CREDIT AGREEMENT
Among
ePlus inc.
And its Subsidiaries Named Herein
And
Certain Banking Institutions Named Herein
With
NATIONAL CITY BANK
As Administrative Agent
September 23, 2005
Table of Contents
Page
ARTICLE I CERTAIN DEFINITIONS..................................................................................1
Section 1.1 Definitions.........................................................................1
Section 1.2 Accounting Terms...................................................................16
ARTICLE II THE CREDIT FACILITY................................................................................16
Section 2.1 The Loans..........................................................................16
Section 2.2 The Notes..........................................................................17
Section 2.3 Funding Procedures.................................................................18
Section 2.4 Interest...........................................................................19
Section 2.5 Swing Line Loans...................................................................20
Section 2.6 Procedure for Swing Line Borrowing; Refunding of Swing Line
Loans.............................................................................21
Section 2.7 Fees...............................................................................22
Section 2.8 Reduction or Termination of Commitment.............................................23
Section 2.9 Loan Prepayments (Optional and Mandatory)..........................................23
Section 2.10 Payments...........................................................................24
Section 2.11 Changes in Circumstances; Yield Protection.........................................25
Section 2.12 Illegality.........................................................................27
ARTICLE III REPRESENTATIONS AND WARRANTIES....................................................................27
Section 3.1 Organization, Standing.............................................................27
Section 3.2 Corporate Authority, Validity, Etc.................................................27
Section 3.3 Litigation.........................................................................28
Section 3.4 ERISA..............................................................................28
Section 3.5 Financial Statements...............................................................28
Section 3.6 Not in Default, Judgments, Etc.....................................................29
Section 3.7 Taxes..............................................................................29
Section 3.8 Permits, Licenses, Etc.............................................................29
Section 3.9 No Materially Adverse Contracts, Etc...............................................29
Section 3.10 Compliance with Laws, Etc..........................................................29
Section 3.11 Solvency...........................................................................30
Section 3.12 Subsidiaries, Etc..................................................................30
Section 3.13 Title to Properties, Leases........................................................30
Section 3.14 Public Utility Holding Company; Investment Company.................................30
Section 3.15 Margin Stock.......................................................................31
Section 3.16 Use of Proceeds....................................................................31
Section 3.17 Disclosure Generally...............................................................31
Section 3.18 No Material Adverse Effect.........................................................31
Section 3.19 Insurance..........................................................................31
ARTICLE IV CONDITIONS PRECEDENT...............................................................................32
Section 4.1 All Loans..........................................................................32
Section 4.2 Conditions to First Loan...........................................................32
ARTICLE V AFFIRMATIVE COVENANTS...............................................................................34
Section 5.1 Financial Statements and Reports...................................................34
Section 5.2 Corporate Existence................................................................37
Section 5.3 ERISA..............................................................................37
Section 5.4 Compliance with Regulations........................................................37
Section 5.5 Conduct of Business; Permits and Approvals, Compliance with
Laws..............................................................................37
Section 5.6 Maintenance of Property; Insurance.................................................37
Section 5.7 Payment of Debt; Payment of Taxes, Etc.............................................37
Section 5.8 Notice of Events...................................................................38
Section 5.9 Inspection Rights..................................................................38
Section 5.10 Books and Records..................................................................39
Section 5.11 Compliance with Material Contracts.................................................39
Section 5.12 Use of Proceeds....................................................................39
Section 5.13 Further Assurances.................................................................39
Section 5.14 Restrictive Covenants in Other Agreements..........................................39
Section 5.15 Hedge Agreements...................................................................39
ARTICLE VI NEGATIVE COVENANTS.................................................................................41
Section 6.1 Consolidation and Merger...........................................................41
Section 6.2 Debt...............................................................................41
Section 6.3 Liens..............................................................................41
Section 6.4 Guarantees.........................................................................41
Section 6.5 Margin Stock.......................................................................41
Section 6.6 Acquisitions and Investments.......................................................41
Section 6.7 Transfer of Assets; Nature of Business.............................................42
Section 6.8 Restricted Payments................................................................42
Section 6.9 Change of Management...............................................................42
Section 6.10 Limitation on Capital Expenditures.................................................42
Section 6.11 Limitation on Optional Payments and Modification of
Indebtedness......................................................................42
Section 6.12 Accounting Change..................................................................43
Section 6.13 Transactions with Affiliates.......................................................43
Section 6.14 Restriction on Amendment of This Agreement.........................................43
Section 6.15 Restriction on Hedge Arrangements..................................................43
Section 6.16 Restriction on Mexican Subsidiary..................................................44
Section 6.17 Restriction on Transfers from Borrowers to Non-Borrower
Subsidiaries of Borrowers.........................................................44
ARTICLE VII FINANCIAL COVENANTS...............................................................................44
Section 7.1 Maximum Recourse Leverage..........................................................44
Section 7.2 Maximum Recourse Debt to EBITDA....................................................44
Section 7.3 Interest Coverage Ratio............................................................44
Section 7.4 Minimum Net Worth..................................................................44
Section 7.5 Borrowing Base.....................................................................44
Section 7.6 Delinquency of Portfolio...........................................................45
ARTICLE VIII DEFAULT..........................................................................................45
Section 8.1 Events of Default..................................................................45
ARTICLE IX COLLATERAL.........................................................................................48
Section 9.1 Collateral.........................................................................48
ARTICLE X ADMINISTRATIVE AGENT................................................................................48
Section 10.1 Appointment and Authorization......................................................48
Section 10.2 Duties and Obligations.............................................................48
Section 10.3 The Administrative Agent as a Bank.................................................49
Section 10.4 Independent Credit Decisions.......................................................49
Section 10.5 Indemnification....................................................................50
Section 10.6 Successor Administrative Agent.....................................................50
Section 10.7 Allocations Made By the Administrative Agent.......................................50
ARTICLE XI MISCELLANEOUS......................................................................................51
Section 11.1 Waiver.............................................................................51
Section 11.2 Amendments.........................................................................51
Section 11.3 Governing Law......................................................................51
Section 11.4 Participations and Assignments.....................................................51
Section 11.5 Captions...........................................................................52
Section 11.6 Notices............................................................................52
Section 11.7 Sharing of Collections, Proceeds and Set-Offs; Application of
Payments..........................................................................52
Section 11.8 Expenses; Indemnification..........................................................53
Section 11.9 Survival of Warranties and Certain Agreements......................................54
Section 11.10 Severability.......................................................................54
Section 11.11 Banks' Obligations Several; Independent Nature of Banks' Rights....................54
Section 11.12 No Fiduciary Relationship..........................................................54
Section 11.13 CONSENT TO JURISDICTION AND SERVICE OF PROCESS.....................................54
Section 11.14 WAIVER OF JURY TRIAL...............................................................55
Section 11.15 Counterparts; Effectiveness........................................................55
Section 11.16 Use of Defined Terms...............................................................55
Section 11.17 Offsets............................................................................56
Section 11.18 Entire Agreement...................................................................56
Section 11.19 Rights of Banks....................................................................56
SCHEDULES AND EXHIBITS
Schedule 1 Disclosure Schedules
Schedule 2 Applicable Margins, Commitment Fee
Exhibit A Subsidiaries
Exhibit B Banks' Loan Commitments And Percentages
Exhibit C Note
Exhibit D Borrowing Base Certificate
Exhibit E Security Agreement
Exhibit F Pledge Agreement
Exhibit G Compliance Certificate
Exhibit H Accounts Receivable Aging Report
Exhibit I Quarterly Inventory Report
Exhibit J Residuals Report
CREDIT AGREEMENT
This Credit Agreement, dated September 23, 2005 (this "Agreement"), is
entered into by and among ePlus inc., a Delaware corporation (the "Parent"),
each of its subsidiaries that are signatories hereto and named in Exhibit A
attached hereto and such other entities that hereafter become a subsidiary and
are added to Exhibit A (collectively, with the Parent, the "Borrowers" and
individually, a "Borrower"), National City Bank, a national banking association,
as administrative agent for the Banks under this Agreement ("Administrative
Agent"), the other banking institution signatories hereto and named in Exhibit B
attached hereto, and such other institutions that hereafter become a "Bank"
pursuant to ss. 11.4 hereof (collectively, the "Banks" and individually, a
"Bank").
Preliminary Statement
WHEREAS, the Borrowers desire to have available to them a line of credit
facility the proceeds of which may be used for general corporate purposes.
WHEREAS, the Borrowers have requested that the Banks provide such credit
facility and make loans to the Borrowers under the terms and conditions
hereinafter set forth.
WHEREAS, the Banks are willing to continue such credit facility and to make
loans to the Borrowers under the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and promises hereinafter
set forth and intending to be legally bound hereby, the parties hereto agree as
follows:
ARTICLE I
Certain Definitions
-------------------
Section 1.1 Definitions
"Accounts Receivable Aging Report" means a report substantially in the form
of Exhibit H hereto.
"Additional Amount" has the meaning set forth in ss. 2.10(e).
"Administrative Agent" means National City Bank and any successor thereto.
"Affiliate" means any Person: (a) which directly or indirectly controls, or
is controlled by, or is under common control with any Borrower; (b) which
directly or indirectly beneficially owns or holds five percent (5%) or more of
any class of voting stock of any Borrower; or (c) five percent (5%) or more of
whose voting stock is directly or indirectly beneficially owned or held by any
Borrower. The term "control" means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract, or
otherwise.
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"Aggregate Loan Commitment" has the meaning set forth in ss. 2.1(a).
"Agreement" means this Credit Agreement, as amended, supplemented,
modified, replaced, substituted for or restated from time to time and all
exhibits and schedules attached hereto.
"Alternate Base Rate" means, for any day, the higher of (i) the prime
commercial lending rate of the Administrative Agent, in its individual capacity
as a bank, as announced from time to time at its head office, or (ii) the
Federal Funds Rate plus 1/2 of 1% (one-half of one percent), in either case
calculated on a basis of the number of days elapsed in a year of 360 days.
"AMC Inventory and Equipment" means new or used items of Inventory or
Equipment purchased by a Borrower for sale or lease to any AMC Party under an
Asset Management Contract. Once an item of AMC Inventory and Equipment has been
sold or leased by such Borrower to an AMC Party, such item shall no longer be an
item of AMC Inventory and Equipment but, instead, shall result in the creation
of either a Receivable or a Lease.
"AMC Parties" means those entities which become parties to Asset Management
Contracts, unless and until disqualified by the Administrative Agent in its sole
discretion.
"Applicable Borrowing Margin" has the meanings set forth in Schedule 2
attached to this Agreement as it pertains to Base Rate Loans and LIBO Rate
Loans.
"Asset Management Contracts" means those leases and contracts which are
entered into in the ordinary course of business between a Borrower and the AMC
Parties pursuant to which such Borrower may supply an AMC Party with technology
and other equipment. In order to qualify as an Asset Management Contract, the
lease or contract must specifically identify the equipment supplied to the AMC
Party and must absolutely obligate the AMC Party to purchase or lease the
identified equipment from such Borrower by a date certain.
"Available Credit Commitment" means, as to any Bank at any time, an amount
equal to the excess, if any, of (a) such Bank's Loan Commitment then in effect
over (b) such Bank's Loans outstanding and such Bank's Commitment Percentage of
the Swing Line Loans then outstanding; provided, that in calculating the Bank's
Loan Commitment for the purpose of determining such Bank's unused portion of its
Loan Commitment pursuant to ss.2.7, the Bank's Commitment Percentage of the
Swing Line Loans then outstanding shall be deemed to be zero.
"Bank" or "Banks" means have the meaning set forth in the preamble.
"Base Rate Loans" means Loans for which the applicable rate of interest is
based upon the Alternate Base Rate.
"Borrowing Base" means: (i) with respect to Leases, in each case, the
lesser of 95% of the cost of the Equipment subject to the Eligible Lease or 95%
of the Net Present Value of Lease Payments applicable to the Lease; (ii) with
respect to Receivables, 90% of Eligible Receivables; (iii) with respect to AMC
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Inventory and Equipment, 95% of the cost to the applicable Borrower of the
Eligible AMC Inventory and Equipment, net of all rebates, allowances and
credits; (iv) with respect to Non-AMC Inventory and Equipment, 90% of the cost
to the applicable Borrower of the Eligible Non-AMC Inventory and Equipment up to
the lesser of $5,000,000, net of all rebates, allowances and credits, or 50% of
the aggregate Borrowing Base; and (v) with respect to Residuals, 25% of the net
present value of Residuals up to the lesser of $5,000,000 or 25% of the
aggregate Borrowing Base. No item shall be included in the Borrowing Base unless
and until the vendor/manufacturer of the Equipment or underlying Equipment, as
applicable, has been paid in full.
"Borrowing Base Certificate" means a certificate in substantially the form
attached hereto as Exhibit D which shall be signed by the chief financial
officer, treasurer or controller of the Parent.
"Business Day" means any day other than a Saturday, Sunday, or other day on
which commercial banks in Philadelphia are authorized or required to close under
the laws of the Commonwealth of Pennsylvania or the State of Ohio.
"Buy-Sell Contracts" means those agreements which are entered into in the
ordinary course of business between a Borrower and a purchaser with respect to
specified equipment owned by that Borrower.
"Capital Expenditure" means for any period, with respect to any person, the
aggregate of all expenditures by such Person and its Subsidiaries for the
acquisition or leasing (pursuant to a capital lease) of fixed or capital assets
or additions to equipment (including replacements, capitalized repairs and
improvements during such period for its use) which should be capitalized under
GAAP on a consolidated balance sheet of such Person and its Subsidiaries.
"Capital Lease" means all lease obligations of any Person for any property
(whether real, personal or mixed) which have been or should be capitalized on
the books of the lessee in accordance with GAAP.
"Capital Stock" means any and all shares, interests, participations or
other equivalents (however designated) of capital stock of a corporation, any
and all equivalent ownership interests in a Person (other than a corporation)
and any and all warrants, rights or options to purchase any of the foregoing.
"Change of Management" means if any of the following Persons cease to hold
their following current positions with the Parent: (i) Phillip G. Norton as
Chairman of the Board of Directors or (ii) Bruce Bowen as Executive Vice
President.
"Closing Date" means the date of this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, and all rules and regulations with respect thereto in effect from time to
time.
"Collateral" has the meaning set forth in ss. 9.1.
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"Commitment Fee" has the meaning set forth in ss. 2.7(b).
"Commitment Percentage" has the meaning set forth in ss. 2.1(e).
"Commitment Period" means the period beginning on the Closing Date and
ending on the Credit Termination Date.
"Compliance Certificate" has the meaning set forth in ss. 4.1(b).
"Credit Termination Date" means the earliest to occur of (i) the date of
termination in full, pursuant to ss.ss. 2.9 or 8.1 hereof, of the obligations of
such Bank under ss. 2.1 or (ii) July 21, 2006.
"Debt" means, as of any date of determination with respect to the
Borrowers, without duplication, (i) all items which in accordance with GAAP
would be included in determining total liabilities as shown on the liability
side of a balance sheet of the Borrowers as of the date on which Debt is to be
determined, (ii) all indebtedness of others with respect to which any Borrower
has become liable by way of a guarantee or endorsement (other than for
collection or deposit in the ordinary course of business), (iii) all contingent
liabilities of the Borrowers, and (iv) lease obligations that, in conformity
with GAAP, have been capitalized on the Borrowers' balance sheet.
"Default Rate" on any Loan means 2% per annum above the Alternate Base Rate
plus Applicable Borrowing Margin then in effect.
"Dollars" means the lawful currency of the United States of America.
"EBIT" means the sum, for the Parent and its Subsidiaries on a consolidated
basis, of (i) Net Income plus (ii) amounts deducted for interest and taxes,
minus (iii) income from extraordinary items.
"EBITDA" means the sum, for the Parent and its Subsidiaries on a
consolidated basis, of (i) Net Income plus (ii) amounts deducted for interest,
taxes, depreciation and amortization, minus (iii) income from extraordinary
items.
"eGroup" means ePlus Group, inc., a Virginia corporation.
"Eligible AMC Inventory and Equipment" means all AMC Inventory and
Equipment so long as: (i) the relevant Asset Management Contract has not been
terminated; (ii) the relevant AMC Party is in compliance with its obligations
under its Asset Management Contract; (iii) the relevant AMC Party has not
notified any Borrower that such Borrower or any other Borrower is in default of
any of its obligations under the Asset Management Contract; (iv) the AMC
Inventory and Equipment is not subject to any prior assignment, claim, lien,
security interest or other limitation on the absolute title of the applicable
Borrower thereto; (v) the item of AMC Inventory and Equipment constitutes
Collateral as defined in the Security Agreement; (vi) the item of AMC Inventory
or Equipment has not been part of the Borrowing Base for more than 90 days;
(vii) the item of AMC Inventory or Equipment is specifically confirmed to be the
subject of a Lease which is to be executed and delivered in connection
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therewith; and (viii) no invoice has been rendered in connection with said
Inventory or Equipment for reimbursement of monies disbursed by any Borrower
with respect to a purchase order on the basis that Lease Documents have not been
or are not expected to be entered into with respect to the assets relating to
that purchase order. In addition, the aggregate of all Eligible AMC Inventory
and Equipment for any one account debtor/lessee or group of affiliated account
debtors/lessees which is included in the Collateral shall not at any time
exceed: (i) $15,000,000 for Investment Grade Credits; and (ii) $3,000,000 for
Non-Investment Grade Credits.
"Eligible Lease" means a Lease in which: (i) a Borrower is the sole lessor;
(ii) the Lease arose in the ordinary course of business of such Borrower; (iii)
the lessee is not an Affiliate of any Borrower; (iv) the Equipment has been
delivered to and accepted by the lessee and is currently subject to the Lease;
(v) neither the Lease nor the related Equipment is subject to any prior
assignment, claim, lien, security interest or other limitation on the absolute
title of the applicable Borrower thereto; (vi) the Lease payments are not more
than 60 days past due with respect to any payment required thereby (Lease
payments in respect of a newly effective Lease shall not be deemed 60 days past
due until 60 days have elapsed since the effective date of the Lease); (vii) the
Lease provides that the obligations of the lessee to make payments thereunder
are absolute; (viii) the Lease is freely assignable; (ix) the Lease is not
subject to any defense of the lessee; (x) the lessee is not the subject of an
bankruptcy, reorganization or similar proceedings and is not insolvent; (xi) the
Lease is with a lessee/account debtor which is not located outside of the United
States of America; (xii) the Lease has not been part of the Borrowing Base for
more than 12 months; (xiii) the initial term of the Lease does not exceed 72
months, provided, however, that a Lease with an initial term exceeding 72 months
shall be eligible for inclusion in the Borrowing Base upon the prior written
consent of the Administrative Agent, which consent will be granted in the
Administrative Agent's sole discretion; and (xiv) the Lease and the Equipment
being leased constitute Collateral as defined in the Security Agreement. In
addition, the aggregate of all Eligible Receivables and Eligible Leases for any
one account debtor/lessee or group of affiliated account debtors/lessees which
is included in the Collateral shall not at any time exceed: (i) $15,000,000 for
Investment Grade Credits; and (ii) $5,000,000 for Non-Investment Grade Credits.
"Eligible Non-AMC Inventory and Equipment" means all Non-AMC Inventory and
Equipment so long as: (i) such Non-AMC Inventory and Equipment has a wholesale
value equal to or greater than the cost of same to the applicable Borrower; (ii)
such Non-AMC Inventory and Equipment is not subject to any prior assignment,
claim, lien, security interest or other limitation on the absolute title of the
applicable Borrower thereto; (iii) the item of Non-AMC Inventory or Equipment
has not been part of the Borrowing Base for more than 90 days; (iv) the item of
Non-AMC Inventory or Equipment is specifically confirmed to be the subject of a
Lease which is to be executed and delivered in connection therewith; and (v)
such Non-AMC Inventory and Equipment constitutes Collateral as defined in the
Security Agreement. In addition, the aggregate of all Non-AMC Inventory and
Equipment intended for use by any one account debtor/lessee or group of
affiliated account debtors/lessees which is included in the Collateral shall not
at any time exceed shall not at any time exceed $2,500,000.
"Eligible Receivable" means any Receivables with respect to which: (i) a
Borrower is the sole account creditor; (ii) the Receivable arose in the ordinary
course of business of the applicable Borrower or eTechnology; (iii) if
originated by eTechnology, such Receivable and all rights of the account
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creditor thereunder have been irrevocably assigned to a Borrower by ePlus
Technology inc.; (iv) the account debtor is not an Affiliate of any Borrower;
(v) the goods giving rise to the Receivable have been delivered to and accepted
by the account debtor; (vi) the Receivable is not subject to any prior
assignment, claim, lien, security interest or other limitation on the absolute
title of the applicable Borrower thereto; (vii) in the case of Receivables not
involving AMC Inventory and Equipment or Non-AMC Inventory and Equipment, the
Receivable is not more than 30 days past due pursuant to the contractual
agreement of the parties, excluding any amendments thereto for the purpose of
extending the due date; (viii) not more than 120 days have elapsed since the
date the vendor/manufacturer was paid, in the case of AMC Inventory and
Equipment or Non-AMC Inventory and Equipment and not more than 30 days have
elapsed since the date of the invoice to the obligor in respect of said
Receivable which is no longer included in the Borrowing Base as Eligible AMC
Inventory and Equipment or as Eligible Non-AMC Inventory and Equipment; (ix) the
Receivable is not subject to any defense of the account debtor; (x) the
Receivable is freely assignable; (xi) the Receivable is not questionable as to
collectibility; (xii) the account debtor is not the subject of any bankruptcy,
reorganization or similar proceeding and is not insolvent; (xiii) the Receivable
is with an account debtor which is not located outside of the United States of
America; (xiv) the Receivable does not have a due date longer than 60 days from
the date of provision of the goods to the account debtor; and (xv) the
Receivable constitutes Collateral as defined in the Security Agreement. In
addition, the aggregate of all Eligible Receivables and Eligible Leases for any
one account debtor/lessee or group of affiliated account debtors/lessees which
is included in the Collateral shall not at any time exceed: (i) $15,000,000 for
Investment Grade Credits; and (ii) $4,000,000 for Non-Investment Grade Credits.
No amount payable with respect to a Lease shall be deemed an Eligible
Receivable. For purposes of clarification, the amount of an Eligible Receivable
assigned to a Borrower by eTechnology shall be the amount collectible thereunder
and not the cost thereof.
"Environmental Control Statutes" means each and every applicable federal,
state, county or municipal environmental statute, ordinance, rule, regulation,
order, directive or requirement, together with all successor statutes,
ordinances, rules, regulations, orders, directives or requirements, of any
Governmental Authority, including without limitation laws in any way related to
Hazardous Substances.
"Equipment" means new and used equipment purchased by a Borrower from
Persons for lease to unaffiliated Persons. The term "Equipment" also shall
include all items shown on the original purchase invoice including computer
software, installation charges and training.
"ERISA" means the Employee Retirement Income Security Act of 1974, as it
may be amended from time to time.
"ERISA Affiliate" means any corporation which is a member of the same
controlled group of corporations as any Borrower within the meaning of ss.
414(b) of the Code, or any trade or business which is under common control with
any Borrower within the meaning of ss. 414(c) of the Code.
"eTechnology" means ePlus Technology, inc., a Virginia corporation.
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"Event of Default" has the meaning set forth in ss. 8.1.
"Federal Funds Rate" means, for any day, the rate per annum (rounded
upwards, if necessary, to the nearest 1/100 of 1%) equal to the weighted average
of the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers on such day, as published by
the Federal Reserve Bank of New York on the Business Day next succeeding such
day, provided that if the day for which such rate is to be determined is not a
Business Day, the Federal Funds Rate for such day shall be such rate on such
transactions on the next preceding Business Day as so published on the next
succeeding Business Day.
"Fee Letter" means the Fee Letter, dated September 7, 2005, between the
Parent and the Administrative Agent, as the same may be amended, supplemented,
replaced or otherwise modified from time to time in accordance with this
Agreement.
"Fiscal Quarter" means a fiscal quarter of the Borrowers, which shall be
any quarterly period ending on March 31, June 30, September 30 or December 31 of
any year.
"Fiscal Year" means a fiscal year of the Borrowers, which shall end on the
last day of March in each year.
"GAAP" means generally accepted accounting principles as in effect from
time to time in the United States, consistently applied.
"GAAP Net Worth" means Net Worth less the principal amount of Subordinated
Debt, if any.
"Governmental Authority" means the federal, state, county or municipal
government, or any department, agency, bureau or other similar type body
obtaining authority therefrom or created pursuant to any laws, including without
limitation Environmental Control Statutes.
"Hazardous Substances" means without limitation, any regulated substance,
toxic substance, hazardous substance, hazardous waste, pollution, pollutant or
contaminant, as defined or referred to in the Resource Conservation and Recovery
Act, as amended, 15 U.S.C., ss.2601 et seq.; the Comprehensive Environmental
Response, Compensation and Liability Act, 33 U.S.C. ss.1251 et seq.; the federal
underground storage tank law, Subtitle I of the Resource Conservation and
Recovery Act, as amended, P.L. 98-616, 42 U.S.C. ss.6901 et seq.; together with
any amendments thereto, regulations promulgated thereunder and all substitutions
thereof, as well as words of similar purport or meaning referred to in any other
federal, state, county or municipal environmental statute, ordinance, rule or
regulation.
"Hedge Arrangement" means for any period for any Person any arrangement or
transaction between such Person and any other Person which is a rate swap
transaction, basis swap, forward rate transaction, commodity swap, interest rate
option, forward foreign exchange transaction, cap transaction, floor
transaction, collar transaction, currency swap transaction, cross-currency rate
swap transaction, currency option or any other similar transaction (including
any option with respect to any of such transactions or arrangements) designed to
protect or mitigate against risks in interest, currency exchange or commodity
price fluctuations.
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"Indebtedness for Borrowed Money" means (i) all indebtedness, liabilities,
and obligations, now existing or hereafter arising, for money borrowed, whether
or not evidenced by any note, indenture, or agreement (including, without
limitation, the Notes and any indebtedness for money borrowed from an Affiliate)
and (ii) all indebtedness of others for money borrowed (including indebtedness
of an Affiliate) with respect to which any Borrower has become liable by way of
a guarantee or indemnity.
"Indemnitee" has the meaning set forth in ss. 11.8.
"Intangible Assets" means all assets of the Parent and its Subsidiaries on
a consolidated basis, which would be classed as intangible assets under GAAP
consistently applied, including, without limitation, goodwill (whether
representing the excess of cost over book value of assets acquired or
otherwise), patents, trademarks, trade names, copyrights, franchises, and
deferred charges (including, without limitation, unamortized debt discount and
expense, organization costs, and research and development costs). For purposes
of this definition, prepayments of taxes, license fees and other expenses shall
not be deemed Intangible Assets.
"Interest Period" means with respect to any LIBO Rate Loan, each period
commencing on the date any such Loan is made, or, with respect to a LIBO Rate
Loan being renewed, the last day of the next preceding Interest Period with
respect to a LIBO Rate Loan, and ending on the numerically corresponding day
(or, if there is no numerically corresponding day, on the last day of the
calendar month) in the first, second, third or sixth calendar month thereafter
as selected under the procedures specified in ss. 2.3 if the Banks are then
offering LIBO Rate Loans for such period; provided that each LIBO Rate Loan
Interest Period which would otherwise end on a day which is not a Business Day
(or, for purposes of Loans to be repaid on a London Business Day, such day is
not a London Business Day) shall end on the next succeeding Business Day (or
London Business Day, as appropriate) unless such next succeeding Business Day
(or London Business Day, as appropriate) falls in the next succeeding calendar
month, in which case the Interest Period shall end on the next preceding
Business Day (or London Business Day, as appropriate).
"Inventory" means new and used goods purchased by a Borrower from Persons
for sale to unaffiliated Persons. The term "inventory" also shall include all
items shown on the original purchase invoice including computer software,
installation charges and training.
"Investment" in any Person means (a) the acquisition (whether for cash,
property, services or securities or otherwise) of capital stock, bonds, notes,
debentures, partnership or other ownership interests or other securities of such
Person; (b) any deposit with, or advance, loan or other extension of credit to,
such Person (other than any such deposit, advance, loan or extension of credit
having a term not exceeding 90 days in the case of unaffiliated Persons and 120
days in the case of Affiliates representing the purchase price of inventory or
supplies purchased in the ordinary course of business) or guarantee or
assumption of, or other contingent obligation with respect to, Indebtedness for
Borrowed Money or other liability of such Person; (c) any capital contribution
to any Person; and (d) (without duplication of the amounts included in (a),(b)
and (c)) any amount that may, pursuant to the terms of such investment, be
required to be paid, deposited, advanced, lent or extended to or guaranteed or
assumed on behalf of such Person.
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"Investment Grade Credit" means any account debtor/lessee of any Borrower
which is rated BBB- or higher by Standard & Poor's or Baa3 or higher by Moody's.
"Lease" means any lease of Equipment (or conditional sales agreement or
similar financing arrangement) made by a Borrower, as lessor.
"Lease Documents" means a schedule referencing assets described in a
purchase order and the master lease agreement incorporated therein by reference.
"LIBO Rate" means, for the applicable Interest Period, (i) the rate,
rounded upwards to the next one-sixteenth of one percent, determined by the
Administrative Agent three London Business Days prior to the date of the
corresponding LIBO Rate Loan, at which the Administrative Agent is offered
deposits in dollars at approximately 11:00 A.M., London time by leading banks in
the interbank Eurodollar or eurocurrency market for delivery on the date of such
Loan in an amount and for a period comparable to the amount and Interest Period
of such Loan and in like funds, divided by (ii) a number equal to one (1.0)
minus the LIBO Rate Reserve Percentage. The LIBO Rate shall be adjusted
automatically with respect to any LIBO Rate Loan outstanding on the effective
date of any change in the LIBO Rate Reserve Percentage, as of such effective
date. LIBO Rate shall be calculated on the basis of the number of days elapsed
in a year of 360 days.
"LIBO Rate Loans" means Loans accruing interest based on the LIBO Rate.
"LIBO Rate Reserve Percentage" means, for any LIBO Rate Loan for any
Interest Period therefore, the daily average of the stated maximum rate
(expressed as a decimal) at which reserves (including any marginal,
supplemental, or emergency reserves) are required to be maintained during such
Interest Period under Regulation D by the Administrative Agent against
"Eurocurrency liabilities" (as such term is used in Regulation D) but without
benefit of credit proration, exemptions, or offsets that might otherwise be
available to the Administrative Agent from time to time under Regulation D.
Without limiting the effect of the foregoing, the LIBO Rate Reserve Percentage
shall reflect any other reserves required to be maintained by the Administrative
Agent against (1) any category of liabilities which includes deposits by
reference to which the rate for LIBO Rate Loans is to be determined; or (2) any
category of extension of credit or other assets which include LIBO Rate Loans.
"Lien" means any lien, mortgage, security interest, chattel mortgage,
pledge or other encumbrance (statutory or otherwise) of any kind securing
satisfaction of an obligation, including any agreement to give any of the
foregoing, any conditional sales or other title retention agreement, any lease
in the nature thereof, and the filing of or the agreement to give any financing
statement under the Uniform Commercial Code of any jurisdiction or similar
evidence of any encumbrance, whether within or outside the United States.
"Loan" or "Loans" has the meanings set forth in ss. 2.1(a), and, where
applicable generally, shall include Swing Line Loans.
"Loan Commitment" has the meaning set forth in ss. 2.1(a).
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"Loan Documents" means this Agreement, the Notes, the Security Agreement,
the Pledge Agreement, the Fee Letter, any Qualifying Hedge Arrangements and all
other documents directly related or incidental to such documents, the Loans or
the Collateral.
"London Business Day" means any Business Day other than a Saturday, Sunday,
or other day on which commercial banks in London are authorized or required to
close under English laws.
"Material Adverse Effect" means any event or condition which, individually
or in the aggregate, could reasonably be expected to (i) have a material adverse
effect on the financial condition, business, properties or profits of the
Borrowers, taken as a group, (ii) give reasonable grounds to conclude that the
Borrowers, taken as a group, will not be able to perform their obligations under
this Agreement, the Notes and the other Loan Documents, or (iii) affect the
legality, validity or enforceability of this Agreement, the Notes, the other
Loan Documents or the rights and remedies of the holders of the Loans.
"Multiemployer Plan" means a multiemployer plan as defined in ERISA ss.
4001(a)(3), which covers employees of any Borrower or any ERISA Affiliate of any
Borrower.
"Net Cost" means with respect to any item of Inventory, the net cost to the
applicable Borrower of such Inventory, excluding delivery, installation and
similar charges and after giving effect to all discounts and credits provided in
connection with the purchase thereof, as established by the invoice for such
Inventory, a copy of which such Borrower shall deliver to the Administrative
Agent upon the Administrative Agent's request.
"Net Income" means net income after income taxes and extraordinary items,
as shown, on a consolidated basis, on the income statement of the Parent and its
Subsidiaries.
"Net Present Value of Lease Payments" means, with respect to any Eligible
Lease, the Present Value of Lease Payments less any sums payable by the
applicable Borrower under that Eligible Lease.
"Net Worth" means, as calculated in accordance with GAAP, the sum, for the
Parent and its Subsidiaries on a consolidated basis, of capital stock, plus
paid-in capital, plus retained earnings and the non-current portion of
Subordinated Debt, if any, minus treasury stock.
"Non-AMC Inventory and Equipment" means new or used items of Inventory or
Equipment (which shall consist of certain computer and other technology
equipment) purchased by a Borrower for sale or lease to any Person other than an
AMC Party. Once an item of Non-AMC Inventory and Equipment has been sold or
leased by such Borrower to a Person, such item shall no longer be an item of
Non-AMC Inventory and Equipment but, instead, shall result in the creation of
either a Receivable or a Lease.
"Non-Investment Grade Credit" means any account debtor/lessee of any
Borrower which is not an Investment Grade Credit.
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"Note" or "Notes" has the meaning set forth in ss. 2.2, and, where
applicable generally, shall include the Swing Line Note.
"Obligations" means all now existing or hereafter arising debts,
obligations, covenants, and duties of payment or performance of every kind,
matured or unmatured, direct or contingent, owing, arising, due, or payable to
the Administrative Agent or the other Banks by or from any Borrower arising out
of this Agreement or any other Loan Document, including, without limitation, all
obligations to repay principal of and interest on the Loans, and to pay
interest, fees, costs, charges, expenses, professional fees, and all sums
chargeable to any Borrower or for which any Borrower is liable as indemnitor
under the Loan Documents, whether or not evidenced by any note or other
instrument.
"Ordinary Course Sale or Financing" means each of the following to occur in
the ordinary course of business of any Borrower:
the sale (including the installment or conditional sale) by such Borrower
of Inventory and Equipment so long as such Borrower receives from such sale 100%
of the fair market value, based on equipment sold in the ordinary course and not
in distress-sale circumstances, of the Inventory and Equipment being sold;
the financing (including refinancing) by such Borrower of Inventory and
Equipment pursuant to this Agreement and the other Loan Documents, so long as
such Borrower receives from such financing 100% of the fair market value, based
on equipment sold in the ordinary course and not in distress-sale circumstances,
of the Inventory and Equipment being financed; provided, however, that except to
the extent otherwise provided in clause (d) below in connection with the
simultaneous sale or financing of any Lease described therein (i) any Lien
granted by such Borrower to such lender in connection with such financing (which
may be a first priority Lien) shall not attach to any property of any Borrower
other than the specific financed Inventory and Equipment, and (ii) the Debt of
such Borrower to such lender in connection with such financing shall be without
recourse to any Borrower except with respect to such Borrower's interest in the
specific financed Inventory and Equipment;
the sale by such Borrower of its ownership interest in any Inventory and
Equipment which has been refinanced in an Ordinary Course Sale or Financing
described in clause (b) above; and
the sale, financing (including refinancing) by such Borrower of any Lease
providing for the lease of Inventory and Equipment so long as such Borrower
receives from such sale or financing 100% of the Net Present Value of Lease
Payments for the Leases being sold or financed; provided, however, that, except
to the extent otherwise provided in the clause (b) above in connection with the
simultaneous financing of Inventory and Equipment (i) any Lien granted by such
Borrower to such lender in connection with any such financing (which may be a
first priority Lien) shall not attach to any property of any Borrower other than
the specific financed Lease, and (ii) the Debt of such Borrower to such lender
in connection with such financing shall be without recourse to any Borrower
except with respect to such Borrower's interest in the specific financed Lease.
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Notwithstanding the foregoing, a financing transaction described in clauses
(b) or (d) above shall still qualify as an Ordinary Course Sale or Financing
even if the Debt of such Borrower to such lender in connection with such
financing is with recourse to such Borrower, as long as the total of such
recourse financing for all Borrowers, in the aggregate, is not more than 15% of
the total amount of such financing in effect for all Borrowers at any time under
clauses (b) and (d).
"Patriot Act" means the Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001
(Public Law 107-56), and the rules and regulations thereunder, each as amended,
supplemented or otherwise modified.
"PBGC" means the Pension Benefit Guaranty Corporation and any successor
thereto.
"Pension Plan" means, at any time, any Plan (including a Multiemployer
Plan), the funding requirements of which (under ERISA ss. 302 or Code ss. 412)
are, or at any time within the six years immediately preceding the time in
question, were in whole or in part, the responsibility of any Borrower or any
ERISA Affiliate of any Borrower.
"Permitted Debt" means (a) Debt of Borrowers under this Agreement,
including but not limited to the Notes, (b) Subordinated Debt, (c) nonrecourse
Debt incurred in connection with an Ordinary Course Sale or Financing, and (d)
recourse Debt expressly permitted by this Agreement (including as permitted in
connection with an Ordinary Course Sale or Financing).
"Permitted Liens" means (a) any Liens for current taxes, assessments and
other governmental charges not yet due and payable or being contested in good
faith by a Borrower by appropriate proceedings and for which adequate reserves
have been established by such Borrower as reflected in its financial statements;
(b) any mechanic's, materialman's, carrier's, warehousemen's or similar Liens
for sums not yet due or being contested in good faith by a Borrower by
appropriate proceedings and for which adequate reserves have been established by
such Borrower as reflected in its financial statements; (c) easements,
rights-of-way, restrictions and other similar encumbrances on the real property
or fixtures of a Borrower incurred in the ordinary course of business which
individually or in the aggregate for all Borrowers are not substantial in amount
and which do not in any case materially detract from the value or marketability
of the property subject thereto or interfere with the ordinary conduct of the
business of any Borrower; (d) Liens (other than Liens imposed on any property of
any Borrower pursuant to ERISA or ss. 412 of the Code) incurred or deposits made
in the ordinary course of business, including Liens in connection with workers'
compensation, unemployment insurance and other types of social security and
Liens to secure performance of tenders, statutory obligations, surety and appeal
bonds (in the case of appeal bonds such Lien shall not secure any reimbursement
or indemnity obligation in an amount greater than $250,000), bids, leases that
are not Capital Leases, performance bonds, sales contracts and other similar
obligations, in each case, not incurred in connection with the obtaining of
credit or the payment of a deferred purchase price, and which do not result in a
Material Adverse Effect; (e) Liens, if any, existing on the date hereof and
listed in Schedule 1 hereto; (f) Liens on specific assets, if any, whether
existing on the date hereof or hereafter created, with respect to Indebtedness
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for Borrowed Money of a type similar to that contemplated herein (including any
Lien on Inventory, Equipment or Leases granted in connection with a nonrecourse
refinancing transaction which qualifies as an Ordinary Course Sale or Financing)
provided that no such Lien shall be a Lien on any of the Collateral; (g) Liens
in favor of the Administrative Agent, for the benefit of itself and the other
Banks, in the Collateral contemplated by this Agreement and the other Loan
Documents and (h) Liens against Collateral arising on account of Qualifying
Hedge Arrangements.
"Person" means any individual, corporation, partnership, joint venture,
association, company, business trust or entity, or other entity of whatever
nature.
"Plan" means an employee benefit plan as defined in ss. 3(3) of ERISA,
other than a Multiemployer Plan, whether formal or informal and whether legally
binding or not.
"Pledge Agreement" means the Pledge Agreement in the form and substance
attached hereto as Exhibit F.
"Potential Default" means an event, condition or circumstance that with the
giving of notice or lapse of time or both would become an Event of Default.
"Present Value of Lease Payments" means the sum of all payments required to
be paid to the lessor under an Eligible Lease with each of such payments
discounted to its present value by applying a discount rate to each payment
equal to the lesser of (a) the one-month LIBO Rate in effect at the time of the
calculation plus the Applicable Borrowing Margin, or (b) the Alternate Base Rate
in effect at the time of the calculation plus the Applicable Borrowing Margin;
provided, however, that any payment under an Eligible Lease shall only be
included for the purpose of calculating the Present Value of Lease Payments if
(i) the payment is not yet due under the Lease; and (ii) the lessee has no
discretion as to whether or not to make the payment.
"Prohibited Transaction" means a transaction that is prohibited under Code
ss. 4975 or ERISA ss. 406 and not exempt under Code ss. 4975 or ERISA ss. 408.
"Property" means any right or interest in or to property of any kind
whatsoever, whether real, personal or mixed and whether tangible or intangible.
"Qualifying Hedge Arrangements" means a Hedge Arrangement which is entered
into after the date hereof, is permitted pursuant to ss. 6.15 and in respect of
which the Administrative Agent has received written notice from the Borrower
providing the Administrative Agent with particulars of such Hedge Arrangement
together with a certificate from the Borrower which provides the details of all
then outstanding Hedge Arrangements and certifies that such new Hedge
Arrangement to which such certificate relates complies with the limitations set
forth in ss. 6.15.
"Quarterly Inventory Report" means a report substantially in the form of
Exhibit I hereto.
"Receivables" means all contractual accounts receivable of all Borrowers;
provided, however, that "Receivables" shall not include (i) any amounts
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receivable in respect of Asset Management Contracts during the period when the
applicable AMC Inventory and Equipment is included in the Borrowing Base as
Eligible AMC Inventory and Equipment; or (ii) any amounts receivable in respect
of the sale of Non-AMC Inventory and Equipment during the period when the
applicable Non-AMC Inventory and Equipment is included in the Borrowing Base as
Eligible Non-AMC Inventory and Equipment.
"Recovery Event" means any settlement of or payment in excess of $500,000
in respect of any property or casualty insurance claim or any condemnation
proceeding (or series of related claims or proceedings) relating to any asset
(or series of related assets) of any of the Borrowers.
"Refunded Swing Line Loans" has the meaning set forth in ss. 2.6(b).
"Refunding Date" has the meaning set forth in ss. 2.6(c).
"Regulation" means any statute, law, ordinance, regulation, order or rule
of any United States or foreign, federal, state, local or other government or
governmental body, including, without limitation, those covering or related to
banking, financial transactions, securities, public utilities, environmental
control, energy, safety, health, transportation, bribery, record keeping,
zoning, antidiscrimination, antitrust, wages and hours, employee benefits, and
price and wage control matters.
"Regulation D" means Regulation D of the Board of Governors of the Federal
Reserve System, as it may be amended from time to time.
"Regulatory Change" means any change after the date hereof in any
Regulation (including Regulation D) or the adoption or making after such date of
any interpretations, directives or requests of or under any Regulation (whether
or not having the force of law) by any court or governmental or monetary
authority charged with the interpretation or administration thereof applying to
a class of banks including any one of the Banks but excluding any foreign office
of any Bank.
"Release" means without limitation, the presence, leaking, leaching,
pouring, emptying, discharging, spilling, using, generating, manufacturing,
refining, transporting, treating, or storing of Hazardous Substances at, into,
onto, from or about the property or the threat thereof, regardless of whether
the result of an intentional or unintentional action or omission, and which is
in violation of applicable law.
"Reportable Event" means, with respect to a Pension Plan: (a) Any of the
events set forth in ERISA ss.ss. 4043(b) (other than a reportable event as to
which the provision of 30 days' notice to the PBGC is waived under applicable
regulations) or 4063(a) or the regulations thereunder, (b) an event requiring
any Borrower or any ERISA Affiliate of any Borrower to provide security to a
Pension Plan under Code ss. 401(a)(29) and (c) any failure by any Borrower or
any ERISA Affiliate of any Borrower to make payments required by Code ss.
412(m).
"Request for Advance" has the meaning set forth in ss. 2.3.
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"Required Banks" at any time means Banks whose Loan Commitments equal or
exceed 66 2/3% of the Aggregate Loan Commitment if no Loans are outstanding or,
if Loans are outstanding, Banks whose outstanding Loans equal or exceed 66 2/3%
of the Loans.
"Requirement of Law" means, as to any Person, the governing documents of
such Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its Property or to which such Person or
any of its Property is subject.
"Residuals" means all of the Borrowers' retained interest in Equipment
under a Lease at the expiration of such Lease, excluding the firm term rental
payments when such Leases are assigned, pledged or sold to non-recourse lenders,
which includes the ownership title and all proceeds from a subsequent sale,
rental, renewal or Lease renewal.
"Residuals Report" means a report substantially in the form of Exhibit J
hereto.
"Security Agreement" means the Security Agreement in the form and substance
attached hereto as Exhibit E.
"Solvent" means, with respect to any Person, that the aggregate present
fair saleable value of such Person's assets is in excess of the total amount of
its probable liabilities on its existing debts as they become absolute and
matured, such Person has not incurred debts beyond its foreseeable ability to
pay such debts as they mature, and such Person has capital adequate to conduct
the business it is presently engaged in or is about to engage in.
"Subordinated Debt" means Debt of Borrowers which is subordinate to the
Obligations pursuant to terms acceptable to Administrative Agent and listed on
Schedule 1 hereto.
"Subsidiary" means a corporation or other entity the shares of stock or
other equity interests of which having ordinary voting power (other than stock
or other equity interests 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 corporation are at the time owned, or the management of which is otherwise
controlled, directly or indirectly through one or more intermediaries or both,
by any Borrower.
"Swing Line Bank" means the Administrative Agent, in its capacity as the
lender of Swing Line Loans.
"Swing Line Commitment" means the obligation of the Swing Line Bank to make
Swing Line Loans pursuant to ss. 2.5 in an aggregate principal amount at any one
time outstanding not to exceed $5,000,000.
"Swing Line Loans" has the meaning set forth in ss. 2.5.
"Swing Line Note" has the meaning set forth in ss. 2.2 (b).
"Swing Line Participation Amount" has the meaning set forth in ss. 2.6.
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"Tangible Net Worth" means Net Worth minus Intangible Assets.
"Taxes" has the meaning set forth in ss. 2.10(d).
"Termination Event" means, with respect to a Pension Plan: (a) a Reportable
Event, (b) the termination of a Pension Plan, or the filing of a notice of
intent to terminate a Pension Plan, or the treatment of a Pension Plan amendment
as a termination under ERISA ss. 4041(c), (c) the institution of proceedings to
terminate a Pension Plan under ERISA ss. 4042 or (d) the appointment of a
trustee to administer any Pension Plan under ERISA ss. 4042.
"Total Recourse Funded Debt" means, for the Parent and its consolidated
Subsidiaries, (i) all indebtedness, liabilities, and obligations, now existing
or hereafter arising, for money borrowed on a recourse basis whether or not
evidenced by any note, indenture, or agreement (including, without limitation,
the Notes and any indebtedness for money borrowed from any Affiliate thereof)
and (ii) all indebtedness of others for money borrowed (including indebtedness
of any Affiliate thereof) with respect to which the Parent or any of its
consolidated Subsidiaries has become liable on a recourse basis by way of a
guarantee or indemnity.
"Unfunded Pension Liabilities" means, with respect to any Pension Plan at
any time, the amount determined by taking the accumulated benefit obligation, as
disclosed in accordance with Statement of Financial Accounting Standards No. 87,
over the fair market value of Pension Plan assets.
"Unrecognized Retiree Welfare Liability" means, with respect to any Plan
that provides post-retirement benefits other than pension benefits, the amount
of the accumulated post-retirement benefit obligation, as determined in
accordance with Statement of Financial Accounting Standards No. 106, as of the
most recent valuation date. Prior to the date such statement is applicable to
any Borrower, such amount of the obligation shall be based on an estimate made
in good faith.
Section 1.2 Accounting Terms.
All accounting terms not specifically defined herein shall be construed in
accordance with GAAP consistent with those applied in the preparation of the
financial statements referred to in ss. 3.5, and all financial data submitted
pursuant to this Agreement shall be prepared in accordance with such principles.
ARTICLE II
The Credit Facility
-------------------
Section 2.1 The Loans.
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(a) Loan Commitment. Subject to the terms and conditions herein set forth,
each Bank agrees, severally and not jointly, to make revolving credit loans
(herein called individually a "Loan" and collectively, the "Loans") to the
Borrowers during the Commitment Period in amounts not to exceed at any time
outstanding the commitment amount set forth opposite the name of such Bank on
Exhibit B hereto (each such amount, as the same may be reduced pursuant to ss.
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2.8, being hereinafter called such Bank's "Loan Commitment"). The Banks'
collective commitment to make Loans shall be the "Aggregate Loan Commitment").
All Loans shall be made by the Banks simultaneously and pro rata in accordance
with their respective Loan Commitments. All Loans shall be made to the Borrowers
at the primary office of the Administrative Agent in Philadelphia located at One
South Broad Street, 13th Floor, Philadelphia, Pennsylvania 19107 or at such
other address or into such other account as the Administrative Agent may provide
by notice to all parties hereto.
(b) Interest Rate Options. The Borrower may request Loans to bear interest
at the Alternate Base Rate or LIBO Rate options, as described in ss.2.4. The
Loans outstanding at any one time may involve any combination of such interest
rate options in such amounts as the Borrower may determine, subject to the terms
and conditions hereof, including the requirements concerning minimum Loan
requests and the requirements that (i) no request may be made which would
require more than one interest rate option or more than one Interest Period to
apply to Loans made on any single date, (ii), in the case of LIBO Rate Loans, no
LIBO Rate Loan may have an Interest Period extending beyond the Credit
Termination Date, and (iii) the aggregate number of all Loans outstanding shall
not exceed six.
(c) Maximum Loans Outstanding. No Borrower shall be entitled to any new
Loan if, after giving effect to such Loan, the unpaid amount of the then
outstanding Loans and Swing Line Loans would exceed the Aggregate Loan
Commitment.
(d) Minimum Loan Amount. Except for Loans which exhaust the full remaining
amount of the Aggregate Loan Commitment and conversions which result in the
conversion of all Loans subject to a particular interest rate option, each of
which may be in lesser amounts, (i) each LIBO Rate Loan when made (and each
conversion of Base Rate Loans into LIBO Rate Loans) shall be in an equal to
$500,000 or a whole multiple of $250,000 in excess thereof, and (ii) each Base
Rate Loan when made (and each conversion of LIBO Rate Loans into Base Rate
Loans) shall be in an amount equal to $250,000 or a whole multiple of $250,000
in excess thereof.
(e) Commitment Percentages. The obligation of each Bank to make a Loan to
the Borrowers at any time shall be limited to its percentage (the "Commitment
Percentage") as set forth opposite its name on Exhibit B hereto multiplied by
the aggregate principal amount of the Loan requested. The principal amounts of
the respective Loans made by the Banks on the occasion of each borrowing shall
be pro rata in accordance with their respective Commitment Percentages. No Bank
shall be required or permitted to make any Loan if, immediately after giving
effect to such Loan, and the application of the proceeds of a Loan to the extent
applied to the repayment of the Loans, the sum of such Bank's Loans and Swing
Line Loans (in the case of the Swing Line Bank) outstanding would exceed such
Bank's Loan Commitment.
(f) Repayment. Each Loan shall mature on the Credit Termination Date. Upon
maturity, the Loans shall be due and payable.
(g) Reborrowing Prior to the Credit Termination Date and within the limits
of the Aggregate Loan Commitment, the Borrowers may borrow, prepay (pursuant to
ss. 2.9) and reborrow Loans. All Loans shall mature and be due and payable on
the Credit Termination Date.
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(h) Several Obligations. The failure of any one or more Banks to make Loans
in accordance with its or their obligations shall not relieve the other Banks of
their several obligations hereunder, but in no event shall the aggregate amount
at any one time outstanding which any Bank shall be required to lend hereunder
exceed its Loan Commitment.
Section 2.2 The Notes.
----------
The Loans made by each Bank shall be evidenced by a single revolving credit
note of the Borrowers (each such promissory note as it may be amended, extended,
modified, restated, replaced, substituted for or renewed, being referred to
herein as a "Note" and all Notes together as the "Notes") in principal face
amount equal to such Bank's Loan Commitment payable to the order of such Bank
and otherwise in the form attached hereto as Exhibit C. Each Note shall be dated
its date of issuance, shall bear interest at the rate per annum and be payable
as to principal and interest in accordance with the terms hereof. Each Bank
shall maintain records of all Loans made by it and evidenced by its Note and of
all payments thereon, which records shall be conclusive absent manifest error.
The Swing Line Loans made by the Swing Line Bank shall be evidenced by a
single swing line note of the Borrowers (such promissory note as it may be
amended, extended, modified, restated, replaced, substituted for or renewed,
being referred to herein as the "Swing Line Note") in principal face amount of
$5,000,000. The Swing Line Note shall be dated its date of issuance, shall bear
interest at the rate per annum and be payable as to principal and interest in
accordance with the terms hereof. The Swing Line Bank shall maintain records of
all Swing Line Loans made by it and evidenced by the Swing Line Note and of all
payments thereon, which records shall be conclusive absent manifest error.
Section 2.3 Funding Procedures.
--------------------
(a) Requests for Advance. Each request for a Loan or the conversion or
renewal of an interest rate with respect to a Loan shall be made not later than
11:00 a.m. on a Business Day by delivery to the Administrative Agent of a
written request signed by the Borrowers or, in the alternative, a telephone
request followed promptly by written confirmation of the request (a "Request for
Advance"), specifying the date and amount of the Loan to be made, converted or
renewed, selecting the interest rate option applicable thereto, and in the case
of a LIBO Rate Loan, specifying the Interest Period applicable to such Loan. The
form of request to be used in connection with the making, conversion or renewal
of Loans shall be that form provided to the Borrowers by the Administrative
Agent. Each request shall be received on the same Business Day of the date of
the proposed borrowing, conversion or renewal in the case of Base Rate Loans and
three London Business Days prior to the date of the proposed borrowing,
conversion or renewal in the case of LIBO Rate Loans. No request shall be
effective until actually received in writing by the Administrative Agent. Any
request may be made by submission of such request by facsimile transmission with
the signed original being promptly transmitted to the Administrative Agent. The
Administrative Agent shall be entitled to rely on a facsimile of the signed
original as fully as if it had received the signed original.
(b) Irrevocability. Upon receipt of a request for a Loan and if the
conditions precedent provided herein shall be satisfied at the time of such
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request, the Administrative Agent promptly shall notify each Bank of such
request and of such Bank's ratable share of such Loan. Upon receipt of a request
for a Loan by the Administrative Agent, the request shall not be revocable by
any Borrower.
(c) Availability of Funds. Not later than 1:00 p.m. EST on the date of each
Loan, each Bank shall make available (except as provided in clause (d) below)
its ratable share of such Loan, in immediately available funds, to the
Administrative Agent at the address set forth opposite its name on the signature
page hereof or at such account in London as the Administrative Agent shall
specify to the Borrowers and the Banks. Unless the Administrative Agent knows
that any applicable condition specified herein has not been satisfied, it will
make funds so received from the Banks immediately available to the Borrowers on
the date of each Loan by a credit to the account designated by the Borrowers at
the Administrative Agent's address set forth opposite its name on the signature
page hereof or at such other destination and in such other form as the Borrowers
may request, in writing.
(d) Funding Assumptions. Unless the Administrative Agent has been notified
by any Bank at least one Business Day prior to the date of the making,
conversion or renewal of any LIBO Rate Loan, or by 11:00 a.m. EST on the date of
the making, conversion or renewal of any Base Rate Loan, that such Bank does not
intend to make available to the Administrative Agent such Bank's portion of the
total amount of the Loan to be made, converted or renewed on such date, the
Administrative Agent may assume that such Bank has made or will make such amount
available to the Administrative Agent on the date of the Loan and the
Administrative Agent may, in reliance upon such assumption, make available to
the Borrowers a corresponding amount. If and to the extent such Bank shall not
have so made such funds available to the Administrative Agent, such Bank agrees
to repay the Administrative Agent forthwith on demand such corresponding amount
together with interest thereon, for each day from the date such amount is made
available to the Borrowers until the date such amount is repaid to the
Administrative Agent, at the Federal Funds Rate plus 50 basis points for three
Business Days, and thereafter at the Alternate Base Rate plus the Applicable
Borrowing Margin. If such Bank shall repay to the Administrative Agent such
corresponding amount, such amounts so repaid shall constitute such Bank's Loan
for purposes of this Agreement. If such Bank does not repay such corresponding
amount forthwith upon the Administrative Agent's demand therefor, the
Administrative Agent shall promptly notify the Borrowers, and the Borrowers
shall immediately pay such corresponding amount to the Administrative Agent,
without any prepayment penalty or premium, but with interest on the amount
repaid, for each day from the date such amount is made available to the
Borrowers until the date such amount is repaid to the Administrative Agent, at
the rate of interest applicable at the time to such Loan. Nothing herein shall
be deemed to relieve any Bank of its obligation to fulfill its Loan Commitment
hereunder or to prejudice any rights which the Borrowers may have against any
Bank as a result of any default by such Bank hereunder.
(e) Funding of Net Amount. If the Banks make a Loan on a day on which all
or any part of an outstanding Loan from the Banks is to be repaid, each Bank
shall apply the proceeds of its new Loan to make such repayment and only an
amount equal to the difference (if any) between the amount being borrowed and
the amount being repaid shall be made available by such Bank to the Borrowers as
provided in clause (c).
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Section 2.4 Interest. The Borrowers may request that Loans bear interest at
the the Alternate Base Rate or, so long as no Event of Default or Potential
Default has occurred and is continuing, the LIBO Rate the from time to time, as
set forth below. Swing Line Loans shall be Base Rate Loans only.
(a) Alternate Base Rate. Each Base Rate Loan shall bear interest on the
principal amount thereof from the date made until such Loan is paid in full or
converted, at a rate per annum equal to the Alternate Base Rate plus the
Applicable Borrowing Margin.
(b) LIBO Rate. Each LIBO Rate Loan shall bear interest on the principal
amount thereof from the date made until such Loan is paid in full, renewed, or
converted, at a rate per annum equal to the LIBO Rate plus the Applicable
Borrowing Margin. After receipt of a request for a LIBO Rate Loan, the
Administrative Agent shall proceed to determine the LIBO Rate to be applicable
thereto. The Administrative Agent shall give prompt notice by telephone or
facsimile to the Borrowers of the LIBO Rate thus determined in respect of each
LIBO Rate Loan or any change therein.
(c) Renewals and Conversions of Loans. On the last day of each Interest
Period, the LIBO Rate Loan then maturing shall automatically be renewed for a
new Interest Period of like duration, unless the Borrowers shall have given the
Administrative Agent notice of a permitted conversion or renewal for an Interest
Period of different duration as provided in ss. 2.4 hereof, or an Event of
Default or Potential Default exists or would thereby occur. If no Event of
Default or Potential Default exists or would thereby occur, the Borrowers shall
have the right to convert Base Rate Loans into LIBO Rate Loans, to convert LIBO
Rate Loans into Base Rate Loans, and to renew LIBO Rate Loans for Interest
Periods of different duration, from time to time, provided that they shall give
the Administrative Agent notice of each permitted conversion or renewal as
provided in ss. 2.4 hereof, and LIBO Rate Loans may be converted or renewed for
different Interest Periods only as of the last day of the applicable Interest
Period for such Loans. The Administrative Agent shall use reasonable commercial
efforts to notify the Borrowers of the effectiveness of such conversion or
renewal (automatic or not automatic), and the new interest rate to which the
converted or renewed Loan is subject, as soon as practicable after the
conversion or renewal; provided, however, that any failure to give such notice
shall not affect the Borrowers' obligations or the Banks' rights and remedies
hereunder in any way whatsoever. In the event a LIBO Rate Loan is not
automatically renewed as provided herein and the Borrowers shall not have
selected an alternative Interest Period for any LIBO Rate Loan maturing as
provided herein, such Loan shall be automatically converted into a Base Rate
Loan on the last day of the Interest Period for such Loan.
(d) Automatic Reinstatement. The joint and several liability of the
Borrowers under this ss. 2.4 shall continue to be effective or be automatically
reinstated, as the case may be, if at any time any payment, in whole or in part,
to the Banks is rescinded or must otherwise be restored or returned upon the
insolvency, bankruptcy, dissolution, liquidation or reorganization of any
Borrower or any other Person, or upon or as a result of the appointment of a
custodian, receiver, trustee or other officer with similar powers with respect
to any Borrower or any other Person or any substantial part of its property, or
otherwise, all as though such payment had not been made.
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(e) Default Rate. From and after the date of an Event of Default shall have
occurred and for so long as an Event of Default shall be continuing, the Loans
and the Swing Line Loans shall bear interest at the Default Rate.
Section 2.5 Swing Line Loans.
----------------
Subject to the terms and conditions hereof, the Swing Line Bank agrees to
make a portion of the credit otherwise available to the Borrowers under the
Aggregate Loan Commitment from time to time during the Commitment Period by
making swing line loans ("Swing Line Loans") to any Borrower; provided that (i)
the aggregate principal amount of Swing Line Loans outstanding at any time shall
not exceed the Swing Line Commitment then in effect (notwithstanding that the
Swing Line Loans outstanding at any time, when aggregated with the Swing Line
Bank's other outstanding Loans hereunder, may exceed the Swing Line Commitment
then in effect) and (ii) no Borrower shall request, and the Swing Line Bank
shall not make, any Swing Line Loan if, after giving effect to the making of
such Swing Line Loan, the aggregate amount of the Available Credit Commitments
for any Bank would be less than zero. During the Commitment Period, such
Borrower may use the Swing Line Commitment by borrowing, repaying and
reborrowing, all in accordance with the terms and conditions hereof.
Each Swing Line Loan shall mature on the earlier to occur of (i) the tenth
Business Day after the drawing thereof and (ii) the Credit Termination Date.
Upon maturity, the Loans shall be due and payable.
Section 2.6 Procedure for Swing Line Borrowing; Refunding of Swing Line
---------------------------------------------------------------
Loans.
- -----
Whenever such Borrower desires that the Swing Line Bank make Swing Line
Loans it shall give the Swing Line Bank irrevocable telephonic notice confirmed
promptly in writing (which telephonic notice must be received by the Swing Line
Bank not later than 11:00 A.M. on a Business Day on the proposed borrowing
date), specifying (i) the amount to be borrowed and (ii) the requested borrowing
date (which shall be a Business Day during the Commitment Period). Each
borrowing under the Swing Line Commitment shall be in an amount equal to
$250,000 or a whole multiple of $250,000 in excess thereof. Not later than 1:00
P.M. on a Business Day on the borrowing date specified in a notice in respect of
Swing Line Loans, the Swing Line Bank shall make available to the Administrative
Agent, at the address set forth opposite the Administrative Agent's name on the
signature page hereof or at such account in London as the Administrative Agent
shall specify to such Borrower and the Banks, an amount in immediately available
funds equal to the amount of the Swing Line Loan to be made by the Swing Line
Bank. The Administrative Agent shall make the proceeds of such Swing Line Loan
available to such Borrower on such borrowing date in immediately available
funds.
The Swing Line Bank, at any time and from time to time in its sole and
absolute discretion may, on behalf of such Borrower (which hereby irrevocably
directs the Swing Line Bank to act on its behalf), on one Business Day's notice
given by the Swing Line Bank no later than 11:00 A.M. on a Business Day, request
each Bank to make, and each Bank hereby agrees to make, a Loan in an amount
equal to such Bank's Commitment Percentage of the aggregate amount of the Swing
Line Loans (the "Refunded Swing Line Loans") outstanding on the date of such
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notice, to repay the Swing Line Bank. Each Bank shall make the amount of such
Loan available to the Administrative Agent at the Administrative Agent's funding
office in immediately available funds, not later than 1:00 on a Business Day,
one Business Day after the date of such notice. The proceeds of such Loans shall
be immediately made available by the Administrative Agent to the Swing Line Bank
for application by the Swing Line Bank to the repayment of the Refunded Swing
Line Loans. Such Borrower irrevocably authorizes the Swing Line Bank to charge
such Borrower's accounts with the Administrative Agent (up to the amount
available in each such account) in order to immediately pay the amount of such
Refunded Swing Line Loans to the extent amounts received from the Banks are not
sufficient to repay in full such Refunded Swing Line Loans.
If prior to the time a Loan would have otherwise been made pursuant to
Section 2.6(b), one of the events described in Section 8(d) shall have occurred
and be continuing with respect to such Borrower or if for any other reason, as
determined by the Swing Line Bank in its sole discretion, Loans may not be made
as contemplated by Section 2.6(b), each Bank shall, on the date such Loan was to
have been made pursuant to the notice referred to in Section 2.6(b) (the
"Refunding Date"), purchase for cash an undivided participating interest in the
then outstanding Swing Line Loans by paying to the Swing Line Bank an amount
(the "Swing Line Participation Amount") equal to (i) such Bank's Commitment
Percentage times (ii) the sum of the aggregate principal amount of Swing Line
Loans then outstanding which were to have been repaid with such Loans.
Whenever, at any time after the Swing Line Bank has received from any Bank
such Bank's Swing Line Participation Amount, the Swing Line Bank receives any
payment on account of the Swing Line Loans, the Swing Line Bank will distribute
to such Bank its Swing Line Participation Amount (appropriately adjusted, in the
case of interest payments, to reflect the period of time during which such
Bank's participating interest was outstanding and funded and, in the case of
principal and interest payments, to reflect such Bank's pro rata portion of such
payment if such payment is not sufficient to pay the principal of and interest
on all Swing Line Loans then due); provided, however, that in the event that
such payment received by the Swing Line Bank is required to be returned, such
Bank will return to the Swing Line Bank any portion thereof previously
distributed to it by the Swing Line Bank.
Each Bank's obligation to make the Loans referred to in Section 2.6(b) and
to purchase participating interests pursuant to Section 2.6(c) shall be absolute
and unconditional and shall not be affected by any circumstance, including,
without limitation, (i) any setoff, counterclaim, recoupment, defense or other
right which such Bank or such Borrower may have against the Swing Line Bank,
such Borrower or any other Person for any reason whatsoever; (ii) the occurrence
or continuance of a Default or an Event of Default or the failure to satisfy any
of the other conditions specified in Section 5; (iii) any adverse change in the
condition (financial or otherwise) of such Borrower; (iv) any breach of this
Agreement or any other Loan Document by such Borrower, any other party to this
credit facility or any other Bank; or (v) any other circumstance, happening or
event whatsoever, whether or not similar to any of the foregoing.
Section 2.7 Fees.
----
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(a) Structuring and Arranging Fee; Administrative Fee; Upfront Fee. A
structuring and arranging fee as well as an administrative fee shall be payable
to the Administrative Agent as set forth in the Fee Letter. The Borrowers also
agree, jointly and severally, to pay to the Administrative Agent and the other
Banks all reasonable fees and expenses, including upfront fees, as determined by
the Administrative Agent as set forth in the Fee Letter.
(b) Commitment Fee. The Borrowers agree, jointly and severally, to pay to
the Administrative Agent for the account of each Bank as compensation for the
Aggregate Loan Commitment, a fee ("Commitment Fee") computed at the rate per
annum set forth in Schedule 2 attached to this Agreement on the average daily
amount of the unused portion of the Aggregate Loan Commitment accrued from and
after the date hereof. The unused portion of the Aggregate Loan Commitment means
the Aggregate Loan Commitment less the aggregate principal amount of the
outstanding Loans hereunder, but shall not include any amounts due under Swing
Line Loans. The Commitment Fee shall be calculated and be payable quarterly in
arrears and on the Credit Termination Date. The Commitment Fee shall be
calculated on the basis of a 360-day year for the actual number of days elapsed.
Section 2.8 Reduction or Termination of Commitment.
--------------------------------------
(a) Voluntary Reduction or Termination. The Borrowers may at any time, on
not less than three Business Days' written notice, (i) permanently reduce the
Aggregate Loan Commitment, provided that any reduction shall be in the amount of
$1,000,000 or a multiple thereof and that no such reduction shall cause the
aggregate principal amount of Loans outstanding to exceed the Aggregate Loan
Commitment as reduced, or (ii) terminate the Aggregate Loan Commitment.
(b) Credit Termination Date Acceleration. In the event the Aggregate Loan
Commitment is terminated, the Credit Termination Date shall accelerate to such
date of termination and the Borrowers shall, simultaneously with such
termination, repay the Base Rate Loans and LIBO Rate Loans in accordance with
ss. 2.10.
Section 2.9 Loan Prepayments (Optional and Mandatory).
-----------------------------------------
(a) Base Rate Loans. On two Business Day's notice to the Administrative
Agent and the Banks, the Borrowers may, at their option, prepay any Base Rate
Loan in whole at any time or in part from time to time, provided that each
partial prepayment shall be in the principal amount of $1,000,000 or, if
greater, then in multiples thereof and, if less than $1,000,000 shall be
outstanding, in principal amount equal to the aggregate principal amount
remaining outstanding.
(b) LIBO Rate Loans. On three Business Day's notice to the Administrative
Agent and the Banks, the Borrowers may, at their option prepay any LIBO Rate
Loan provided that if they shall prepay a LIBO Rate Loan prior to the last day
of the applicable Interest Period, or shall fail to borrow any LIBO Rate Loan on
the date such Loan is to be made, they shall pay to each Bank, in addition to
the principal and interest then to be paid in the case of a prepayment, on such
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date of prepayment, the Additional Amount incurred or sustained by such Bank as
a result of such prepayment or failure to borrow.
(c) Mandatory Prepayments. The Borrower shall prepay Base Rate Loans and
LIBO Rate Loans, in such order and combination as it may elect, in an amount
equal to (1) 100% of the net proceeds received by it from the sale of any
material assets which sale was not made in the ordinary course of the Borrower's
business, (2) 100% of the net cash proceeds, if any, from any Capital Stock
issued by the Borrower or Debt incurred by the Borrower (other than Indebtedness
for Borrowed Money) and (3) 100% of the net proceeds of any Recovery Event.
Section 2.10 Payments.
--------
(a) Base Rate Loans. Accrued interest on all Base Rate Loans shall be due
and payable on the last Business Day of each calendar month and upon the Credit
Termination Date.
(b) LIBO Rate Loans. Accrued interest on LIBO Rate Loans with Interest
Periods of one, two, three or six months shall be due and payable on the last
day of such Interest Period. Accrued interest on LIBO Rate Loans with Interest
Periods of six months shall be due and payable at the end of the third month and
on the last day of the Interest Period.
(c) Form of Payments, Application of Payments, Payment Administration, Etc.
Provided that no Event of Default or Potential Default then exists, all payments
and prepayments shall be applied to the Loans in such order and to such extent
as shall be specified by the Borrowers, by written notice to the Administrative
Agent at the time of such payment or prepayment. Except as otherwise provided
herein, all payments of principal, interest, fees, or other amounts payable by
the Borrowers hereunder shall be remitted to the Administrative Agent on behalf
of the Banks at the address set forth opposite its name on the signature page
hereof or at such office or account as the Administrative Agent shall specify to
the Borrowers, in immediately available funds not later than 2:00 p.m. on the
day when due. Whenever any payment is stated as due on a day which is not a
Business Day, the maturity of such payment shall, except as otherwise provided
in the definition of "Interest Period," be extended to the next succeeding
Business Day and interest shall continue to accrue during such extension. Each
Borrower authorizes the Administrative Agent to deduct from any account of any
Borrower maintained at the Administrative Agent or over which the Administrative
Agent has control any amount payable under this Agreement, the Notes or any
other Loan Document. The Administrative Agent's failure to deliver any bill,
statement or invoice with respect to amounts due under this Section or under any
Loan Document shall not affect the Borrowers' joint and several obligation to
pay any installment of principal, interest or any other amount under this
Agreement when due and payable.
(d) Net Payments. All payments made to the Banks by the Borrowers
hereunder, under the Notes or under any other Loan Document will be made without
set off, counterclaim or other defense. All such payments will be made free and
clear of, and without deduction or withholding for, any present or future taxes,
levies, imposts, duties, fees, assessments or other charges of whatever nature
now or hereafter imposed by any jurisdiction or any political subdivision or
taxing authority thereof or therein (but excluding any tax imposed on or
-24-
measured by the gross or net income of a Bank (including all interest, penalties
or similar liabilities related thereto) pursuant to the laws of the United
States of America or any political subdivision thereof, or taxing authority of
the United States of America or any political subdivision thereof, in which the
principal office or applicable lending office of a Bank is located), and all
interest, penalties or similar liabilities with respect thereto (collectively,
together with any amounts payable pursuant to the next sentence, "Taxes"). If
any Taxes are so levied or imposed, the Borrowers agree to pay the full amount
of such Taxes, and such additional amounts as may be necessary so that every
payment of all amounts due hereunder, under each Note or under any other Loan
Document, after withholding or deduction for or on account of any Taxes, will
not be less than the amount provided for herein or in such Note. The Borrowers
will furnish to each Bank upon request certified copies of tax receipts
evidencing such payment by the Borrowers. The Borrowers will indemnify and hold
harmless each Bank, and reimburse each Bank upon its written request, for the
amount of any Taxes so levied or imposed and paid or withheld by each Bank.
(e) Prepayment of LIBO Rate Loans. If any principal of a LIBO Rate Loan
shall be repaid (whether upon prepayment, reduction of the Loan Commitment after
acceleration or for any other reason) or converted to a Base Rate Loan prior to
the last day of the Interest Period applicable to such LIBO Rate Loan or if the
Borrowers fail for any reason to borrow a LIBO Rate Loan after giving
irrevocable notice pursuant to ss. 2.3, the Borrowers shall pay to the
Administrative Agent on behalf of the Banks, in addition to the principal and
interest then to be paid, such additional amounts as may be necessary to
compensate each Bank for all direct and indirect costs and losses (including
losses resulting from redeployment of prepaid or unborrowed funds at rates lower
than the cost of such funds to each Bank, and including lost profits incurred or
sustained by each Bank) as a result of such repayment or failure to borrow (the
"Additional Amount"). The Additional Amount (which each Bank shall take
reasonable measures to minimize) shall be specified in a written notice or
certificate delivered to the Borrowers by the Administrative Agent. Such notice
or certificate shall contain a calculation in reasonable detail of the
Additional Amount to be compensated and shall be conclusive as to the facts and
the amounts stated therein, absent manifest error.
(f) Demand Deposit Account. The Borrowers shall maintain at least one
demand deposit account with the Administrative Agent for purposes of this
Agreement. Each Borrower authorizes the Administrative Agent (but the
Administrative Agent shall not be obligated) to deposit into said account all
amounts to be advanced to the Borrowers hereunder. Further, each Borrower
authorizes the Administrative Agent (but the Administrative Agent shall not be
obligated) to deduct from said account, or any other account maintained by the
Borrowers at the Administrative Agent any amount payable hereunder on or after
the date upon which it is due and payable. Such authorization shall include but
not be limited to amounts payable with respect to principal, interest, fees and
expenses.
Section 2.11 Changes in Circumstances; Yield Protection.
------------------------------------------
If any Regulatory Change or compliance by any Bank with any request made
after the date hereof by the Board of Governors of the Federal Reserve System or
by any Federal Reserve Bank or other central bank or fiscal, monetary or similar
authority (in each case whether or not having the force of law) shall:
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(i) impose, modify or make applicable any reserve, special deposit,
Federal Deposit Insurance Corporation premium or similar requirement or
imposition against assets held by, or deposits in or for the account of, or
loans made by, or any other acquisition of funds for loans or advances by,
any Bank;
(ii) impose on any Bank any other condition regarding its Note;
(iii) subject any Bank to, or cause the withdrawal or termination of
any previously granted exemption with respect to, any tax (including any
withholding tax but not including any income tax not currently causing such
Bank to be subject to withholding) or any other levy, impost, duty, charge,
fee or deduction on or from any payments due from any Borrower; or
(iv) change the basis of taxation of payments from any Borrower to
such Bank (other than by reason of a change in the method of taxation of
such Bank's net income);
and the result of any of the foregoing events is to increase the cost to any
Bank of making or maintaining any Loan or to reduce the amount of principal,
interest or fees to be received by any Bank hereunder in respect of any Loan,
such Bank will immediately so notify the Administrative Agent and the Borrowers.
If such Bank determines in good faith that the effects of the change resulting
in such increased cost or reduced amount cannot reasonably be avoided or the
cost thereof mitigated, then upon notice by such Bank to the Administrative
Agent and the Borrowers, the Borrowers shall pay to such Bank on each interest
payment date of the Loan, such additional amount as shall be necessary to
compensate such Bank for such increased cost or reduced amount.
If any Bank shall determine that any Regulation regarding capital adequacy
or the adoption of any Regulation regarding capital adequacy, which Regulation
is applicable to banks (or their holding companies) generally and a specific
bank (or its holding company) specifically, or any change therein, or any change
in the interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by such Bank (or its holding company) with
any such request or directive regarding capital adequacy (whether or not having
the force of law) of any such authority, central bank or comparable agency, has
the effect of reducing the rate of return on such Bank's capital as a
consequence of its obligations hereunder to a level below that which such Bank
could have achieved but for such adoption, change or compliance (taking into
consideration such Bank's policies with respect to capital adequacy) by an
amount deemed by such Bank to be material, the Borrowers shall promptly pay to
such Bank, upon the demand of such Bank, such additional amount or amounts as
will compensate such Bank for such reduction.
If any Bank shall determine (which determination shall be, in the absence
of fraud or manifest error, conclusive and binding upon all parties hereto) that
by reason of abnormal circumstances affecting the interbank Eurodollar or
applicable eurocurrency market, adequate and reasonable means do not exist for
ascertaining the LIBO Rate to be applicable to the requested LIBO Rate Loan or
that Eurodollar or eurocurrency funds in amounts sufficient to fund all the LIBO
Rate Loans are not obtainable on reasonable terms, such Bank shall give notice
-26-
of such inability or determination by telephone and thereupon the obligations of
the Banks to make, convert other Loans to, or renew such LIBO Rate Loan shall be
excused, subject, however, to the right of the Borrowers at any time thereafter
to submit another request.
Determination by any Bank for purposes of this ss. 2.11 of the effect of
any Regulatory Change or other change or circumstance referred to above on its
costs of making or maintaining Loans or on amounts receivable by it in respect
of the Loans and of the additional amounts required to compensate such Bank in
respect of any additional costs, shall be made in good faith and shall be
evidenced by a certificate, signed by an officer of such Bank and delivered to
the Borrowers, as to the fact and amount of the increased cost incurred by or
the reduced amount accruing to such Bank owing to such event or events. Such
certificate shall be prepared in reasonable detail and shall be conclusive as to
the facts and amounts stated therein, absent manifest error.
Each Bank will notify the Borrowers of any event that will entitle such
Bank to compensation pursuant to this Section as promptly as practicable after
it obtains knowledge thereof and determines to request such compensation. Said
notice shall be in writing, shall specify the applicable Section or Sections of
this Agreement to which it relates and shall set forth the amount or amounts
then payable pursuant to this Section. The Borrowers shall pay such Bank the
amount shown as due on such notice within 30 days after its receipt of the same.
Section 2.12 Illegality. Notwithstanding any other provision in this
Agreement, if the adoption of any applicable Regulation, or any change therein,
or any change in the interpretation or administration thereof by any
governmental authority, central bank, or comparable agency charged with the
interpretation or administration thereof, or compliance by any Bank with any
request or directive (whether or not having the force of law) of any such
authority, central bank, or comparable agency shall make it unlawful or
impossible for such Bank to (1) maintain its Loan Commitment, then upon notice
to the Borrowers and the Administrative Agent by such Bank, the Loan Commitment
shall terminate; or (2) maintain or fund its LIBO Rate Loans, then upon notice
to the Borrowers of such event, the Borrowers' outstanding LIBO Rate Loans shall
be converted into Base Rate Loans.
ARTICLE III
Representations and Warranties
------------------------------
Each Borrower jointly and severally represents and warrants to the
Administrative Agent and the Banks that:
Section 3.1 Organization, Standing. It and each Subsidiary of any Borrower
(i) is a corporation duly organized, validly existing and in good standing under
the laws of its jurisdiction of incorporation, (ii) has the corporate power and
authority necessary to own its assets, carry on its businesses and enter into
and perform its obligations hereunder and under each Loan Document to which it
is a party, and (iii) is qualified to do business and is in good standing in
each jurisdiction where the nature of its business or the ownership of its
properties requires such qualification, except where the failure to be so
qualified would not result in a Material Adverse Effect.
-27-
Section 3.2 Corporate Authority, Validity, Etc. The making and performance of
the Loan Documents are within its power and authority and have been duly
authorized by all necessary corporate action. The making and performance of the
Loan Documents do not and under present law will not require any consent or
approval of the shareholders of any Borrower or any other person, do not and
under present law will not violate any law, rule, regulation order, writ,
judgment, injunction, decree, determination or award, do not violate any
provision of its charter or by-laws, do not and will not result in any breach of
any material agreement, lease or instrument to which it is a party, by which it
is bound or to which any of its assets are or may be subject, and do not and
will not give rise to any Lien upon any of its assets. The number of shares and
classes of the capital stock of each Borrower are accurately set forth on
Schedule 1 attached hereto; all such shares are validly issued, fully paid and
non-assessable, and the issuance and sale thereof are in compliance with all
applicable federal and state securities and other applicable laws; and the
shareholders' ownership thereof is free and clear of any liens or encumbrances
or other contractual restrictions. Further, no Borrower is in default under any
such agreement, lease or instrument. No authorizations, approvals or consents
of, and no filings or registrations with, any governmental or regulatory
authority or agency are necessary for the execution, delivery or performance by
any Borrower of any Loan Document to which it is a party or for the validity or
enforceability thereof. Each Loan Document, when executed and delivered, will be
the legal, valid and binding obligation of each Borrower, enforceable against it
in accordance with its terms.
Section 3.3 Litigation. Except as disclosed on Schedule 1, there are no
actions, suits or proceedings pending or, to any Borrower's knowledge,
threatened against or affecting any Borrower or any Subsidiary of any Borrower
or any assets of any of them before any court, government agency, or other
tribunal which if adversely determined would result in a Material Adverse
Effect. If there is any disclosure on Schedule 1, the status (including the
tribunal, the nature of the claim and the amount in controversy) of each such
litigation matter as of the date of this Agreement is set forth in Schedule 1.
Section 3.4 ERISA. (a) Each Borrower, each Subsidiary of any Borrower and
each ERISA Affiliate of such Borrower or such Subsidiary is in compliance in all
material respects with all applicable provisions of ERISA and the regulations
promulgated thereunder; and, neither such Borrower, such Subsidiary nor any
ERISA Affiliate maintains or contributes to or has maintained or contributed to
any multiemployer plan (as defined in ss. 4001 of ERISA) under which such
Borrower, such Subsidiary or any ERISA Affiliate could have any withdrawal
liability; (b) neither any Borrower, any Subsidiary of any Borrower nor any
ERISA Affiliate sponsors or maintains any Plan under which there is an
accumulated funding deficiency within the meaning of ss. 412 of the Code,
whether or not waived; (c) the aggregate liability for accrued benefits and
other ancillary benefits under each Plan that is or will be sponsored or
maintained by any Borrower, any Subsidiary of any Borrower or any ERISA
Affiliate (determined on the basis of the actuarial assumptions prescribed for
valuing benefits under terminating single-employer defined benefit plans under
Title IV of ERISA) does not exceed the aggregate fair market value of the assets
under each such defined benefit pension Plan; (d) the aggregate liability of the
Borrowers, the Subsidiaries of any Borrower and each ERISA Affiliate arising out
of or relating to a failure of any Plan to comply with the provisions of ERISA
or the Code, will not have a Material Adverse Effect; and (e) there does not
exist any unfunded liability (determined on the basis of actuarial assumptions
utilized by the actuary for the plan in preparing the most recent Annual Report)
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of the Borrowers, the Subsidiaries of any Borrower or any ERISA Affiliate under
any plan, program or arrangement providing post-retirement life or health
benefits.
Section 3.5 Financial Statements. The consolidated and consolidating
financial statements of the Parent and its Subsidiaries as of and for the Fiscal
Years ending March 31, 2005, consisting in each case of a balance sheet, a
statement of operations, a statement of shareholders' equity, a statement of
cash flows and accompanying footnotes, furnished to the Banks in connection
herewith, present fairly, in all material respects, the financial position,
results of operations and operating statistics of the Parent and its
Subsidiaries as of the dates and for the periods referred to, in conformity with
GAAP. Except as set forth on Schedule 1 hereto, there are no liabilities, fixed
or contingent, which are not reflected in such financial statements, other than
liabilities which are not required to be reflected in such balance sheets.
Section 3.6 Not in Default, Judgments, Etc. No Event of Default or
Potential Default under any Loan Document has occurred and is continuing. Each
Borrower and each Subsidiary of any Borrower has satisfied all judgments and is
not in default with respect to any judgment, writ, injunction, decree, rule, or
regulation of any court, arbitrator, or federal, state, municipal, or other
governmental authority, commission, board, bureau, agency, or instrumentality,
domestic or foreign.
Section 3.7 Taxes. Each Borrower and each Subsidiary of any Borrower has
filed all federal, state, local and foreign tax returns and reports which they
are required by law to file and as to which its failure to file would have a
Material Adverse Effect, and has paid all taxes, including wage taxes,
assessments, withholdings and other governmental charges which are presently due
and payable, other than those being contested in good faith by appropriate
proceedings, if any, and disclosed on Schedule 1. The tax charges, accruals and
reserves on the books of each Borrower and each Subsidiary of any Borrower are
adequate to pay all such taxes that have accrued but are not presently due and
payable.
Section 3.8 Permits, Licenses, Etc. Each Borrower and each Subsidiary of
any Borrower possesses all permits, licenses, franchises, trademarks, trade
names, copyrights and patents necessary to the conduct of their respective
businesses as presently conducted or as presently proposed to be conducted,
except where the failure to possess the same would not have a Material Adverse
Effect.
Section 3.9 No Materially Adverse Contracts, Etc. No Borrower and no
Subsidiary of any Borrower is subject to any charter, corporate or other legal
restriction, or any judgment, decree, order, rule or regulation which in the
judgment of its directors or officers has or is expected in the future to have a
materially adverse effect on its operations, business, assets, liabilities or
upon its ability to perform under the Loan Documents. No Borrower and no
Subsidiary of any Borrower is a party to any contract or agreement which in the
judgment of its directors or officers has or is expected to have any materially
adverse effect on its business, except as otherwise reflected in adequate
reserves.
Section 3.10 Compliance with Laws, Etc.
--------------------------
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(a) Compliance Generally. Each Borrower and each Subsidiary of any Borrower
is in compliance in all material respects with all Regulations applicable to
their respective businesses (including obtaining all authorizations, consents,
approvals, orders, licenses, exemptions from, and making all filings or
registrations or qualifications with, any court or governmental department,
public body or authority, commission, board, bureau, agency, or
instrumentality), the noncompliance with which would have a Material Adverse
Effect.
(b) Hazardous Wastes, Substances and Petroleum Products. Each Borrower and
each Subsidiary of any Borrower has received all permits and filed all
notifications necessary to carry on its business; and is in compliance in all
respects with all Environmental Control Statutes. No Borrower and no Subsidiary
of any Borrower has given any written or oral notice, or failed to give required
notice, to the Environmental Protection Agency ("EPA") or any state or local
agency with regard to any actual or imminently threatened Release of Hazardous
Substances on properties owned, leased or operated by it or used in connection
with the conduct of its business and operations. No Borrower and no Subsidiary
of any Borrower has received notice that it is potentially responsible for costs
of clean-up or remediation of any actual or imminently threatened Release of
Hazardous Substances pursuant to any Environmental Control Statute. To the best
of each Borrower's knowledge and belief, no real property owned or leased by any
Borrower or any Subsidiary of any Borrower is in violation of any Environmental
Laws and no Hazardous Substances are present on said real property in violation
of applicable law. No Borrower and no Subsidiary of any Borrower has been
identified in any litigation, administrative proceedings or investigation as a
potentially responsible party for any liability under any Environmental Laws.
Section 3.11 Solvency. Each Borrower and each Subsidiary of any Borrower
is, and after giving effect to the transactions contemplated hereby, will be,
Solvent.
Section 3.12 Subsidiaries, Etc. No Borrower has any Subsidiaries, except as
set forth in Schedule 1 hereto. Set forth in Schedule 1 hereto is a complete and
correct list, as of the date of this Agreement, of all Investments held by each
Borrower in any joint venture or other Person.
Section 3.13 Title to Properties, Leases. Each Borrower has good and
marketable title to all assets and properties reflected as being owned by it in
its financial statements as well as to all assets and properties acquired since
said date (except property disposed of since said date in the ordinary course of
business). Except for the Liens set forth in Schedule 1 hereto and any other
Permitted Liens, there are no Liens on any of such assets or properties. It has
the right to, and does, enjoy peaceful and undisturbed possession under all
material leases under which it is leasing property as a lessee. All such leases
are valid, subsisting and in full force and effect, and none of such leases is
in default, except where such default would not have a Material Adverse Effect.
None of the pledged Collateral is subject to any Lien. Upon the filing of
financing statements set forth in Schedule 1, the Administrative Agent, on
behalf of itself and the other Banks, will have a properly perfected, first
priority security interest in all of the Collateral.
Section 3.14 Public Utility Holding Company; Investment Company. No
Borrower and no Subsidiary of any Borrower is a "public utility company" or a
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"holding company," or a "subsidiary company" of a "holding company," or an
"affiliate" of a "holding company" or of a "subsidiary company" of a "holding
company," as such terms are defined in the Public Utility Holding Company Act of
1935, as amended; or a "public utility" within the meaning of the Federal Power
Act, as amended. Further, no Borrower and no Subsidiary of any Borrower is an
"investment company" or an "affiliated person" of an "investment company" or a
company "controlled" by an "investment company" as such terms are defined in the
Investment Company Act of 1940, as amended.
Section 3.15 Margin Stock. No Borrower and no Subsidiary of any Borrower is
or will be engaged principally or as one of its important activities in the
business of extending credit for the purpose of purchasing or carrying or
trading in any margin stocks or margin securities (within the meaning of
Regulation U of the Board of Governors of the Federal Reserve System as amended
from time to time). No Borrower will use or permit any proceeds of the Loans or
Swing Line Loans to be used, either directly or indirectly, for the purpose,
whether immediate, incidental or ultimate, of buying or carrying margin stocks
or margin securities.
Section 3.16 Use of Proceeds. The Borrowers will use the proceeds of any
Loan or Swing Line Loan to refinance existing indebtedness, to support working
capital needs, to finance permitted acquisitions and for general corporate
purposes.
Section 3.17 Disclosure Generally. The representations and statements made
by each Borrower on its own behalf or on behalf of its Subsidiaries in
connection with this credit facility and the Loans, including representations
and statements in each of the Loan Documents, do not and will not contain any
untrue statement of a material fact or omit to state a material fact or any fact
necessary to make the representations made not materially misleading. No written
information, exhibit, report, brochure or financial statement furnished by any
Borrower to the Banks in connection with this credit facility, the Loans, or any
Loan Document contains or will contain any material misstatement of fact or omit
to state a material fact or any fact necessary to make the statements contained
therein not misleading.
Section 3.18 No Material Adverse Effect. Since March 31, 2005, no Material
Adverse Effect has occurred.
Section 3.19 Insurance. Each Borrower and each Subsidiary of any Borrower
is insured by insurers of recognized financial responsibility against such
losses and risks and in such amounts as are prudent and customary in the
businesses in which it is engaged; and each Borrower and each Subsidiary of any
Borrower (i) has not received notice from any insurer or agent of such insurer
that substantial capital improvements or other material expenditures will have
to be made in order to continue such insurance or (ii) does not have any reason
to believe that it will not be able to renew its existing insurance coverage as
and when such coverage expires or obtain similar coverage from similar insurers
at a cost that would not result in a Material Adverse Effect.
Section 3.20 Foreign Assets Control Regulations. None of the requesting or
borrowing of any Loans or the use of the proceeds thereof of such will violate
the Trading With the Enemy Act (50 U.S.C. ss. 1 et seq., as amended) (the
"Trading With the Enemy Act") or any of the foreign assets control regulations
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of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as
amended) (the "Foreign Assets Control Regulations") or any enabling legislation
or executive order relating thereto (which for the avoidance of doubt shall
include, but shall not be limited to (a) Executive Order 13224 of September 21,
2001 Blocking Property and Prohibiting Transactions With Persons Who Commit,
Threaten to Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)) (the
"Executive Order") and (b) the Patriot Act. Furthermore, none of the Borrowers
or their Affiliates (a) are or will become a "blocked person" as described in
the Executive Order, the Trading With the Enemy Act or the Foreign Assets
Control Regulations or (b) engage or will engage in any dealings or
transactions, or be otherwise associated, with any such "blocked person".
ARTICLE IV
Conditions Precedent
Section 4.1 All Loans. After this Agreement has become effective, the
obligation of each Bank to make any Loan (including but not limited to the first
Loan hereunder) is conditioned upon the following:
(a) Documents. The Borrowers shall have delivered and the Administrative
Agent shall have received a Request for Advance.
(b) Compliance Certificate. The Administrative Agent shall have received a
certificate in the form attached hereto as Exhibit G ("Compliance Certificate").
(c) Borrowing Base Certificate. The Administrative Agent shall have
received a Borrowing Base Certificate dated the date of the Loan requested under
this Agreement with sufficient Collateral thereunder.
(d) Covenants; Representations. The Administrative Agent shall have
received a certificate from each Borrower stating that such Borrower and any
Subsidiary of such Borrower, as applicable, is in compliance with all covenants,
agreements and conditions in each Loan Document and each representation and
warranty contained in each Loan Document is true with the same effect as if such
representation or warranty had been made on the date such Loan is made or
issued.
(e) Defaults. The Administrative Agent shall have received a certificate
from each Borrower stating that immediately prior to and after giving effect to
such transaction, no Event of Default or Potential Default shall exist.
(f) Material Adverse Effect. Since March 31, 2005, no Material Adverse
Effect has occurred.
(g) Collateral Field Audit. As to any loan requested after November 30,
2005, the Administrative Agent shall have received, a collateral field audit of
the Borrowers prepared by Protiviti.
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Section 4.2 Conditions to First Loan. In addition to the conditions to all
Loans as provided in ss. 4.1, the obligation of each Bank to make its first Loan
hereunder is conditioned upon the following:
(a) Articles, Bylaws. Each Bank shall have received copies of the Articles
or Certificates of Incorporation and Bylaws of each Borrower certified by the
applicable Secretary of State and either the Secretary or Assistant Secretary of
such Borrower; together with a Certificate of Good Standing from any
jurisdiction where the nature of its business or the ownership of its properties
requires such qualification except where the failure to be so qualified would
not have a Material Adverse Effect.
(b) Evidence of Authorization. Each Bank shall have received copies
certified by the Secretary or Assistant Secretary of each Borrower of all
corporate or other action taken by each Person other than a Bank who is a party
to any Loan Document to authorize its execution and delivery and performance of
the Loan Documents and to authorize the Loans, together with such other related
papers as the Administrative Agent shall reasonably require.
(c) Legal Opinions. Each Bank shall have received a favorable written
opinion in form and substance satisfactory to the Banks from Michael E. Geltner
& Associates, as counsel for the Borrowers and the Subsidiaries of the
Borrowers, which shall be addressed to the Banks and be dated the date of the
first Loan.
(d) Incumbency. The Administrative Agent, on behalf of the Banks, shall
have received a certificate signed by the secretary or assistant secretary of
each Borrower and each Subsidiary of any Borrower, together with the true
signature of the officer or officers authorized to execute and deliver the Loan
Documents and certificates thereunder, upon which the Banks shall be entitled to
rely conclusively until it shall have received a further certificate of the
secretary or assistant secretary of any Borrower or Subsidiary, as applicable,
amending such Borrower's and such Subsidiary's prior certificate and submitting
the signature of the officer or officers named in the new certificate as being
authorized to execute and deliver Loan Documents and certificates thereunder.
(e) Notes. Each Bank shall have received its Note, and the Swing Line Bank
shall have received its Swing Line Note, each duly executed, completed and
issued in accordance herewith.
(f) Documents. The Administrative Agent, on behalf of the Banks, shall have
received all certificates, instruments and other documents then required to be
delivered pursuant to any Loan Documents, in each instance in form and substance
reasonably satisfactory to it.
(g) Lien Searches. The Administrative Agent shall have received the results
of a recent lien, tax lien, judgment and litigation search in each of the
jurisdictions or offices in which Uniform Commercial Code financing statements
or other filings or recordations should be made to evidence or perfect first
priority security interests in all tangible and intangible property of the
Borrowers, and such search shall reveal no Liens on any of the tangible and
intangible property of the Borrowers except for the Permitted Liens set forth in
Schedule 1.
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(h) Due Diligence. The Administrative Agent shall have completed, and be
satisfied with the results of, its due diligence investigation of the Borrowers
and their Subsidiaries.
(i) Pledged Stock; Stock Power. The Administrative Agent shall have
received the certificates representing the shares of Capital Stock pledged
pursuant to the Pledge Agreement, together with an undated stock power for each
such certificate executed in blank by a duly authorized officer of the pledgor
thereof.
(j) Filings, Registrations, and Recordings. Each document (including,
without limitation, any Uniform Commercial Code financing statement) required by
the Security Agreement or under any law or reasonably requested by the
Administrative Agent to be filed, registered or recorded in order to create in
favor of the Administrative Agent, for the benefit of itself and the other
Banks, a properly perfected, first priority security interest in the Collateral
described therein, shall have been delivered to the Administrative Agent in
proper form for filing, registration or recordation.
(k) Consents. Each Borrower shall have provided to each Bank evidence
satisfactory to it that all governmental, shareholder and third party consents
and approvals necessary in connection with the transactions contemplated hereby
have been obtained and remain in effect.
(l) Insurance. The Administrative Agent shall have received insurance
certificates satisfying the requirements set forth in ss.5.6.
(m) Other Agreements. Each Borrower shall have executed and delivered each
other Loan Document required hereunder.
(n) Fees, Expenses. The Borrowers shall simultaneously pay or shall have
paid all fees and expenses due hereunder or any other Loan Document.
ARTICLE V
Affirmative Covenants
---------------------
Each Borrower covenants and agrees that from and after the date hereof and
so long as any Loan Commitment is in effect or any Obligation remains unpaid or
outstanding, it will:
Section 5.1 Financial Statements and Reports. Furnish to the Administrative
Agent and to each Bank the following financial information:
(a) Annual Statements. No later than sixty (60) days after the end of each
Fiscal Year, the consolidated and consolidating balance sheet of the Parent and
its Subsidiaries as of the end of such year and the prior year in comparative
form, and related statements of operations, shareholders' equity, and cash flows
for the Fiscal Year and the prior Fiscal Year in comparative form. The financial
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statements shall be in reasonable detail with appropriate notes and be prepared
in accordance with GAAP. The consolidated annual financial statements shall be
certified (without any qualification or exception) by independent certified
public accountants of nationally recognized standing reasonably acceptable to
the Administrative Agent. Such financial statements shall be accompanied by a
report of such independent certified public accountants stating that, in the
opinion of such accountants, such financial statements present fairly, in all
material respects, the financial position, and the results of operations and the
cash flows of the Parent and its Subsidiaries for the period then ended in
conformity with GAAP, except for inconsistencies resulting from changes in
accounting principles and methods agreed to by such accountants and specified in
such report, and that, in the case of such financial statements, the examination
by such accountants of such financial statements has been made in accordance
with generally accepted auditing standards and accordingly included examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements and assessing the accounting principles used and
significant estimates made, as well as evaluating the overall financial
statement presentation. Each financial statement provided under this subsection
(a) shall be accompanied by a certificate signed by such accountants either
stating that during the course of their examination nothing came to their
attention which would cause them to believe that any event has occurred and is
continuing which constitutes an Event of Default or Potential Default, or
describing each such event. In addition to the annual financial statements, each
Borrower shall, promptly upon receipt thereof, furnish to the Banks a copy of
each other report submitted to its board of directors by its independent
accountants in connection with any annual, interim or special audit made by them
of the financial records of any Borrower.
(b) Quarterly Statements. No later than forty-five (45) calendar days after
the end of each of the first three Fiscal Quarters of each Fiscal Year, the
consolidated and consolidating balance sheet and related statements of
operations, shareholders' equity and cash flows of the Parent and its
Subsidiaries for such period and for the period from the beginning of such
fiscal year to the end of such Fiscal Quarter and a corresponding financial
statement for the same period in the preceding Fiscal Year certified by the
chief financial officer of the Parent as having been prepared in accordance with
GAAP (subject to changes resulting from audits and year-end adjustments);
provided, however, that if the independent certified public accountants issue a
review report on the quarterly financial statements of any Borrower, the
financial statements required by this subsection (b) shall be accompanied by a
certificate signed by such accountants either stating that during the course of
their examination nothing came to their attention which would cause them to
believe that any event has occurred and is continuing which constitutes an Event
of Default or Potential Default, or describing each such event and the remedial
steps being taken by the Borrowers or any of them.
(c) Compliance Certificate. Within sixty (60) calendar days after the end
of each of the first three Fiscal Quarters of each Fiscal Year and within one
hundred thirty (130) calendar days after the end of each Fiscal Year, a
Compliance Certificate signed by the chief executive officer, president, or
chief financial officer of the Parent.
(d) Budgets and Projections. No later than ninety (90) calendar days after
the end of each fiscal year of the Borrowers, a detailed consolidated budget for
the following fiscal year on a quarterly basis for the Borrowers (including a
projected consolidated balance sheet of the Borrowers and their Subsidiaries as
of the end of the following fiscal year, and the related consolidated statements
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of projected cash flow, projected changes in financial position and projected
income), and, as soon as available, significant revisions, if any, of such
budget and projections with respect to such fiscal year (collectively, the
"Projections"), which Projections shall in each case be accompanied by a
certificate of a responsible officer stating that such Projections are based
upon reasonable estimates, information and assumptions and that such responsible
officer has no reason to believe that such Projections are incorrect or
misleading in any material respect.
(e) No Default. Within sixty (60) calendar days after the end of each of
the first three Fiscal Quarters of each Fiscal Year and within one hundred
thirty (130) calendar days after the end of each Fiscal Year, a certificate
signed by the chief executive officer, chief operating officer or chief
financial officer of each Borrower certifying that, to the best of such
officer's knowledge, after due inquiry, no event has occurred and is continuing
which constitutes an Event of Default or Potential Default, or describing each
such event and the remedial steps being taken by the Borrowers or any of them.
(f) Collateral Field Audit. Provide a collateral field audit of the
Borrowers prepared by a mutually acceptable firm at least once a year on the
anniversary date of this Agreement.
(g) ERISA. All reports and forms filed with respect to all Plans, except as
filed in the normal course of business and that would not result in an adverse
action to be taken under ERISA, and details of related information of a
Reportable Event, promptly following each filing.
(h) Material Changes. Notification to the Administrative Agent and to each
Bank of any litigation, administrative proceeding, investigation, business
development, or change in financial condition which would have a Material
Adverse Effect, promptly following its discovery.
(i) Other Information. Promptly, upon request by the Administrative Agent
from time to time (which may be on a monthly or other basis), each Borrower
shall provide such other information and reports regarding its operations,
business affairs, prospects and financial condition as the Agent or the Banks
may reasonably request.
(j) Monthly Borrowing Base Certificate. No later than fifteen (15) days
after the end of each calendar month, as of the last day of such calendar month,
a Borrowing Base Certificate signed by the chief financial officer, treasurer or
controller of the Parent.
(k) Monthly Accounts Receivable Aging Report. No later than thirty (30)
days after the end of each calendar month for the first eleven (11) months of
each Fiscal Year and no later than sixty (60) days after the end of each Fiscal
Year, an accounts receivable aging report in the form attached hereto as Exhibit
H ("Accounts Receivable Aging Report") signed by the chief financial officer,
treasurer or controller of the Parent. In the case of the first two calendar
months of each Fiscal Quarter, the information contained in this report need not
include Receivables related to Buy/Sell Contracts or AMC Receivables (less than
or over 120 days) as referenced in Exhibit H hereto.
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(l) Quarterly Inventory Report. No later than sixty (60) calendar days
after the end of each Fiscal Quarter for the first three (3) Fiscal Quarters of
each Fiscal Year and no later than one hundred thirty (130) days after the end
of each Fiscal Year, a quarterly inventory report in the form attached hereto as
Exhibit I ("Quarterly Inventory Report") signed by the chief financial officer,
treasurer or controller of the Parent.
(m) Quarterly Residuals Report. Within sixty (60) calendar days after the
end of each of the first three Fiscal Quarters of each Fiscal Year and within
one hundred thirty (130) calendar days after the end of each Fiscal Year, a
residuals report in the form attached hereto as Exhibit J ("Residuals Report")
signed by the chief financial officer, treasurer or controller of the Parent.
Section 5.2 Corporate Existence. Preserve its corporate existence and the
corporate existence of each of its Subsidiaries, and all of their respective
material franchises, licenses, patents, copyrights, trademarks and trade names
consistent with good business practice; and maintain, keep, and preserve all of
its properties (tangible and intangible) necessary or useful in the conduct of
its business in good working order and condition, ordinary wear and tear
excepted.
Section 5.3 ERISA. Comply in all material respects with the provisions of
ERISA to the extent applicable to any Plan maintained for the employees of any
Borrower, any Subsidiary of any Borrower or any ERISA Affiliate; do or cause to
be done all such acts and things that are required to maintain the qualified
status of each Plan and tax exempt status of each trust forming part of such
Plan; not incur any material accumulated funding deficiency (within the meaning
of ERISA and the regulations promulgated thereunder), or any material liability
to the PBGC (as established by ERISA); not permit any event to occur as
described in ss. 4042 of ERISA or which may result in the imposition of a lien
on its properties or assets; notify the Banks in writing promptly after it has
come to the attention of senior management of any Borrower of the assertion or
threat of any "reportable event" or other event described in ss. 4042 of ERISA
(relating to the soundness of a Plan) or the PBGC's ability to assert a material
liability against it or impose a lien on its, its Subsidiaries' or any ERISA
Affiliates' properties or assets; and refrain from engaging in any Prohibited
Transactions or actions causing possible liability under ss. 5.02 of ERISA.
Section 5.4 Compliance with Regulations. Comply in all material respects
with all Regulations applicable to the business of any Borrower or any
Subsidiary of any Borrower, the noncompliance with which would have a Material
Adverse Effect.
Section 5.5 Conduct of Business; Permits and Approvals, Compliance with
Laws. Continue to engage in an efficient and economical manner in a business
substantially the same as conducted by it on the date of this Agreement;
maintain in full force and effect, its franchises, and all licenses, patents,
trademarks, trade names, contracts, permits, approvals and other rights
necessary to the profitable conduct of its business.
Section 5.6 Maintenance of Property; Insurance. Keep all of the property,
equipment and systems of the Borrowers and the Subsidiaries of the Borrowers
useful and necessary in their respective business in good working order and
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condition, ordinary wear and tear excepted. Maintain insurance with financially
sound and reputable insurance companies or associations in such amounts and
covering such risks as are usually carried by companies engaged in the same or a
similar business and similarly situated, which insurance may provide for
reasonable deductibility from coverage thereof.
Section 5.7 Payment of Debt; Payment of Taxes, Etc. Where the amount
involved exceeds $250,000 or where the non-payment or non-discharge would
otherwise have a Material Adverse Effect on any Borrower, any Subsidiary of any
Borrower or any of the assets of such entities: promptly pay and discharge (a)
all of its Debt in accordance with the terms thereof; (b) all taxes,
assessments, and governmental charges or levies imposed upon it or upon its
income and profits, upon any of its property, real, personal or mixed, or upon
any part thereof, before the same shall become in default; (c) all lawful claims
for labor, materials and supplies or otherwise, which, if unpaid, might become a
lien or charge upon such property or any part thereof; provided, however, that
so long as such Borrower first notifies the Banks of its intention to do so,
such Borrower shall not be required to pay and discharge any such Debt, tax,
assessment, charge, levy or claim so long as the failure to so pay or discharge
does not constitute or result in an Event of Default or a Potential Default
hereunder and so long as no foreclosure or other similar proceedings shall have
been commenced against such property or any part thereof and so long as the
validity thereof shall be contested in good faith by appropriate proceedings
diligently pursued and it shall have set aside on its books adequate reserves
with respect thereto.
Section 5.8 Notice of Events. Promptly upon discovery of any of the
following events, the Borrowers shall provide telephone notice to the Banks
(confirmed within three (3) calendar days by written notice), describing the
event and all action the Borrowers, their Subsidiaries or any of them, as
applicable, propose to take with respect thereto:
(a) an Event of Default or Potential Default under this Agreement or any
other Loan Document;
(b) any default or event of default under a contract or contracts and the
default or event of default involves payments by any Borrower or any Borrower's
Subsidiary in an aggregate amount equal to or in excess of $250,000;
(c) a default or event of default under or as defined in any evidence of or
agreements for Indebtedness for Borrowed Money under which the liability of any
Borrower or any Subsidiary of any Borrower is equal to or in excess of $250,000,
singularly or in the aggregate, whether or not an event of default thereunder
has been declared by any party to such agreement or any event which, upon the
lapse of time or the giving of notice or both, would become an event of default
under any such agreement or instrument or would permit any party to any such
instrument or agreement to terminate or suspend any commitment to lend to such
Borrower or such Subsidiary or to declare or to cause any such indebtedness to
be accelerated or payable before it would otherwise be due;
(d) the institution of, any material adverse determination in, or the entry
of any default judgment or order or stipulated judgment or order in, any suit,
action, arbitration, administrative proceeding, criminal prosecution or
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governmental investigation against any Borrower or any Subsidiary of any
Borrower in which the amount in controversy is in excess of $250,000, singularly
or in the aggregate; or
(e) any change in any Regulation, including, without limitation, changes in
tax laws and regulations, which would have a Material Adverse Effect.
Section 5.9 Inspection Rights. During regular business hours and then as
often as requested of any Borrower or it Subsidiary by the Administrative Agent,
permit the Administrative Agent, or any authorized officer, employee, agent, or
representative of the Administrative Agent to examine and make abstracts from
the records and books of account of any Borrower or its Subsidiary, wherever
located, and to visit the properties of any Borrower; and to discuss the
affairs, finances, and accounts of any Borrower or any Subsidiary of any
Borrower with its Chairman, President, any executive vice president, its chief
financial officer, treasurer, controller or independent accountants. If no Event
of Default or Potential Default shall be in existence, the Administrative Agent
shall limit such examination to two times each calendar year and the Borrowers
shall reimburse the Administrative Agent for its expenses in connection with
each such inspection promptly following the completion of each such inspection.
If the inspection shall be made during the continuance of a Potential Default or
an Event of Default, there shall be no limit on the number of inspections which
can be made. Similarly, in the event of any inspection during such period, the
Borrowers shall reimburse the Administrative Agent for its expenses in
connection with each such inspection promptly following the completion of each
such inspection. At all times, it is understood and agreed by the Borrowers that
all expenses in connection with any such inspection which may be incurred by any
Borrower, any officers and employees thereof and the attorneys and independent
certified public accountants therefor shall be expenses payable by the Borrowers
and shall not be expenses of the Banks. The Administrative Agent shall be
permitted to communicate the information gained from any such inspection to the
other Banks.
Section 5.10 Books and Records. Maintain the books and records of the
Borrowers and any Subsidiaries of the Borrowers at all times in accordance with
GAAP.
Section 5.11 Compliance with Material Contracts. Each Borrower and each
Subsidiary will comply in all material respects with all obligations, terms,
conditions and covenants, as applicable, in all Debt of each Borrower and each
such Subsidiary and all instruments and agreements related thereto, and all
other instruments and agreements to which it is a party or by which it is bound
or any of its properties is affected and in respect of which the failure to
comply would have a Material Adverse Effect.
Section 5.12 Use of Proceeds. The Borrowers will use the proceeds of any
Loan made pursuant hereto to refinance existing indebtedness, to support working
capital needs, to finance permitted acquisitions and for general corporate
purposes.
Section 5.13 Further Assurances. Do such further acts and things and
execute and deliver to the Administrative Agent and/or the Banks such additional
assignments, agreements, powers and instruments, as the Administrative Agent
and/or any Bank may reasonably require or reasonably deem advisable to carry
into affect the purposes of this Agreement or to better assure and confirm unto
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the Administrative Agent and each Bank its rights, powers and remedies
hereunder.
Section 5.14 Restrictive Covenants in Other Agreements. In the event that
any Borrower shall enter into or otherwise become subject to or suffer to exist
any agreement pertaining to Debt which contains covenants or restrictions that
are more restrictive on it than the covenants and restrictions contained in this
Agreement, each and every such covenant and restriction shall be deemed
incorporated herein by reference as fully as if set forth herein. If and to the
extent that any such covenant or restriction shall be inconsistent with or
otherwise be in conflict with any covenant or restriction set forth herein
(other than by reason of its being more restrictive), this Agreement shall
govern.
Section 5.15 Hedge Agreements. At the request of the Administrative Agent
and at least on an annual basis, review its hedge program with the
Administrative Agent and provide satisfactory evidence that it has entered into
and is maintaining a sound and fiscally responsible hedge program for interest
risk management and foreign exchange fluctuations. Each Borrower shall
administer such hedge program to reduce materially the risk to such Borrower's
financial position.
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ARTICLE VI
Negative Covenants
------------------
Each Borrower covenants and agrees on behalf of itself and its
Subsidiaries, unless specifically excepted hereafter, that from and after the
date hereof and so long as any Loan Commitment is in effect or any Obligation
remains unpaid or outstanding, it and its Subsidiaries will not:
Section 6.1 Consolidation and Merger. Merge or consolidate with or into any
corporation except, if no Potential Default or Event of Default shall have
occurred and be continuing either immediately prior to or upon the consummation
of such transaction, any Person may be merged into any Borrower, as long as such
Borrower is the surviving entity.
Section 6.2 Debt. Except for Debt incurred by a Subsidiary of a Borrower
that is not also a Borrower hereunder, create, assume or permit to exist any
Debt except for Permitted Debt.
Section 6.3 Liens. Except for Liens on assets or property against a
Subsidiary of a Borrower that is not also a Borrower hereunder, create, assume
or permit to exist any Lien on any of their property or assets, whether now
owned or hereafter acquired, or upon any income or profits therefrom, except
Permitted Liens.
Section 6.4 Guarantees. Guarantee or otherwise in any way become or be
responsible for indebtedness or obligations (including working capital
maintenance, take-or-pay contracts) of any other Person (including but not
limited to any Subsidiary of any Borrower), contingently or otherwise, in any
amounts that would exceed an aggregate of $15,000,000 for all Borrowers and
their Subsidiaries taken together.
Section 6.5 Margin Stock. Use or permit any proceeds of the Loans to be
used, either directly or indirectly, for the purpose, whether immediate,
incidental or ultimate, of buying or carrying margin stock within the meaning of
Regulation U of The Board of Governors of the Federal Reserve System, as amended
from time to time.
Section 6.6 Acquisitions and Investments. Purchase or otherwise acquire
(including without limitation by way of share exchange) any part or amount of
the capital stock or assets of, or make any Investments in any other Person; or
enter into any new business activities or ventures not directly related to their
present business; or create any Subsidiary, unless, with respect to purchases or
acquisitions and to the extent applicable, (a) the stock, obligations or
securities acquired or held by the Borrower or the Borrower's Subsidiary is
received in settlement of Debts created in the ordinary course of business and
owed to such Borrower or Borrower's Subsidiary, (b) the Borrower or the
Borrower's Subsidiary makes and owns (i) Investments in certificates of deposits
or time deposits having maturities in each case not exceeding one year from the
date of issuance thereof and issued by a Bank, or any FDIC-insured commercial
bank incorporated in the United States or any state thereof having a combined
capital and surplus of not less than $150,000,000, (ii) Investments in
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marketable direct obligations issued or unconditionally guaranteed by the United
States of America, any agency thereof, or backed by the full faith and credit of
the United States of America, in each case maturing within one year from the
date of issuance or acquisition thereof, (iii) Investments in commercial paper
issued by a corporation incorporated in the United States or any state thereof
maturing no more than one year from the date of issuance thereof and, at the
time of acquisition, having a rating of A-1 (or better) by Standard & Poor's
Corporation or P-1 (or better) by Moody's Investors Service, Inc. and (iv)
Investments in money market mutual funds all of the assets of which are invested
in cash or investments described in the immediately preceding clauses (i), (ii)
and (iii), (c) such purchase or acquisition is non-hostile, (d) the aggregate
purchase price of each purchase or acquisition is less than or equal to
$5,000,000, (e) the aggregate purchase price of all purchases and acquisitions
during any twelve month period is less than or equal to $20,000,000, (f) no
Event of Default or Potential Default exists or would exist immediately
thereafter at the closing of such purchase or acquisition or arise from the
consummation of such purchase or acquisition, and (g) prior to each purchase or
acquisition closing, the Administrative Agent shall receive (i) revised
projection models incorporating such purchase or acquisition and (ii) evidence
that after the purchase or acquisition closing, the Aggregate Loan Commitment
less all of the then outstanding Loans will be greater than or equal to
$10,000,000.
Section 6.7 Transfer of Assets; Nature of Business. Sell, transfer, pledge,
assign or otherwise dispose of any of their assets unless such sale or
disposition shall be in the ordinary course of its business for value received
(and in the case of any sale or refinancing of Inventory, Equipment or Leases,
each such sale or refinancing must be an Ordinary Course Sale or Financing), or
discontinue, liquidate or change in any material respect any substantial part of
their operations or business. Sales of groups of Leases in securitization
transactions that comply with the requirements of an Ordinary Course Sale or
Financing shall be permitted.
Section 6.8 Restricted Payments. Make or pay any redemptions, repurchases,
dividends or distributions of any kind with respect to its capital stock except
that as long as no Event of Default or Potential Default shall be in existence:
(i) dividends may be made and paid as long as the aggregate thereof does not
exceed 50% of its [Net Income (net of any net losses)] accumulated after June
30, 2005; and (ii) repurchases of the common stock may occur during the twelve
month period commencing when the stock buyback plan of the Company becomes
effective so long as such repurchases do not exceed $12,500,000 in the
aggregate.
Section 6.9 Change of Management. Permit any Change of Management.
Section 6.10 Limitation on Capital Expenditures. Make or commit to make, on
an aggregate basis with any other Borrower and with any Subsidiary of any
Borrower, any Capital Expenditure in excess of $10,000,000 per annum, excluding
assets purchased under the ordinary course of its financing business.
Section 6.11 Limitation on Optional Payments and Modification of
Indebtedness. Make any optional or voluntary payment, prepayment, repurchase or
redemption of any recourse Debt or amend, modify or otherwise change, or consent
or agree to or permit any amendment, modification, waiver or other change to,
any of the terms of any recourse Debt agreement, unless such amendment,
modification or waiver would extend the maturity or reduce the amount of any
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payment of principal thereof, reduce the rate or extend the date for payment of
interest thereon or relax any covenant or other restriction applicable to the
Borrower and does not involve the payment of a consent fee.
Section 6.12 Accounting Change. Make or permit any change in financial
accounting policies or financial reporting practices, except as required by GAAP
or regulations of the Securities and Exchange Commission, if applicable.
Section 6.13 Transactions with Affiliates. Enter into any transaction
(including, without limitation, the purchase, sale or exchange of property, the
rendering of any services or the payment of management fees) with any Affiliate,
except transactions in the ordinary course of, and pursuant to the reasonable
requirements of, their business, and in good faith and upon commercially
reasonable terms and except for assignments to eGroup of receivables generated
by eTechnology arising from its normal business activities, which receivables,
upon such assignment, meet the criteria for Eligible Receivables.
Section 6.14 Restriction on Amendment of This Agreement. Enter into or
otherwise become subject to or suffer to exist any agreement which would require
them or any of them to obtain the consent of any other person as a condition to
the ability of the Banks and the Borrowers to amend or otherwise modify this
Agreement.
Section 6.15 Restriction on Hedge Arrangements. Enter into or permit to be
outstanding at any time any Hedge Arrangement unless:
such Hedge Arrangement is a rate swap, interest rate option, forward rate
transaction, forward foreign exchange transaction or cross currency rate swap
transaction;
such Hedge Arrangement is designed to protect the Borrower against
fluctuations in currency exchange rates or interest rates;
such Hedge Arrangement has been entered into by the Borrower bona fide and
in good faith in the ordinary course of its business for the purpose of carrying
on the same and not for speculative purposes;
the counterparty under such Hedge Arrangement is reasonably acceptable to
the Administrative Agent;
the counterparty under such Hedge Arrangement is not given any security
interest in the Collateral which is superior to the Bank's;
the extent of the security interest, if any, of the counterparty under such
Hedge Arrangement is not greater than the counterparty's credit exposure under
the Hedge Arrangement and such credit exposure is calculated in a reasonable and
customary manner; and
documentation of such Hedge Arrangement shall conform to ISDA standards and
must be acceptable to the Administrative Agent with respect to intercreditor
issues.
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Section 6.16 Restriction on Mexican Subsidiary. Permit MLC Leasing S.A. DE
C.V. ESTATUTS (Mexico) to become an active corporation.
Section 6.17 Restriction on Transfers from Borrowers to Non-Borrower
Subsidiaries of Borrowers. Lend, invest or transfer any cash or other Property
to Subsidiaries of Borrowers when such Subsidiaries are not Borrowers, except
for loans, investments and transfers made by the Borrower in the ordinary course
of business pursuant to a good-faith, arm's length transaction relating to the
Borrower's (a) purchase of Equipment or Inventory or (b) Capital Expenditures
except for transfer of funds to eTechnology in connection with its assignment to
eGroup of receivables generated by eTechnology as set forth in ss. 6.13, which
transfer shall represent the purchase price of such receivables and shall not
exceed 100% of the amount of such receivables.
ARTICLE VII
Financial Covenants
-------------------
The Borrowers, jointly and severally, covenant and agree that from and
after the date hereof and so long as the any Loan Commitment is in effect or any
Obligation remains unpaid or outstanding:
Section 7.1 Maximum Recourse Leverage. The ratio of (a) Total Recourse
Funded Debt to (b) Tangible Net Worth, will not at any time exceed 3.00:1.
Section 7.2 Maximum Recourse Debt to EBITDA. The ratio of (a) Total
Recourse Funded Debt to (b) EBITDA, for the four (4) most recently ended
consecutive Fiscal Quarters will not at any time exceed 3.00:1.
Section 7.3 Interest Coverage Ratio. The ratio of (a) EBIT to (b) interest
expense of the Parent and its Subsidiaries on a consolidated basis, for the four
(4) most recently ended consecutive Fiscal Quarters will not at any time be less
than 1.75.
Section 7.4 Minimum Net Worth. Net Worth will not at any time be less than
the sum of (a) 90% of consolidated GAAP Net Worth on June 30, 2005, (b)
seventy-five percent (75%) of Net Income for each Fiscal Quarter ending after
June 30, 2005, without deduction for any net losses, (c) one hundred percent
(100%) of the net proceeds from any sale of equity securities after the date of
this Agreement, and (d) one hundred percent (100%) of the fair value of any
equity securities issued after the date of this Agreement in connection with any
acquisition permitted hereunder or by waiver hereto.
Section 7.5 Borrowing Base. The aggregate principal amount of Loans
outstanding shall not at any time exceed the Borrowing Base or the Aggregate
Loan Commitment, whichever is less; provided, however, that this covenant shall
not be deemed breached if, at the time such aggregate amount exceeds said level,
within four Business Days after the earlier of the date any Borrower first has
knowledge of such excess or the date of the next Borrowing Base Certificate
disclosing the existence of such excess, a prepayment of Loans shall be made in
an amount sufficient to assure continued compliance with this covenant in the
future.
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Section 7.6 Delinquency of Portfolio. The delinquency will not exceed the
following, as presented substantially in the form of Exhibit G hereto:
(a) Asset Management Contracts. In the case of accounts receivable
pertaining to Asset Management Contracts, the aggregate amount of accounts
receivable which are more than 120 days past due will not exceed five percent
(5%) of the aggregate amount of all such accounts receivable. Notwithstanding
the Borrowers' internal record keeping procedures, an account receivable shall
not be deemed to be more than 120 days past due with respect to any individual
Asset Management Contract until 120 days shall have elapsed following the date
such contract was executed, delivered and made effective. For purposes of this
calculation, contracts that have been amended or otherwise modified or waived in
order to cure any delinquency shall be deemed to be delinquent in their
entireties.
(b) Buy-Sell Contracts. In the case of accounts receivable pertaining to
Buy-Sell Contracts, the aggregate amount of accounts receivable which are more
than 60 days past due will not exceed five percent (5%) of the aggregate amount
of all such accounts receivable. An account receivable pertaining to Buy-Sell
Contracts shall be deemed to be more than 60 days past due with respect to any
individual contract if it is 60 days past due as specified in the applicable
contract. For purposes of this calculation, contracts that have been amended or
otherwise modified or waived in order to cure any delinquency shall be deemed to
be delinquent in their entireties.
(c) Lease Portfolio. In the case of accounts receivable pertaining to lease
agreements, the aggregate amount of accounts receivable which are more than 90
days past due will not exceed five percent (5%) of the aggregate amount of all
such accounts receivable. An account receivable pertaining to a lease agreement
shall be deemed to be more than 90 days past due with respect to any individual
agreement if it is 90 days past due as specified in the applicable agreement.
For purposes of this calculation, leases that have been amended or otherwise
modified or waived in order to cure any delinquency shall be deemed to be
delinquent in their entireties.
ARTICLE VIII
Default
-------
Section 8.1 Events of Default. The Borrowers shall be in default if any one or
more of the following events (each an "Event of Default") occurs:
(a) Payments. The Borrowers fail to pay any principal of or interest on any
Note when due and payable (whether at maturity, by notice of intention to
prepay, or otherwise) or fail to pay when it is due and payable any other amount
payable under any Loan Document and such failure shall continue for a period of
five days or more.
(b) Covenants. The Borrowers fail to observe or perform (1) any term,
condition or covenant set forth in ss.ss.5.1(a), 5.1(b), 5.1(c), or 5.1(j),
ss.5.2 (first sentence only); and any section of Article 6 or 7 of this
Agreement, as and when required, or (2) any term, condition or covenant
contained in this Agreement or any other Loan Document other than as set forth
in (1) above, as and when required and such failure shall continue for a period
of 10 days or more.
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(c) Representations and Warranties. Any representation or warranty made or
deemed to be made by any Borrower, herein or in any Loan Document or in any
exhibit, schedule, report or certificate delivered pursuant hereto or thereto
shall prove to have been false, misleading or incorrect in any material respect
when made or deemed to have been made.
(d) Bankruptcy. Any Borrower or any Subsidiary of any Borrower is dissolved
or liquidated, makes an assignment for the benefit of creditors, files a
petition in bankruptcy, is adjudicated insolvent or bankrupt, petitions or
applies to any tribunal for any receiver or trustee, commences any proceeding
relating to itself under any bankruptcy, reorganization, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction, has commenced
against it any such proceeding which remains undismissed for a period of thirty
(30) days, or indicates its consent to, approval of or acquiescence in any such
proceeding, or any receiver of or trustee for any Borrower, any Subsidiary of
any Borrower or any substantial part of the property of any Borrower or any
Subsidiary of any Borrower is appointed, or if any such receivership or
trusteeship to continues undischarged for a period of thirty (30) days.
(e) Certain Other Defaults. Any Borrower, any Subsidiary of any Borrower or
the Borrowers as a group shall fail to pay when due any Indebtedness for
Borrowed Money which singularly or in the aggregate exceeds $250,000, and such
failure shall continue beyond any applicable cure period, or any Borrower, any
Subsidiary of any Borrower or the Borrowers as a group shall suffer to exist any
default or event of default in the performance or observance, subject to any
applicable grace period, of any agreement, term, condition or covenant with
respect to any agreement or document relating to Indebtedness for Borrowed Money
if the effect of such default is to permit, with the giving of notice or passage
of time or both, the holders thereof, or any trustee or agent for said holders,
to terminate or suspend any commitment (which is equal to or in excess of
$250,000) to lend money or to cause or declare any portion of any borrowings
thereunder to become due and payable prior to the date on which it would
otherwise be due and payable, provided that during any applicable cure period
the Banks' obligations hereunder to make further Loans shall be suspended.
Notwithstanding anything to the contrary in the immediately preceding sentence,
it shall not be an Event of Default hereunder for a Borrower or a Subsidiary of
a Borrower to fail to pay when due any Indebtedness for Borrowed Money so long
as such Borrower or such Subsidiary is contesting in good faith through
litigation its obligation to pay such Indebtedness for Borrowed Money; provided,
however, that if the aggregate amount of any Indebtedness for Borrowed Money
contested by a Borrower, the Subsidiary or the Borrowers as a group exceeds
$250,000, such Borrower (for itself and its Subsidiaries) or Borrowers, as
applicable, shall be required to post a bond equal to the amount that such
Indebtedness for Borrowed Money exceeds $250,000.
(f) Judgments. Any judgments against any Borrower, any Subsidiary of any
Borrower or the Borrowers as a group or against assets or property of any
Borrower, the Subsidiary or the Borrowers as a group for amounts in excess of
$250,000 in the aggregate remain unpaid, unstayed on appeal, undischarged,
unbonded and undismissed for a period of thirty (30) days.
(g) Attachments. Any assets of any Borrower or the Borrowers as a group
shall be subject to attachments, levies, or garnishments for amounts in excess
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of $250,000 in the aggregate which have not been dissolved or satisfied within
twenty (20) days after service of notice thereof to such Borrower or Borrowers,
as applicable.
(h) Change of Management. There occurs any Change of Management.
(i) Security Interests. Any security interest created pursuant to any Loan
Document shall cease to be in full force and effect, or shall cease in any
material respect to give the Administrative Agent, the Liens, rights, powers and
privileges purported to be created thereby (including, without limitation, a
perfected security interest in, and Lien on, all of the Collateral), superior to
and prior to the rights of all third Persons, and subject to no other Liens
(except as permitted by ss. 6.3).
(j) Material Adverse Effect. There occurs any Material Adverse Effect.
(k) ERISA. (a) Any Borrower or any ERISA Affiliate of any such Borrower is
not in compliance in all material respects with all applicable provisions of
ERISA and the regulations promulgated thereunder; and, either the Borrower or an
ERISA Affiliate of such Borrower maintains or contributes to or has maintained
or contributed to any multiemployer plan (as defined in ss. 4001 of ERISA) under
which such Borrower any ERISA Affiliate could have any withdrawal liability; (b)
either the Borrower or any ERISA Affiliate of the Borrower sponsors or maintains
any Plan under which there is an accumulated funding deficiency within the
meaning of ss. 412 of the Code, whether or not waived; (c) the aggregate
liability for accrued benefits and other ancillary benefits under each Plan that
is or will be sponsored or maintained by the Borrower or any ERISA Affiliate of
the Borrower (determined on the basis of the actuarial assumptions prescribed
for valuing benefits under terminating single-employer defined benefit plans
under Title IV of ERISA) exceeds the aggregate fair market value of the assets
under each such defined benefit pension Plan; (d) the aggregate liability of the
Borrower and each ERISA Affiliate of the Borrower arising out of or relating to
a failure of any Plan to comply with the provisions of ERISA or the Code, will
have a Material Adverse Effect; and (e) an unfunded liability (determined on the
basis of actuarial assumptions utilized by the actuary for the plan in preparing
the most recent Annual Report) of the Borrower or any ERISA Affiliate exists
under any plan, program or arrangement providing post-retirement life or health
benefits.
THEN and in every such event other than that specified in ss. 8.1(d), the
Administrative Agent may, in its sole discretion, or at the written request of
the Required Banks shall, terminate the Aggregate Loan Commitment (the date of
such termination then being the Credit Termination Date) and declare the Notes,
the Swing Line Note and all other Obligations, including without limitation
accrued interest, to be, and they shall thereupon forthwith become due and
payable without presentment, demand, or notice of any kind, all of which are
hereby expressly waived by each Borrower. Upon the taking of any such action,
the Administrative Agent shall provide prompt notice of such action to the other
Banks. Upon the occurrence of any event specified in ss. 8.1(d), the Notes,
Swing Line Loans and all other Obligations, including without limitation accrued
interest, shall immediately be due and payable without presentment, demand,
protest or other notice of any kind, all of which are hereby expressly waived by
each Borrower and the Aggregate Loan Commitment shall immediately terminate (the
date of such termination then being the Credit Termination Date). From and after
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the date an Event of Default shall have occurred and for so long as an Event of
Default shall be continuing, the Loans shall bear interest at the Default Rate.
ARTICLE IX
Collateral
----------
Section 9.1 Collateral. Except as otherwise specifically set forth herein
or in any other Loan Document, any and all Loans made and outstanding and their
repayment at all times shall be secured by a first priority, perfected, security
interest in the Collateral (as defined in the Security Agreement, hereinafter
referred to as the "Collateral") subject only to Permitted Liens.
ARTICLE X
Administrative Agent
--------------------
Section 10.1 Appointment and Authorization. Each Bank hereby irrevocably
appoints and authorizes National City Bank, as Administrative Agent hereunder
and as collateral agent, to take such action on its behalf and to exercise such
powers under this Agreement and the Loan Documents as are specifically delegated
to it as Administrative Agent by the terms hereof or thereof, together with such
other powers as are reasonably incidental thereto. The relationship between the
Administrative Agent and each Bank has no fiduciary aspects, and the
Administrative Agent's duties hereunder are acknowledged to be only ministerial
and not involving the exercise of discretion on its part. Nothing in this
Agreement or any Loan Document shall be construed to impose on the
Administrative Agent any duties or responsibilities other than those for which
express provision is made herein or therein. In performing its duties and
functions under this Article 10, the Administrative Agent does not assume and
shall not be deemed to have assumed, and hereby expressly disclaims, any
obligation with or for any Borrower. As to matters not expressly provided for in
this Agreement or any Loan Document, the Administrative Agent shall not be
required to exercise any discretion or to take any action or communicate any
notice, but shall be fully protected in so acting or refraining from acting upon
the instructions of the Required Banks and their respective successors and
assigns; provided, however, that in no event shall the Administrative Agent be
required to take any action which exposes it to individual liability or which is
contrary to this Agreement, any Loan Document or applicable law, and the
Administrative Agent shall be fully justified in failing or refusing to take any
action hereunder unless it shall first be specifically indemnified to its
satisfaction by the Banks against any and all liability and expense which may be
incurred by it by reason of taking or omitting to take any such action. If an
indemnity furnished to the Administrative Agent for any purpose shall, in its
reasonable opinion, be insufficient or become impaired, the Administrative Agent
may call for additional indemnity from the Banks and not commence or cease to do
the acts for which such indemnity is requested until such additional indemnity
is furnished.
Section 10.2 Duties and Obligations. In performing its functions and duties
hereunder on behalf of the Banks, the Administrative Agent shall exercise the
same care and skill as it would exercise in dealing with loans for its own
account. Neither the Administrative Agent nor any of its directors, officers,
employees or other agents shall be liable for any action taken or omitted to be
taken by it or them under or in connection with this Agreement or any Loan
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Document except for its or their own gross negligence or willful misconduct.
Without limiting the generality of the foregoing, the Administrative Agent (a)
may consult with legal counsel and other experts selected by it and shall not be
liable for any action taken or omitted to be taken by it in good faith and in
accordance with the advice of such experts; (b) makes no representation or
warranty to any Bank as to, and shall not be responsible to any Bank for, any
recital, statement, representation or warranty made in or in connection with
this Agreement, any Loan Document or in any written or oral statement (including
a financial or other such statement), instrument or other document delivered in
connection herewith or therewith or furnished to any Bank by or on behalf of any
Borrower; (c) shall have no duty to ascertain or inquire into any Borrower's
performance or observance of any of the covenants or conditions contained herein
or to inspect any of the property (including the books and records) of any
Borrower or inquire into the use of the proceeds of the Loans or (unless the
officers of the Administrative Agent active in their capacity as officers of the
Administrative Agent on any Borrower's account have actual knowledge thereof or
have been notified in writing thereof) to inquire into the existence or possible
existence of any Event of Default or Potential Default; (d) shall not be
responsible to any Bank for the due execution, legality, validity,
enforceability, effectiveness, genuineness, sufficiency, collectibility or value
of this Agreement or any other Loan Document or any instrument or document
executed or issued pursuant hereto or in connection herewith, except to the
extent that such may be dependent on the due authorization and execution by the
Administrative Agent itself; (e) except as expressly provided herein in respect
of information and data furnished to the Administrative Agent for distribution
to the Banks, shall have no duty or responsibility, either initially or on a
continuing basis, to provide to any Bank any credit or other information with
respect to any Borrower, whether coming into its possession before the making of
the Loans or at any time or times thereafter; and (f) shall incur no liability
under or in respect of this Agreement or any other Loan Document for, and shall
be entitled to rely and act upon, any notice, consent, certificate or other
instrument or writing (which may be by facsimile (telecopier), telegram, cable,
or other electronic means) believed by it to be genuine and correct and to have
been signed or sent by the proper party or parties.
Section 10.3 The Administrative Agent as a Bank. With respect to its Loan
Commitment and the Loans and Swing Line Loans made and to be made by it, the
Administrative Agent shall have the same rights and powers under this Agreement
and all other Loan Documents as the other Banks and may exercise the same as if
it were not the Administrative Agent. The terms "Bank" and "Banks" as used
herein shall, unless otherwise expressly indicated, include the Administrative
Agent in its individual capacity. The Administrative Agent and any successor
Administrative Agent which is a commercial bank, and their respective
affiliates, may accept deposits from, lend money to, act as trustee under
indentures of and generally engage in any kind of business with, the Borrowers
and their affiliates from time to time, all as if such entity were not the
Administrative Agent hereunder and without any duty to account therefor to any
Bank.
Section 10.4 Independent Credit Decisions. Each Bank acknowledges to the
Administrative Agent that it has, independently and without reliance upon the
Administrative Agent or any other Bank, and based upon such documents and
information as it has deemed appropriate, made its own independent credit
analysis and decision to enter into this Agreement. Each Bank also acknowledges
that it will, independently or through other advisers and representatives but
without reliance upon the Administrative Agent or any other Bank, and based upon
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such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or refraining from taking
any action under this Agreement or any Loan Document.
Section 10.5 Indemnification. The Banks agree to indemnify the
Administrative Agent (to the extent not previously reimbursed by the Borrowers),
ratably in proportion to each Bank's Commitment Percentage, from and against any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses and disbursements of any kind or nature
whatsoever which may be imposed on, incurred by or asserted against the
Administrative Agent in its capacity as Administrative Agent in any way relating
to or arising out of this Agreement or any Loan Document or any action taken or
omitted to be taken by the Administrative Agent in its capacity as
Administrative Agent hereunder or under any Loan Document; provided that none of
the Banks shall be liable for any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting from the Administrative Agent `s gross negligence or
willful misconduct. Without limiting the generality of the foregoing, each Bank
agrees to reimburse the Administrative Agent, promptly on demand, for such
Bank's ratable share (based upon the aforesaid apportionment) of any
out-of-pocket expenses (including reasonable counsel fees and disbursements)
incurred by the Administrative Agent in connection with the preparation,
execution, administration or enforcement of, or the preservation of any rights
under, this Agreement and the Loan Documents to the extent that the
Administrative Agent is not reimbursed for such expenses by the Borrowers.
Section 10.6 Successor Administrative Agent. The Administrative Agent may
resign at any time by giving written notice of such resignation to the Banks and
the Borrowers, such resignation to be effective only upon the appointment of a
successor Administrative Agent as hereinafter provided. Upon any such notice of
resignation, the Banks shall jointly appoint a successor Administrative Agent
upon written notice to the Borrowers and the Administrative Agent. If no
successor Administrative Agent shall have been jointly appointed by such Banks
and shall have accepted such appointment within thirty (30) days after the
Administrative Agent shall have given notice of resignation, the Administrative
Agent may, upon notice to the Borrowers and the Banks, appoint a successor
Administrative Agent. Upon its acceptance of any appointment as Administrative
Agent hereunder, the successor Administrative Agent shall succeed to and become
vested with all the rights, powers, privileges and duties of the Administrative
Agent, and the Administrative Agent shall be discharged from its duties and
obligations as Administrative Agent under this Agreement and the Loan Documents.
After the Administrative Agent `s resignation hereunder, the provisions hereof
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was the Administrative Agent under this Agreement and the Loan
Documents.
Section 10.7 Allocations Made By the Administrative Agent. As between the
Administrative Agent and the Banks, unless a Bank objecting to a determination
or allocation made by the Administrative Agent pursuant to this Agreement
delivers to the Administrative Agent written notice of such objection within two
hundred ten (210) days after the date any distribution was made by the
Administrative Agent, such determination or allocation shall be conclusive on
such one hundred twentieth day and only those items expressly objected to in
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such notice shall be deemed disputed by such Bank. The Administrative Agent
shall not have any duty to inquire as to the application by the Banks of any
amounts distributed to them.
ARTICLE XI
Miscellaneous
-------------
Section 11.1 Waiver. No failure or delay on the part of the Administrative
Agent or any Bank or any holder of any Note in exercising any right, power or
remedy under any Loan Document shall operate as a waiver thereof; nor shall any
single or partial exercise of any such right, power or remedy preclude any other
or further exercise thereof or the exercise of any other right, power or remedy
under any Loan Document. The remedies provided under the Loan Documents are
cumulative and not exclusive of any remedies provided by law.
Section 11.2 Amendments. No amendment, modification, termination or waiver
of any Loan Document or any provision thereof nor any consent to any departure
by the Borrowers therefrom shall be effective, except for the addition of an
Additional Bank to this Agreement, unless the same shall have been approved in
writing by the Required Banks, be in writing and be signed by the Administrative
Agent, the Required Banks and the Borrowers, and then any such waiver or consent
shall be effective only in the instance and for the specific purpose for which
given, provided, however, that unanimous written consent of all of the Banks
shall be required for: (a) any increase in the amount of the Aggregate Loan
Commitment; (b) any reduction in principal, interest, or fees payable by the
Borrowers under this Agreement; (c) any extension of the Credit Termination Date
or the maturity date of any Loan; (d) any extension of the due date for payment
of any principal, interest or fees to be collected on behalf of the Banks; (e)
any release of all or substantially all of the Collateral; (f) any change in the
definition of Required Banks and (g) any release of a Borrower or a guarantor of
principal, interest, or fees payable by the Borrowers under this Agreement. No
notice to or demand on the Borrowers shall entitle the Borrowers to any other or
further notice or demand in similar or other circumstances.
Section 11.3 Governing Law. The Loan Documents and all rights and
obligations of the parties thereunder shall be governed by and be construed and
enforced in accordance with the laws of the Commonwealth of Pennsylvania without
regard to Pennsylvania or federal principles of conflict of laws.
Section 11.4 Participations and Assignments. Each Borrower hereby
acknowledges and agrees that any Bank may at any time: (a) grant participations
in all or any portion of its Note or of its right, title and interest therein or
in or to this Agreement (collectively, "Participations") to any other lending
office of such Bank or, with the consent of the Borrowers (not to be
unreasonably withheld), to any other bank, lending institution or other entity
which has the requisite sophistication to evaluate the merits and risks of
investments in Participations ("Participants"); provided, however, that: (i) all
amounts payable by the Borrowers hereunder shall be determined as if such Bank
had not granted such Participation; and (ii) any agreement pursuant to which
such Bank may grant a Participation: (x) shall provide that such Bank shall
retain the sole right and responsibility to enforce the obligations of the
Borrowers hereunder including, without limitation, the right to approve any
amendment, modification or waiver of any provisions of this Agreement; and (y)
such participation agreement may provide that such Bank will not agree to any
modification, amendment or waiver of this Agreement without the consent of the
-51-
Participant if such modification, amendment or waiver would reduce the principal
of or rate of interest on any Loan or postpone the date fixed for any payment of
principal of or interest on any Loan or increase the Aggregate Loan Commitment
or release any of the Collateral; and (b) assign any or all of its obligations
under this Agreement and the Loan Documents (but only with the consent of the
Parent and the Administrative Agent which consent shall not be unreasonably
withheld), provided that each such assignment shall be in an amount of at least
$5,000,000; and (ii) each such assignment by a Bank of its Note or a portion
thereof, or Loan Commitment or a portion thereof shall be made in such manner so
that the same portion of its Loans, Note and Loan Commitment is assigned to the
respective assignee. Upon each such assignment, the assigning Bank shall pay the
Administrative Agent an assignment fee of $3,500.
Section 11.5 Captions. Captions in the Loan Documents are included for
convenience of reference only and shall not constitute a part of any Loan
Document for any other purpose.
Section 11.6 Notices. All notices, requests, demands, directions,
declarations and other communications between the Banks and the Borrowers
provided for in any Loan Document shall, except as otherwise expressly provided,
be mailed by registered or certified mail, return receipt requested, or
telegraphed, or faxed, or delivered in hand to the applicable party at its
address indicated opposite its name on the signature pages hereto. The foregoing
shall be effective and deemed received three days after being deposited in the
mails, postage prepaid, addressed as aforesaid and shall whenever sent by
telegram, telegraph or fax or delivered in hand be effective when received. Any
party may change its address by a communication in accordance herewith.
Section 11.7 Sharing of Collections, Proceeds and Set-Offs; Application of
--------------------------------------------------------------
Payments.
- --------
(a) If any Bank, by exercising any right of set-off, counterclaim or
foreclosure against trade collateral or otherwise, receives payment of principal
or interest or other amount due on any Note which is greater than the percentage
share of such Bank (determined as set forth below), the Bank receiving such
proportionately greater payment shall purchase such participations in the Loans
held by the other Banks, and such other adjustments shall be made as may be
required, so that all such payments shall be shared by the Banks on the basis of
their percentage shares; provided that if all or any portion of such
proportionately greater payment of such indebtedness is thereafter recovered
from, or must otherwise be restored by, such purchasing Bank, the purchase shall
be rescinded and the purchase price restored to the extent of such recovery, but
without interest being paid by such purchasing Bank. The percentage share of
each Bank shall be based on the portion of the outstanding Loans of such Bank
(prior to receiving any payment for which an adjustment must be made under this
Section) in relation to the aggregate outstanding Loans of all the Banks. Each
Borrower agrees, to the fullest extent may effectively do so under applicable
law, that any holder of a participation in a Loan or reimbursement obligation,
whether or not acquired pursuant to the foregoing arrangements, may exercise
rights of set-off or counterclaim and other rights with respect to such
participation as fully as if such holder of a participation were a direct
creditor of any Borrower in the amount of such participation. If under any
applicable bankruptcy, insolvency or other similar law, any Bank receives a
secured claim in lieu of a set-off to which this Section would apply, such Bank
-52-
shall, to the extent practicable, exercise its rights in respect of such secured
claim in a manner consistent with the rights of the Banks entitled under this
Section to share in the benefits of any recovery on such secured claim.
(b) If an Event of Default or Potential Default shall have occurred and be
continuing the Administrative Agent and each Bank and each Borrower agree that
all payments on account of the Loans shall be applied by the Administrative
Agent and the Banks as follows:
First, to the Administrative Agent for any Administrative Agent fees then
due and payable under this Agreement until such fees are paid in full;
Second, to the Administrative Agent for any fees, costs or expenses
(including expenses described in ss. 11.8) incurred by the Administrative
Agent under any of the Loan Documents or this Agreement, then due and
payable and not reimbursed by the Borrowers or the Banks until such fees,
costs and expenses are paid in full;
Third, to the Banks for their percentage shares of the Commitment Fee then
due and payable under this Agreement until such fee is paid in full;
Fourth, to the Banks for their respective shares of all costs, expenses and
fees then due and payable from the Borrowers until such costs, expenses and
fees are paid in full;
Fifth, to the Banks for their percentage shares of all interest then due
and payable from the Borrowers until such interest is paid in full, which
percentage shares shall be calculated by determining each Bank's percentage
share of the amounts allocated in (a) above determined as set forth in said
clause (a); and
Sixth, to the Banks for their percentage shares of the principal amount of
the Loans then due and payable from the Borrowers until such principal is
paid in full, which percentage shares shall be calculated by determining
each Bank's percentage share of the amounts allocated in (a) above
determined as set forth in said clause (a).
Section 11.8 Expenses; Indemnification. The Borrowers will from time to
time reimburse the Administrative Agent promptly following demand for all
reasonable out-of-pocket expenses (including the reasonable fees and expenses of
legal counsel) in connection with (a) the preparation of the Loan Documents, (b)
the making of any Loans, and (c) the administration of the Loan Documents,
including but not limited to all amendments, waivers and advice concerning the
Loan Documents. The Borrowers also will from time to time reimburse the
Administrative Agent and each Bank for all out-of-pocket expenses (including the
reasonable fees and expenses of legal counsel) in connection with the
enforcement of the Loan Documents. In addition to the payment of the foregoing
expenses, each Borrower hereby agrees to indemnify, protect and hold the
Administrative Agent, each Bank and any holder of any Note and the officers,
directors, employees, agents, affiliates and attorneys of the Administrative
Agent, each Bank and such holder (collectively, the "Indemnitees") harmless from
and against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses and disbursements of any kind or
nature, including reasonable fees and expenses of legal counsel, which may be
imposed on, incurred by, or asserted against such Indemnitee by any Borrower or
other third parties and arise out of or relate to this Agreement or the other
-53-
Loan Documents or any other matter whatsoever related to the transactions
contemplated by or referred to in this Agreement or the other Loan Documents;
provided, however, that the Borrowers shall have no obligation to an Indemnitee
hereunder to the extent that the liability incurred by such Indemnitee has been
determined by a court of competent jurisdiction to be the result of gross
negligence or willful misconduct of such Indemnitee.
Section 11.9 Survival of Warranties and Certain Agreements. All agreements,
representations and warranties made or deemed made herein shall survive the
execution and delivery of this Agreement, the making of the Loans hereunder and
the execution and delivery of the Note. Notwithstanding anything in this
Agreement or implied by law to the contrary, the agreements of the Borrowers set
forth in ss.ss. 2.10(d), 2.10(e), 2.11 and 11.8 shall survive the payment of the
Loans and the termination of this Agreement. This Agreement shall remain in full
force and effect until the repayment in full of all amounts owed by the
Borrowers under the Notes or any other Loan Document.
Section 11.10 Severability. The invalidity, illegality or unenforceability
in any jurisdiction of any provision in or obligation under this Agreement, the
Notes or other Loan Documents shall not affect or impair the validity, legality
or enforceability of the remaining provisions or obligations under this
Agreement, the Notes or other Loan Documents or of such provision or obligation
in any other jurisdiction.
Section 11.11 Banks' Obligations Several; Independent Nature of Banks'
Rights. The obligation of each Bank hereunder is several and not joint and no
Bank shall be the agent of any other (except to the extent the Administrative
Agent is authorized to act as such hereunder). No Bank shall be responsible for
the obligation or commitment of any other Bank hereunder. In the event that any
Bank at any time should fail to make a Loan as herein provided, the other Banks,
or any of them as may then be agreed upon, at their sole option, may make the
Loan that was to have been made by the Bank so failing to make such Loan.
Nothing contained in any Loan Document and no action taken by the Administrative
Agent or any Bank pursuant hereto or thereto shall be deemed to constitute the
Banks to be a partnership, an association, a joint venture or any other kind of
entity. The amounts payable at any time hereunder to each Bank shall be a
separate and independent debt, and, subject to the terms of this Agreement, each
Bank shall be entitled to protect and enforce its rights arising out of this
Agreement and it shall not be necessary for any other Bank to be joined as an
additional party in any proceeding for such purpose.
Section 11.12 No Fiduciary Relationship. No provision in this Agreement or
in any of the other Loan Documents and no course of dealing between the parties
shall be deemed to create any fiduciary duty by any Bank to any Borrower.
Section 11.13 CONSENT TO JURISDICTION AND SERVICE OF PROCESS. EACH
BORROWER, THE ADMINISTRATIVE AGENT AND EACH BANK HEREBY CONSENTS TO THE
JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE EASTERN DISTRICT
OF PENNSYLVANIA AND IRREVOCABLY AGREES THAT, ANY ACTIONS OR PROCEEDINGS ARISING
OUT OF OR RELATING TO THE NOTE, THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS MAYBE
LITIGATED IN SUCH COURTS. EACH PARTY TO THIS AGREEMENT ACCEPTS FOR ITSELF AND IN
-54-
CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE
JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON
CONVENIENT, AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY
IN CONNECTION WITH THIS AGREEMENT, ANY NOTE, OR SUCH OTHER LOAN DOCUMENT.
Section 11.14 WAIVER OF JURY TRIAL. EACH BORROWER, THE ADMINISTRATIVE AGENT
AND EACH BANK HEREBY WAIVES ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM
OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT, ANY OF THE LOAN
DOCUMENTS, OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS
AGREEMENT AND THE LENDER/BORROWER RELATIONSHIP ESTABLISHED HEREBY. THE SCOPE OF
THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY
BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION,
INCLUDING WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY
CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. EACH BORROWER, THE
ADMINISTRATIVE AGENT AND EACH BANK ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL
INDUCEMENT TO THE TRANSACTION, THAT EACH HAS ALREADY RELIED ON THE WAIVER IN
ENTERING INTO THIS AGREEMENT AND THAT EACH WILL CONTINUE TO RELY ON THE WAIVER
IN THEIR RELATED FUTURE DEALINGS. EACH BORROWER, THE ADMINISTRATIVE AGENT AND
EACH BANK FURTHER WARRANTS AND REPRESENTS THAT EACH HAS REVIEWED THIS WAIVER
WITH ITS LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS
IRREVOCABLE, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS,
SUPPLEMENTS, MODIFICATIONS, REPLACEMENTS OR RESTATEMENTS TO THIS AGREEMENT, THE
LOAN DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOANS.
IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO
A TRIAL BY THE COURT.
Section 11.15 Counterparts; Effectiveness. This Agreement and any amendment
hereto or waiver hereof may be signed in any number of counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument. This Agreement and any amendments
hereto or waivers hereof shall become effective when the Administrative Agent
shall have received signed counterparts or notice by fax of the signature page
that the counterpart has been signed and is being delivered to it or facsimile
that such counterparts have been signed by all the parties hereto or thereto.
Section
11.16 Use of Defined Terms. All words used herein in the singular or plural
shall be deemed to have been used in the plural or singular where the context or
construction so requires. Any defined term used in the singular preceded by
"any" shall be taken to indicate any number of the members of the relevant
class.
-55-
Section 11.17 Offsets. Nothing in this Agreement shall be deemed a waiver
or prohibition of any Bank's right of banker's lien or offset.
Section 11.18 Entire Agreement. This Agreement, the Notes issued hereunder
and the other Loan Documents constitute the entire understanding of the parties
hereto as of the date hereof with respect to the subject matter hereof and
thereof and supersede any prior agreements, written or oral, with respect hereto
or thereto.
Section 11.19 Rights of Banks. Subject to the provisions of Section 11.7
hereof, each of the Banks and their respective Affiliates, without having to
account to the other Banks or any other Person, may accept other compensation
from the Borrowers and their Affiliates and may accept deposits from, lend money
to and generally engage in any kind of banking, trust or other business with the
Borrowers and their Affiliates to the same extent and under the same
circumstances as though the Loan Documents had not been entered into; provided,
however, that no such transaction shall be, or cause any Borrower to be, in
violation of any Loan Documents as at the time any such transaction shall take
place.
Section 11.20 USA Patriot Act. Each Bank that is subject to the
requirements of the Patriot Act hereby notifies each Borrower that pursuant to
the requirements of the Patriot Act, it is required to obtain, verify and record
information that identifies each Borrower, which information includes the name
and address of each Borrower and other information that will allow such Bank to
identify each Borrower in accordance with the Patriot Act, and each Borrower
hereby agrees to deliver such information to the Banks as may be requested.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have each caused this Credit
Agreement to be duly executed by their duly authorized representatives as of the
date first above written.
ePLUS inc.
By: /s/ KLEYTON L. PARKHURST
------------------------
Name: Kleyton L. Parkhurst
Title: Senior Vice President
ePLUS Group, inc.
By: /s/ KLEYTON L. PARKHURST
------------------------
Name: Kleyton L. Parkhurst
Title: Senior Vice President
ePLUS Government, inc.
By: /s/ KLEYTON L. PARKHURST
------------------------
Name: Kleyton L. Parkhurst
Title: Senior Vice President
ePLUS Capital, inc.
By: /s/ KLEYTON L. PARKHURST
------------------------
Name: Kleyton L. Parkhurst
Title: President
Notices To:
George W. Fox, Jr.
13595 Dulles Technology Drive
Herndon, Virginia 20171
FAX No. 703-984-8684
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NATIONAL CITY BANK
By: /s/ KENNETH S. JAMISON
----------------------------
Name: Kenneth S. Jamison
Title: Vice President
Notices To:
Michael J. Labrum
Senior Vice President
National City Bank
Transportation, Equipment & Lease Finance Group
One South Broad Street, 13th Floor, Loc. 01-5997
Philadelphia, PA 19107
Fax: 267-256-4001
BRANCH BANKING AND TRUST COMPANY
OF VIRGINIA
By: /s/ JAMES E. DAVIS
----------------------------
Name: James E. Davis
Title: Senior Vice President
Notices To:
Ron Gudbrandsen
Vice President
Branch Banking and Trust Company
1909 K Street, N.W.
Washington, D.C. 20006
Fax: 202-835-9287
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SCHEDULE 2
Applicable Margins and Commitment Fee
Advances under the Facility shall carry an interest rate based upon the
Borrower's ratio of Total Recourse Funded Debt to Earnings Before Interest,
Taxes, Depreciation, and Amortization ("Total Recourse Funded Debt to EBITDA"),
as outlined below:
- ------------------------------- --------------- -------------
Total Recourse
Funded
Debt/EBITDA LIBOR + ABR+
- ------------------------------- --------------- -------------
>2.5 250.0 bps 25.0 bps
-
> 2.0 <2.5 225.0 bps 0.0 bps
-
> 1.5 < 2.0 200.0 bps 0.0 bps
-
< 1.5 175.0 bps 0.0 bps
- ------------------------------- --------------- -------------
The Commitment Fee will be subject to a performance grid determined by the usage
under the Facility based upon the following:
Usage <= 50% of the Facility = 50 bps
Usage > 50% of the Facility = 30 bps
EXHIBIT A
List of ePlus inc. Subsidiaries
ePlus Group, inc., a Commonwealth of Virginia corporation, a wholly-owned
subsidiary
ePlus Government, inc., a Commonwealth of Virginia corporation, a wholly-owned
subsidiary
ePlus Capital, inc., a Commonwealth of Virginia corporation, a wholly-owned
subsidiary
EXHIBIT B
Banks' Loan Commitments and Percentages
Bank Commitment Percentage
---- ------------ ------------
National City Bank $20,000,000 57.142857%
Specialized Banking Group, Philadelphia Region
One South Broad Street, 13th Floor, Loc. 01-5997
Philadelphia, PA 19107
Fax: 267-256-4001
Branch Banking and Trust Company, $15,000,000 42.857143%
of Virginia, a Virginia banking corporation
Ron Gudbrandsen
1909 K Street, N.W.
Washington, D.C. 20006
Fax: 202-835-9287
EXHIBIT C
Note
Philadelphia, Pennsylvania
$_____,000,000 September ___, 2005
For Value Received, ePlus inc., a Delaware corporation, ePlus Group, inc., a
Virginia corporation, ePlus Government, inc., a Virginia corporation, and ePlus
Capital, inc., a Virginia corporation, (collectively, the "Borrowers" and
individually, a "Borrower") hereby jointly and severally promise to pay to the
order of _____________ (the "Bank"), in lawful currency of the United States of
America in immediately available funds at the offices of NATIONAL CITY BANK
located at One South Broad St., 13th Floor, Philadelphia, Pennsylvania, on the
earlier to occur of acceleration of the maturity date as provided in the Credit
Agreement described below or the Credit Termination Date, the principal sum of
______________ MILLION DOLLARS ($____,000,000) or, if less, the then unpaid
principal amount of all Loans made by the Bank pursuant to the Credit Agreement
(defined below).
The Borrowers jointly and severally promise also to pay interest on the unpaid
principal amount hereof in like money at such office from the date hereof until
paid in full at the rates and at the times provided in the Credit Agreement,
dated September __, 2005, by and among the Borrowers and the banking
institutions named therein, with National City Bank, as Administrative Agent (as
such may be amended, modified, supplemented, restated and/or replaced from time
to time, the "Credit Agreement").
This Note is a Note referred to in the Credit Agreement. This Note is entitled
to the benefits of and is secured by security interests referred to in the
Credit Agreement. Capitalized terms used in this Note but not defined herein
shall have the meanings ascribed to such terms in the Credit Agreement. This
Note is subject to voluntary prepayment and mandatory repayment prior to demand,
acceleration of maturity or the Credit Termination Date, in whole or in part, as
provided in the Credit Agreement.
In case an Event of Default shall occur and be continuing, the maturity date of
the principal of and the accrued interest on this Note may be accelerated and be
declared to be due and payable in the manner and with the effect provided in the
Credit Agreement.
Each Borrower hereby waives presentment, demand, protest or notice of any kind
in connection with this Note.
Notwithstanding the face amount of this Note, the undersigneds' liability
hereunder shall be limited, at all times, to the actual aggregate outstanding
indebtedness relating to the Loans, including all principal and interest,
together with all fees and expenses as provided in the Credit Agreement, as
established by the Bank's books and records which shall be conclusive absent
manifest error.
This Note shall be construed in accordance with and be governed by the law of
the commonwealth of Pennsylvania without regard to Pennsylvania or federal
principles of conflict of laws.
ePLUS inc.
By: ______________________________
Name:
Title:
ePLUS Group, inc.
By: ______________________________
Name:
Title:
ePLUS Government, inc.
By: ______________________________
Name:
Title:
ePLUS Capital, inc.
By: ______________________________
Name:
Title:
EXHIBIT E
SECURITY AGREEMENT
------------------
This Security Agreement, dated September 23, 2005 (this "Security
Agreement"), is entered into by and among ePlus inc., a Delaware corporation,
ePlus Group, inc., a Virginia corporation, ePlus Government, inc., a Virginia
corporation, and ePlus Capital, inc., a Virginia corporation, each with its main
business office located at 13595 Dulles Technology Drive, Herndon, Virginia
20171 (collectively, the "Debtors" and individually, a "Debtor") and NATIONAL
CITY BANK, a national banking association, as Administrative Agent for itself
and on behalf of each of the Banks now or hereafter party to the Credit
Agreement (defined below) (the "Secured Party"). Capitalized terms used herein
and not otherwise defined herein shall have the meanings assigned in the Credit
Agreement.
Preliminary Statement
WHEREAS, this Security Agreement is entered into in accordance with and is
a condition precedent to any Loan under the Credit Agreement;
Now, therefore, the Debtors and the Secured Party, intending to be legally
bound, agree as follows:
1. Definitions.
As used herein the following terms have the meanings indicated:
(A) "Accounts," "Chattel Paper," "Documents," "Equipment," "General
Intangibles," "Goods," "Instruments," "Inventory" and "Proceeds" have the
meanings assigned to them under the Uniform Commercial Code as in effect in the
Commonwealth of Pennsylvania and shall be applicable solely for purposes of the
Collateral.
(B) "Collateral" means all right, title and interest of the Debtor in, to and
under all of the assets, properties and rights of the Debtor, including, without
limitation, all personal and fixture property of the Debtor of every kind and
nature, wherever located, whether now owned or hereafter acquired or arising,
including, without limitation, all goods (including, without limitation,
consumer goods, inventory, equipment and any accessions thereto), instruments
(including, without limitation, promissory notes), documents, accounts
(including, without limitation, health-care-insurance receivables), chattel
paper (whether tangible or electronic), deposit accounts, letter-of-credit
rights (whether or not the letter of credit is evidenced by a writing),
commercial tort claims, securities and all other investment property, supporting
obligations, any other contract rights or rights to the payment of money,
insurance claims, general intangibles (including, without limitation, payment
intangibles), all cash and non-cash proceeds of all of the foregoing, and
proceeds of proceeds. The term "Collateral" shall not include any Inventory,
Equipment or Chattel Paper that has been sold to a third party or refinanced
with another lender pursuant to an Ordinary Course Sale or Financing (provided,
however, that if any such Inventory, Equipment or Chattel Paper is ever returned
to a Debtor, it shall once again be deemed "Collateral"). The term "Collateral"
shall not include any Inventory, Equipment or Chattel Paper that has been sold
to a third party or refinanced with another lender pursuant to an Ordinary
Course Sale or Financing (provided, however, that if any of such Inventory,
Equipment or Chattel Paper is ever returned to a Debtor, it shall once again be
deemed "Collateral").
(C) "Credit Agreement" means that certain Credit Agreement, dated September
__, 2005 (as such agreement may be amended, restated, modified, replaced or
substituted hereafter) between the Debtors, the banking institutions signatories
thereto, and Secured Party as Administrative Agent for itself and the other
banking institutions (the Secured Party, in its individual capacity, and said
banking institutions, collectively, the "Banks" and, individually, a "Bank").
(D) "Lease" means any capital lease or operating lease (or conditional
sales agreement or any similar financing arrangement) upon which any Debtor is
the lessor or an assignee of the lessor which lease is included in the
Collateral.
(E) "Liabilities" means all existing and future indebtedness and other
liabilities, absolute or contingent, direct or indirect, primary or secondary,
of the Debtors to the Banks arising hereunder or in respect of the Notes or
otherwise in connection with the Credit Agreement or any Loan Document plus all
obligations of the Debtors to any Bank in respect of any interest rate swap
agreement, interest rate cap agreement, interest collar agreement, interest rate
hedging agreement, interest rate floor agreement or other similar agreement or
arrangement.
(F) "Prevailing Interest Rate" as of any date means the highest rate of
interest then payable by the Debtors under any Loan.
2. Grant of Security; Assignment of Leases.
To secure the payment, promptly when due, and the punctual performance of
all of the Liabilities, each Debtor hereby:
(A) pledges and assigns to the Secured Party, and grants to the Secured
Party and agrees that the Secured Party shall have, a general continuing lien
upon and security interest in all the Collateral, which lien and security
interest shall be a general continuing first priority lien upon and security
interest in all the Collateral.
(B) assigns and transfers to the Secured Party all such Debtor's right,
title and interest in and to all rentals and other amounts payable under the
Leases, and all proceeds from insurance and any proceeding, payable to or
receivable by such Debtor under or in connection therewith, and all rights,
powers and remedies (but none of the duties or obligations, if any) of such
Debtor under the Leases, including all rights of such Debtor to give and receive
any notice, consent, waiver, demand or approval under or in respect of the
Leases, to exercise any election or option thereunder or in respect thereof, to
accept any surrender of any property subject thereto, to execute and deliver any
bill of sale for any such property, and to do all other things which such Debtor
is entitled to do under the Leases.
3. Leases.
(A) Each Debtor shall remain liable as lessor under its Leases to perform
all the obligations assumed by each Debtor thereunder. The obligations of each
Debtor under the Leases may be performed by Secured Party or any subsequent
assignee of the Secured Party ("Subsequent Secured Party") without releasing any
Debtor therefrom. The Secured Party or any Subsequent Secured Party shall have
no liability or obligation under the Leases by reason of this Agreement and
shall not, by reason of this Agreement, be obligated to perform any of the
obligations of any Debtor under any Leases or to file any claim or take any
other action to collect or enforce any payment assigned hereunder.
(B) Each Debtor hereby agrees (i) to perform duly and punctually each of
the terms, conditions and covenants contained in the Leases, and (ii) subject to
such Debtor's business judgment and reasonable commercial practice, to exercise
promptly and diligently each and every right it may have under the Leases.
(C) Each Debtor does hereby warrant and represent that all Leases are in
full force and effect and that no Debtor has assigned or pledged, and hereby
covenants that no Debtor will assign or pledge, so long as this Agreement shall
remain in effect, the whole or any part of the rights hereby assigned, to anyone
other than the Secured Party.
(D) Each Debtor does hereby warrant and represent that for each Lease with
an original equipment cost in excess of $50,000, it has taken all possible
action to protect its first-priority security interest in such leased property,
which may include filing UCC or other financing statements (listing the
applicable Debtor as the secured party, the lessee as debtor, and such leased
property as collateral) in such locations as would be required by applicable law
(if such Debtor were a secured party and the lessee were a debtor) under the UCC
or other applicable statute or regulation, which is assignable to the Secured
Party. If any Debtor assumes a pre-existing Lease, such Debtor shall use its
best efforts to comply with this ss. 3(D) to the extent permitted under such
Lease.
(E) Subject to the provisions of this Agreement, and until the occurrence
of an Event of Default and upon demand by the Secured Party, a Debtor may
exercise all the rights and enjoy all the benefits of the lessor under its
Leases.
4. Books and Records. Each Debtor shall faithfully keep complete and
accurate books and records and make all necessary entries therein to reflect the
quantities, costs, current values and locations of all Collateral, the events
and transactions giving rise thereto and all payments, credits and adjustments
applicable thereto, shall keep the Secured Party fully and accurately informed
as to the locations of all such books and records and shall permit the Secured
Party's agents to have such access to them and to any other records pertaining
to the Debtor's business as the Secured Party may request from time to time.
5. Control of and Access to Collateral.
(A) Prior to any Lease being included in the Borrowing Base calculation,
each originally executed Lease included in the Collateral shall be marked
"Original" and legended in form satisfactory to the Secured Party to indicate
that it is the only original of the Lease held by any Debtor; provided, however,
that a Debtor may provide its Lessee with a duplicate original, which shall be
sufficiently legended so as to indicate that the Debtor holds the true
"Original." All other copies shall be marked "copy." The Secured Party may at
any time and in its sole discretion request possession any or all original
Leases; from and after such request, any Leases subject to such request shall
not be included in the Borrowing Base unless and until such original Leases are
delivered by the Debtors to the Secured Party together with a list of the
invoices for the equipment being leased (which list shall include the invoice
number, invoice date, vendor identity, description of equipment, amount of
invoice and the number and date of the check whereby the invoice was paid by the
applicable Debtor). Further, if Secured Party shall so request in connection
with its periodic reviews of the Collateral and the Borrowing Base (or at any
time after the occurrence of an Event of Default), the Debtors shall make
available to Lender the original paid invoices with respect to all equipment
related to Leases, regardless of whether such Leases were made pursuant to Asset
Management Contracts.
(B) Upon the occurrence of an Event of Default, the Secured Party shall
have the right at any time to take possession of the Collateral or any part
thereof. Notwithstanding any such taking of possession, the Collateral shall
remain at all times at the applicable Debtor's sole risk, and to the full extent
permitted by law the Secured Party shall not be responsible for any loss, damage
or diminution in the value thereof. All costs of transportation, packaging,
custody, processing, storage, and insurance of any unit or item of Collateral
which may be incurred by the Secured Party shall be promptly repaid to the
Secured Party by the Debtors together with interest thereon at the Prevailing
Interest Rate, and such Debtor's liability to the Secured Party for such
repayment with interest shall be included in the Liabilities.
(C) If any item or unit of Collateral is now or hereafter the subject of a
certificate of title or is required by law so to be, the Debtors will promptly
procure the necessary certificate of title and take all steps necessary to cause
the Secured Party's lien or security interest therein to be noted on the face of
such certificate and undertake such other steps as may be necessary to assure
that the Secured Party has a first priority, perfected security interest in each
such item or unit of Collateral, and shall thereafter deposit the original of
such certificate of title with the Secured Party.
(D) The Debtors shall immediately notify the Secured Party of any event
causing any deterioration, loss or depreciation in value of any substantial
portion of the Collateral and the Debtors' best estimate of the amount of such
deterioration, loss or depreciation.
(E) The Debtors shall afford the Secured Party's agents access to the
Collateral from time to time upon request for purposes of examination,
inspection and appraisal thereof and to verify the Debtors' books and records
pertaining thereto. After an Event of Default and upon the Secured Party's
demand therefor, the Debtors shall assemble the Collateral and make it available
to the Secured Party at such place reasonably convenient to both parties as the
Secured Party may designate, and the Secured Party's rights to such assemblage
shall be enforceable by injunction. If an Event of Default shall not exist, the
Secured Party shall furnish written prior notice to the Debtors reasonably in
advance of any intended examination, inspection, appraisal and verification and
such activity shall commence during the Debtor's normal business hours.
(F) From and after the occurrence of an Event of Default hereunder, the
Debtors shall pay to the Secured Party on demand any and all expenses of
conducting any and all periodic examinations or reviews or causing any periodic
examinations or reviews of Collateral determined to be appropriate by the
Secured Party (including but not limited to reasonable attorneys' fees and legal
expenses) which may be incurred by the Secured Party, with interest at the
Prevailing Interest Rate.
(G) Upon an Event of Default, the Secured Party is hereby granted a license
or other right to use, without charge, Debtors' labels, intellectual property,
or use of any name, trade secrets, tradenames, trademarks and advertising
matter, or any property of a similar nature, as it pertains to the Collateral,
in advertising for sale and selling any Collateral, and Debtors' rights under
all licenses and all franchise agreements shall inure to the Secured Party's
benefit.
6. Maintenance of Collateral; Sale. Subject to the Debtors' business
judgment and reasonable commercial practice, the Debtors shall take good care of
the Collateral and shall afford it suitable preventive maintenance. The Debtors
shall pay the cost of all repairs to or maintenance of the Collateral and shall
not permit anything to be done that might in any way impair the value of any of
the Collateral or any of the security intended to be afforded by this Agreement.
The Debtors shall conscientiously adhere to a well designed internal control
system with respect to the Collateral, and such system shall be capable of
permitting the Debtors and the Secured Party to identify readily at any time the
location and condition of each and every item of Collateral. The Debtors will
not permit any of the Collateral to become or be a fixture. The Debtors shall
not sell, exchange, salvage, replace or dispose of any items or unit of its
Inventory or Equipment or any of its rights therein, except that so long as no
Debtor is in default hereunder, the Debtors shall have the right to sell its
Inventory and Equipment in each case in the ordinary course of its business and
it shall have the right to lease or re-lease its Inventory and Equipment in the
ordinary course of its business.
7. Insurance.
(a) The Debtors shall bear the risk of each item or unit of Inventory and
Equipment being lost, destroyed, irreparably damaged or rendered permanently
unfit for sale, lease or use or being damaged in part, from any cause whatsoever
at any time during the term of this Agreement, and shall at its own cost and
expense obtain and keep in full force and effect, in kind and form reasonably
satisfactory to the Secured Party, or in the alternative shall cause the lessee
under each applicable Lease to do the same with respect to Inventory or
Equipment subject to the lessee's Lease, all risk of physical loss or damage
insurance covering the Inventory and Equipment wherever the same may be located,
insuring against the risks of fire, explosion, theft and such other risks as are
customarily insured against by organizations engaged in the same business and
similarly situated with the Debtors (and specifically including vandalism,
malicious mischief coverage, loss overboard and breakage), in an amount usually
carried by organizations engaged in the same business or similarly situated with
the Debtors. All policies of such insurance shall be written for the benefit of
the applicable Debtor as the insured.
(b) If the Debtors or the applicable lessee fails to pay any premium on any
such insurance, the Secured Party shall have the right, but shall be under no
obligation, to pay such premium for such Debtor's account. Such Debtor shall
repay to the Secured Party on demand all sums which the Secured Party shall have
paid under this section in respect of insurance premiums, with interest thereon
at the Prevailing Interest Rate, and such Debtor's liability to the Secured
Party for such repayment with interest shall be included in the Liabilities.
Each Debtor hereby assigns to the Secured Party any return or unearned premium
which may be due upon the cancellation for any reason whatsoever of any policy
of insurance maintained in respect of the Collateral and hereby directs the
insurer to pay the Secured Party any amount so due. The Debtors' right to
receive payment of any such return or unearned premium and the proceeds of any
such insurance shall constitute a part of the Collateral for all purposes
hereof.
8. Title to Collateral.
(A) Each Debtor has acquired or shall acquire absolute and exclusive title
to each and every item or unit of the Collateral attribute to it free and clear
of all liens, claims, security interests and other encumbrances, except as
permitted under the Credit Agreement, and each Debtor shall warrant and defend
its title to such Collateral, subject to the rights of the Secured Party,
against the claims and demands of all persons whomsoever. Without limiting the
generality of the foregoing, no Debtor shall pledge, assign or otherwise
encumber, or permit any liens or security interests (other than those in favor
of the Secured Party) to attach to, any of the Collateral, nor permit any of the
Collateral to be levied upon under any legal process.
(B) The Secured Party may, at its sole election but without obligation to
do so, discharge any unpermitted encumbrance pertaining to the Collateral and
all expenses incurred by the Secured Party in so doing, together with interest
thereon at the Prevailing Interest Rate, shall be added to the Liabilities and
shall be payable by the Debtors on demand.
9. Taxes and Liens. The Debtors shall promptly notify the Secured Party in
the event there ever arises against any of the Collateral any lien, assessment
or tax or other liability, whether or not entitled to priority over the Secured
Party's security interest hereunder. In any such event, whether or not such
notice is given, the Secured Party shall have the right (but shall be under no
obligation) to pay any tax or other liability of the Debtors deemed by the
Secured Party in good faith to affect the Secured Party's interests hereunder.
The Debtors shall repay to the Secured Party on demand all sums which the
Secured Party shall have paid under this section in respect of taxes or other
liabilities of the Debtors, with interest thereon at the Prevailing Interest
Rate, and the Debtors' liability to the Secured Party for such repayment with
interest shall be included in the Liabilities. The Secured Party shall be
subrogated to the extent of any such payment by it to all the rights and liens
of the payee against the Debtors' assets.
10. Collection of Accounts, Etc.
(A) Until otherwise notified by the Secured Party, the Debtors may collect
all the Accounts but the Proceeds of all Accounts so collected by the Debtors
shall be held by the Debtors in trust for the Secured Party. The Secured Party
may at any time during the existence of an Event of Default terminate the
authority hereby given to the Debtors to collect the Proceeds of such Accounts
and, acting if it so chooses in each Debtor's name, collect such Accounts
itself, directly or through an agent, sell, assign, compromise, discharge or
extend the time for payment of such Accounts, institute legal action for the
collection of such Accounts and do all acts and things necessary or incidental
thereto, and each Debtor hereby ratifies all that the Secured Party shall
lawfully do under the authority hereby granted to it. The Secured Party may at
any time during the existence of an Event of Default, without notice to any
Debtor, notify any account debtor on any such Account that such Account has been
assigned to the Secured Party and is to be paid directly to the Secured Party.
Alternatively, at its election the Secured Party may require any Debtor to, and
in such event such Debtor at its sole expense will, notify its account debtors
that payments thereon are thenceforth to be made directly to the Secured Party.
Without the written consent of the Secured Party in each case, no Debtor shall
compromise, discharge, extend the time for payment of or otherwise grant any
indulgence or allowance with respect to any such Account except for minor
indulgences or allowances in the ordinary course of business which are not
related to an extension or restructuring of credit to an account debtor of a
duration in excess of 30 days in any instance.
(B) If any such Account arises out of a contract with the United States or
any department, agency or instrumentality thereof, the Debtors will immediately
so notify the Secured Party in writing and will execute all instruments and take
all steps required by the Secured Party in order that the security interest of
the Secured Party hereunder in all such Accounts under such contract and the
Proceeds thereof shall be perfected under the Federal Assignment of Claims Act.
(C) From and after the occurrence and during the continuance of any Event
of Default, if any of the Collateral is or becomes evidenced by a promissory
note, draft, trade acceptance, Chattel Paper, Instrument or Document of Title,
the Debtors will promptly deliver the same to the Secured Party appropriately
endorsed to the Secured Party's order. Regardless of the form of such
endorsement, each Debtor hereby waives presentment, demand, notice of dishonor,
protest and notice of protest and all other notices with respect thereto. The
Debtors will promptly notify the Secured Party of any Material Adverse Effect of
which it has knowledge in the financial condition of any account debtor on any
material Account pertaining to a Lease or in the collectibility of any of such
Accounts, and of all claims, rejections, returns and adjustments which may
result in a material reduction of the liability of an account debtor on any such
Account.
11. Locations of the Collateral; Change of Principal Place of Business;
Name; Change in Corporate Organization.
(A) If any of the Collateral or any of the Debtors' records concerning any
of the Collateral are at any time to be located on premises leased by any
Debtor, or any premises owned by any Debtor subject to a mortgage or other lien,
the Debtors shall obtain and deliver to the Secured Party, prior to the delivery
of any such Collateral or books or records to such premises, an agreement in
form satisfactory to the Secured Party waiving the landlord's, mortgagee's or
other lienholder's right to enforce against the Collateral or the Debtors'
records concerning the same and assuring the Secured Party's access to such
Collateral and books and records to facilitate the Secured Party's exercise of
its rights to take possession thereof. The location of each Debtor's chief
executive office and all locations at which any Debtor maintains a place of
business are set forth in Schedule A, and each Debtor agrees to provide the
Secured Party annually with a list of each location of any such place of
business or the establishment of any additional place of business of the
Debtors, provided however that if a Debtor intends to change its principal place
of business, such Debtor must provide thirty (30) days written notice of such
change to the Secured Party.
(B) Each Debtor represents and warrants that at no time during the past
five (5) years has it been known by or used any other name, including any trade
or fictitious name, except as disclosed in Schedule A. Each Debtor covenants
that, if such Debtor intends to change its name, it will provide thirty (30)
days written notice of such change to the Secured Party.
(C) The Debtor shall not change its type of organization, jurisdiction of
organization or other legal structure. Each Debtor covenants that, if such
Debtor intends to change its type of organization, jurisdiction of organization
or other legal structure, it will provide thirty (30) days written notice of
such change to the Secured Party.
12. Further Assurances. The Debtors shall continue to conduct their
business in substantially the manner heretofore conducted and will make no
material changes therein which might impair the security of the Secured Party.
The Debtors shall execute and deliver to the Secured Party from time to time all
such other agreements, instruments and other documents (including without
limitation all requested financing and continuation statements) and do all such
other and further acts and things as the Secured Party may reasonably request in
order further to evidence or carry out the intent of this Agreement or to
perfect the liens and security interests created hereby or intended so to be.
13. Default and Remedies.
(A) The Debtors shall be in default hereunder upon the occurrence of any
one of the following events (each an "Event of Default"):
(1) any Debtor shall fail to pay any amount payable in respect of any
Liability when due (including the expiration of any applicable
grace periods).
(2) any representation, warranty or information herein, heretofore or
hereafter furnished to the Secured Party by any Debtor in
connection with any of the Liabilities, including any warranty
made by such Debtor through the submission of any schedule,
statement, certificate or other document pursuant to or in
connection with this Agreement, shall be false in any material
respect.
(3) any Debtor shall fail to timely perform any of its obligations
under this Agreement.
(4) there shall exist any Potential Default or Event of Default as
defined under the Credit Agreement.
(B) Upon the occurrence of any Event of Default which shall be continuing,
(i) unless the Secured Party elects otherwise, the entire unpaid amount of such
of the Liabilities as is not then otherwise due and payable shall become
immediately due and payable without notice to or demand on any Debtor, (ii) the
Secured Party or its agents may enter any Debtor's premises to exercise the
Secured Party's right to take possession of any Collateral, and (iii) the
Secured Party may at its option exercise from time to time any and all rights
and remedies available to it under the Uniform Commercial Code or otherwise,
including the right to assemble, receipt for, adjust, modify, repair, refurnish
or refurbish (but without any obligation to do so) or foreclose or otherwise
realize upon any of the Collateral and to dispose of any of the Collateral at
one or more public or private sales or other proceedings. Each Debtor agrees
that the Secured Party or its nominee may become the purchaser at any such sale
or sales. Each Debtor further agrees that ten (10) days shall be reasonable
prior notice of the date of any public sale or other disposition of all or any
part of the Collateral, or of the date on or after which any private sale or
other disposition of the same may be made.
(C) The exercise by the Secured Party of any one right or remedy shall not
be deemed a waiver or release of or any election against any other right or
remedy, and the Secured Party may proceed against the Debtors or any of them and
the Collateral and any other collateral granted by any Debtor to the Secured
Party under any other agreement, all in any order and through any available
remedies. A waiver on any one occasion shall not be construed as a waiver or bar
on any future occasion. All property of any kind held at any time by the Secured
Party as Collateral shall stand as one general continuing collateral security
for all the Liabilities and may be retained by the Secured Party as security
until all the Liabilities are fully satisfied. The Debtors shall pay to the
Secured Party on demand any and all expenses (including reasonably attorneys'
fees and legal expenses) which may have been incurred by the Secured Party with
interest at the Prevailing Interest Rate (i) in the prosecution or defense of
any action growing out of or connected with the subject matter of this
Agreement, the Liabilities, the Collateral or any of the Secured Party's rights
therein or thereto; or (ii) in connection with the custody, preservation, use,
operation, preparation for sale or sale of any of the Collateral, the incurring
of all of which are hereby authorized to the extent the Secured Party deems the
same advisable. The Debtors' liability to the Secured Party for any such payment
with interest shall be included in the Liabilities. The Proceeds of any
Collateral received by the Secured Party at any time before or after default,
whether from a sale or other disposition of Collateral or otherwise, or the
Collateral itself, may be applied to the payment in full or in part of such of
the Liabilities and in such order and manner as the Secured Party may elect.
Each Debtor to the extent of its rights in the Collateral waives and releases
any right to require the Secured Party to collect any of the Liabilities from
any other of the Collateral or any other collateral then held by the Secured
Party under any theory of marshaling of assets or otherwise.
14. Power of Attorney. Each Debtor hereby irrevocably appoints any officer,
employee or agent of the Secured Party as its true and lawful attorney-in-fact
with power to (i) endorse such Debtor's name upon any notes, checks, drafts,
money orders, or other instruments or payments or other Collateral that may come
into the Secured Party's possession; (ii) sign and endorse such Debtor's name
upon any documents of title, invoices, freight or express bills, assignments,
verifications and notices in connection with any of the Collateral, and any
instruments or documents relating thereto or to such Debtor's rights therein;
and (iii) execute in such Debtor's name and file one or more financing,
amendment and continuation statements covering the Collateral. Any such attorney
of such Debtor shall have full power to do any and all things necessary to be
done with respect to the above transactions as fully and effectually as such
Debtor might do, and each Debtor hereby ratifies all that said attorney shall
lawfully do or cause to be done by virtue hereof.
15. Financing Statements. Each Debtor shall execute all financing
statements and amendments thereto as the Secured Party may request from time to
time to evidence the security interest granted to the Secured Party hereunder
and will pay all filing fees and taxes, if any, necessary to effect the filing
thereof. Wherever permitted by law, each Debtor authorizes the Secured Party to
file financing statements with respect to the Collateral without the signature
of such Debtor. A copy of this Agreement or a copy of any financing statement
prepared in connection with this Agreement may itself be filed as a financing
statement.
16. Notices. All notices, requests, demands, directions, declarations and
other communications provided for herein shall be in writing (including
telegraphic and facsimile communication) and shall be mailed by registered or
certified mail, return receipt requested, or telecopied or delivered in hand to
the applicable party at its address indicated below, or, as to each party, at
such other address as shall hereafter be designated by such party in a written
notice to the others complying as to delivery with the terms of this Section.
Each such notice, request, demand, direction, declaration or other communication
shall, if mailed, be effective when deposited in the mails, postage prepaid,
addressed as aforesaid, and shall, if sent by telegram or facsimile (telecopier)
or delivered in hand or by overnight courier, be effective when received.
If to Debtor: ePlus inc.
13595 Dulles Technology Drive
Herndon, Virginia 20171
Attention: George W. Fox, Jr.
Telecopy: (703) 834-5718
With a Copy To: Michael E. Geltner & Associates
Number 10 E. Street, S.E.
Washington, D.C. 20003
Attention: Michael E. Geltner
Telecopy: (202) 547-1138
If to Secured Party: National City Bank
Transportation, Equipment & Lease Finance Group
One South Broad Street, 13th Floor, Loc. 01-5997
Philadelphia, PA 19107
Attention: Michael J. Labrum, Senior Vice President
Telecopy: (267) 256-4001
With a Copy To: Reed Smith LLP
1650 Market Street
Philadelphia, PA 19103
Attention: David A. Surbeck
Telecopy: (215) 851-1420
17. Miscellaneous.
(A) This Agreement shall commence on the date hereof and shall continue in
full force and effect so long as any of the Liabilities shall exist from time to
time.
(B) No modification or waiver of any provision hereof shall be effective
unless the same is in writing and signed by the party against whom its
enforcement is sought. This Agreement and any amendment hereto or waiver of any
provision hereof may be signed in any number of counterparts with the same
effect as if the signatures thereto and hereto were upon the same instrument.
(C) The representations, warranties, covenants and agreements contained
herein are all material and continuing, and any breach of them shall constitute
a material breach of this Agreement.
(D) All the rights and remedies of the Secured Party hereunder shall be
concurrent and cumulative with and not alternative to or in lieu of the Secured
Party's rights and remedies under any other agreement or agreements.
(E) This Agreement shall bind and inure to the benefit of the parties and
their respective successors and assigns, except that no Debtor shall assign any
of its rights hereunder without the Secured Party's prior written consent.
(F) Any provision of this Agreement which is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof or affecting the validity or enforceability of such provision
in any other jurisdiction.
(G) No persons other than the Debtors and the Secured Party, and the
assignees of the Secured Party, are intended to be benefited hereby or shall
have any rights hereunder, as third-party beneficiaries or otherwise.
(H) Each Debtor acknowledges that this Agreement and the obligations of the
Debtors hereunder and the security created or intended to be created hereby have
constituted, and were intended by such Debtor to constitute, a material
inducement to the Secured Party to enter into the Credit Agreement and other
agreements referred to therein, knowing that the Secured Party will rely upon
this Agreement. Each Debtor intends to be legally bound hereby.
(I) This Agreement shall be deemed to be a contract made under and shall be
construed in accordance with the laws of the Commonwealth of Pennsylvania
without regard to Pennsylvania or federal principles of conflict of laws.
IN WITNESS WHEREOF, the parties hereto have each caused this Security
Agreement to be duly executed by their duly authorized representatives as of the
date first above written.
Debtors
ePLUS inc.
By: /s/ KLEYTON L. PARKHURST
------------------------
Name: Kleyton L. Parkhurst
Title: Senior Vice President
ePLUS Group, inc.
By: /s/ KLEYTON L. PARKHURST
------------------------
Name: Kleyton L. Parkhurst
Title: Senior Vice President
ePLUS Government, inc.
By: /s/ KLEYTON L. PARKHURST
------------------------
Name: Kleyton L. Parkhurst
Title: Senior Vice President
ePLUS Capital, inc.
By: /s/ KLEYTON L. PARKHURST
------------------------
Name: Kleyton L. Parkhurst
Title: President
Secured Party
NATIONAL CITY BANK
By: /s/ KEN JAMISON
------------------------
Name: Ken Jamison
Title: Vice President
EXHIBIT F
PLEDGE AGREEMENT
----------------
This Pledge Agreement (the "Pledge Agreement"), dated September 23, 2005,
is made by ePlus inc., a Delaware corporation ("Pledgor") in favor of NATIONAL
CITY BANK (the "Pledgee"), as Administrative Agent for itself and on behalf of
each of the Banks (defined below) now or hereafter party to the Credit Agreement
(defined below). All references in this Agreement to "Pledgee" means National
City Bank as Administrative Agent for itself and the other Banks under the
Credit Agreement. All capitalized terms not defined in this Agreement have the
meanings assigned to them in the Credit Agreement.
Preliminary Statement
WHEREAS, Pledgor owns 100% of the capital stock of each of the companies
listed on Schedule 1 hereto;
WHEREAS, Pledgor and Pledgee are parties to a Credit Agreement dated
September __, 2005 (as such agreement may be amended, restated, modified,
replaced or substituted hereafter, the "Credit Agreement"), by and among Pledgor
and certain of Pledgor's existing and hereinafter acquired subsidiaries (the
"Borrower Subsidiaries" and collectively with Pledgor, the "Borrowers"), the
banking institutions signatories thereto, and Pledgee as Administrative Agent
for itself and the other banking institutions (Pledgee and the banking
institutions collectively the "Banks" and individually a "Bank"); and
WHEREAS, Pledgor will benefit from the Loans to itself and the other
Borrowers under the terms and conditions of the Credit Agreement, and the Board
of Directors of Pledgor has determined that the execution and delivery by
Pledgor of this Agreement is necessary and convenient to the conduct, promotion
and attainment of its business;
NOW, THEREFORE, in consideration of the foregoing premises and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound hereby, Pledgor hereby makes the
following representations and warranties to Pledgee and covenants and agrees
with Pledgee as follows:
1. Pledge of Stock. As collateral security for the punctual payment and
performance of all existing and future indebtedness and other liabilities,
absolute or contingent, direct or indirect, primary or secondary, of any
Borrower to each Bank and to all Banks, of any nature whatsoever arising under
the Credit Agreement and the Notes issued thereunder (the "Notes"), that certain
Security Agreement dated September __, 2005 (the "Security Agreement") by and
among Pledgor and the Borrower Subsidiaries as debtors and Pledgee as the
secured party on behalf of itself and the other Banks, and under any other Loan
Document, and all the obligations of Pledgor hereunder (all of such
indebtedness, liabilities and obligations being hereinafter sometimes referred
to collectively as the "Obligations"), Pledgor hereby pledges and collaterally
assigns to Pledgee and grants to Pledgee and agrees that Pledgee shall have a
first priority security interest in and pledge of 100% of the issued and
outstanding shares of capital stock of each domestic subsidiary, and 65% of the
issued and outstanding shares of voting capital stock and 100% of the issued and
outstanding shares of non-voting capital stock of each foreign subsidiary, as
set forth on Schedule 1 hereto (such shares together with any shares or other
securities or property referred to in Section 6, being hereinafter sometimes
referred to collectively as the "Pledged Securities").
2. Representations and Warranties. Pledgor represents and warrants to and
agrees with Pledgee as follows:
(a) Pledgor has examined and is fully familiar and satisfied with the
Credit Agreement, Notes, Security Agreement and all other Loan Documents, and
all the representations and warranties set forth therein, whether in respect of
Pledgor or otherwise, are accurate in all respects on and as of the date hereof.
(b) The Pledged Securities are duly and validly issued, fully paid and
non-assessable and have been duly and validly pledged hereunder in accordance
with law, and Pledgor warrants and covenants to defend Pledgee's right, security
interest and special property interest in and to the Pledged Securities against
the claims and demands of all persons whomsoever. Pledgor is the exclusive
legal, equitable and beneficial owner of, and has good title to, all the Pledged
Securities on Schedule 1 hereto, free and clear of all claims, liens, security
interests and other encumbrances (except for the security interest created in
favor of Pledgee), and Pledgor has the unqualified legal right to pledge the
same hereunder. The Pledged Securities constitute 100% of the issued shares of
any class of capital stock of each domestic subsidiary, and 65% of the issued
voting shares and 100% of the issued nonvoting shares of each foreign
subsidiary, respectively, outstanding on the date hereof. Each certificate
evidencing any of the Pledged Securities pledged hereunder by Pledgor is issued
in the name of Pledgor and has attached a stock power duly signed in blank by
Pledgor with all appropriate signature guarantees and bears no restrictive or
cautionary legend. The security interest created hereby or intended so to be
represents a valid lien on and security interest in the Pledged Securities, and
such security interest is superior and prior in right to the rights of all third
persons. The parties acknowledge that, at such time as Pledgee is deemed to have
received possession of the Pledged Securities for purposes of this Agreement, no
filings or recordings (including without limitation filings under the Uniform
Commercial Code) will be necessary to be made to perfect, protect and preserve
the security interest of Pledgee in the Pledged Securities created by this
Agreement or intended so to be.
(c) Pledgor, for itself and its successors and assigns, does hereby
irrevocably waive and release all preemptive, first-refusal and other similar
rights to purchase any or all of the Pledged Securities upon any sale thereof by
Pledgee hereunder, whether such right to purchase arises under the
organizational documents of any subsidiary, by agreement, by operation of law,
or otherwise.
(d) All the foregoing representations, warranties and agreements shall
survive the execution and delivery of this Agreement, the Credit Agreement, the
Security Agreement, the Notes and all other Loan Documents.
3. Reregistration of Shares. At any time and from time to time Pledgee may
cause all or any of the Pledged Securities to be transferred into its name or
into the name of its nominee or nominees.
4. Reservation of Voting Rights. Upon the occurrence and during the
continuance of an Event of Default, Pledgee shall be entitled (but shall not be
obligated) to exercise any and all voting power with respect to the Pledged
Securities. At all other times Pledgor shall be entitled to exercise in a manner
not inconsistent with the provisions of this Agreement all voting power with
respect to the Pledged Securities.
5. Preservation and Protection of Collateral.
(a) Pledgee shall be under no duty or liability with respect to the
collection, protection or preservation of the Pledged Securities, or otherwise,
other than the obligation to deal with the Pledged Securities while in its
possession in the same manner as Pledgee deals with similar securities or
property for its own account.
(b) Pledgor agrees to pay when due all taxes, charges, Liens and
assessments against its respective Pledged Securities in which it has an
interest, unless being contested in good faith by appropriate proceedings
diligently conducted and against which adequate reserves have been established
in accordance with GAAP and evidenced to the satisfaction of Pledgee and
provided further that all enforcement proceedings in the nature of levy or
foreclosure are effectively stayed. Upon the failure of Pledgor to so pay or
contest such taxes, charges, Liens or assessments, Pledgee at its sole option
may pay or contest any of them (Pledgee having the sole right to determine the
legality or validity and the amount necessary to discharge such taxes, charges,
Liens or assessments.)
6. Additional Collateral Security. If, upon the dissolution or liquidation
(in whole or in part) of any subsidiary listed on Schedule 1 hereto, any sum
shall be paid upon or with respect to any of the Pledged Securities, such sum
shall be paid over to Pledgee to be held by Pledgee as additional collateral
security for the Obligations. In case any stock dividend shall be declared on
any of the Pledged Securities, or any shares of stock or fractions thereof shall
be issued pursuant to any stock split involving any of the Pledged Securities,
or any distribution of capital shall be made on any of the Pledged Securities,
or any property shall be distributed upon or with respect to the Pledged
Securities pursuant to any recapitalization or reclassification of the capital
of any subsidiary listed on Schedule 1 hereto, or pursuant to a reorganization
thereof, the shares or other property so distributed shall be delivered to
Pledgee as additional collateral security for the Obligations.
7. Remedies in General. Upon the occurrence and during the continuance of
an Event of Default, Pledgee shall have, without obligation to resort to other
security or to recourse against any guarantor or other party secondarily liable,
the right at any time and from time to time to sell, resell, assign and deliver,
in Pledgee's discretion, all or any of the Pledged Securities, in one or more
parcels at the same or different times, and all right, title, interest, claim
and demand therein and right of redemption thereof, at public or private sale,
for cash, upon credit or for immediate or future delivery, and at such price or
prices and on such terms as Pledgee may determine, Pledgor hereby agreeing that
upon any such sale any and all equity and right of redemption shall be
automatically waived and released without any further action on the part of
Pledgor, and in connection therewith Pledgee may grant options, all without any
demand, advertisement or notice, all of which are hereby expressly waived. In
the event of any such sale, Pledgee shall, at least 10 days before the sale,
give Pledgor notice of its intention to sell which notice Pledgor agrees is
reasonable. Upon each such sale, Pledgee or Pledgor may purchase all or any of
the Pledged Securities being sold, free of any equity or right of redemption.
The proceeds of each such sale shall be applied to the payment of all costs and
expenses of every kind for sale or delivery, including reasonable compensation
to the agents and attorneys of Pledgee, and all other expenses, liabilities and
advances made or incurred by Pledgee in connection therewith, and after
deducting such costs and expenses from the proceeds of sale, Pledgee shall apply
any residue to the payment of the Obligations in such order as Pledgee may deem
fit. The balance, if any, remaining after payment in full of the Obligations
shall be paid over to Pledgor. Upon the occurrence and during the continuance of
an Event of Default, Pledgee shall also have, without obligation to resort to
other security or to recourse against any guarantor or other party secondarily
liable and in addition to the other remedies provided in this Section 7, the
right at any time and from time to time, but not the obligation, to exercise
ownership of the Pledged Securities and to take all actions as may be permitted
under applicable law.
8. Certain Securities Law Undertakings. In the event Pledgee is permitted
to sell any of the Pledged Securities pursuant to Section 7, upon the written
request of Pledgee to cause any registration, qualification or compliance under
any federal or state securities law or laws to be effected with respect to any
of the Pledged Securities, Pledgor as soon as practicable and at its expense
will use its best efforts to cause such registration, qualification or
compliance to be effected (and be kept effective) as may be so requested and as
would permit or facilitate the sale and distribution of such Pledged Securities.
Pledgor will use its best efforts to cause Pledgee to be kept reasonably advised
in writing as to the progress of each such registration, qualification or
compliance and as to the completion thereof and will furnish or use its best
efforts to cause to be furnished to Pledgee, without expense to Pledgee, such
number of prospectuses or offering circulars and other documents incident
thereto as Pledgee may from time to time reasonably request. Pledgor will
indemnify and hold harmless Pledgee from and against any claims or liabilities
caused by any untrue statement of a material fact or omission of a material fact
required to be stated in any registration statement, offering circular or
prospectus used in connection with such registration or compliance, or necessary
to make the statements therein not misleading, except insofar as such claims or
liabilities are caused by any untrue statement or omission based on or in
conformity with any written statement supplied by Pledgee. If at any time when
Pledgee shall determine to exercise its rights to sell all or any part of the
Pledged Securities pursuant to Section 7, such Pledged Securities or the part
thereof to be sold shall not, for any reason, be effectively registered under
the Securities Act of 1933 (the "Securities Act"), Pledgee is hereby expressly
authorized to sell such Pledged Securities or such part thereof by private sale
in such manner and under such circumstances as Pledgee may deem necessary or
advisable in order that such sale may legally be effected without such
registration. Without limiting the generality of the foregoing, in any such
event Pledgee: (a) may proceed to make such private sale whether or not a
registration statement for the purpose of registering the Pledged Securities or
such part thereof shall have been filed under the Securities Act; (b) may
approach and negotiate with a restricted number of potential purchasers to
effect such sale; and (c) may restrict such sale to a limited number of
purchasers that meet certain requirements as to nature of business, level of
sophistication and investment intention (including without limitation, to
purchasers each of whom will represent and agree to the satisfaction of Pledgee
that such purchaser is purchasing for its own account, for investment, and not
with a view to the distribution or sale of such Pledged Securities or part
thereof). Pledgee may require Pledgor, and Pledgor hereby agrees upon the
written request of Pledgee, to cause: (i) a legend or legends to be placed on
the certificates to be delivered to such purchasers to the effect that the
offering and sale of the Pledged Securities represented thereby have not been
registered under the Securities Act and setting forth or referring to any
required restrictions on the transferability of such Pledged Securities; (ii)
the issuance of stop transfer instructions to the transfer agent of any
subsidiary with respect to the Pledged Securities (or if such subsidiary
transfers its own securities, a notation in the appropriate records of such
subsidiary); and (iii) to be delivered to the purchasers a signed written
agreement of Pledgor and such subsidiary, that such purchasers will be entitled
to the rights of Pledgee under this Section 8. In addition, it is understood
that any such purchasers may be required as a condition of any such sale to
furnish a signed written agreement that the Pledged Securities will not be sold
without registration or other compliance with the requirements of the Securities
Act. In the event of any such sale, Pledgor hereby consents and agrees that
Pledgee shall not incur any responsibility or liability for selling all or any
part of the Pledged Securities at a price which, Pledgee in its absolute
discretion, may deem reasonable under the circumstances, notwithstanding the
possibility that a substantially higher price might be realized if the sale were
public and deferred until after registration as aforesaid.
9. Rights and Remedies Cumulative; Indemnities. The rights, powers and
remedies provided herein in favor of Pledgee shall not be deemed exclusive, but
shall be cumulative, and shall be in addition to all other rights and remedies
in favor of Pledgee existing at law or in equity, including without limitation
all the rights, powers and remedies available to a secured party under the
Uniform Commercial Code as in effect in the Commonwealth of Pennsylvania or any
other appropriate jurisdiction. Pledgor shall indemnify and save harmless
Pledgee from and against any and all liabilities, losses and damages which it
may incur in the exercise or performance of any of its rights, powers or
remedies set forth herein; provided, however, that Pledgor shall not have any
obligation to indemnify any such indemnitee against any liability, loss or
damage resulting from such indemnitee's own gross negligence or bad faith.
10. Right to Execute Endorsements. Pledgee shall have the right, for and in
the name, place and stead of Pledgor and acting as its attorney-in-fact if
necessary, to execute endorsements, assignments and other instruments of
conveyance or transfer with respect to all or any of the Pledged Securities
whenever any such execution is required or permitted hereunder.
11. No Waiver; Amendments. No delay on the part of Pledgee in exercising
any of its options, powers or rights, and no partial or single exercise thereof,
shall constitute a waiver thereof or of any other option, power or right. None
of the terms and conditions of this Agreement may be amended, modified or waived
orally but only in a writing signed by Pledgee and Pledgor.
12. Termination of Agreement; Return of Collateral. Should this Agreement
become temporarily inoperative for any reason (including without limitation the
payment of all the Obligations) prior to the Credit Termination Date (as defined
in the Credit Agreement), this Agreement shall nevertheless continue in effect
through the Credit Termination Date to secure the payment and performance of all
future Obligations whenever and as often as they may arise hereunder or under
the Credit Agreement, the Security Agreement, Notes or any other Loan Document.
However, upon the full payment and performance of all the Obligations and the
termination of the Credit Agreement, the Security Agreement, and Notes, this
Agreement shall expire and Pledgor (except to the extent otherwise contemplated
hereby) shall be entitled to the return of all of its respective Pledged
Securities and other property and cash held in pledge hereunder which have not
been used or applied to the payment of the Obligations.
13. Further Assurances; Immunities. With respect to the Pledged Securities
and any security interest of Pledgee therein, Pledgor agrees to do, file,
record, make, execute and deliver all such acts, deeds, things, notices and
instruments as may be necessary or desirable in the opinion of Pledgee in order
to vest more fully in and assure to Pledgee the security interests in the
Pledged Securities created hereby or intended so to be and the enforcement and
realization of all of the benefits of the rights, remedies and powers of Pledgee
hereunder relating to the Pledged Securities. Without limiting the generality of
the foregoing, if at any time hereafter, whether or not due to any change in
circumstances (including without limitation any change in applicable law or any
decision hereafter made by a court construing any applicable law), it is, in the
opinion of counsel for Pledgee, necessary or desirable to file or record this
Agreement or any financing statement or other instrument relating hereto,
Pledgor agrees to pay all fees, costs and expenses of such recording or filing
and to execute and deliver any instruments which may be necessary or appropriate
to make such filing or recording effective. Pledgor hereby irrevocably appoints
Pledgee its attorney-in-fact to perform, in Pledgor's name or Pledgee's name or
otherwise, any and all acts, including without limitation the signing and filing
of financing statements and amendments thereto, which Pledgee may deem necessary
or appropriate to effect and continue the security interests created hereby or
intended so to be or otherwise to preserve and protect the Pledged Securities
and the security interest of Pledgee therein, but nothing herein contained or
otherwise shall require Pledgee to take any such action. The duty of Pledgee in
respect of the Pledged Securities shall be strictly confined to one of
reasonable care in the custody of the certificates therefor so long as they are
in the custody of Pledgee. Without limiting the generality of the preceding
sentence, Pledgee shall not be under any duty to anyone to send any notices,
perform any services, vote, exercise any options or elections with respect to,
pay any taxes or charges associated with, or otherwise take any action of any
kind with respect to, any of the Pledged Securities.
14. Transfers of Interest. Pledgee may transfer its interest in the Pledged
Securities, or any part thereof, to any replacement or successor agent under the
Credit Agreement, who shall thereupon become vested with all the rights,
remedies, powers, security interests and liens herein granted to Pledgee in
respect of the Pledged Securities or the transferred part thereof, subject,
however, to the restrictions contained herein.
15. Expenses. Pledgor agrees that the Pledged Securities secure, and
further agrees to pay on demand, all reasonable expenses (including but not
limited to attorneys' fees and costs for legal services, costs of insurance and
payments of taxes or other charges) of, or incidental to, the custody, care,
sale or realization on any of the Pledged Securities or in any way relating to
the enforcement or protection of the rights of Pledgee hereunder.
16. Notices. All notices, requests, demands, directions, declarations and
other communications provided for herein shall be in writing (including
telegraphic and facsimile communication) and shall be mailed by registered or
certified mail, return receipt requested, or telecopied or delivered in hand to
the applicable party at its address indicated below, or, as to each party, at
such other address as shall hereafter be designated by such party in a written
notice to the others complying as to delivery with the terms of this Section.
Each such notice, request, demand, direction, declaration or other communication
shall, if mailed, be effective when deposited in the mails, postage prepaid,
addressed as aforesaid, and shall, if sent by telegram or facsimile (telecopier)
or delivered in hand or by overnight courier, be effective when received.
If to Pledgor: ePlus inc.
13595 Dulles Technology Drive
Herndon, Virginia 20171
Attention: George W. Fox, Jr.
Telecopy: (703) 834-5718
With a Copy To: Michael E. Geltner & Associates
Number 10 E. Street, S.E.
Washington, D.C. 20003
Attention: Michael E. Geltner
Telecopy: (202) 547-1138
If to Pledgee: National City Bank
Transportation, Equipment & Lease Finance Group
One South Broad Street, 13th Floor, Loc. 01-5997
Philadelphia, PA 19107
Attention: Michael J. Labrum, Senior Vice President
Telecopy: (267) 256-4001
With a Copy To: Reed Smith LLP
1650 Market Street
Philadelphia, PA 19103
Attention: David A. Surbeck
Telecopy: (215) 851-1420
17. Governing Law; Consent to Jurisdiction. This Agreement and the rights
and obligations of the parties hereunder shall be governed by and construed and
enforced in accordance with the laws of the Commonwealth of Pennsylvania.
Pledgor hereby consents to the jurisdiction of the courts of the Commonwealth of
Pennsylvania in any action or proceeding which may be brought against Pledgor
under or in connection with this Agreement or any of the transactions
contemplated hereby or to enforce any undertaking contained herein, and in the
event any such action or proceeding shall be brought against it, Pledgor agrees
not to raise any objection to such jurisdiction or to the laying of the venue
thereof in Pennsylvania, and further agrees that service of process in any such
action or proceeding may be duly effected upon Pledgor by service in accordance
with the provisions of the Uniform Interstate and International Procedure Act as
in effect in Pennsylvania.
18. Certain Waivers; Integration. Pledgor hereby waives notice of any and
all defaults on the part of the Borrowers under the Credit Agreement, Security
Agreement, Notes or other Loan Documents. Pledgor further waives presentment for
payment, protest, dishonor and notice of dishonor and of protest with respect to
the Notes. This Agreement states the entire agreement of the parties concerning
the subject matter hereof, and it is acknowledged that there are no customs,
usages, representations, or assurances referring to the subject matter hereof,
and no inducements leading to the execution or delivery hereof, other than those
expressed herein.
19. Counterparts. This Agreement may be executed in any number of
counterparts and all the counterparts taken together shall be deemed to
constitute one and the same instrument.
20. Miscellaneous. This Agreement shall bind and inure to the benefit of
Pledgor and Pledgee and their respective successors and assigns, except that
Pledgor shall not have the right to assign any of its rights hereunder or
interests herein without the written consent of Pledgee. No persons other than
Pledgor, Pledgee and the other Banks, and the assignees of Pledgee and the other
Banks are intended to be benefited hereby or shall have any rights hereunder, as
third-party beneficiaries or otherwise. Pledgor acknowledges that this Agreement
and the obligations of Pledgor hereunder and the security created or intended to
be created hereby have constituted, and were intended by Pledgor to constitute,
a material inducement to Pledgee and the Banks to execute and deliver the Credit
Agreement (which will inure to the direct and immediate benefit of Pledgor as a
Borrower under such Credit Agreement), knowing that Pledgee and the Banks will
rely upon this Agreement. Pledgor intends this to be a sealed instrument and to
be legally bound hereby. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without affecting the
validity or enforceability of the remainder of this Agreement or the validity or
enforceability of such provision in any other jurisdiction. Words of any gender
herein shall include any other genders, and the singular shall include the
plural and vice versa, whenever the same is necessary to produce a fair and
meaningful construction.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the undersigned has executed this Pledge Agreement as
of the day and year first above written.
ePlus inc.
By /s/ KLEYTON L. PARKHURST
---------------------------
Name: Kleyton L. Parkhurst
Title:Senior Vice President
SCHEDULE 1
TO
PLEDGE AGREEMENT
Pledged Shares Owned and Pledged by Pledgor
Subsidiary (jursidiction of Number of Percentage Class of Stock
organization) Shares of Shares Stock Certificate
Nos.
- --------------------------- ----------- ---------- ------------- -----------
ePlus Group, inc. (VA) 1000 100% common 1
ePlus Government, inc. (VA) 500 100% common 1
ePlus Capital inc. (VA) 500 100% common 1
ePlus Technology, inc. (VA) 100 100% common 1
ePlus Systems, inc. (VA) 500 100% common 1
ePlus Document Systems, inc. (VA) 500 100% common 1
ePlus Information Holdings, inc. (VA) 500 100% common 1
ePlus Government Services, inc. (VA) 500 100% common 1