement is hereby amended to read in
its entirety as follows:
SECTION 10.1 AMENDMENTS, ETC. No amendment or waiver of any
provision of the Loan Documents nor consent to any departure by the Borrower
therefrom, shall in any event be effective unless the same shall be in writing
and signed by the Required Lenders (or by the Agent at the written request of
the Required Lenders), and then such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given; PROVIDED,
HOWEVER, that no such waiver, amendment, or consent shall, unless in writing and
signed by all the Lenders and the Borrower and acknowledged by the Agent, do any
of the following:
a. increase or extend the Commitment of any Lender;
b. postpone or delay any date fixed by this Agreement or any
other Loan Document for any payment of principal, interest,
fees or other amounts due to the Lenders (or any of them)
hereunder or under any other Loan Document;
c. reduce the outstanding principal of, or the rate of
interest specified herein on the Revolving Loans (except
for pricing adjustments resulting from the application of
the appropriate Applicable Margin), or any fees or other
amounts payable hereunder or under any other Loan Document;
d. change the percentage of the Commitments that is required
for the Lenders or any of them to take any action
hereunder;
e. amend this Section or any provision of the Agreement
providing for consent or other action by all the Lenders;
f. release Collateral other than as permitted by Section 8.11;
g. change the definition of "Required Lenders";
h. release the Borrower from any obligation for the payment of
money; or
i. amend any of the provisions of Article IX.
and, provided further, however, that no amendment, waiver or consent shall,
unless in writing and signed by the Agent or the Issuing Bank, as the case may
be, affect the rights or duties of the Agent or the Issuing Bank under this
Agreement or any other Loan Document. The foregoing notwithstanding, any
amendment, modification, waiver, consent, termination, or release of or with
respect to any provision of this Agreement or any other Loan Document that
relates only to the relationship of the Lender Group among themselves, and that
does not affect the rights or obligations of the Borrower, shall not require
consent by or the agreement of the Borrower.
10
15. SECTION 10.3 of the Agreement is hereby amended to read in
its entirety as follows:
SECTION 10.3 RIGHT OF SETOFF. Upon and only after the
occurrence of any uncured Event of Default, the Agent, each Lender and the
Issuing Bank is hereby authorized by the Borrower, at any time and from time to
time, without notice, (a) to set off against, and to appropriate and apply to
the payment of, the obligations and liabilities of the Borrower under the Loan
Documents (whether matured or unmatured, fixed or contingent or liquidated or
unliquidated) any and all amounts owing by any member of the Lender Group to the
Borrower (whether payable in Dollars or any other currency, whether matured or
unmatured, and, in the case of deposits, whether general or special, time or
demand and however evidenced) and (b) pending any such action, to the extent
necessary, to hold such amounts as collateral to secure such obligations and
liabilities and to return as unpaid for insufficient funds any and all checks
and other items drawn against any deposits so held as the Agent, any Lender or
the Issuing Bank in its sole discretion may elect. Each member of the Lender
Group and the Issuing Bank is authorized to debit any account maintained with it
by the Borrower for any amount of principal, interest or fees which are then due
and owing to the Lender Group.
16. SECTION 10.5 of the Agreement is hereby amended to read in
its entirety as follows:
SECTION 10.5 COSTS AND EXPENSES. The Borrower shall pay to the
Agent promptly after receipt of notice the full amount of all costs and expenses
("LENDER GROUP EXPENSES"), including reasonable attorneys' fees (to include
outside counsel fees and all allocated costs of the Agent's in-house counsel),
incurred by the Agent in connection with the negotiation, syndication,
preparation, execution and administration of any commitment letter or this
Agreement and each other of the Loan Documents, and the preparation of any
amendments and waivers hereto and thereto; or incurred by the Agent, the Lender
Group or the Issuing Bank in connection with (a) the enforcement of the Lender
Group's or the Issuing Bank's rights and/or the collection of any amounts which
become due to the Lender Group or the Issuing Bank under any of the Loan
Documents (including, without limitation, in appellate, bankruptcy, insolvency,
liquidation, reorganization, moratorium or other similar proceedings) or the
restructuring of the Loan Documents, and (b) the prosecution or defense of any
action in any way related to any of the Loan Documents, including, without
limitation, any action for declaratory relief.
17. SUBSECTIONS (b), (d) AND (e) of SECTION 10.8 of the
Agreement are hereby amended to read in their entirety as follows:
11
(b) The Borrower, each Lender, the Issuing Bank and
the Agent irrevocably consent and submit to the non-exclusive
jurisdiction of the state courts of the County of Los Angeles
and the United States District Court for the Central District
of California and waive any objection based on venue or FORUM
NON CONVENIENS with respect to any action instituted therein
arising under this Agreement or any of the other Loan
Documents or in any way connected with or related or
incidental to the dealings of the parties hereto in respect of
this Agreement or any of the other Loan Documents or the
transactions related hereto or thereto, in each case whether
now existing or hereafter arising, and whether in contract,
tort, equity or otherwise, and agree that any dispute with
respect to any such matters shall be heard only in the courts
described above.
(d) THE BORROWER, EACH LENDER, THE ISSUING BANK, AND
THE AGENT EACH HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY
CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (1) ARISING UNDER
THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR (2) IN
ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE
DEALINGS OF THE PARTIES HERETO IN RESPECT OF THIS AGREEMENT OR
ANY OF THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS RELATED
HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR
HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR
OTHERWISE. THE BORROWER, EACH LENDER, THE ISSUING BANK, AND
THE AGENT EACH HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT
TRIAL WITHOUT A JURY AND THAT THE BORROWER, EACH LENDER, OR
THE AGENT MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS
AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF
THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY
JURY.
(e) Neither the Lender Group nor the Issuing Bank
shall have any liability to the Borrower (whether in tort,
contract, equity or otherwise) for losses suffered by the
Borrower in connection with, arising out of, or in any way
related to the transactions or relationships contemplated by
this Agreement, or any act, omission or event occurring in
connection herewith, unless it is determined by a final and
non-appealable judgment or court order binding on the Lender
Group or the Issuing Bank, as the case may be, that the losses
were the result of acts or omissions constituting gross
12
negligence or willful misconduct. In any such litigation, the
Lender Group or the Issuing Bank, as the case may be, shall be
entitled to the benefit of the rebuttable presumption that it
acted in good faith and with the exercise of ordinary care in
the performance by it of the terms of this Agreement.
18. The Agreement, and all rights and obligations of the
parties thereto with respect thereto, shall be governed by and construed and
interpreted in accordance with SECTION 10.8 of the Agreement. The jury trial
waiver contained in the Agreement remains in full force and effect.
19. Borrower represents and warrants to the Lender Group as
follows: (a) The execution, delivery, and performance by Borrower of this
Amendment Number One has been duly authorized by all necessary corporate and
other action and do not and will not require by the Borrower any registration
with, consent or approval of, or notice to or action by, any Person in order to
be effective and enforceable, (b) the Agreement, as amended by this Amendment
Number One, constitutes the legal, valid, and binding obligation of Borrower,
enforceable against Borrower in accordance with its terms, without defense,
counterclaim, or offset, (c) the representations and warranties of the Borrower
in this Amendment Number One, the Agreement as amended by this Amendment Number
One, and the other Loan Documents shall be true and correct in all respects on
and as of the date hereof, as though made on such date (except to the extent
that such representations and warranties relate solely to an earlier date), and
(d) to the Borrower's actual knowledge, no injunction, writ, restraining order,
or other order of any nature prohibiting, directly or indirectly, the
consummation of the transactions contemplated herein shall have been issued and
remain in force by any governmental authority against the Borrower or the Lender
Group.
20. Except as herein expressly amended or modified by this
Amendment Number One, all terms, covenants and provisions of the Agreement are
and shall remain in full force and effect and all references therein to the
Agreement shall henceforth refer to the Agreement as amended by this Amendment
Number One. This Amendment Number One shall be deemed incorporated into, and a
part of, the Agreement.
21. This Amendment Number One, together with the Agreement and
the other Loan Documents, contains the entire and exclusive agreement of the
parties hereto with reference to the matters discussed herein and therein. This
Amendment Number One supersedes all prior drafts and communications with respect
thereto. This Amendment Number One may not be amended except in writing executed
by both of the parties hereto.
22. If any term or provision of this Amendment Number One
shall be deemed prohibited by or invalid under any applicable law, such
provision shall be invalidated without affecting the remaining provisions of
this Amendment Number One or the Agreement, respectively.
13
23. This Amendment Number One shall not be effective until the
following conditions precedent are satisfied (or waived by the Lender Group in
their sole and absolute discretion): (a) Each party named on the signature pages
of this Amendment Number One has executed and delivered a counterpart of this
Amendment Number One, and (b) Lender Group shall have received such opinions of
counsel to Borrower as Lender Group may require, which opinions shall be
satisfactory in form and substance to Lender Group.
24. This Amendment Number One may be executed in any number of
counterparts, each of which shall be deemed an original, and all such
counterparts together shall constitute but one and the same instrument. Delivery
of an executed counterpart of this Amendment Number One by telefacsimile shall
be equally as effective as delivery of an original executed counterpart of this
Amendment Number One. Any party delivering an executed counterpart of this
Amendment Number One by telefacsimile also shall deliver an original executed
counterpart of this Amendment Number One but the failure to deliver an original
executed counterpart shall not affect the validity, enforceability, and binding
effect of this Amendment Number One.
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PAGE}
14
IN WITNESS HEREOF, this Amendment Number One has been executed
and delivered as of the date first set forth of above.
AGENT: BORROWER:
- ------ ---------
MELLON BANK, N.A., as Agent SM&A CORPORATION
By: /s/ Richard M. McNiven By: /s/ Kenneth W. Colbaugh
--------------------------------- -------------------------------
Name: Richard M. McNiven Name: Kenneth W. Colbaugh
Title: Assistant Vice President Title: Executive Vice President and
Chief Operations Officer
Address: Address:
Mellon Bank SM&A Corporation
Mellon Bank Center 4695 MacArthur Court
400 South Hope Street 8th Floor
5th Floor Newport Beach, California 92660
Los Angeles, California 90071 Attention: Kenneth W. Colbaugh
Executive Vice President and
Attention: Richard M. McNiven, Chief Operations Officer
Assistant Vice President
LENDERS:
--------
MELLON BANK, N.A.
By: /s/ Richard M. McNiven
---------------------------------
Name: Richard M. McNiven
Title: Assistant Vice President
Address:
Mellon Bank
Mellon Bank Center
400 South Hope Street
5th Floor
Los Angeles, California 90071
Attention: Richard M. McNiven
Assistant Vice President
IMPERIAL BANK
By: /s/ Denise D. Pardue
--------------------------------
Name: Denise D. Pardue
Title: Vice President
Address:
Imperial Bank
695 Town Center Drive
Costa Mesa, California 92626
Attention: Denise D. Pardue
Vice President
15