Exhibit 10.1
SECOND AMENDED AND RESTATED REVOLVING
CREDIT AND SECURITY AGREEMENT
PNC BANK, NATIONAL ASSOCIATION
(AS LENDER AND AS AGENT)
WITH
COMPUDYNE CORPORATION
COMPUDYNE - PUBLIC SAFETY & JUSTICE, INC.
NORMENT SECURITY GROUP, INC.
NORSHIELD CORPORATION
FIBER SENSYS, LLC
COMPUDYNE - INTEGRATED ELECTRONICS DIVISION, LLC
CORRLOGIC, LLC
XANALYS CORPORATION
(BORROWERS)
December 19, 2005
TABLE OF CONTENTS
I. DEFINITIONS..............................................................................................1
1.1. Accounting Terms................................................................................1
1.2. General Terms...................................................................................2
1.3. Uniform Commercial Code Terms..................................................................22
1.4. Certain Matters of Construction................................................................22
II. ADVANCES, PAYMENTS......................................................................................23
2.1. Revolving Advances.............................................................................23
2.2. Procedure for Revolving Advances Borrowing.....................................................25
2.3. Disbursement of Advance Proceeds...............................................................27
2.4. Reserved.......................................................................................27
2.5. Maximum Advances...............................................................................27
2.6. Repayment of Advances..........................................................................27
2.7. Repayment of Excess Advances...................................................................28
2.8. Statement of Account...........................................................................28
2.9. Letters of Credit..............................................................................28
2.10. Issuance of Letters of Credit..................................................................28
2.11. Requirements For Issuance of Letters of Credit.................................................29
2.12. Disbursements, Reimbursement...................................................................29
2.13. Repayment of Participation Advances............................................................30
2.14. Documentation..................................................................................31
2.15. Determination to Honor Drawing Request.........................................................31
2.16. Nature of Participation and Reimbursement Obligations..........................................31
2.17. Indemnity......................................................................................32
2.18. Liability for Acts and Omissions...............................................................33
2.19. Additional Payments............................................................................34
2.20. Manner of Borrowing and Payment................................................................34
2.21. Mandatory Prepayments..........................................................................36
2.22. Use of Proceeds................................................................................36
2.23. Defaulting Lender..............................................................................36
2.24. Confirmation of Existing Indebtedness..........................................................37
III. INTEREST AND FEES.......................................................................................37
3.1. Interest.......................................................................................37
3.2. Letter of Credit Fees..........................................................................38
3.3. Closing Fee and Facility Fee...................................................................39
3.4. Collateral Monitoring Fee, Collateral Evaluation Fee and Fee Letter............................39
3.5. Computation of Interest and Fees...............................................................39
3.6. Maximum Charges................................................................................39
3.7. Increased Costs................................................................................39
3.8. Basis For Determining Interest Rate Inadequate or Unfair.......................................40
3.9. Capital Adequacy...............................................................................41
3.10. Gross Up for Taxes.............................................................................41
3.11. Withholding Tax Exemption......................................................................42
IV. COLLATERAL: GENERAL TERMS..............................................................................43
4.1. Security Interest in the Collateral............................................................43
4.2. Perfection of Security Interest................................................................43
4.3. Disposition of Collateral......................................................................43
4.4. Preservation of Collateral.....................................................................43
4.5. Ownership of Collateral........................................................................44
4.6. Defense of Agent's and Lenders' Interests......................................................44
4.7. Books and Records..............................................................................45
4.8. Financial Disclosure...........................................................................45
4.9. Compliance with Laws...........................................................................45
4.10. Inspection of Premises.........................................................................45
4.11. Insurance......................................................................................46
4.12. Failure to Pay Insurance.......................................................................46
4.13. Payment of Taxes...............................................................................47
4.14. Payment of Leasehold Obligations...............................................................47
4.15. Receivables....................................................................................47
4.16. Inventory......................................................................................49
4.17. Maintenance of Equipment.......................................................................50
4.18. Exculpation of Liability.......................................................................50
4.19. Environmental Matters..........................................................................50
4.20. Financing Statements...........................................................................52
V. REPRESENTATIONS AND WARRANTIES..........................................................................52
5.1. Authority......................................................................................52
5.2. Formation and Qualification....................................................................53
5.3. Survival of Representations and Warranties.....................................................53
5.4. Tax Returns....................................................................................53
5.5. Financial Statements...........................................................................53
5.6. Entity Names...................................................................................54
5.7. O.S.H.A. and Environmental Compliance..........................................................54
5.8. Solvency; No Litigation, Violation, Indebtedness or Default....................................54
5.9. Patents, Trademarks, Copyrights and Licenses...................................................55
5.10. Licenses and Permits...........................................................................56
5.11. Default of Indebtedness........................................................................56
5.12. No Default.....................................................................................56
5.13. No Burdensome Restrictions.....................................................................56
5.14. No Labor Disputes..............................................................................56
5.15. Margin Regulations.............................................................................56
5.16. Investment Company Act.........................................................................57
5.17. Disclosure.....................................................................................57
5.18. Delivery of Subordinated Loan Documentation and IRB Documentation..............................57
5.19. Swaps..........................................................................................57
5.20. Conflicting Agreements.........................................................................57
5.21. Application of Certain Laws and Regulations....................................................57
5.22. Business and Property of Borrowers.............................................................57
5.23. Section 20 Subsidiaries........................................................................57
5.24. Anti-Terrorism Laws............................................................................57
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5.25. Trading with the Enemy.........................................................................58
5.26. Federal Securities Laws........................................................................58
VI. AFFIRMATIVE COVENANTS...................................................................................58
6.1. Payment of Fees................................................................................59
6.2. Conduct of Business and Maintenance of Existence and Assets....................................59
6.3. Violations.....................................................................................59
6.4. Government Receivables.........................................................................59
6.5. Financial Covenants............................................................................59
6.6. Execution of Supplemental Instruments..........................................................60
6.7. Payment of Indebtedness........................................................................60
6.8. Standards of Financial Statements..............................................................60
6.9. Federal Securities Laws........................................................................60
VII. NEGATIVE COVENANTS......................................................................................60
7.1. Merger, Consolidation, Acquisition and Sale of Assets..........................................60
7.2. Creation of Liens..............................................................................60
7.3. Guarantees.....................................................................................60
7.4. Investments....................................................................................61
7.5. Loans..........................................................................................61
7.6. Capital Expenditures...........................................................................61
7.7. Dividends......................................................................................61
7.8. Indebtedness...................................................................................61
7.9. Nature of Business.............................................................................61
7.10. Transactions with Affiliates...................................................................61
7.11. Leases.........................................................................................61
7.12. Subsidiaries...................................................................................62
7.13. Fiscal Year and Accounting Changes.............................................................62
7.14. Pledge of Credit...............................................................................62
7.15. Amendment of Articles of Incorporation, By-Laws................................................62
7.16. Compliance with ERISA..........................................................................62
7.17. Prepayment of Indebtedness.....................................................................62
7.18. Anti-Terrorism Laws............................................................................63
7.19. Membership/Partnership Interests...............................................................63
7.20. Trading with the Enemy Act.....................................................................63
7.21. Subordinated Notes and Industrial Revenue Bonds................................................63
7.22. Other Agreements...............................................................................63
VIII. CONDITIONS PRECEDENT....................................................................................63
8.1. Conditions to Initial Advances.................................................................63
8.2. Conditions to Each Advance.....................................................................67
8.3. Conditions to Revolving Advances...............................................................68
IX. INFORMATION AS TO BORROWERS.............................................................................68
9.1. Disclosure of Material Matters.................................................................68
9.2. Schedules......................................................................................68
9.3. Environmental Reports..........................................................................68
9.4. Litigation.....................................................................................68
9.5. Material Occurrences...........................................................................68
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9.6. Government Receivables.........................................................................69
9.7. Annual Financial Statements....................................................................69
9.8. Quarterly Financial Statements.................................................................69
9.9. Monthly Financial Statements...................................................................70
9.10. Other Reports..................................................................................70
9.11. Additional Information.........................................................................70
9.12. Projected Operating Budget.....................................................................70
9.13. Variances From Operating Budget................................................................70
9.14. Notice of Suits, Adverse Events................................................................70
9.15. ERISA Notices and Requests.....................................................................71
9.16. Additional Documents...........................................................................71
X. EVENTS OF DEFAULT.......................................................................................71
10.1. Nonpayment.....................................................................................71
10.2. Breach of Representation.......................................................................72
10.3. Financial Information..........................................................................72
10.4. Judicial Actions...............................................................................72
10.5. Noncompliance..................................................................................72
10.6. Judgments......................................................................................72
10.7. Bankruptcy.....................................................................................72
10.8. Inability to Pay...............................................................................72
10.9. Intentionally Omitted..........................................................................72
10.10. Material Adverse Effect........................................................................72
10.11. Lien Priority..................................................................................73
10.12. Subordinated Loan or IRB Default...............................................................73
10.13. Cross Default..................................................................................73
10.14. Breach of Guaranty.............................................................................73
10.15. Change of Ownership............................................................................73
10.16. Invalidity.....................................................................................73
10.17. Licenses.......................................................................................73
10.18. Seizures.......................................................................................73
10.19. Operations.....................................................................................73
10.20. Pension Plans..................................................................................74
XI. LENDERS' RIGHTS AND REMEDIES AFTER DEFAULT..............................................................74
11.1. Rights and Remedies............................................................................74
11.2. Agent's Discretion.............................................................................76
11.3. Setoff.........................................................................................76
11.4. Rights and Remedies not Exclusive..............................................................76
11.5. Allocation of Payments After Event of Default..................................................76
XII. WAIVERS AND JUDICIAL PROCEEDINGS........................................................................77
12.1. Waiver of Notice...............................................................................77
12.2. Delay..........................................................................................77
12.3. Jury Waiver....................................................................................77
XIII. EFFECTIVE DATE AND TERMINATION..........................................................................77
13.1. Term...........................................................................................77
13.2. Termination....................................................................................78
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XIV. REGARDING AGENT.........................................................................................78
14.1. Appointment....................................................................................78
14.2. Nature of Duties...............................................................................79
14.3. Lack of Reliance on Agent and Resignation......................................................79
14.4. Certain Rights of Agent........................................................................80
14.5. Reliance.......................................................................................80
14.6. Notice of Default..............................................................................80
14.7. Indemnification................................................................................80
14.8. Agent in its Individual Capacity...............................................................80
14.9. Delivery of Documents..........................................................................81
14.10. Borrowers' Undertaking to Agent................................................................81
14.11. No Reliance on Agent's Customer Identification Program.........................................81
14.12. Other Agreements...............................................................................81
XV. BORROWING AGENCY........................................................................................81
15.1. Borrowing Agency Provisions....................................................................81
15.2. Waiver of Subrogation..........................................................................82
XVI. MISCELLANEOUS...........................................................................................82
16.1. Governing Law..................................................................................82
16.2. Entire Understanding...........................................................................83
16.3. Successors and Assigns; Participations; New Lenders............................................85
16.4. Application of Payments........................................................................86
16.5. Indemnity......................................................................................87
16.6. Notice.........................................................................................87
16.7. Survival.......................................................................................89
16.8. Severability...................................................................................89
16.9. Expenses.......................................................................................89
16.10. Injunctive Relief..............................................................................89
16.11. Consequential Damages..........................................................................89
16.12. Captions.......................................................................................90
16.13. Counterparts; Facsimile Signatures.............................................................90
16.14. Construction...................................................................................90
16.15. Confidentiality; Sharing Information...........................................................90
16.16. Publicity......................................................................................90
16.17. Certifications From Banks and Participants; USA PATRIOT Act....................................91
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SECOND AMENDED AND RESTATED REVOLVING
CREDIT AND SECURITY AGREEMENT
Second Amendment and Restated Revolving Credit and Security Agreement dated
as of December 19, 2005 among COMPUDYNE CORPORATION, a Nevada corporation
("CompuDyne"), COMPUDYNE - PUBLIC SAFETY & JUSTICE, INC., a Virginia corporation
(CompuDyne Safety"), NORMENT SECURITY GROUP, INC., a Delaware corporation
("Norment"), NORSHIELD CORPORATION, an Alabama corporation ("Norshield"), FIBER
SENSYS, LLC, a Delaware limited liability company ("Fiber"), COMPUDYNE -
INTEGRATED ELECTRONICS DIVISION, LLC, a Delaware limited liability company
("CompuDyne Integrated"), CORRLOGIC, LLC, a Delaware limited liability company
("CorrLogic") and Xanalys Corporation, a Delaware corporation ("Xanalys")
(CompuDyne, CompuDyne Safety, Norment, Norshield, Fiber, CompuDyne Integrated
and CorrLogic and Xanalys, each a "Borrower", and collectively "Borrowers"), the
financial institutions which are now or which hereafter become a party hereto
(collectively, the "Lenders" and individually a "Lender") and PNC BANK, NATIONAL
ASSOCIATION ("PNC"), as agent for Lenders (PNC, in such capacity, the "Agent").
BACKGROUND
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A. On or about November 16, 2001, PNC Bank, National Association ("PNC NA")
the banks and financial institutions party to the Original PNC Loan Agreement
(as herein defined) and CompuDyne entered into a certain Credit Agreement (as
heretofore amended, restated, supplemented or replaced from time to time, the
"Original PNC Loan Agreement") and certain related agreements, instruments and
documents to evidence the obligation of CompuDyne to repay an original maximum
amount of $25,000,000 thereunder.
B. On or about March 31, 2004, CompuDyne and PNC NA and the banks and
financial institutions party to the Restated Credit Agreement (as therein
defined) entered into a certain Amended and Restated Credit and Security
Agreement (as heretofore amended, restated, supplemented or replaced from time
to time, the "Restated Loan Agreement") and certain related agreements,
instruments and documents (collectively with the Restated Loan Agreement, the
"Existing Loan Documents") to evidence the obligations of CompuDyne to repay an
original maximum amount of $25,000,000 thereunder pursuant to which such parties
amended and restated the Original PNC Loan Agreement.
C. The parties have agreed to amend and restate the Restated Loan Agreement
on the terms and conditions set forth herein, and in connection therewith
Borrowers wish, from time to time, to obtain Advances from Lenders up to the
Maximum Revolving Advance Amount. Lenders are willing to continue to make loans
and grant extensions of credit to Borrowers under the terms and provisions
hereinafter set forth.
IN CONSIDERATION of the mutual covenants and undertakings herein contained,
Borrowers, Lenders and Agent hereby agree as follows:
I. DEFINITIONS.
1.1. Accounting Terms. As used in this Agreement, the Other Documents or
any certificate, report or other document made or delivered pursuant to this
Agreement, accounting terms not defined in Section 1.2 or elsewhere in this
Agreement and accounting terms partly defined in Section 1.2 to the extent not
defined, shall have the respective meanings given to them under GAAP; provided,
however, whenever such accounting terms are used for the purposes of determining
compliance with financial covenants in this Agreement, such accounting terms
shall be defined in accordance with GAAP as applied in preparation of the
audited financial statements of Borrowers for the fiscal year ended December 31,
2004.
1.2. General Terms. For purposes of this Agreement the following terms
shall have the following meanings:
"Accountants" shall have the meaning set forth in Section 9.7 hereof.
"Advance Rates" shall have the meaning set forth in Section 2.1(a)(y)(vii).
"Advances" shall mean and include the Revolving Advances and Letters of
Credit.
"Affiliate" of any Person shall mean (a) any Person which, directly or
indirectly, is in control of, is controlled by, or is under common control with
such Person, or (b) any Person who is a director, managing member, general
partner or officer (i) of such Person, (ii) of any Subsidiary of such Person or
(iii) of any Person described in clause (a) above. For purposes of this
definition, control of a Person shall mean the power, direct or indirect, (x) to
vote 10% or more of the Equity Interests having ordinary voting power for the
election of directors of such Person or other Persons performing similar
functions for any such Person, or (y) to direct or cause the direction of the
management and policies of such Person whether by ownership of Equity Interests,
contract or otherwise.
"Agent" shall have the meaning set forth in the preamble to this Agreement
and shall include its successors and assigns.
"Agreement" shall mean this Revolving Credit and Security Agreement, as the
same may be amended, restated, supplemented or otherwise modified from time to
time.
"Alternate Base Rate" shall mean, for any day, a rate per annum equal to
the higher of (i) the Base Rate in effect on such day and (ii) the Federal Funds
Open Rate in effect on such day plus 1/2 of 1%.
"Anti-Terrorism Laws" shall mean any Applicable Laws relating to terrorism
or money laundering, including Executive Order No. 13224, the USA PATRIOT Act,
the Applicable Laws comprising or implementing the Bank Secrecy Act, and the
Applicable Laws administered by the United States Treasury Department's Office
of Foreign Asset Control (as any of the foregoing Applicable Laws may from time
to time be amended, renewed, extended, or replaced).
"Applicable Law" shall mean all laws, rules and regulations applicable to
the Person, conduct, transaction, covenant, Other Documents or contract in
question, including all applicable common law and equitable principles; all
provisions of all applicable state, federal and foreign constitutions, statutes,
rules, regulations and orders of any Governmental Body, and all orders,
judgments and decrees of all courts and arbitrators.
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"Authority" shall have the meaning set forth in Section 4.19(d).
"Base Rate" shall mean the base commercial lending rate of PNC as publicly
announced to be in effect from time to time, such rate to be adjusted
automatically, without notice, on the effective date of any change in such rate.
This rate of interest is determined from time to time by PNC as a means of
pricing some loans to its customers and is neither tied to any external rate of
interest or index nor does it necessarily reflect the lowest rate of interest
actually charged by PNC to any particular class or category of customers of PNC.
"Billings in Excess of Costs" shall mean, as of the date of any
determination, the amount billed by a Borrower to a particular Customer on a
contract which is in excess of the revenue earned by such Borrower under such
contract with the Customer, as determined in accordance with GAAP and as set
forth in Borrowers' most recently delivered balance sheet.
"Blocked Accounts" shall have the meaning set forth in Section 4.15(h).
"Blocked Account Bank" shall have the meaning set forth in Section 4.15(h).
"Blocked Person" shall have the meaning set forth in Section 5.24(b)
hereof.
"Bonded Receivables" shall mean any Receivable arising from a Customer
pursuant to contract for which a Borrower has posted a performance bond to
secure such Borrower's performance thereunder.
"Borrower" or "Borrowers" shall have the meaning set forth in the preamble
to this Agreement and shall extend to all permitted successors and assigns of
such Persons.
"Borrowers on a Consolidated Basis" shall mean the consolidation in
accordance with GAAP of the accounts or other items of the Borrowers and their
respective Subsidiaries.
"Borrowers' Account" shall have the meaning set forth in Section 2.8.
"Borrowing Agent" shall mean CompuDyne.
"Borrowing Base Certificate" shall mean a certificate in substantially the
form of Exhibit 1.2 duly executed by the President, Chief Financial Officer or
Controller of the Borrowing Agent and delivered to the Agent, appropriately
completed, by which such officer shall certify to Agent the Formula Amount and
calculation thereof as of the date of such certificate.
"Business Day" shall mean any day other than Saturday or Sunday or a legal
holiday on which commercial banks are authorized or required by law to be closed
for business in East Brunswick, New Jersey and, if the applicable Business Day
relates to any Eurodollar Rate Loans, such day must also be a day on which
dealings are carried on in the London interbank market.
"Capital Expenditures" shall mean expenditures made or liabilities incurred
for the acquisition of any fixed assets or improvements, replacements,
substitutions or additions thereto which have a useful life of more than one
year, including the total principal portion of Capitalized Lease Obligations,
which, in accordance with GAAP, would be classified as capital expenditures.
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"Capitalized Lease Obligation" shall mean any Indebtedness of any Borrower
represented by obligations under a lease that is required to be capitalized for
financial reporting purposes in accordance with GAAP.
"CERCLA" shall mean the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended, 42 U.S.C. ss.ss.9601 et seq.
"Change of Ownership" shall mean (a) 100% of the Equity Interests of any
direct or indirect Subsidiary of CompuDyne is no longer owned directly or
indirectly (on a fully diluted basis) by CompuDyne, (b) (i) any person or group
of persons (within the meaning of Sections 13(d) or 14(a) of the Security
Exchange Act of 1934, as amended) shall have acquired beneficial ownership of
(within the meaning of Rule 13d-3 promulgated by the Securities and Exchange
Commission under Act) 50% or more of the voting Equity Interest of CompuDyne; or
(ii) from and after the date hereof, individuals who on the date hereof
constitute the board of directors of CompuDyne (together with any new directors
whose election by such Board of Directors or whose nomination for election by
the shareholders of CompuDyne was approved by a vote of a majority of the
directors then still in office who were either directors on the date hereof or
whose election or nomination for election was previously approved) cease for any
reason to constitute a majority of the board of directors of CompuDyne then in
office; or (c) any merger, consolidation or sale of substantially all of the
property or assets of any Borrower or any direct or indirect Subsidiary of any
Borrower except as permitted by Section 7.1.
"Charges" shall mean all taxes, charges, fees, imposts, levies or other
assessments, including all net income, gross income, gross receipts, sales, use,
ad valorem, value added, transfer, franchise, profits, inventory, capital stock,
license, withholding, payroll, employment, social security, unemployment,
excise, severance, stamp, occupation and property taxes, custom duties, fees,
assessments, liens, claims and charges of any kind whatsoever, together with any
interest and any penalties, additions to tax or additional amounts, imposed by
any taxing or other authority, domestic or foreign (including the Pension
Benefit Guaranty Corporation or any environmental agency or superfund), upon the
Collateral, any Borrower or any of its Affiliates.
"Closing Date" shall mean December 19, 2005 or such other date as may be
agreed to by the parties hereto.
"Code" shall mean the Internal Revenue Code of 1986, as the same may be
amended or supplemented from time to time, and any successor statute of similar
import, and the rules and regulations thereunder, as from time to time in
effect.
"Collateral" shall mean and include:
a. all Receivables;
b. all Equipment;
c. all General Intangibles;
d. all Inventory;
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e. all Investment Property;
f. all Real Property;
g. all Subsidiary Stock;
h. all of each Borrower's right, title and interest in and to, whether now
owned or hereafter acquired and wherever located, (i) its respective goods and
other property including, but not limited to, all merchandise returned or
rejected by Customers, relating to or securing any of the Receivables; (ii) all
of each Borrower's rights as a consignor, a consignee, an unpaid vendor,
mechanic, artisan, or other lienor, including stoppage in transit, setoff,
detinue, replevin, reclamation and repurchase; (iii) all additional amounts due
to any Borrower from any Customer relating to the Receivables; (iv) other
property, including warranty claims, relating to any goods securing the
Obligations; (v) all of each Borrower's contract rights, rights of payment which
have been earned under a contract right, instruments (including promissory
notes), documents, chattel paper (including electronic chattel paper), warehouse
receipts, deposit accounts, letters of credit and money; (vi) all commercial
tort claims (whether now existing or hereafter arising); (vii) all insurance
claims and settlement claims; (viii) if and when obtained by any Borrower, all
real and personal property of third parties in which such Borrower has been
granted a lien or security interest as security for the payment or enforcement
of Receivables; (ix) all letter of credit rights (whether or not the respective
letter of credit is evidenced by a writing); (x) all supporting obligations; and
(xi) any other goods, personal property or real property now owned or hereafter
acquired in which any Borrower has expressly granted a security interest or may
in the future grant a security interest to Agent hereunder, or in any amendment
or supplement hereto or thereto, or under any other agreement between Agent and
any Borrower;
i. all of each Borrower's ledger sheets, ledger cards, files,
correspondence, records, books of account, business papers, computers, computer
software (owned by any Borrower or in which it has an interest), computer
programs, tapes, disks and documents relating to (a), (b), (c), (d), (e), (f),
(g) or (h) of this Paragraph; and
j. all proceeds and products of (a), (b), (c), (d), (e), (f), (g), (h) and
(i) in whatever form, including, but not limited to: cash, deposit accounts
(whether or not comprised solely of proceeds), certificates of deposit,
insurance proceeds (including hazard, flood and credit insurance), negotiable
instruments and other instruments for the payment of money, chattel paper,
security agreements, documents, eminent domain proceeds, condemnation proceeds
and tort claim proceeds.
"Commitment Percentage" of any Lender shall mean the percentage set forth
below such Lender's name on the signature page hereof as same may be adjusted
upon any assignment by a Lender pursuant to Section 16.3(b) hereof.
"Commitment Transfer Supplement" shall mean a document in the form of
Exhibit 16.3 hereto, properly completed and otherwise in form and substance
satisfactory to Agent by which the Purchasing Lender purchases and assumes a
portion of the obligation of Lenders to make Advances under this Agreement.
"Compliance Certificate" shall mean a compliance certificate to be signed
by the Chief Financial Officer or Controller of Borrowing Agent, which shall
state that, based on an examination sufficient to permit such officer to make an
informed statement, no Default or Event of Default exists, or if such is not the
5
case, specifying such Default or Event of Default, its nature, when it occurred,
whether it is continuing and the steps being taken by Borrowers with respect to
such default and, such certificate shall have appended thereto calculations
which set forth Borrowers' compliance with the requirements or restrictions
imposed by Sections 6.5, 7.4, 7.5, 7.6, 7.7, 7.8 and 7.11.
"Consents" shall mean all filings and all licenses, permits, consents,
approvals, authorizations, qualifications and orders of Governmental Bodies and
other third parties, domestic or foreign, necessary to carry on any Borrower's
business or necessary (including to avoid a conflict or breach under any
agreement, instrument, other document, license, permit or other authorization)
for the execution, delivery or performance of this Agreement, the Other
Documents, the Subordinated Loan Documentation, the IRB Documentation, including
any Consents required under all applicable federal, state or other Applicable
Law.
"Consigned Inventory" shall mean Inventory of any Borrower that is in the
possession of another Person on a consignment, sale or return, or other basis
that does not constitute a final sale and acceptance of such Inventory.
"Controlled Group" shall mean, at any time, each Borrower and all members
of a controlled group of corporations and all trades or businesses (whether or
not incorporated) under common control and all other entities which, together
with any Borrower, are treated as a single employer under Section 414 of the
Code.
"Costs in Excess Advance Rate" shall have the meaning set forth in Section
2.1(a)(y)(iii) hereof.
Costs in Excess of Billings" shall mean, as of the date of any
determination, the amount of revenue earned by a Borrower from a Customer
pursuant to a contract, which is in excess of the amount billed by a Borrower to
such Customer under such contract, as determined in accordance with GAAP and as
set forth in Borrowers' most recently delivered balance sheet.
"Current Value of Marketable Securities" shall mean, as of the date of any
determination, the aggregate market value of securities issued by Federal Home
Loan Bank, Fannie Mae, Freddie Mac and Ginnie Mae, which have been pledged to
Agent for the benefit of Lenders pursuant to the Securities Pledge Agreement and
in which Agent has a first priority security interest, as determined by
reference to the closing market price existing on the immediately preceding
Business Day.
"Customer" shall mean and include the account debtor with respect to any
Receivable and/or the prospective purchaser of goods, services or both with
respect to any contract or contract right, and/or any party who enters into or
proposes to enter into any contract or other arrangement with any Borrower,
pursuant to which such Borrower is to deliver any personal property or perform
any services.
"Debt Payment" shall mean and include all cash expended or required by any
Borrower to make (a) interest payments, or interest accrued but unpaid, on the
Advances hereunder, plus (b) payments for all Letter of Credit Fees, plus (c)
payments with respect to any Indebtedness for borrowed money, plus (d) payments
made with respect to Capitalized Lease Obligations.
6
"Default" shall mean an event, circumstance or condition which, with the
giving of notice or passage of time or both, would constitute an Event of
Default.
"Default Rate" shall have the meaning set forth in Section 3.1 hereof.
"Defaulting Lender" shall have the meaning set forth in Section 2.23(a)
hereof.
"Deferred Revenue" shall mean revenue that is received, and to be treated,
by a Borrower as "deferred revenue" pursuant to and in accordance with GAAP.
"Depository Accounts" shall have the meaning set forth in Section 4.15(h)
hereof.
"Documents" shall have the meaning set forth in Section 8.1(c) hereof.
"Dollar" and the sign "$" shall mean lawful money of the United States of
America.
"Domestic Rate Loan" shall mean any Advance that bears interest based upon
the Alternate Base Rate.
"Drawing Date" shall have the meaning set forth in Section 2.12(b) hereof.
"Early Termination Date" shall have the meaning set forth in Section 13.1
hereof.
"Earnings Before Interest and Taxes" shall mean for any period the sum of
(i) net income (or loss) of Borrowers on a Consolidated Basis for such period
(excluding extraordinary gains and losses), plus (ii) all interest expense of
Borrowers on a Consolidated Basis for such period, plus (iii) all Letter of
Credit Fees expense of Borrowers on a Consolidated Basis for such period, plus
(iv) all charges against income of Borrowers on a Consolidated Basis for such
period for federal, state and local taxes actually paid.
"EBITDA" shall mean for any period the sum of (i) Earnings Before Interest
and Taxes for such period, plus (ii) depreciation expenses for such period, plus
(iii) amortization expenses for such period, plus (iv) any non-cash charges
against net income required to be recognized in connection with the issuance of
Equity Interests to employees or otherwise in accordance with SFAS 123R
"Accounting for Stock Based Compensation" promulgated by FASB (whether upon
lapse of vesting restrictions, exercise of employee options or otherwise).
"Eligible Government Receivables" shall mean Receivables which meet all
requirements of Eligible Receivables other than the condition set forth in
subsection (i) of the definition of Eligible Receivables.
"Eligible Inventory" shall mean and include Inventory that consists of raw
materials and finished goods, with respect to each Borrower, valued at the lower
of cost or market value, determined on a first-in-first-out basis, which is not,
in Agent's opinion, obsolete, slow moving or unmerchantable and which Agent, in
its Permitted Discretion, shall not deem ineligible Inventory, based on such
considerations as Agent may from time to time deem reasonably appropriate
including whether the Inventory is subject to a perfected, first priority
security interest in favor of Agent and no other Lien (other than a Permitted
Encumbrance). In addition, Inventory shall not be Eligible Inventory if it: (i)
7
does not conform to all standards imposed by any Governmental Body which has
regulatory authority over such goods or the use or sale thereof, (ii) except as
provided below, is in transit, (iii) is located outside the continental United
States or at a location that is not otherwise in compliance with this Agreement,
(iv) constitutes Consigned Inventory, (v) is the subject of an Intellectual
Property Claim, (vi) is subject to a License Agreement or other agreement that
limits, conditions or restricts any Borrower's or Agent's right to sell or
otherwise dispose of such Inventory, unless Agent is a party to a Licensor/Agent
Agreement with the Licensor under such License Agreement, or (vii) is situated
at a location not owned by a Borrower unless the owner or occupier of such
location has executed in favor of Agent a Lien Waiver Agreement. Eligible
Inventory shall include all Inventory in-transit for which title has passed to a
Borrower, which is insured to the full value thereof and for which Agent shall
have in its possession (a) all negotiable bills of lading properly endorsed and
(b) all non-negotiable bills of lading issued in Agent's name.
"Eligible Receivables" shall mean and include with respect to each
Borrower, each Receivable of such Borrower arising in the Ordinary Course of
Business and which Agent, in its Permitted Discretion shall deem to be an
Eligible Receivable, based on such considerations as Agent may from time to time
deem appropriate. A Receivable shall not be deemed eligible unless such
Receivable is subject to Agent's first priority perfected security interest and
no other Lien (other than Permitted Encumbrances), and is evidenced by an
invoice or other documentary evidence satisfactory to Agent. In addition, no
Receivable shall be an Eligible Receivable if:
a. it arises out of a sale made by any Borrower to an Affiliate of any
Borrower or to a Person controlled by an Affiliate of any Borrower;
b. it is due or unpaid more than one hundred twenty (120) days after the
original invoice date;
c. fifty percent (50%) or more of the Receivables from such Customer are
not deemed Eligible Receivables hereunder. Such percentage may, in (i) Agent's
Permitted Discretion be decreased from time to time and (ii) Agent's sole
discretion be increased from time to time;
d. any covenant, representation or warranty contained in this Agreement
with respect to such Receivable has been breached;
e. the Customer shall (i) apply for, suffer, or consent to the appointment
of, or the taking of possession by, a receiver, custodian, trustee or liquidator
of itself or of all or a substantial part of its property or call a meeting of
its creditors, (ii) admit in writing its inability, or be generally unable, to
pay its debts as they become due or cease operations of its present business,
(iii) make a general assignment for the benefit of creditors, (iv) commence a
voluntary case under any state or federal bankruptcy laws (as now or hereafter
in effect), (v) be adjudicated a bankrupt or insolvent, (vi) file a petition
seeking to take advantage of any other law providing for the relief of debtors,
(vii) acquiesce to, or fail to have dismissed, any petition which is filed
against it in any involuntary case under such bankruptcy laws, or (viii) take
any action for the purpose of effecting any of the foregoing;
f. the sale is to a Customer outside the continental United States of
America, unless the sale is on letter of credit, guaranty or acceptance terms,
in each case acceptable to Agent in its Permitted Discretion;
8
g. the sale to the Customer is on a bill-and-hold, guaranteed sale,
sale-and-return, sale on approval, consignment or any other repurchase or return
basis or is evidenced by chattel paper;
h. Agent believes, in its Permitted Discretion, that collection of such
Receivable is insecure or that such Receivable may not be paid by reason of the
Customer's financial inability to pay;
i. the Customer is the United States of America, any state or any
department, agency or instrumentality of any of them, unless the applicable
Borrower assigns its right to payment of such Receivable to Agent pursuant to
the Assignment of Claims Act of 1940, as amended (31 U.S.C. Sub-Section 3727 et
seq. and 41 U.S.C. Sub-Section 15 et seq.) or has otherwise complied with other
applicable statutes or ordinances;
j. the goods giving rise to such Receivable have not been delivered to and
accepted by the Customer or the services giving rise to such Receivable have not
been performed by the applicable Borrower and accepted by the Customer or the
Receivable otherwise does not represent a final sale;
k. the Receivables of the Customer exceed a credit limit determined by
Agent, in its Permitted Discretion, to the extent such Receivable exceeds such
limit;
l. the Receivable is subject to any offset, deduction, defense, dispute, or
counterclaim only to the extent of any offset, deduction, defense, dispute or
counterclaim, the Customer is also a creditor or supplier of a Borrower or the
Receivable is contingent in any respect or for any reason;
m. the applicable Borrower has made any agreement with any Customer for any
deduction therefrom, except for discounts or allowances made in the Ordinary
Course of Business for prompt payment, all of which discounts or allowances are
reflected in the calculation of the face value of each respective invoice
related thereto;
n. any return, rejection or repossession of the merchandise has occurred or
the rendition of services has been disputed;
o. such Receivable is not payable to a Borrower;
p. such Receivable constitutes a Bonded Receivable;
q. such Receivable includes any Retainages, to the extent of any
Retainages;
r. such Receivable constitutes a Deferred Revenue;
s. such Receivable includes Billings in Excess of Costs to the extent such
Receivable exceeds contractually earned revenues; or
t. such Receivable is not otherwise satisfactory to Agent as determined in
good faith by Agent in the exercise of its Permitted Discretion.
"Environmental Complaint" shall have the meaning set forth in Section
4.19(d) hereof.
9
"Environmental Indemnity Agreement" shall mean the environmental indemnity
agreement executed and delivered by Borrowers to Agent in form and substance
satisfactory to Agent.
"Environmental Laws" shall mean all federal, state and local environmental,
land use, zoning, health, chemical use, safety and sanitation laws, statutes,
ordinances and codes relating to the protection of the environment and/or
governing the use, storage, treatment, generation, transportation, processing,
handling, production or disposal of Hazardous Substances and the rules,
regulations, policies, guidelines, interpretations, decisions, orders and
directives of federal, state and local governmental agencies and authorities
with respect thereto.
"Equipment" shall mean and include as to each Borrower all of such
Borrower's goods (other than Inventory) whether now owned or hereafter acquired
and wherever located including all equipment, machinery, apparatus, motor
vehicles, fittings, furniture, furnishings, fixtures, parts, accessories and all
replacements and substitutions therefor or accessions thereto.
"Equity Interests" of any Person shall mean any and all shares, rights to
purchase, options, warrants, general, limited or limited liability partnership
interests, member interests, participation or other equivalents of or interest
in (regardless of how designated) equity of such Person, whether voting or
nonvoting, including common stock, preferred stock, convertible securities or
any other "equity security" (as such term is defined in Rule 3a11-1 of the
General Rules and Regulations promulgated by the SEC under the Exchange Act).
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time and the rules and regulations promulgated thereunder.
"Eurodollar Rate" shall mean for any Eurodollar Rate Loan for the then
current Interest Period relating thereto the interest rate per annum determined
by Agent by dividing (the resulting quotient rounded upwards, if necessary, to
the nearest 1/100th of 1% per annum) (i) the rate of interest determined by
Agent in accordance with its usual procedures (which determination shall be
conclusive absent manifest error) to be the average of the London interbank
offered rates for U.S. Dollars quoted by the British Bankers' Association as set
forth on Moneyline Telerate (or appropriate successor or, if British Banker's
Association or its successor ceases to provide such quotes, a comparable
replacement determined by Agent) display page 3750 (or such other display page
on the Moneyline Telerate system as may replace display page 3750) two (2)
Business Days prior to the first day of such Interest Period for an amount
comparable to such Eurodollar Rate Loan and having a borrowing date and a
maturity comparable to such Interest Period by (ii) a number equal to 1.00 minus
the Reserve Percentage. The Eurodollar Rate may also be expressed by the
following formula:
Average of London interbank offered rates quoted by BBA as shown on
Eurodollar Rate = Moneyline Telerate Service display page 3750 or appropriate
successor - Reserve Percentage.
The Eurodollar Rate shall be adjusted with respect to any Eurodollar Rate
Loan that is outstanding on the effective date of any change in the Reserve
Percentage as of such effective date. The Agent shall give prompt notice to the
Borrowing Agent of the Eurodollar Rate as determined or adjusted in accordance
herewith, which determination shall be conclusive absent manifest error.
10
"Eurodollar Rate Loan" shall mean an Advance at any time that bears
interest based on the Eurodollar Rate.
"Event of Default" shall have the meaning set forth in Article X hereof.
"Exchange Act" shall have the mean the Securities Exchange Act of 1934, as
amended.
"Executive Order No. 13224" shall mean the Executive Order No. 13224 on
Terrorist Financing, effective September 24, 2001, as the same has been, or
shall hereafter be, renewed, extended, amended or replaced.
"Existing Indebtedness" shall have the meaning set forth in Section 2.24
hereof.
"Existing Letters of Credit" collectively, the letters of credit existing
on the Closing Date and described on Schedule I hereto, as each such letter of
credit may be amended, supplemented, replace or otherwise modified from time to
time.
"Existing Loan Documents" shall have the meaning set forth in the
Background section hereof.
"Federal Funds Effective Rate" for any day shall mean the rate per annum
(based on a year of 360 days and actual days elapsed and rounded upward to the
nearest 1/100 of 1%) announced by the Federal Reserve Bank of New York (or any
successor) on such day as being the weighted average of the rates on overnight
federal funds transactions arranged by federal funds brokers on the previous
trading day, as computed and announced by such Federal Reserve Bank (or any
successor) in substantially the same manner as such Federal Reserve Bank
computes and announces the weighted average it refers to as the "Federal Funds
Effective Rate" as of the date of this Agreement; provided, if such Federal
Reserve Bank (or its successor) does not announce such rate on any day, the
"Federal Funds Effective Rate" for such day shall be the Federal Funds Effective
Rate for the last day on which such rate was announced.
"Federal Funds Open Rate" shall mean the rate per annum determined by the
Agent in accordance with its usual procedures (which determination shall be
conclusive absent manifest error) to be the "open" rate for federal funds
transactions as of the opening of business for federal funds transactions among
members of the Federal Reserve System arranged by federal funds brokers on such
day, as quoted by Garvin Guybutler Corporation, any successor entity thereto, or
any other broker selected by the Agent, as set forth on the applicable Telerate
display page; provided, however; that if such day is not a Business Day, the
Federal Funds Open Rate for such day shall be the "open" rate on the immediately
preceding Business Day, or if no such rate shall be quoted by a Federal funds
broker at such time, such other rate as determined by the Agent in accordance
with its usual procedures.
"Fixed Charge Coverage Ratio" shall mean and include, with respect to any
fiscal period, the ratio of (a) EBITDA minus unfinanced capitalized expenditures
made during such period, minus cash taxes paid during such period to (b) all
Debt Payments made during such period, calculated on a rolling four quarter
basis; provided, however, that such calculation for the fiscal quarter ending
June 30, 2006 shall be for the two (2) most recent fiscal quarterly periods
11
ending on such date, and such calculation for the fiscal quarter ending
September 30, 2006 shall be for the three (3) most recent fiscal quarterly
periods ending on such date.
"FMV of Real Property" shall mean the appraised fair market value of each
parcel of Borrowers' Real Property as listed in the appraisal by Loewe-Adler
International, Inc. dated October 20, 2005 ("Real Property Appraisal"), which is
not encumbered by a Lien (other than a Permitted Encumbrance) as determined in
accordance with the Real Property Appraisal.
"Foreign Subsidiary" of any Person, shall mean any Subsidiary of such
Person that is not organized or incorporated in the United States or any State
or territory thereof.
"Formula Amount" shall have the meaning set forth in Section 2.1(a).
"GAAP" shall mean generally accepted accounting principles in the United
States of America in effect from time to time.
"General Intangibles" shall mean and include as to each Borrower all of
such Borrower's general intangibles, whether now owned or hereafter acquired,
including all payment intangibles, all choses in action, causes of action,
corporate or other business records, inventions, designs, patents, patent
applications, equipment formulations, manufacturing procedures, quality control
procedures, trademarks, trademark applications, service marks, trade secrets,
goodwill, copyrights, design rights, software, computer information, source
codes, codes, records and updates, registrations, licenses, franchises, customer
lists, tax refunds, tax refund claims, computer programs, all claims under
guaranties, security interests or other security held by or granted to such
Borrower to secure payment of any of the Receivables by a Customer (other than
to the extent covered by Receivables) all rights of indemnification and all
other intangible property of every kind and nature (other than Receivables).
"Government Receivables Advance Rate" shall have the meaning set forth in
Section 2.1(a)(y)(vii).
"Governmental Acts" shall have the meaning set forth in Section 2.17.
"Governmental Body" shall mean any nation or government, any state or other
political subdivision thereof or any entity, authority, agency, division or
department exercising the legislative, judicial, regulatory or administrative
functions of or pertaining to a government.
"Guarantor" shall mean any Person who may hereafter guarantee payment or
performance of the whole or any part of the Obligations and "Guarantors" means
collectively all such Persons.
"Guarantor Security Agreement" shall mean any Security Agreement executed
by any Guarantor in favor of Agent securing the Guaranty of such Guarantor.
"Guaranty" shall mean any guaranty of the obligations of Borrowers executed
by a Guarantor in favor of Agent for its benefit and for the ratable benefit of
Lenders.
"Hazardous Discharge" shall have the meaning set forth in Section 4.19(d)
hereof.
"Hazardous Substance" shall mean, without limitation, any flammable
explosives, radon, radioactive materials, asbestos, urea formaldehyde foam
12
insulation, polychlorinated biphenyls, petroleum and petroleum products,
methane, hazardous materials, Hazardous Wastes, hazardous or Toxic Substances or
related materials as defined in CERCLA, the Hazardous Materials Transportation
Act, as amended (49 U.S.C. Sections 1801, et seq.), RCRA, Articles 15 and 27 of
the New York State Environmental Conservation Law or any other applicable
Environmental Law and in the regulations adopted pursuant thereto.
"Hazardous Wastes" shall mean all waste materials subject to regulation
under CERCLA, RCRA or applicable state law, and any other applicable Federal and
state laws now in force or hereafter enacted relating to hazardous waste
disposal.
"Hedge Liabilities" shall have the meaning provided in the definition of
"Lender-Provided Interest Rate Hedge".
"Indebtedness" of a Person at a particular date shall mean all obligations
of such Person which in accordance with GAAP would be classified upon a balance
sheet as liabilities (except capital stock and surplus earned or otherwise) and
in any event, without limitation by reason of enumeration, shall include all
indebtedness, debt and other similar monetary obligations of such Person whether
direct or guaranteed, and all premiums, if any, due at the required prepayment
dates of such indebtedness, and all indebtedness secured by a Lien on assets
owned by such Person, whether or not such indebtedness actually shall have been
created, assumed or incurred by such Person. Any indebtedness of such Person
resulting from the acquisition by such Person of any assets subject to any Lien
shall be deemed, for the purposes hereof, to be the equivalent of the creation,
assumption and incurring of the indebtedness secured thereby, whether or not
actually so created, assumed or incurred.
"Indenture Agreement" shall mean that certain Indenture Agreement among
Subordinated Lender and CompuDyne dated as of January 15, 2004.
"Indenture Subordination Agreement" shall mean the Letter Agreement dated
December 19, 2005 among Agent, Borrowers and Trustee.
"Industrial Revenue Bonds" shall mean those certain industrial revenue
bonds issued pursuant to the IRB Documentation.
"Ineligible Security" shall mean any security which may not be underwritten
or dealt in by member banks of the Federal Reserve System under Section 16 of
the Banking Act of 1933 (12 U.S.C. Section 24, Seventh), as amended.
"Intellectual Property" shall mean property constituting under any
Applicable Law a patent, patent application, copyright, trademark, service mark,
trade name, mask work, trade secret or license or other right to use any of the
foregoing.
"Intellectual Property Claim" shall mean the assertion by any Person of a
claim (whether asserted in writing, by action, suit or proceeding or otherwise)
that any Borrower's ownership, use, marketing, sale or distribution of any
Inventory, Equipment, Intellectual Property or other property or asset is
violative of any ownership of or right to use any Intellectual Property of such
Person.
"Interest Period" shall mean the period provided for any Eurodollar Rate
Loan pursuant to Section 2.2(b).
13
"Interest Rate Hedge" shall mean an interest rate exchange, collar, cap,
swap, adjustable strike cap, adjustable strike corridor or similar agreements
entered into by any Borrower or its Subsidiaries in order to provide protection
to, or minimize the impact upon, such Borrower, any Guarantor and/or their
respective Subsidiaries of increasing floating rates of interest applicable to
Indebtedness.
"Inventory" shall mean and include as to each Borrower all of such
Borrower's now owned or hereafter acquired goods, merchandise and other personal
property, wherever located, to be furnished under any consignment arrangement,
contract of service or held for sale or lease, all raw materials, work in
process, finished goods and materials and supplies of any kind, nature or
description which are or might be used or consumed in such Borrower's business
or used in selling or furnishing such goods, merchandise and other personal
property, and all documents of title or other documents representing them.
"Inventory Advance Rate" shall have the meaning set forth in Section
2.1(a)(y)(ii) hereof.
"Investment Property" shall mean and include as to each Borrower, all of
such Borrower's now owned or hereafter acquired securities (whether certificated
or uncertificated), securities entitlements, securities accounts, commodities
contracts and commodities accounts.
"IRB Documentation" shall mean, collectively, that certain (i) Trust
Indenture dated as of August 1, 1999, between The Industrial Development Board
of the City of Montgomery and Regions Bank, as U.S. Trustee, relating to the
issuance of $2,100,000 Variable/Fixed Rate Industrial Revenue Bonds (Norment
Industries, Inc. Project Series 1999); and (ii) Trust Indenture dated as of
April 1, 2002, between The Industrial Development Board of the City of
Montgomery and Regions Bank, as U.S. Trustee, relating to the issuance of
$3,500,000 Industrial Revenue Bonds (Norment Security Group, Inc. Project Series
2002), and and all documents delivered in connection with each of the foregoing
(other than any credit or loan agreements superseded by the Original PNC Loan
Agreement, the Restate Loan Agreement or by this Agreement).
"IRB Letters of Credit" shall mean, collectively, that certain (i) letter
of credit in the original amount of $1,847,300 bearing an L/C No. S243626 SCP,
as amended from time to time, issued by PNC in favor of Municipal Agency, and
(ii) letter of credit in the amount of $3,547,945 bearing an L/C No. S247779
SCP, as amended from time to time, issued by PNC in favor of Municipal Agency.
"IRB Offering" shall mean the issuance of Individual Revenue Bonds.
"Issuer" shall mean any Person who issues a Letter of Credit and/or accepts
a draft pursuant to the terms hereof.
"Lender" and "Lenders" shall have the meaning ascribed to such term in the
preamble to this Agreement and shall include each Person which becomes a
transferee, successor or assign of any Lender.
"Lender-Provided Interest Rate Hedge" shall mean an Interest Rate Hedge
which is provided by any Lender and with respect to which the Agent confirms
14
meets the following requirements: such Interest Rate Hedge (i) is documented in
a standard International Swap Dealer Association Agreement, (ii) provides for
the method of calculating the reimbursable amount of the provider's credit
exposure in a reasonable and customary manner, and (iii) is entered into for
hedging (rather than speculative) purposes. The liabilities of any Borrower to
the provider of any Lender-Provided Interest Rate Hedge (the "Hedge
Liabilities") shall be "Obligations" hereunder, guaranteed obligations under the
Guaranty and secured obligations under the Guarantor Security Agreement and
otherwise treated as Obligations for purposes of each of the Other Documents.
The Liens securing the Hedge Liabilities shall be pari passu with the Liens
securing all other Obligations under this Agreement and the Other Documents.
"Letter of Credit Fees" shall have the meaning set forth in Section 3.2.
"Letter of Credit Borrowing" shall have the meaning set forth in Section
2.12(d).
"Letter of Credit Sublimit" shall mean $18,000,000.
"Letters of Credit" shall mean, collectively, the Existing Letters of
Credit and any letters of credit issued by Agent under Section 2.9 hereof have
the meaning set forth in Section 2.9.
"License Agreement" shall mean any agreement between any Borrower and a
Licensor pursuant to which such Borrower is authorized to use any Intellectual
Property in connection with the manufacturing, marketing, sale or other
distribution of any Inventory of such Borrower or otherwise in connection with
such Borrower's business operations.
"Licensor" shall mean any Person from whom any Borrower obtains the right
to use (whether on an exclusive or non-exclusive basis) any Intellectual
Property in connection with such Borrower's manufacture, marketing, sale or
other distribution of any Inventory or otherwise in connection with such
Borrower's business operations.
"Licensor/Agent Agreement" shall mean an agreement between Agent and a
Licensor, in form and content satisfactory to Agent, by which Agent is given the
unqualified right, vis-a-vis such Licensor, to enforce Agent's Liens with
respect to and to dispose of any Borrower's Inventory with the benefit of any
Intellectual Property applicable thereto, irrespective of such Borrower's
default under any License Agreement with such Licensor.
"Lien" shall mean any mortgage, deed of trust, pledge, hypothecation,
assignment, security interest, lien (whether statutory or otherwise), Charge,
claim or encumbrance, or preference, priority or other security agreement or
preferential arrangement held or asserted in respect of any asset of any kind or
nature whatsoever including any conditional sale or other title retention
agreement, any lease having substantially the same economic effect as any of the
foregoing, and the filing of, or agreement to give, any financing statement
under the Uniform Commercial Code or comparable law of any jurisdiction.
"Lien Waiver Agreement" shall mean an agreement which is executed in favor
of Agent by a Person who owns or occupies premises at which any Collateral may
be located from time to time and by which such Person shall waive any Lien that
such Person may ever have with respect to any of the Collateral and shall
authorize Agent from time to time to enter upon the premises to inspect or
remove the Collateral from such premises or to use such premises to store or
dispose of such Inventory.
15
"Marketable Securities Advance Rate" shall have the meaning set forth in
Section 2.1(a)(y)(vi) hereof.
"Material Adverse Effect" shall mean a material adverse effect on (a) the
condition (financial or otherwise), results of operations, assets, business or
properties of any Borrower or any Guarantor, (b) the Borrowers' ability to duly
and punctually pay or perform the Obligations in accordance with the terms
thereof, (c) the value of the Collateral, or Agent's Liens on the Collateral or
the priority of any such Lien or (d) the practical realization of the benefits
of Agent's and each Lender's rights and remedies under this Agreement and the
Other Documents.
"Maximum Face Amount" shall mean, with respect to any outstanding Letter of
Credit, the face amount of such Letter of Credit including all automatic
increases provided for in such Letter of Credit, whether or not any such
automatic increase has become effective.
"Maximum Revolving Advance Amount" shall mean $20,000,000.
"Maximum Undrawn Amount" shall mean with respect to any outstanding Letter
of Credit, the amount of such Letter of Credit that is or may become available
to be drawn, including all automatic increases provided for in such Letter of
Credit, whether or not any such automatic increase has become effective.
"Mortgage Modification Agreement" shall mean collectively those mortgage
modification agreements modifying the mortgages on the Real Property securing
the Obligations together with all extensions, renewals, amendments, supplements,
modifications, substitutions and replacements thereto and thereof.
"Multiemployer Plan" shall mean a "multiemployer plan" as defined in
Sections 3(37) and 4001(a)(3) of ERISA.
"Multiple Employer Plan" shall mean a Plan which has two or more
contributing sponsors (including any Borrower or any member of the Controlled
Group) at least two of whom are not under common control, as such a plan is
described in Section 4064 of ERISA.
"Municipal Agency" shall mean Regions Bank, as Trustee under the applicable
IRB Documentation.
"Note" shall mean the Revolving Credit Note.
"Obligations" shall mean and include any and all loans, advances, debts,
liabilities, obligations, covenants and duties owing by any Borrower to Lenders
or Agent or to any other direct or indirect subsidiary or affiliate of Agent or
any Lender of any kind or nature, present or future (including any interest or
other amounts accruing thereon after maturity, or after the filing of any
petition in bankruptcy, or the commencement of any insolvency, reorganization or
like proceeding relating to any Borrower, whether or not a claim for post-filing
or post-petition interest or other amounts is allowed in such proceeding),
whether or not evidenced by any note, guaranty or other instrument, whether
arising under any agreement, instrument or document, (including this Agreement
and the Other Documents) whether or not for the payment of money, whether
arising by reason of an extension of credit, opening of a letter of credit,
loan, equipment lease or guarantee, under any interest or currency swap, future,
16
option or other similar agreement, or in any other manner, whether arising out
of overdrafts or deposit or other accounts or electronic funds transfers
(whether through automated clearing houses or otherwise) or out of the Agent's
or any Lenders non-receipt of or inability to collect funds or otherwise not
being made whole in connection with depository transfer check or other similar
arrangements, whether direct or indirect (including those acquired by assignment
or participation), absolute or contingent, joint or several, due or to become
due, now existing or hereafter arising, contractual or tortious, liquidated or
unliquidated, regardless of how such indebtedness or liabilities arise or by
what agreement or instrument they may be evidenced or whether evidenced by any
agreement or instrument, including, but not limited to, any and all of any
Borrower's Indebtedness and/or liabilities under this Agreement, the Other
Documents or under any other agreement between Agent or Lenders and any Borrower
and any amendments, extensions, renewals or increases and all costs and expenses
of Agent and any Lender incurred in the documentation, negotiation,
modification, enforcement, collection or otherwise in connection with any of the
foregoing, including but not limited to reasonable attorneys' fees and expenses
and all obligations of any Borrower to Agent or Lenders to perform acts or
refrain from taking any action.
"OLV of M&E" shall mean the appraised orderly liquidation value of
Borrowers' machinery and Equipment as listed in the appraisal by DovBid
Valuation Services dated November 3, 2005 ("M&E Appraisal"), which is not
encumbered by a Lien (other than a Permitted Encumbrance), as determined in
accordance with the M&E Appraisal.
"Ordinary Course of Business" shall mean with respect to any Borrower, the
ordinary course of such Borrower's business as conducted on the Closing Date.
"Other Documents" shall mean the Mortgage Modification Agreement, the Note,
the Perfection Certificate, the Environmental Indemnity Agreement, any Guarantor
Security Agreement, and any and all other agreements, instruments and documents,
including guaranties, pledges, powers of attorney, consents, interest or
currency swap agreements or other similar agreements and all other writings
heretofore, now or hereafter executed by any Borrower or any Guarantor and/or
delivered to Agent or any Lender in respect of the transactions contemplated by
this Agreement.
"Out-of-Formula Loans" shall have the meaning set forth in Section 16.2(b).
"Parent" of any Person shall mean a corporation or other entity owning,
directly or indirectly at least 50% of the shares of stock or other ownership
interests having ordinary voting power to elect a majority of the directors of
the Person, or other Persons performing similar functions for any such Person.
"Participant" shall mean each Person who shall be granted the right by any
Lender to participate in any of the Advances and who shall have entered into a
participation agreement in form and substance satisfactory to such Lender.
"Participation Advance" shall have the meaning set forth in Section
2.12(d).
"Participation Commitment" shall mean each Lender's obligation to buy a
participation of the Letters of Credit issued hereunder.
"Payment Office" shall mean initially Two Tower Center Boulevard, East
Brunswick, New Jersey 08816; thereafter, such other office of Agent, if any,
which it may designate by notice to Borrowing Agent and to each Lender to be the
Payment Office.
17
"PBGC" shall mean the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA or any successor.
"Pension Benefit Plan" shall mean at any time any employee pension benefit
plan (including a Multiple Employer Plan, but not a Multiemployer Plan) which is
covered by Title IV of ERISA or is subject to the minimum funding standards
under Section 412 of the Code and either (i) is maintained by any member of the
Controlled Group for employees of any member of the Controlled Group; or (ii)
has at any time within the preceding five years been maintained by any entity
which was at such time a member of the Controlled Group for employees of any
entity which was at such time a member of the Controlled Group.
"Perfection Certificate" shall mean the Perfection Certificate and the
responses thereto provided by Borrowers and delivered to Agent.
"Permitted Discretion" means Agent's commercially reasonable credit
judgment from the perspective of an asset based secured lender made in good
faith and determined on a basis consistent with its then current credit policies
and procedures.
"Permitted Encumbrances" shall mean: (a) Liens in favor of Agent for the
benefit of Agent and Lenders; (b) Liens for taxes, assessments or other
governmental charges not delinquent or being contested in good faith and by
appropriate proceedings and with respect to which proper reserves have been
taken by Borrowers; provided, that, the Lien shall have no effect on the
priority of the Liens in favor of Agent or the value of the assets in which
Agent has such a Lien and a stay of enforcement of any such Lien shall be in
effect; (c) Liens disclosed in the financial statements referred to in Section
5.5, the existence of which Agent has consented to; (d) deposits or pledges to
secure obligations under worker's compensation, social security or similar laws,
or under unemployment insurance; (e) deposits or pledges to secure bids,
tenders, contracts (other than contracts for the payment of money), leases,
statutory obligations, surety and appeal bonds and other obligations of like
nature arising in the Ordinary Course of Business; (f) Liens arising by virtue
of the rendition, entry or issuance against any Borrower or any Subsidiary, or
any property of any Borrower or any Subsidiary, of any judgment, writ, order, or
decree for so long as each such Lien (i) is in existence for less than 20
consecutive days after it first arises or is being Properly Contested and (ii)
is at all times junior in priority to any Liens in favor of Agent; (g)
mechanics', workers', materialmen's or other like Liens arising in the Ordinary
Course of Business with respect to obligations which are not due or which are
being contested in good faith by the applicable Borrower; (h) Liens placed upon
fixed assets hereafter acquired to secure a portion of the purchase price
thereof, provided that (x) any such lien shall not encumber any other property
of any Borrower and (y) the aggregate amount of Indebtedness secured by such
Liens incurred as a result of such purchases during any fiscal year shall not
exceed the amount provided for in Section 7.6; (i) zoning restrictions,
easements, licenses of other restrictions on the use of Real Property approved
by Agent or other minor irregularities in title thereto; (j) other Liens
incidental to the conduct of Borrowers' business or the ownership of its
18
property and assets which were not incurred in connection with the borrowing of
money or the obtaining of advances or credit, and which do not in the aggregate
materially detract from Agent's or Lenders' rights in and to the Collateral or
the value of Borrowers' property or assets or which do not materially impair the
use thereof in the operation of Borrowers' business, and (k) Liens disclosed on
Schedule 1.2.
"Person" shall mean any individual, sole proprietorship, partnership,
corporation, business trust, joint stock company, trust, unincorporated
organization, association, limited liability company, limited liability
partnership, institution, public benefit corporation, joint venture, entity or
Governmental Body (whether federal, state, county, city, municipal or otherwise,
including any instrumentality, division, agency, body or department thereof).
"Plan" shall mean any employee benefit plan within the meaning of Section
3(3) of ERISA (including a Pension Benefit Plan), maintained for employees of
any Borrower or any member of the Controlled Group or any such Plan to which any
Borrower or any member of the Controlled Group is required to contribute on
behalf of any of its employees.
"PNC" shall have the meaning set forth in the preamble to this Agreement
and shall extend to all of its successors and assigns.
"Properly Contested" shall mean, in the case of any Indebtedness of any
Person (including any taxes) that is not paid as and when due or payable by
reason of such Person's bona fide dispute concerning its liability to pay same
or concerning the amount thereof: (i) such Indebtedness is being properly
contested in good faith by appropriate proceedings promptly instituted and
diligently conducted; (ii) such Person has established appropriate reserves as
shall be required in conformity with GAAP; (iii) the non-payment of such
Indebtedness will not have a Material Adverse Effect and will not result in the
forfeiture of any assets of such Person; (iv) no Lien is imposed upon any of
such Person's assets with respect to such Indebtedness unless such Lien is at
all times junior and subordinate in priority to the Liens in favor of the Agent
(except only with respect to property taxes that have priority as a matter of
applicable state law) and enforcement of such Lien is stayed during the period
prior to the final resolution or disposition of such dispute; (v) if such
Indebtedness results from, or is determined by the entry, rendition or issuance
against a Person or any of its assets of a judgment, writ, order or decree,
enforcement of such judgment, writ, order or decree is stayed pending a timely
appeal or other judicial review; and (vi) if such contest is abandoned, settled
or determined adversely (in whole or in part) to such Person, such Person
forthwith pays such Indebtedness and all penalties, interest and other amounts
due in connection therewith.
"Purchasing Lender" shall have the meaning set forth in Section 16.3
hereof.
"RCRA" shall mean the Resource Conservation and Recovery Act, 42 U.S.C.
ss.ss. 6901 et seq., as same may be amended from time to time.
"Real Property" shall mean all of each Borrower's right, title and interest
in and to the owned and leased premises identified on Schedule 4.19 hereto.
"Receivables" shall mean and include, as to each Borrower, all of such
Borrower's accounts, contract rights, instruments (including those evidencing
indebtedness owed to such Borrower by its Affiliates), documents, chattel paper
(including electronic chattel paper), general intangibles relating to accounts,
drafts and acceptances, credit card receivables and all other forms of
obligations owing to such Borrower arising out of or in connection with the sale
or lease of Inventory or the rendition of services, all supporting obligations,
guarantees and other security therefor, whether secured or unsecured, now
existing or hereafter created, and whether or not specifically sold or assigned
to Agent hereunder.
19
"Receivables Advance Rate" shall have the meaning set forth in Section
2.1(a)(y)(i) hereof.
"Reimbursement Obligation" shall have the meaning set forth in Section
2.12(b)hereof.
"Release" shall have the meaning set forth in Section 5.7(c)(i) hereof.
"Reportable Event" shall mean a reportable event described in Section
4043(c) of ERISA or the regulations promulgated thereunder.
"Required Lenders" shall mean Lenders holding more than fifty percent (50%)
of the Advances and, if no Advances are outstanding, shall mean Lenders holding
more than fifty percent (50%) of the Commitment Percentages; provided, however,
if there are fewer than three (3) Lenders, Required Lenders shall mean all
Lenders.
"Reserve Percentage" shall mean as of any day the maximum percentage in
effect on such day as prescribed by the Board of Governors of the Federal
Reserve System (or any successor) for determining the reserve requirements
(including supplemental, marginal and emergency reserve requirements) with
respect to eurocurrency funding (currently referred to as "Eurocurrency
Liabilities".
"Retainage" shall mean that portion of a Receivable that a Customer is not
obligated to pay until the end of a specified period of time or until after the
satisfactory performance of a contract or agreement.
"Revolving Advances" shall mean Advances made other than Letters of Credit.
"Revolving Credit Note" shall mean the promissory note referred to in
Section 2.1(a) hereof.
"Revolving Interest Rate" shall mean an interest rate per annum equal to
(a) the Alternate Base Rate with respect to Domestic Rate Loans and (b) the sum
of the Eurodollar Rate plus two and one half percent (2.50%) with respect to
Eurodollar Rate Loans.
"SEC" shall mean the Securities and Exchange Commission or any successor
thereto.
"Section 20 Subsidiary" shall mean the Subsidiary of the bank holding
company controlling PNC, which Subsidiary has been granted authority by the
Federal Reserve Board to underwrite and deal in certain Ineligible Securities.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Securities Account Control Agreement" shall mean that certain Letter
Agreement executed by CompuDyne, Legg Mason Walker, Incorporated, and Agent
dated as of even date herewith.
"Securities Pledge Agreement" shall mean that certain Collateral Pledge
Agreement, in form and substance satisfactory to Agent, executed by Borrowers
and delivered to Agent on or prior to the Closing Date.
20
"Settlement Date" shall mean the Closing Date and thereafter Wednesday or
Thursday of each week or more frequently if Agent deems appropriate unless such
day is not a Business Day in which case it shall be the next succeeding Business
Day.
"Subordinated Lenders" shall mean the "note holders" under the Indenture
Agreement.
"Subordinated Loan" shall mean the loan evidenced by the Subordinated Note.
"Subordinated Loan Documentation" shall mean the Subordinated Notes and all
other documents, instruments and agreements executed in connection therewith.
"Subordinated Notes" shall mean those certain 6.25% Convertible
Subordinated Notes Due 2011 issued by CompuDyne in favor of Subordinated Lenders
dated January 15, 2004 and any replacements or substitutes totaling in the
aggregate $40,250,000.
"Subordination Agreement" shall mean the Indenture Subordination Agreement.
"Subsidiary" of any Person shall mean a corporation or other entity of
whose Equity Interests having ordinary voting power (other than Equity Interests
having such power only by reason of the happening of a contingency) to elect a
majority of the directors of such corporation, or other Persons performing
similar functions for such entity, are owned, directly or indirectly, by such
Person.
"Subsidiary Stock" shall mean all of the issued and outstanding Equity
Interests of any Subsidiary owned by any Borrower.
"Term" shall have the meaning set forth in Section 13.1 hereof.
"Termination Event" shall mean (i) a Reportable Event with respect to any
Plan or Multiemployer Plan; (ii) the withdrawal of any Borrower or any member of
the Controlled Group from a Plan or Multiemployer Plan during a plan year in
which such entity was a "substantial employer" as defined in Section 4001(a)(2)
of ERISA; (iii) the providing of notice of intent to terminate a Plan in a
distress termination described in Section 4041(c) of ERISA; (iv) the institution
by the PBGC of proceedings to terminate a Plan or Multiemployer Plan; (v) any
event or condition (a) which might constitute grounds under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to administer, any
Plan or Multiemployer Plan, or (b) that may result in termination of a
Multiemployer Plan pursuant to Section 4041A of ERISA; or (vi) the partial or
complete withdrawal within the meaning of Sections 4203 and 4205 of ERISA, of
any Borrower or any member of the Controlled Group from a Multiemployer Plan.
"Toxic Substance" shall mean and include any material present on the Real
Property or the Leasehold Interests which has been shown to have significant
adverse effect on human health or which is subject to regulation under the Toxic
Substances Control Act (TSCA), 15 U.S.C. ss.ss. 2601 et seq., applicable state
law, or any other applicable Federal or state laws now in force or hereafter
enacted relating to toxic substances. "Toxic Substance" includes but is not
limited to asbestos, polychlorinated biphenyls (PCBs) and lead-based paints.
21
"Trading with the Enemy Act" shall mean the foreign assets control
regulations of the United States Treasury Department (31 CFR, Subtitle B,
Chapter V, as amended) and any enabling legislation or executive order relating
thereto.
"Transferee" shall have the meaning set forth in Section 16.3(c) hereof.
"Trustee" shall mean Wachovia Bank of Delaware, National Association.
"Undrawn Availability" at a particular date shall mean an amount equal to
(a) the lesser of (i) the Formula Amount and (ii) the Maximum Revolving Advance
Amount, minus (b) the sum of (i) the outstanding amount of Advances plus (ii)
all amounts due and owing to any Borrower's trade creditors which are
outstanding 60 or more days beyond the original due date and not otherwise
extended on formal terms which have been approved by Agent, plus (iii) fees and
expenses of the Borrowers hereunder which are due and payable but which have not
been paid or charged to Borrowers' Account.
"Uniform Commercial Code" shall have the meaning set forth in Section 1.3
hereof.
"Unrestricted Undrawn Borrowing Base Availability" at a particular date
shall mean an amount equal to (a) the Formula Amount minus (b) the sum of (i)
the outstanding amount of Advances plus (ii) all amounts due and owing to any
Borrower's trade creditors which are outstanding 60 or more days beyond the
original due date and not otherwise extended on formal terms which have been
approved by Agent, plus (iii) fees and expenses of the Borrowers hereunder which
are due and payable but which have not been paid or charged to Borrowers'
Account.
"USA PATRIOT Act" shall mean the Uniting and Strengthening America by
Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of
2001, Public Law 107-56, as the same has been, or shall hereafter be, renewed,
extended, amended or replaced.
"Week" shall mean the time period commencing with the opening of business
on a Wednesday and ending on the end of business the following Tuesday.
1.3. Uniform Commercial Code Terms. All terms used herein and defined in
the Uniform Commercial Code as adopted in the Commonwealth of Pennsylvania from
time to time (the "Uniform Commercial Code") shall have the meaning given
therein unless otherwise defined herein. Without limiting the foregoing, the
terms "accounts", "chattel paper", "instruments", "general intangibles",
"payment intangibles", "supporting obligations", "securities", "investment
property", "documents", "deposit accounts", "software", "letter of credit
rights", "inventory", "equipment" and "fixtures", as and when used in the
description of Collateral shall have the meanings given to such terms in
Articles 8 or 9 of the Uniform Commercial Code. To the extent the definition of
any category or type of collateral is expanded by any amendment, modification or
revision to the Uniform Commercial Code, such expanded definition will apply
automatically as of the date of such amendment, modification or revision.
1.4. Certain Matters of Construction. The terms "herein", "hereof" and
"hereunder" and other words of similar import refer to this Agreement as a whole
and not to any particular section, paragraph or subdivision. All references
22
herein to Articles, Sections, Exhibits and Schedules shall be construed to refer
to Articles and Sections of, and Exhibits and Schedules to, this Agreement. Any
pronoun used shall be deemed to cover all genders. Wherever appropriate in the
context, terms used herein in the singular also include the plural and vice
versa. All references to statutes and related regulations shall include any
amendments of same and any successor statutes and regulations. Unless otherwise
provided, all references to any instruments or agreements to which Agent is a
party, including references to any of the Other Documents, shall include any and
all modifications or amendments thereto and any and all extensions or renewals
thereof. All references herein to the time of day shall mean the time in New
York, New York. Unless otherwise provided, all financial calculations shall be
performed with Inventory valued on a first-in, first-out basis. Whenever the
words "including" or "include" shall be used, such words shall be understood to
mean "including, without limitation" or "include, without limitation". A Default
or Event of Default shall be deemed to exist at all times during the period
commencing on the date that such Default or Event of Default occurs to the date
on which such Default or Event of Default is waived in writing pursuant to this
Agreement or, in the case of a Default, is cured within any period of cure
expressly provided for in this Agreement; and an Event of Default shall
"continue" or be "continuing" until such Event of Default has been waived in
writing by the Required Lenders. Any Lien referred to in this Agreement or any
of the Other Documents as having been created in favor of Agent, any agreement
entered into by Agent pursuant to this Agreement or any of the Other Documents,
any payment made by or to or funds received by Agent pursuant to or as
contemplated by this Agreement or any of the Other Documents, or any act taken
or omitted to be taken by Agent, shall, unless otherwise expressly provided, be
created, entered into, made or received, or taken or omitted, for the benefit or
account of Agent and Lenders. Wherever the phrase "to the best of Borrowers'
knowledge" or words of similar import relating to the knowledge or the awareness
of any Borrower are used in this Agreement or Other Documents, such phrase shall
mean and refer to (i) the actual knowledge of a senior officer of any Borrower
or (ii) the knowledge that a senior officer would have obtained if he had
engaged in good faith and diligent performance of his duties, including the
making of such reasonably specific inquiries as may be necessary of the
employees or agents of such Borrower and a good faith attempt to ascertain the
existence or accuracy of the matter to which such phrase relates. All covenants
hereunder shall be given independent effect so that if a particular action or
condition is not permitted by any of such covenants, the fact that it would be
permitted by an exception to, or otherwise within the limitations of, another
covenant shall not avoid the occurrence of a default if such action is taken or
condition exists. In addition, all representations and warranties hereunder
shall be given independent effect so that if a particular representation or
warranty proves to be incorrect or is breached, the fact that another
representation or warranty concerning the same or similar subject matter is
correct or is not breached will not affect the incorrectness of a breach of a
representation or warranty hereunder.
II. ADVANCES, PAYMENTS.
2.1. Revolving Advances.
a. Amount of Revolving Advances. Subject to the terms and conditions set
forth in this Agreement including Section 2.1(b), each Lender, severally and not
jointly, will make Revolving Advances to Borrowers in aggregate amounts
outstanding at any time equal to such Lender's Commitment Percentage of the
lesser of (x) the Maximum Revolving Advance Amount less the aggregate Maximum
Undrawn Amount of all outstanding Letters of Credit and (y) an amount equal to
the sum of:
23
(i) up to 80%, subject to the provisions of Section 2.1(b) hereof
("Receivables Advance Rate"), of Eligible Receivables, plus
(ii) up to the lesser of (A) 50%, subject to the provisions of Section
2.1(b) hereof, of the value of the Eligible Inventory ("Inventory Advance Rate")
and (B) $3,000,000 in the aggregate at any one time, plus
(iii) up to the lesser of (A) 50%, subject to the provisions of Sections
2.1(b) and 2.1(c) hereof, of the value of Costs in Excess of Billings ("Costs in
Excess Advance Rate") and (B) $5,000,000 in the aggregate at any one time, plus
(iv) $1,487,500, which represents 70% of the FMV of Real Property provided
that the amount set forth in this Section 2.1(a)(y)(iv) shall be reduced (but
not below zero) by $12,395.83 on the first day of each month, commencing on
February 1, 2006, plus
(v) $1,288,560, which represents 80% of the OLV of M&E provided that the
amount set forth in this Section 2.1(a)(y)(v) shall be reduced (but not below
zero) by $21,476 on the first day of each month, commencing on February 1, 2006,
plus
(vi) 90%, subject to the provisions of Section 2.1(b) hereof, of the
Current Value of Marketable Securities ("Marketable Securities Advance Rate"),
plus
(vii) up to the lesser of (A) 80%, subject to the provisions of Section
2.1(b) hereof, of the value of Eligible Government Receivables ("Government
Receivables Advance Rate" and together with the Receivables Advance Rate,
Inventory Advance Rate, the Costs in Excess Advance Rate and the Marketable
Securities Advance Rate, collectively, the "Advance Rates") and or (B)
$1,000,000 in the aggregate at any one time, minus
(viii) the aggregate Maximum Undrawn Amount of all outstanding Letters of
Credit, including without limitation, the Existing Letters of Credit, minus
(ix) such reserves as Agent may reasonably deem proper and necessary in its
Permitted Discretion from time to time.
The amount derived from the sum of (x) Sections 2.1(a)(y)(i), (ii) (iii),
(iv), (v), (vi) and (vii) minus (y) Section 2.1 (a)(y)(viii) and (ix) at any
time and from time to time shall be referred to as the "Formula Amount". The
Revolving Advances shall be evidenced by one or more secured promissory notes
(collectively, the "Revolving Credit Note") substantially in the form attached
hereto as Exhibit 2.1(a).
b. Discretionary Rights. The Advance Rates may be (i) decreased by Agent at
any time and from time to time in the exercise of its Permitted Discretion or
(ii) increased by Agent at any time and from time to time in the exercise of its
sole discretion. Each Borrower consents to any such increases or decreases and
acknowledges that decreasing the Advance Rates or increasing or imposing
reserves may limit or restrict Advances requested by Borrowing Agent. The rights
of Agents under this subsection are subject to the provisions of Section
16.2(b).
c. Sublimit for Revolving Advances Against Costs in Excess of Billings. The
aggregate outstanding amount of Revolving Advances made as of any date of
determination to Borrowers against Costs in Excess of Billings shall not exceed,
as a percentage of the Formula Amount, 50%.
24
2.2. Procedure for Revolving Advances Borrowing.
a. Borrowing Agent on behalf of any Borrower may notify Agent prior to
10:00 a.m. on a Business Day of a Borrower's request to incur, on that day, a
Revolving Advance hereunder. Should any amount required to be paid as interest
hereunder, or as fees or other charges under this Agreement or any other
agreement with Agent or Lenders, or with respect to any other Obligation, become
due, same shall be deemed a request for a Revolving Advance as of the date such
payment is due, in the amount required to pay in full such interest, fee, charge
or Obligation under this Agreement or any other agreement with Agent or Lenders,
and such request shall be irrevocable.
b. Notwithstanding the provisions of subsection (a) above, in the event any
Borrower desires to obtain a Eurodollar Rate Loan, Borrowing Agent shall give
Agent written notice by no later than 10:00 a.m. on the day which is three (3)
Business Days prior to the date such Eurodollar Rate Loan is to be borrowed,
specifying (i) the date of the proposed borrowing (which shall be a Business
Day), (ii) the type of borrowing and the amount on the date of such Advance to
be borrowed, which amount shall be an integral multiple of $1,000,000, and (iii)
the duration of the first Interest Period therefor. Interest Periods for
Eurodollar Rate Loans shall be for one, two or three months; provided, if an
Interest Period would end on a day that is not a Business Day, it shall end on
the next succeeding Business Day unless such day falls in the next succeeding
calendar month in which case the Interest Period shall end on the next preceding
Business Day. No Eurodollar Rate Loan shall be made available to any Borrower
during the continuance of a Default or an Event of Default. After giving effect
to each requested Eurodollar Rate Loan, including those which are converted from
a Domestic Rate Loan under Section 2.2(d), there shall not be outstanding more
than three (3) Eurodollar Rate Loans, in the aggregate.
c. Each Interest Period of a Eurodollar Rate Loan shall commence on the
date such Eurodollar Rate Loan is made and shall end on such date as Borrowing
Agent may elect as set forth in subsection (b)(iii) above provided that the
exact length of each Interest Period shall be determined in accordance with the
practice of the interbank market for offshore Dollar deposits and no Interest
Period shall end after the last day of the Term.
Borrowing Agent shall elect the initial Interest Period applicable to a
Eurodollar Rate Loan by its notice of borrowing given to Agent pursuant to
Section 2.2(b) or by its notice of conversion given to Agent pursuant to Section
2.2(d), as the case may be. Borrowing Agent shall elect the duration of each
succeeding Interest Period by giving irrevocable written notice to Agent of such
duration not later than 10:00 a.m. on the day which is three (3) Business Days
prior to the last day of the then current Interest Period applicable to such
Eurodollar Rate Loan. If Agent does not receive timely notice of the Interest
Period elected by Borrowing Agent, Borrowing Agent shall be deemed to have
elected to convert to a Domestic Rate Loan subject to Section 2.2(d) herein
below.
d. Provided that no Event of Default shall have occurred and be continuing,
25
Borrowing Agent may, on the last Business Day of the then current Interest
Period applicable to any outstanding Eurodollar Rate Loan, or on any Business
Day with respect to Domestic Rate Loans, convert any such loan into a loan of
another type in the same aggregate principal amount provided that any conversion
of a Eurodollar Rate Loan shall be made only on the last Business Day of the
then current Interest Period applicable to such Eurodollar Rate Loan. If
Borrowing Agent desires to convert a loan, Borrowing Agent shall give Agent
written notice by no later than 10:00 a.m. (i) on the day which is three (3)
Business Days' prior to the date on which such conversion is to occur with
respect to a conversion from a Domestic Rate Loan to a Eurodollar Rate Loan, or
(ii) on the day which is one (1) Business Day prior to the date on which such
conversion is to occur with respect to a conversion from a Eurodollar Rate Loan
to a Domestic Rate Loan, specifying, in each case, the date of such conversion,
the loans to be converted and if the conversion is from a Domestic Rate Loan to
any other type of loan, the duration of the first Interest Period therefor.
e. At its option and upon written notice given prior to 10:00 a.m. (New
York time) at least three (3) Business Days' prior to the date of such
prepayment, any Borrower may prepay the Eurodollar Rate Loans in whole at any
time or in part from time to time with accrued interest on the principal being
prepaid to the date of such repayment. Such Borrower shall specify the date of
prepayment of Advances which are Eurodollar Rate Loans and the amount of such
prepayment. In the event that any prepayment of a Eurodollar Rate Loan is
required or permitted on a date other than the last Business Day of the then
current Interest Period with respect thereto, such Borrower shall indemnify
Agent and Lenders therefor in accordance with Section 2.2(f) hereof.
f. Each Borrower shall indemnify Agent and Lenders and hold Agent and
Lenders harmless from and against any and all losses or expenses that Agent and
Lenders may sustain or incur as a consequence of any prepayment, conversion of
or any default by any Borrower in the payment of the principal of or interest on
any Eurodollar Rate Loan or failure by any Borrower to complete a borrowing of,
a prepayment of or conversion of or to a Eurodollar Rate Loan after notice
thereof has been given, including, but not limited to, any interest payable by
Agent or Lenders to lenders of funds obtained by it in order to make or maintain
its Eurodollar Rate Loans hereunder. A certificate as to any additional amounts
payable pursuant to the foregoing sentence submitted by Agent or any Lender to
Borrowing Agent shall be conclusive absent manifest error.
g. Notwithstanding any other provision hereof, if any Applicable Law,
treaty, regulation or directive, or any change therein or in the interpretation
or application thereof, shall make it unlawful for any Lender (for purposes of
this subsection (g), the term "Lender" shall include any Lender and the office
or branch where any Lender or any corporation or bank controlling such Lender
makes or maintains any Eurodollar Rate Loans) to make or maintain its Eurodollar
Rate Loans, the obligation of Lenders to make Eurodollar Rate Loans hereunder
shall forthwith be cancelled and Borrowers shall, if any affected Eurodollar
Rate Loans are then outstanding, promptly upon request from Agent, either pay
all such affected Eurodollar Rate Loans or convert such affected Eurodollar Rate
Loans into loans of another type. If any such payment or conversion of any
Eurodollar Rate Loan is made on a day that is not the last day of the Interest
Period applicable to such Eurodollar Rate Loan, Borrowers shall pay Agent, upon
Agent's request, such amount or amounts as may be necessary to compensate
Lenders for any loss or expense sustained or incurred by Lenders in respect of
such Eurodollar Rate Loan as a result of such payment or conversion, including
(but not limited to) any interest or other amounts payable by Lenders to lenders
26
of funds obtained by Lenders in order to make or maintain such Eurodollar Rate
Loan. A certificate as to any additional amounts payable pursuant to the
foregoing sentence submitted by Lenders to Borrowing Agent shall be conclusive
absent manifest error.
2.3. Disbursement of Advance Proceeds. All Advances shall be disbursed from
whichever office or other place Agent may designate from time to time and,
together with any and all other Obligations of Borrowers to Agent or Lenders,
shall be charged to Borrowers' Account on Agent's books. During the Term,
Borrowers may use the Revolving Advances by borrowing, prepaying and
reborrowing, all in accordance with the terms and conditions hereof. The
proceeds of each Revolving Advance requested by Borrowing Agent on behalf of any
Borrower or deemed to have been requested by any Borrower under Section 2.2(a)
hereof shall, with respect to requested Revolving Advances to the extent Lenders
make such Revolving Advances, be made available to the applicable Borrower on
the day so requested by way of credit to such Borrower's operating account at
PNC, or such other bank as Borrowing Agent may designate following notification
to Agent, in immediately available federal funds or other immediately available
funds or, with respect to Revolving Advances deemed to have been requested by
any Borrower, be disbursed to Agent to be applied to the outstanding Obligations
giving rise to such deemed request.
2.4. Reserved.
2.5. Maximum Advances. The aggregate balance of Advances outstanding at any
time shall not exceed the lesser of (a) the Maximum Revolving Advance Amount and
(b) the Formula Amount.
2.6. Repayment of Advances.
a. The Advances shall be due and payable in full on the last day of the
Term subject to earlier prepayment as herein provided.
b. Each Borrower recognizes that the amounts evidenced by checks, notes,
drafts or any other items of payment relating to and/or proceeds of Collateral
may not be collectible by Agent on the date received. In consideration of
Agent's agreement to conditionally credit Borrowers' Account as of the Business
Day on which Agent receives those items of payment, each Borrower agrees that,
in computing the charges under this Agreement, all items of payment shall be
deemed applied by Agent on account of the Obligations one (1) Business Day after
(i) the Business Day Agent receives such payments via wire transfer or
electronic depository check or (ii) in the case of payments received by Agent in
any other form, the Business Day such payment constitutes good funds in Agent's
account. Agent is not, however, required to credit Borrowers' Account for the
amount of any item of payment which is unsatisfactory to Agent and Agent may
charge Borrowers' Account for the amount of any item of payment which is
returned to Agent unpaid.
c. All payments of principal, interest and other amounts payable hereunder,
or under any of the Other Documents shall be made to Agent at the Payment Office
not later than 2:00 P.M. (New York time) on the due date therefor in lawful
money of the United States of America in federal funds or other funds
immediately available to Agent. Agent shall have the right to effectuate payment
on any and all Obligations due and owing hereunder by charging Borrowers'
Account or by making Advances as provided in Section 2.2 hereof.
27
d. Borrowers shall pay principal, interest, and all other amounts payable
hereunder, or under any related agreement, without any deduction whatsoever,
including, but not limited to, any deduction for any setoff or counterclaim.
2.7. Repayment of Excess Advances. The aggregate balance of Advances
outstanding at any time in excess of the maximum amount of Advances permitted
hereunder shall be immediately due and payable without the necessity of any
demand, at the Payment Office, whether or not a Default or Event of Default has
occurred.
2.8. Statement of Account. Agent shall maintain, in accordance with its
customary procedures, a loan account ("Borrowers' Account") in the name of
Borrowers in which shall be recorded the date and amount of each Advance made by
Agent and the date and amount of each payment in respect thereof; provided,
however, the failure by Agent to record the date and amount of any Advance shall
not adversely affect Agent or any Lender. Each month, Agent shall send to
Borrowing Agent a statement showing the accounting for the Advances made,
payments made or credited in respect thereof, and other transactions between
Agent and Borrowers during such month. The monthly statements shall be deemed
correct and binding upon Borrowers in the absence of manifest error and shall
constitute an account stated between Lenders and Borrowers unless Agent receives
a written statement of Borrowers' specific exceptions thereto within thirty (30)
days after such statement is received by Borrowing Agent. The records of Agent
with respect to the loan account shall be conclusive evidence absent manifest
error of the amounts of Advances and other charges thereto and of payments
applicable thereto.
2.9. Letters of Credit. Subject to the terms and conditions hereof, Agent
shall issue or cause the issuance of standby and/or trade Letters of Credit for
the account of any Borrower; provided, however, that Agent will not be required
to issue or cause to be issued any Letters of Credit to the extent that the
issuance thereof would then cause the sum of (i) the outstanding Revolving
Advances plus (ii) the Maximum Undrawn Amount of all outstanding Letters of
Credit to exceed the lesser of (x) the Maximum Revolving Advance Amount and (y)
the Formula Amount. The Maximum Undrawn Amount of outstanding Letters of Credit
shall not exceed in the aggregate at any time the Letter of Credit Sublimit. All
disbursements or payments related to Letters of Credit shall be deemed to be
Domestic Rate Loans consisting of Revolving Advances and shall bear interest at
the Revolving Interest Rate for Domestic Rate Loans. Letters of Credit that have
not been drawn upon shall not bear interest.
2.10. Issuance of Letters of Credit.
a. Borrowing Agent, on behalf of Borrowers, may request Agent to issue or
cause the issuance of a Letter of Credit by delivering to Agent at the Payment
Office, prior to 10:00 a.m. (New York time), at least five (5) Business Days'
prior to the proposed date of issuance, Agent's form of Letter of Credit
Application (the "Letter of Credit Application") completed to the satisfaction
of Agent; and, such other certificates, documents and other papers and
information as Agent may reasonably request. Borrowing Agent, on behalf of
Borrowers, also has the right to give instructions and make agreements with
respect to any application, any applicable letter of credit and security
agreement, any applicable letter of credit reimbursement agreement and/or any
other applicable agreement, any letter of credit and the disposition of
documents, disposition of any unutilized funds, and to agree with Agent upon any
amendment, extension or renewal of any Letter of Credit.
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b. Each Letter of Credit shall, among other things, (i) provide for the
payment of sight drafts, other written demands for payment, or acceptances of
usance drafts when presented for honor thereunder in accordance with the terms
thereof and when accompanied by the documents described therein and (ii) have an
expiry date not later than twelve (12) months after such Letter of Credit's date
of issuance other than the IRB Letters of Credit [and the $467,000 issued in
favor of Raffles - to be discussed] and in no event later than the last day of
the Term. Each standby Letter of Credit shall be subject either to the Uniform
Customs and Practice for Documentary Credits (1993 Revision), International
Chamber of Commerce Publication No. 500, and any amendments or revision thereof
adhered to by the Issuer ("UCP 500") or the International Standby Practices
(ISP98-International Chamber of Commerce Publication Number 590) (the "ISP98
Rules"), as determined by Agent, and each trade Letter of Credit shall be
subject to UCP 500.
c. Agent shall use its reasonable efforts to notify Lenders of the request
by Borrowing Agent for a Letter of Credit hereunder.
2.11. Requirements For Issuance of Letters of Credit. Borrowing Agent shall
authorize and direct any Issuer to name the applicable Borrower as the
"Applicant" or "Account Party" of each Letter of Credit. If Agent is not the
Issuer of any Letter of Credit, Borrowing Agent shall authorize and direct the
Issuer to deliver to Agent all instruments, documents, and other writings and
property received by the Issuer pursuant to the Letter of Credit and to accept
and rely upon Agent's instructions and agreements with respect to all matters
arising in connection with the Letter of Credit, and the application therefor.
2.12. Disbursements, Reimbursement.
a. Immediately upon the issuance of each Letter of Credit, each Lender
shall be deemed to, and hereby irrevocably and unconditionally agrees to,
purchase from Agent a participation in such Letter of Credit and each drawing
thereunder in an amount equal to such Lender's Commitment Percentage of the
Maximum Face Amount of such Letter of Credit and the amount of such drawing,
respectively.
b. In the event of any request for a drawing under a Letter of Credit
(including Existing Letters of Credit which shall be deemed to have been issued
hereunder) by the beneficiary or transferee thereof, Agent will promptly notify
Borrowing Agent. Provided that Borrowing Agent shall have received such notice,
the Borrowers shall reimburse (such obligation to reimburse Agent shall
sometimes be referred to as a "Reimbursement Obligation") Agent prior to 12:00
Noon, New York time on each date that an amount is paid by Agent under any
Letter of Credit (each such date, a "Drawing Date") in an amount equal to the
amount so paid by Agent. In the event Borrowers fail to reimburse Agent for the
full amount of any drawing under any Letter of Credit by 12:00 Noon, New York
time, on the Drawing Date, Agent will promptly notify each Lender thereof, and
Borrowers shall be deemed to have requested that a Domestic Rate Loan be made by
the Lenders to be disbursed on the Drawing Date under such Letter of Credit,
subject to the amount of the unutilized portion of the lesser of Maximum
Revolving Advance Amount or the Formula Amount and subject to Section 8.2
hereof. Any notice given by Agent pursuant to this Section 2.12(b) may be oral
if immediately confirmed in writing; provided that the lack of such an immediate
confirmation shall not affect the conclusiveness or binding effect of such
notice.
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c. Each Lender shall upon any notice pursuant to Section 2.12(b) make
available to Agent an amount in immediately available funds equal to its
Commitment Percentage of the amount of the drawing, whereupon the participating
Lenders shall (subject to Section 2.12(d)) each be deemed to have made a
Domestic Rate Loan to Borrowers in that amount. If any Lender so notified fails
to make available to Agent the amount of such Lender's Commitment Percentage of
such amount by no later than 2:00 p.m., New York time on the Drawing Date, then
interest shall accrue on such Lender's obligation to make such payment, from the
Drawing Date to the date on which such Lender makes such payment (i) at a rate
per annum equal to the Federal Funds Rate during the first three days following
the Drawing Date and (ii) at a rate per annum equal to the rate applicable to
Domestic Rate Loans on and after the fourth day following the Drawing Date.
Agent will promptly give notice of the occurrence of the Drawing Date, but
failure of Agent to give any such notice on the Drawing Date or in sufficient
time to enable any Lender to effect such payment on such date shall not relieve
such Lender from its obligation under this Section 2.12(c), provided that such
Lender shall not be obligated to pay interest as provided in Section 2.12(c) (i)
and (ii) until and commencing from the date of receipt of notice from Agent of a
drawing.
d. With respect to any unreimbursed drawing that is not converted into a
Domestic Rate Loan to Borrowers, in whole or in part, as contemplated by Section
2.12(b), because of Borrowers' failure to satisfy the conditions set forth in
Section 8.2 (other than any notice requirements) or for any other reason,
Borrowers shall be deemed to have incurred from Agent a borrowing (each a
"Letter of Credit Borrowing") in the amount of such drawing. Such Letter of
Credit Borrowing shall be due and payable on demand (together with interest) and
shall bear interest at the rate per annum applicable to a Domestic Rate Loan.
Each Lender's payment to Agent pursuant to Section 2.12(c) shall be deemed to be
a payment in respect of its participation in such Letter of Credit Borrowing and
shall constitute a "Participation Advance" from such Lender in satisfaction of
its Participation Commitment under this Section 2.12.
e. Each Lender's Participation Commitment shall continue until the last to
occur of any of the following events: (x) Agent ceases to be obligated to issue
or cause to be issued Letters of Credit hereunder; (y) no Letter of Credit
issued or created hereunder remains outstanding and un-cancelled and (z) all
Persons (other than the Borrowers) have been fully reimbursed for all payments
made under or relating to Letters of Credit.
2.13. Repayment of Participation Advances.
a. Upon (and only upon) receipt by Agent for its account of immediately
available funds from Borrowers (i) in reimbursement of any payment made by the
Agent under the Letter of Credit with respect to which any Lender has made a
Participation Advance to Agent, or (ii) in payment of interest on such a payment
made by Agent under such a Letter of Credit, Agent will pay to each Lender, in
the same funds as those received by Agent, the amount of such Lender's
Commitment Percentage of such funds, except Agent shall retain the amount of the
Commitment Percentage of such funds of any Lender that did not make a
Participation Advance in respect of such payment by Agent.
b. If Agent is required at any time to return to any Borrower, or to a
trustee, receiver, liquidator, custodian, or any official in any insolvency
30
proceeding, any portion of the payments made by Borrowers to Agent pursuant to
Section 2.13(a) in reimbursement of a payment made under the Letter of Credit or
interest or fee thereon, each Lender shall, on demand of Agent, forthwith return
to Agent the amount of its Commitment Percentage of any amounts so returned by
Agent plus interest at the Federal Funds Effective Rate.
2.14. Documentation. Each Borrower agrees to be bound by the terms of the
Letter of Credit Application and by Agent's interpretations of any Letter of
Credit issued on behalf of such Borrower and by Agent's written regulations and
customary practices relating to letters of credit, though Agent's
interpretations may be different from such Borrower's own. In the event of a
conflict between the Letter of Credit Application and this Agreement, this
Agreement shall govern. It is understood and agreed that, except in the case of
gross negligence or willful misconduct (as determined by a court of competent
jurisdiction in a final non-appealable judgment), Agent shall not be liable for
any error, negligence and/or mistakes, whether of omission or commission, in
following the Borrowing Agent's or any Borrower's instructions or those
contained in the Letters of Credit or any modifications, amendments or
supplements thereto.
2.15. Determination to Honor Drawing Request. In determining whether to
honor any request for drawing under any Letter of Credit by the beneficiary
thereof, Agent shall be responsible only to determine that the documents and
certificates required to be delivered under such Letter of Credit have been
delivered and that they comply on their face with the requirements of such
Letter of Credit and that any other drawing condition appearing on the face of
such Letter of Credit has been satisfied in the manner so set forth.
2.16. Nature of Participation and Reimbursement Obligations. Each Lender's
obligation in accordance with this Agreement to make the Revolving Advances or
Participation Advances as a result of a drawing under a Letter of Credit, and
the obligations of Borrowers to reimburse Agent upon a draw under a Letter of
Credit, shall be absolute, unconditional and irrevocable, and shall be performed
strictly in accordance with the terms of this Section 2.16 under all
circumstances, including the following circumstances:
(i) any set-off, counterclaim, recoupment, defense or other right which
such Lender may have against Agent, any Borrower or any other Person for any
reason whatsoever;
(ii) the failure of any Borrower or any other Person to comply, in
connection with a Letter of Credit Borrowing, with the conditions set forth in
this Agreement for the making of a Revolving Advance, it being acknowledged that
such conditions are not required for the making of a Letter of Credit Borrowing
and the obligation of the Lenders to make Participation Advances under Section
2.12;
(iii) any lack of validity or enforceability of any Letter of Credit;
(iv) any claim of breach of warranty that might be made by Borrower or any
Lender against the beneficiary of a Letter of Credit, or the existence of any
claim, set-off, recoupment, counterclaim, crossclaim, defense or other right
which any Borrower or any Lender may have at any time against a beneficiary, any
successor beneficiary or any transferee of any Letter of Credit or the proceeds
thereof (or any Persons for whom any such transferee may be acting), Agent or
31
any Lender or any other Person, whether in connection with this Agreement, the
transactions contemplated herein or any unrelated transaction (including any
underlying transaction between any Borrower or any Subsidiaries of such Borrower
and the beneficiary for which any Letter of Credit was procured);
(v) the lack of power or authority of any signer of (or any defect in or
forgery of any signature or endorsement on) or the form of or lack of validity,
sufficiency, accuracy, enforceability or genuineness of any draft, demand,
instrument, certificate or other document presented under or in connection with
any Letter of Credit, or any fraud or alleged fraud in connection with any
Letter of Credit, or the transport of any property or provisions of services
relating to a Letter of Credit, in each case even if Agent or any of Agent's
Affiliates has been notified thereof;
(vi) payment by Agent under any Letter of Credit against presentation of a
demand, draft or certificate or other document which does not comply with the
terms of such Letter of Credit;
(vii) the solvency of, or any acts or omissions by, any beneficiary of any
Letter of Credit, or any other Person having a role in any transaction or
obligation relating to a Letter of Credit, or the existence, nature, quality,
quantity, condition, value or other characteristic of any property or services
relating to a Letter of Credit;
(viii) any failure by the Agent or any of Agent's Affiliates to issue any
Letter of Credit in the form requested by Borrowing Agent, unless the Agent has
received written notice from Borrowing Agent of such failure within three (3)
Business Days after the Agent shall have furnished Borrowing Agent a copy of
such Letter of Credit and such error is material and no drawing has been made
thereon prior to receipt of such notice;
(ix) any Material Adverse Effect on any Borrower or any Guarantor;
(x) any breach of this Agreement or any Other Document by any party
thereto;
(xi) the occurrence or continuance of an insolvency proceeding with respect
to any Borrower or any Guarantor;
(xii) the fact that a Default or Event of Default shall have occurred and
be continuing;
(xiii) the fact that the Term shall have expired or this Agreement or the
Obligations hereunder shall have been terminated; and
(xiv) any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing.
2.17. Indemnity. In addition to amounts payable as provided in Section
16.5, each Borrower hereby agrees to protect, indemnify, pay and save harmless
Agent and any of Agent's Affiliates that have issued a Letter of Credit from and
against any and all claims, demands, liabilities, damages, taxes, penalties,
interest, judgments, losses, costs, charges and expenses (including reasonable
fees, expenses and disbursements of counsel and allocated costs of internal
32
counsel) which the Agent or any of Agent's Affiliates may incur or be subject to
as a consequence, direct or indirect, of the issuance of any Letter of Credit,
other than as a result of (A) the gross negligence or willful misconduct of the
Agent as determined by a final and non-appealable judgment of a court of
competent jurisdiction or (b) the wrongful dishonor by the Agent or any of
Agent's Affiliates of a proper demand for payment made under any Letter of
Credit, except if such dishonor resulted from any act or omission, whether
rightful or wrongful, of any present or future de jure or de facto Governmental
Body (all such acts or omissions herein called "Governmental Acts").
2.18. Liability for Acts and Omissions. As between Borrowers and Agent and
Lenders, each Borrower assumes all risks of the acts and omissions of, or misuse
of the Letters of Credit by, the respective beneficiaries of such Letters of
Credit. In furtherance and not in limitation of the respective foregoing, Agent
shall not be responsible for: (i) the form, validity, sufficiency, accuracy,
genuineness or legal effect of any document submitted by any party in connection
with the application for an issuance of any such Letter of Credit, even if it
should in fact prove to be in any or all respects invalid, insufficient,
inaccurate, fraudulent or forged (even if Agent shall have been notified
thereof); (ii) the validity or sufficiency of any instrument transferring or
assigning or purporting to transfer or assign any such Letter of Credit or the
rights or benefits thereunder or proceeds thereof, in whole or in part, which
may prove to be invalid or ineffective for any reason; (iii) the failure of the
beneficiary of any such Letter of Credit, or any other party to which such
Letter of Credit may be transferred, to comply fully with any conditions
required in order to draw upon such Letter of Credit or any other claim of any
Borrower against any beneficiary of such Letter of Credit, or any such
transferee, or any dispute between or among any Borrower and any beneficiary of
any Letter of Credit or any such transferee; (iv) errors, omissions,
interruptions or delays in transmission or delivery of any messages, by mail,
cable, telegraph, telex or otherwise, whether or not they be in cipher; (v)
errors in interpretation of technical terms; (vi) any loss or delay in the
transmission or otherwise of any document required in order to make a drawing
under any such Letter of Credit or of the proceeds thereof; (vii) the
misapplication by the beneficiary of any such Letter of Credit of the proceeds
of any drawing under such Letter of Credit; or (viii) any consequences arising
from causes beyond the control of Agent, including any governmental acts, and
none of the above shall affect or impair, or prevent the vesting of, any of
Agent's rights or powers hereunder. Nothing in the preceding sentence shall
relieve Agent from liability for Agent's gross negligence or willful misconduct
(as determined by a court of competent jurisdiction in a final non-appealable
judgment) in connection with actions or omissions described in such clauses (i)
through (viii) of such sentence. In no event shall Agent or Agent's Affiliates
be liable to any Borrower for any indirect, consequential, incidental, punitive,
exemplary or special damages or expenses (including without limitation
attorneys' fees), or for any damages resulting from any change in the value of
any property relating to a Letter of Credit.
Without limiting the generality of the foregoing, Agent and each of its
Affiliates (i) may rely on any oral or other communication believed in good
faith by Agent or such Affiliate to have been authorized or given by or on
behalf of the applicant for a Letter of Credit, (ii) may honor any presentation
if the documents presented appear on their face substantially to comply with the
terms and conditions of the relevant Letter of Credit; (iii) may honor a
previously dishonored presentation under a Letter of Credit, whether such
dishonor was pursuant to a court order, to settle or compromise any claim of
wrongful dishonor, or otherwise, and shall be entitled to reimbursement to the
same extent as if such presentation had initially been honored, together with
any interest paid by Agent or its Affiliates; (iv) may honor any drawing that is
33
payable upon presentation of a statement advising negotiation or payment, upon
receipt of such statement (even if such statement indicates that a draft or
other document is being delivered separately), and shall not be liable for any
failure of any such draft or other document to arrive, or to conform in any way
with the relevant Letter of Credit; (v) may pay any paying or negotiating bank
claiming that it rightfully honored under the laws or practices of the place
where such bank is located; and (vi) may settle or adjust any claim or demand
made on Agent or its Affiliate in any way related to any order issued at the
applicant's request to an air carrier, a letter of guarantee or of indemnity
issued to a carrier or any similar document (each an "Order") and honor any
drawing in connection with any Letter of Credit that is the subject of such
Order, notwithstanding that any drafts or other documents presented in
connection with such Letter of Credit fail to conform in any way with such
Letter of Credit.
In furtherance and extension and not in limitation of the specific
provisions set forth above, any action taken or omitted by Agent under or in
connection with the Letters of Credit issued by it or any documents and
certificates delivered thereunder, if taken or omitted in good faith and without
gross negligence (as determined by a court of competent jurisdiction in a final
non-appealable judgment), shall not put Agent under any resulting liability to
any Borrower or any Lender.
2.19. Additional Payments. Any sums expended by Agent or any Lender due to
any Borrower's failure to perform or comply with its obligations under this
Agreement or any Other Document including any Borrower's obligations under
Sections 4.2, 4.4, 4.12, 4.13, 4.14 and 6.1 hereof, may be charged to Borrowers'
Account as a Revolving Advance and added to the Obligations.
2.20. Manner of Borrowing and Payment.
a. Each borrowing of Revolving Advances shall be advanced according to the
applicable Commitment Percentages of Lenders.
b. Each payment (including each prepayment) by any Borrower on account of
the principal of and interest on the Revolving Advances, shall be applied to the
Revolving Advances pro rata according to the applicable Commitment Percentages
of Lenders. Except as expressly provided herein, all payments (including
prepayments) to be made by any Borrower on account of principal, interest and
fees shall be made without set off or counterclaim and shall be made to Agent on
behalf of the Lenders to the Payment Office, in each case on or prior to 1:00
P.M., New York time, in Dollars and in immediately available funds.
(i) Notwithstanding anything to the contrary contained in Sections 2.20(a)
and (b) hereof, commencing with the first Business Day following the Closing
Date, each borrowing of Revolving Advances shall be advanced by Agent and each
payment by any Borrower on account of Revolving Advances shall be applied first
to those Revolving Advances advanced by Agent. On or before 1:00 P.M., New York
time, on each Settlement Date commencing with the first Settlement Date
following the Closing Date, Agent and Lenders shall make certain payments as
follows: (I) if the aggregate amount of new Revolving Advances made by Agent
during the preceding Week (if any) exceeds the aggregate amount of repayments
applied to outstanding Revolving Advances during such preceding Week, then each
Lender shall provide Agent with funds in an amount equal to its applicable
Commitment Percentage of the difference between (w) such Revolving Advances and
34
(x) such repayments and (II) if the aggregate amount of repayments applied to
outstanding Revolving Advances during such Week exceeds the aggregate amount of
new Revolving Advances made during such Week, then Agent shall provide each
Lender with funds in an amount equal to its applicable Commitment Percentage of
the difference between (y) such repayments and (z) such Revolving Advances.
(ii) Each Lender shall be entitled to earn interest at the applicable
Revolving Interest Rate on outstanding Advances which it has funded.
(iii) Promptly following each Settlement Date, Agent shall submit to each
Lender a certificate with respect to payments received and Advances made during
the Week immediately preceding such Settlement Date. Such certificate of Agent
shall be conclusive in the absence of manifest error.
c. If any Lender or Participant (a "benefited Lender") shall at any time
receive any payment of all or part of its Advances, or interest thereon, or
receive any Collateral in respect thereof (whether voluntarily or involuntarily
or by set-off) in a greater proportion than any such payment to and Collateral
received by any other Lender, if any, in respect of such other Lender's
Advances, or interest thereon, and such greater proportionate payment or receipt
of Collateral is not expressly permitted hereunder, such benefited Lender shall
purchase for cash from the other Lenders a participation in such portion of each
such other Lender's Advances, or shall provide such other Lender with the
benefits of any such Collateral, or the proceeds thereof, as shall be necessary
to cause such benefited Lender to share the excess payment or benefits of such
Collateral or proceeds ratably with each of the other Lenders; provided,
however, that if all or any portion of such excess payment or benefits is
thereafter recovered from such benefited Lender, such purchase shall be
rescinded, and the purchase price and benefits returned, to the extent of such
recovery, but without interest. Each Lender so purchasing a portion of another
Lender's Advances may exercise all rights of payment (including rights of
set-off) with respect to such portion as fully as if such Lender were the direct
holder of such portion.
d. Unless Agent shall have been notified by telephone, confirmed in
writing, by any Lender that such Lender will not make the amount which would
constitute its applicable Commitment Percentage of the Advances available to
Agent, Agent may (but shall not be obligated to) assume that such Lender shall
make such amount available to Agent on the next Settlement Date and, in reliance
upon such assumption, make available to Borrowers a corresponding amount. Agent
will promptly notify Borrowing Agent of its receipt of any such notice from a
Lender. If such amount is made available to Agent on a date after such next
Settlement Date, such Lender shall pay to Agent on demand an amount equal to the
product of (i) the daily average Federal Funds Rate (computed on the basis of a
year of 360 days) during such period as quoted by Agent, times (ii) such amount,
times (iii) the number of days from and including such Settlement Date to the
date on which such amount becomes immediately available to Agent. A certificate
of Agent submitted to any Lender with respect to any amounts owing under this
paragraph (e) shall be conclusive, in the absence of manifest error. If such
amount is not in fact made available to Agent by such Lender within three (3)
Business Days after such Settlement Date, Agent shall be entitled to recover
such an amount, with interest thereon at the rate per annum then applicable to
such Revolving Advances hereunder, on demand from Borrowers; provided, however,
that Agent's right to such recovery shall not prejudice or otherwise adversely
affect Borrowers' rights (if any) against such Lender.
35
2.21. Mandatory Prepayments. Subject to Section 4.3 hereof, when any
Borrower sells or otherwise disposes of any Collateral other than Inventory in
the Ordinary Course of Business, Borrowers shall repay the Revolving Advances in
an amount equal to the net proceeds of such sale (i.e., gross proceeds less the
reasonable costs of such sales or other dispositions), such repayments to be
made promptly but in no event more than one (1) Business Day following receipt
of such net proceeds, and until the date of payment, such proceeds shall be held
in trust for Agent. The foregoing shall not be deemed to be implied consent to
any such sale otherwise prohibited by the terms and conditions hereof. Such
repayments shall be applied to the Revolving Advances in such order as Agent may
determine, subject to Borrowers' ability to reborrow Revolving Advances in
accordance with the terms hereof.
2.22. Use of Proceeds.
a. Borrowers shall apply the proceeds of Advances to (i) pay fees and
expenses relating to this transaction, and (ii) provide for its working capital
needs and reimburse drawings under Letters of Credit.
b. Without limiting the generality of Section 2.22(a) above, neither the
Borrowers, the Guarantors nor any other Person which may in the future become
party to this Agreement or the Other Documents as a Borrower or Guarantor,
intends to use nor shall they use any portion of the proceeds of the Advances,
directly or indirectly, for any purpose in violation of the Trading with the
Enemy Act.
2.23. Defaulting Lender.
a. Notwithstanding anything to the contrary contained herein, in the event
any Lender (x) has refused (which refusal constitutes a breach by such Lender of
its obligations under this Agreement) to make available its portion of any
Advance or (y) notifies either Agent or Borrowing Agent that it does not intend
to make available its portion of any Advance (if the actual refusal would
constitute a breach by such Lender of its obligations under this Agreement)
(each, a "Lender Default"), all rights and obligations hereunder of such Lender
(a "Defaulting Lender") as to which a Lender Default is in effect and of the
other parties hereto shall be modified to the extent of the express provisions
of this Section 2.23 while such Lender Default remains in effect.
b. Advances shall be incurred pro rata from Lenders (the "Non-Defaulting
Lenders") which are not Defaulting Lenders based on their respective Commitment
Percentages, and no Commitment Percentage of any Lender or any pro rata share of
any Advances required to be advanced by any Lender shall be increased as a
result of such Lender Default. Amounts received in respect of principal of any
type of Advances shall be applied to reduce the applicable Advances of each
Lender (other than any Defaulting Lender) pro rata based on the aggregate of the
outstanding Advances of that type of all Lenders at the time of such
application; provided, that, Agent shall not be obligated to transfer to a
Defaulting Lender any payments received by Agent for the Defaulting Lender's
benefit, nor shall a Defaulting Lender be entitled to the sharing of any
payments hereunder (including any principal, interest or fees). Amounts payable
to a Defaulting Lender shall instead be paid to or retained by Agent. Agent may
hold and, in its discretion, re-lend to a Borrower the amount of such payments
received or retained by it for the account of such Defaulting Lender.
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c. A Defaulting Lender shall not be entitled to give instructions to Agent
or to approve, disapprove, consent to or vote on any matters relating to this
Agreement and the Other Documents. All amendments, waivers and other
modifications of this Agreement and the Other Documents may be made without
regard to a Defaulting Lender and, for purposes of the definition of "Required
Lenders", a Defaulting Lender shall be deemed not to be a Lender and not to have
Advances outstanding.
d. Other than as expressly set forth in this Section 2.23, the rights and
obligations of a Defaulting Lender (including the obligation to indemnify Agent)
and the other parties hereto shall remain unchanged. Nothing in this Section
2.23 shall be deemed to release any Defaulting Lender from its obligations under
this Agreement and the Other Documents, shall alter such obligations, shall
operate as a waiver of any default by such Defaulting Lender hereunder, or shall
prejudice any rights which any Borrower, Agent or any Lender may have against
any Defaulting Lender as a result of any default by such Defaulting Lender
hereunder.
e. In the event a Defaulting Lender retroactively cures to the satisfaction
of Agent the breach which caused a Lender to become a Defaulting Lender, such
Defaulting Lender shall no longer be a Defaulting Lender and shall be treated as
a Lender under this Agreement.
2.24. Confirmation of Existing Indebtedness. Borrowers acknowledge and
confirm that as of December 14, 2005, they are indebted to PNC NA, without
defense, set-off or counter-claim under the Existing Loan Documents in the
principal amount of $7,207,918 on account of undrawn Letters of Credit
("Existing Indebtedness"). This Agreement and the Notes amend and restate but do
not extinguish the indebtedness evidenced by the Existing Loan Documents. The
Existing Indebtedness shall be deemed to constitute Obligations hereunder and
Borrowers shall be jointly and severally, absolutely and unconditionally, liable
for the repayment of Obligations in accordance with the terms hereof and the
Other Documents. The execution and delivery of this Agreement and the Other
Documents, however, does not evidence or represent a refinancing, repayment,
accord and/or satisfaction or novation of the Existing Indebtedness. All of PNC
NA's obligations to Borrowers with respect to Advances to be made concurrently
herewith or after the date hereof are set forth in this Agreement. All Liens and
security interests previously granted to or for the benefit of PNC NA, pursuant
to, or in connection with, the Existing Loan Documents are acknowledged and
reconfirmed and remain in full force and effect and are not intended to be
released, replaced or impaired and are hereunder deemed to be granted to Agent
in its capacity as Agent for the benefit of Lenders. Borrowers confirm that to
the extent that any of the Loan Documents (as defined in the Existing Loan
Documents) have not been amended and/or restated, they remain in full force and
effect and shall be deemed for all purposes to be Other Documents as used
herein.
III. INTEREST AND FEES.
3.1. Interest. Interest on Advances shall be payable in arrears on the
first day of each month with respect to Domestic Rate Loans and, with respect to
Eurodollar Rate Loans, at the end of each Interest Period. Interest charges
shall be computed on the actual principal amount of Advances outstanding during
the month at a rate per annum equal to the applicable Revolving Interest Rate.
Whenever, subsequent to the date of this Agreement, the Alternate Base Rate is
increased or decreased, the Revolving Interest Rate for Domestic Rate Loans
shall be similarly changed without notice or demand of any kind by an amount
equal to the amount of such change in the Alternate Base Rate during the time
such change or changes remain in effect. The Eurodollar Rate shall be adjusted
with respect to Eurodollar Rate Loans without notice or demand of any kind on
the effective date of any change in the Reserve Percentage as of such effective
date. Upon and after the occurrence of an Event of Default, and during the
continuation thereof, (i) at the option of Agent or at the direction of Required
Lenders, the Obligations (other than Eurodollar Rate Loans) shall bear interest
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at the Revolving Interest Rate for Domestic Loans plus two (2.0%) percent per
annum and (ii) Eurodollar Rate Loans shall bear interest at the Revolving
Interest Rate for Eurodollar Rate Loans plus two (2.0%) percent per annum (as
applicable, the "Default Rate").
3.2. Letter of Credit Fees.
a. Borrowers shall pay (x) to Agent, for the ratable benefit of Lenders,
fees for each Letter of Credit (including the Existing Letters of Credit which
shall be deemed to be issued hereunder) for the period from and excluding the
date of issuance of same to and including the date of expiration or termination,
equal to the average daily face amount of each outstanding Letter of Credit
multiplied by the difference between the Eurodollar Rate and the interest rate
being charged for Eurodollar Rate Loans (including any applicable Default Rate)
per annum, such fees to be calculated on the basis of a 360-day year for the
actual number of days elapsed and to be payable quarterly in arrears on the
first day of each quarter and on the last day of the Term, and (y) to the
Issuer, a fronting fee of one quarter of one percent (0.25%) per annum, together
with any and all administrative, issuance, amendment, payment and negotiation
charges with respect to Letters of Credit and all fees and expenses as agreed
upon by the Issuer and the Borrowing Agent in connection with any Letter of
Credit, including in connection with the opening, amendment or renewal of any
such Letter of Credit and any acceptances created thereunder and shall reimburse
Agent for any and all fees and expenses, if any, paid by Agent to the Issuer
(all of the foregoing fees, the "Letter of Credit Fees"). All such charges shall
be deemed earned in full on the date when the same are due and payable hereunder
and shall not be subject to rebate or pro-ration upon the termination of this
Agreement for any reason. Any such charge in effect at the time of a particular
transaction shall be the charge for that transaction, notwithstanding any
subsequent change in the Issuer's prevailing charges for that type of
transaction. All Letter of Credit Fees payable hereunder shall be deemed earned
in full on the date when the same are due and payable hereunder and shall not be
subject to rebate or pro-ration upon the termination of this Agreement for any
reason.
Upon the occurrence of an Event of Default, on demand in the event
Borrowers elect to terminate this Agreement, or upon the expiration of the Term
unless other arrangements satisfactory to Agent have been established, Borrowers
will cause cash to be deposited and maintained in an account with Agent, as cash
collateral, in an amount equal to one hundred and two percent (102%) of the
Maximum Undrawn Amount of all outstanding Letters of Credit, and each Borrower
hereby irrevocably authorizes Agent, in its discretion, on such Borrower's
behalf and in such Borrower's name, to open such an account and to make and
maintain deposits therein, or in an account opened by such Borrower, in the
amounts required to be made by such Borrower, out of the proceeds of Receivables
or other Collateral or out of any other funds of such Borrower coming into any
Lender's possession at any time. Agent will invest such cash collateral (less
applicable reserves) in such short-term money-market items as to which Agent and
such Borrower mutually agree and the net return on such investments shall be
credited to such account and constitute additional cash collateral. No Borrower
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may withdraw amounts credited to any such account except upon the occurrence of
all of the following: (x) payment and performance in full of all Obligations,
(y) expiration or termination of all Letters of Credit and (z) termination of
this Agreement.
3.3. Closing Fee and Facility Fee.
a. Closing Fee. Upon the execution of this Agreement, Borrowers shall pay
to Agent for the ratable benefit of Lenders a closing fee of $50,000 less that
portion of the fees of $100,000 heretofore paid by Borrowers to Agent remaining
after application of such fee to out of pocket expenses.
b. Facility Fee. If, for any calendar quarter during the Term, the average
daily unpaid balance of the Revolving Advances and undrawn amount of any
outstanding Letters of Credit for each day of such calendar quarter does not
equal the Maximum Revolving Advance Amount, then Borrowers shall pay to Agent
for the ratable benefit of Lenders a fee at a rate equal to three-eighths of one
percent (.375%) per annum on the amount by which the Maximum Revolving Advance
Amount exceeds such average daily balance. Such fee shall be payable to Agent in
arrears on the first day of each calendar quarter with respect to the previous
calendar quarter.
3.4. Collateral Monitoring Fee, Collateral Evaluation Fee and Fee Letter.
a. Collateral Monitoring Fee. Borrowers shall pay Agent a collateral
monitoring fee equal to $1,000 per month commencing on the first day of the
month following the Closing Date and on the first day of each month thereafter
during the Term. The collateral monitoring fee shall be deemed earned in full on
the date when same is due and payable hereunder and shall not be subject to
rebate or proration upon termination of this Agreement for any reason.
b. Collateral Evaluation Fee. Borrowers shall pay to Agent on demand an
amount equal to $750 per day for each person employed to perform a collateral
evaluation, examination or analysis, plus all costs and disbursements incurred
by Agent in the performance of such evaluation, examination or analysis, the
need for which is to be determined by Agent and which monitoring is undertaken
by Agent or for Agent's benefit.
3.5. Computation of Interest and Fees. Interest and fees hereunder shall be
computed on the basis of a year of 360 days and for the actual number of days
elapsed. If any payment to be made hereunder becomes due and payable on a day
other than a Business Day, the due date thereof shall be extended to the next
succeeding Business Day and interest thereon shall be payable at the Revolving
Interest Rate for Domestic Rate Loans during such extension.
3.6. Maximum Charges. In no event whatsoever shall interest and other
charges charged hereunder exceed the highest rate permissible under law. In the
event interest and other charges as computed hereunder would otherwise exceed
the highest rate permitted under law, such excess amount shall be first applied
to any unpaid principal balance owed by Borrowers, and if the then remaining
excess amount is greater than the previously unpaid principal balance, Lenders
shall promptly refund such excess amount to Borrowers and the provisions hereof
shall be deemed amended to provide for such permissible rate.
3.7. Increased Costs. In the event that any Applicable Law, treaty or
governmental regulation, or any change therein or in the interpretation or
39
application thereof, or compliance by any Lender (for purposes of this Section
3.7, the term "Lender" shall include Agent or any Lender and any corporation or
bank controlling Agent or any Lender) and the office or branch where Agent or
any Lender (as so defined) makes or maintains any Eurodollar Rate Loans with any
request or directive (whether or not having the force of law) from any central
bank or other financial, monetary or other authority, shall:
a. subject Agent or any Lender to any tax of any kind whatsoever with
respect to this Agreement or any Other Document or change the basis of taxation
of payments to Agent or any Lender of principal, fees, interest or any other
amount payable hereunder or under any Other Documents (except for changes in the
rate of tax on the overall net income of Agent or any Lender by the jurisdiction
in which it maintains its principal office);
b. impose, modify or hold applicable any reserve, special deposit,
assessment or similar requirement against assets held by, or deposits in or for
the account of, advances or loans by, or other credit extended by, any office of
Agent or any Lender, including pursuant to Regulation D of the Board of
Governors of the Federal Reserve System; or
c. impose on Agent or any Lender or the London interbank Eurodollar market
any other condition with respect to this Agreement or any Other Document;
and the result of any of the foregoing is to increase the cost to Agent or
any Lender of making, renewing or maintaining its Advances hereunder by an
amount that Agent or such Lender deems to be material or to reduce the amount of
any payment (whether of principal, interest or otherwise) in respect of any of
the Advances by an amount that Agent or such Lender deems to be material, then,
in any case Borrowers shall as promptly as practicable pay Agent or such Lender,
upon its demand, such additional amount as will compensate Agent or such Lender
for such additional cost or such reduction, as the case may be; provided,
however, that the foregoing shall not apply to increased costs which are
reflected in the Eurodollar Rate; provided, further the Borrower shall not be
obligated to pay Agent or such Lender any compensation attributable to any
period prior to the date that is 180 days prior to the date on which Agent or
such Lender gave notice of the circumstances entitling Agent or such Lender to
such additional compensation. Agent or such Lender shall certify the amount of
such additional cost or reduced amount to Borrowing Agent, and such
certification shall be conclusive absent manifest error.
3.8. Basis For Determining Interest Rate Inadequate or Unfair. In the event
that Agent or any Lender shall have determined that:
a. reasonable means do not exist for ascertaining the Eurodollar Rate
applicable pursuant to Section 2.2 hereof for any Interest Period; or
b. Dollar deposits in the relevant amount and for the relevant maturity are
not available in the London interbank Eurodollar market, with respect to an
outstanding Eurodollar Rate Loan, a proposed Eurodollar Rate Loan, or a proposed
conversion of a Domestic Rate Loan into a Eurodollar Rate Loan,
then Agent shall give Borrowing Agent prompt written, telephonic or
telegraphic notice of such determination. If such notice is given, (i) any such
requested Eurodollar Rate Loan shall be made as a Domestic Rate Loan, unless
Borrowing Agent shall notify Agent no later than 10:00 a.m. (New York City time)
two (2) Business Days prior to the date of such proposed borrowing, that its
40
request for such borrowing shall be cancelled or made as an unaffected type of
Eurodollar Rate Loan, (ii) any Domestic Rate Loan or Eurodollar Rate Loan which
was to have been converted to an affected type of Eurodollar Rate Loan shall be
continued as or converted into a Domestic Rate Loan, or, if Borrowing Agent
shall notify Agent, no later than 10:00 a.m. (New York City time) two (2)
Business Days prior to the proposed conversion, shall be maintained as an
unaffected type of Eurodollar Rate Loan, and (iii) any outstanding affected
Eurodollar Rate Loans shall be converted into a Domestic Rate Loan, or, if
Borrowing Agent shall notify Agent, no later than 10:00 a.m. (New York City
time) two (2) Business Days prior to the last Business Day of the then current
Interest Period applicable to such affected Eurodollar Rate Loan, shall be
converted into an unaffected type of Eurodollar Rate Loan, on the last Business
Day of the then current Interest Period for such affected Eurodollar Rate Loans.
Until such notice has been withdrawn, Lenders shall have no obligation to make
an affected type of Eurodollar Rate Loan or maintain outstanding affected
Eurodollar Rate Loans and no Borrower shall have the right to convert a Domestic
Rate Loan or an unaffected type of Eurodollar Rate Loan into an affected type of
Eurodollar Rate Loan.
3.9. Capital Adequacy.
a. In the event that Agent or any Lender shall have determined that any
Applicable Law, rule, regulation or guideline regarding capital adequacy, or any
change therein, or any change in the interpretation or administration thereof by
any Governmental Body, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by Agent or any Lender
(for purposes of this Section 3.9, the term "Lender" shall include Agent or any
Lender and any corporation or bank controlling Agent or any Lender) and the
office or branch where Agent or any Lender (as so defined) makes or maintains
any Eurodollar Rate Loans with any request or directive regarding capital
adequacy (whether or not having the force of law) of any such authority, central
bank or comparable agency, has or would have the effect of reducing the rate of
return on Agent or any Lender's capital as a consequence of its obligations
hereunder to a level below that which Agent or such Lender could have achieved
but for such adoption, change or compliance (taking into consideration Agent's
and each Lender's policies with respect to capital adequacy) by an amount deemed
by Agent or any Lender to be material, then, from time to time, Borrowers shall
pay upon demand to Agent or such Lender such additional amount or amounts as
will compensate Agent or such Lender for such reduction; provided, however, that
the foregoing shall not apply to increased costs which are reflected in the
Eurodollar Rate; provided, further the Borrower shall not be obligated to pay
Agent or such Lender any compensation attributable to any period prior to the
date that is 180 days prior to the date on which Agent or such Lender gave
notice of the circumstances entitling Agent or such Lender to such additional
compensation. In determining such amount or amounts, Agent or such Lender may
use any reasonable averaging or attribution methods. The protection of this
Section 3.9 shall be available to Agent and each Lender regardless of any
possible contention of invalidity or inapplicability with respect to the
Applicable Law, regulation or condition.
b. A certificate of Agent or such Lender setting forth such amount or
amounts as shall be necessary to compensate Agent or such Lender with respect to
Section 3.9(a) hereof when delivered to Borrowing Agent shall be conclusive
absent manifest error.
3.10. Gross Up for Taxes. If any Borrower shall be required by Applicable
Law to withhold or deduct any taxes from or in respect of any sum payable under
this Agreement or any of the Other Documents to Agent, or any Lender, assignee
41
of any Lender, or Participant (each, individually, a "Payee" and collectively,
the "Payees"), (a) the sum payable to such Payee or Payees, as the case may be,
shall be increased as may be necessary so that, after making all required
withholding or deductions, the applicable Payee or Payees receives an amount
equal to the sum it would have received had no such withholding or deductions
been made (the "Gross-Up Payment"), (b) such Borrower shall make such
withholding or deductions, and (c) such Borrower shall pay the full amount
withheld or deducted to the relevant taxation authority or other authority in
accordance with Applicable Law. Notwithstanding the foregoing, no Borrower shall
be obligated to make any portion of the Gross-Up Payment that is attributable to
any withholding or deductions that would not have been paid or claimed had the
applicable Payee or Payees properly claimed a complete exemption with respect
thereto pursuant to Section 3.11 hereof.
3.11. Withholding Tax Exemption.
a. Each Payee that is not incorporated under the Laws of the United States
of America or a state thereof (and, upon the written request of Agent, each
other Payee) agrees that it will deliver to Borrowing Agent and Agent two (2)
duly completed appropriate valid Withholding Certificates (as defined under
ss.1.1441-1(c)(16) of the Income Tax Regulations ("Regulations")) certifying its
status (i.e., U.S. or foreign person) and, if appropriate, making a claim of
reduced, or exemption from, U.S. withholding tax on the basis of an income tax
treaty or an exemption provided by the Code. The term "Withholding Certificate"
means a Form W-9; a Form W-8BEN; a Form W-8ECI; a Form W-8IMY and the related
statements and certifications as required under ss.1.1441-1(e)(2) and/or (3) of
the Regulations; a statement described in ss.1.871-14(c)(2)(v) of the
Regulations; or any other certificates under the Code or Regulations that
certify or establish the status of a payee or beneficial owner as a U.S. or
foreign person.
b. Each Payee required to deliver to Borrowing Agent and Agent a valid
Withholding Certificate pursuant to Section 3.11(a) hereof shall deliver such
valid Withholding Certificate as follows: (A) each Payee which is a party hereto
on the Closing Date shall deliver such valid Withholding Certificate at least
five (5) Business Days prior to the first date on which any interest or fees are
payable by any Borrower hereunder for the account of such Payee; (B) each Payee
shall deliver such valid Withholding Certificate at least five (5) Business Days
before the effective date of such assignment or participation (unless Agent in
its sole discretion shall permit such Payee to deliver such Withholding
Certificate less than five (5) Business Days before such date in which case it
shall be due on the date specified by Agent). Each Payee which so delivers a
valid Withholding Certificate further undertakes to deliver to Borrowing Agent
and Agent two (2) additional copies of such Withholding Certificate (or a
successor form) on or before the date that such Withholding Certificate expires
or becomes obsolete or after the occurrence of any event requiring a change in
the most recent Withholding Certificate so delivered by it, and such amendments
thereto or extensions or renewals thereof as may be reasonably requested by
Borrowing Agent or Agent.
c. Notwithstanding the submission of a Withholding Certificate claiming a
reduced rate of or exemption from U.S. withholding tax required under Section
3.11(b) hereof, Agent shall be entitled to withhold United States federal income
taxes at the full 30% withholding rate if in its reasonable judgment it is
required to do so under the due diligence requirements imposed upon a
withholding agent under ss.1.1441-7(b) of the Regulations. Further, Agent is
42
indemnified under ss.1.1461-1(e) of the Regulations against any claims and
demands of any Payee for the amount of any tax it deducts and withholds in
accordance with regulations under ss.1441 of the Code.
IV. COLLATERAL: GENERAL TERMS
4.1. Security Interest in the Collateral. To secure the prompt payment and
performance to Agent and each Lender of the Obligations, each Borrower hereby
assigns, pledges and grants to Agent for its benefit and for the ratable benefit
of each Lender a continuing security interest in and to and Lien on all of its
Collateral, whether now owned or existing or hereafter acquired or arising and
wheresoever located. Each Borrower shall mark its books and records as may be
necessary or appropriate to evidence, protect and perfect Agent's security
interest and shall cause its financial statements to reflect such security
interest. Each Borrower shall promptly provide Agent with written notice of all
commercial tort claims, such notice to contain the case title together with the
applicable court and a brief description of the claim(s). Upon delivery of each
such notice, such Borrower shall be deemed to hereby grant to Agent a security
interest and lien in and to such commercial tort claims and all proceeds
thereof.
4.2. Perfection of Security Interest. Each Borrower shall take all action
that may be necessary or desirable, or that Agent may request, so as at all
times to maintain the validity, perfection, enforceability and priority of
Agent's security interest in and Lien on the Collateral or to enable Agent to
protect, exercise or enforce its rights hereunder and in the Collateral,
including, but not limited to, (i) immediately discharging all Liens other than
Permitted Encumbrances, (ii) obtaining Lien Waiver Agreements, (iii) delivering
to Agent, endorsed or accompanied by such instruments of assignment as Agent may
specify, and stamping or marking, in such manner as Agent may specify, any and
all chattel paper, instruments, letters of credits and advices thereof and
documents evidencing or forming a part of the Collateral, (iv) entering into
warehousing, lockbox and other custodial arrangements satisfactory to Agent, and
(v) executing and delivering financing statements, control agreements,
instruments of pledge, mortgages, notices and assignments, in each case in form
and substance satisfactory to Agent, relating to the creation, validity,
perfection, maintenance or continuation of Agent's security interest and Lien
under the Uniform Commercial Code or other Applicable Law. By its signature
hereto, each Borrower hereby authorizes Agent to file against such Borrower, one
or more financing, continuation or amendment statements pursuant to the Uniform
Commercial Code in form and substance satisfactory to Agent (which statements
may have a description of collateral which is broader than that set forth
herein). All charges, expenses and fees Agent may incur in doing any of the
foregoing, and any local taxes relating thereto, shall be charged to Borrowers'
Account as a Revolving Advance of a Domestic Rate Loan and added to the
Obligations, or, at Agent's option, shall be paid to Agent for its benefit and
for the ratable benefit of Lenders immediately upon demand.
4.3. Disposition of Collateral. Each Borrower will safeguard and protect
all Collateral for Agent's general account and make no disposition thereof
whether by sale, lease or otherwise except the sale of Inventory in the Ordinary
Course of Business or the disposition of equipment as permitted under Section
7.1 of this Agreement.
4.4. Preservation of Collateral. In addition to the rights and remedies set
forth in Section 11.1 hereof, Agent: (a) may at any time take such steps as
43
Agent deems reasonably necessary to protect Agent's interest in and to preserve
the Collateral, including the hiring of such security guards or the placing of
other security protection measures as Agent may deem appropriate; (b) may employ
and maintain at any of any Borrower's premises a custodian who shall have full
authority to do all acts necessary to protect Agent's interests in the
Collateral; (c) may lease warehouse facilities to which Agent may move all or
part of the Collateral; (d) may use any Borrower's owned or leased lifts,
hoists, trucks and other facilities or equipment for handling or removing the
Collateral; and (e) shall have, and is hereby granted, a right of ingress and
egress to the places where the Collateral is located, and may proceed over and
through any of Borrower's owned or leased property. Each Borrower shall
cooperate fully with all of Agent's efforts to preserve the Collateral and will
take such actions to preserve the Collateral as Agent may direct. All of Agent's
expenses of preserving the Collateral, including any expenses relating to the
bonding of a custodian, shall be charged to Borrowers' Account as a Revolving
Advance and added to the Obligations.
4.5. Ownership of Collateral.
a. With respect to the Collateral, at the time the Collateral becomes
subject to Agent's security interest: (i) each Borrower shall be the sole owner
of and fully authorized and able to sell, transfer, pledge and/or grant a first
priority security interest (subject to Permitted Encumbrances) in each and every
item of the its respective Collateral to Agent (other than the Real Property);
and, except for Permitted Encumbrances the Collateral shall be free and clear of
all Liens and encumbrances whatsoever; (ii) each document and agreement executed
by each Borrower or delivered to Agent or any Lender in connection with this
Agreement shall be true and correct in all respects; (iii) all signatures and
endorsements of each Borrower that appear on such documents and agreements shall
be genuine and each Borrower shall have full capacity to execute same; and (iv)
each Borrower's Equipment and Inventory shall be located as set forth on
Schedule 4.5 and shall not be removed from such location(s) without the prior
written consent of Agent except with respect to the sale of Inventory in the
Ordinary Course of Business and Equipment to the extent permitted in Section 4.3
hereof.
b. (i) There is no location at which any Borrower has any Inventory (except
for Inventory in transit) other than those locations listed on Schedule 4.5;
(ii) Schedule 4.5 hereto contains a correct and complete list, as of the Closing
Date, of the legal names and addresses of each warehouse at which Inventory of
any Borrower is stored; none of the receipts received by any Borrower from any
warehouse states that the goods covered thereby are to be delivered to bearer or
to the order of a named Person or to a named Person and such named Person's
assigns; (iii) Schedule 4.5 hereto sets forth a correct and complete list as of
the Closing Date of (A) each place of business of each Borrower and (B) the
chief executive office of each Borrower; and (iv) Schedule 4.5 hereto sets forth
a correct and complete list as of the Closing Date of the location, by state and
street address, of all Real Property owned or leased by each Borrower, together
with the names and addresses of any landlords.
4.6. Defense of Agent's and Lenders' Interests. Until (a) payment and
performance in full of all of the Obligations and (b) termination of this
Agreement, Agent's interests in the Collateral shall continue in full force and
effect. Except as otherwise permitted herein, during such period no Borrower
shall, without Agent's prior written consent, pledge, sell (except Inventory in
the Ordinary Course of Business), assign, transfer, create or suffer to exist a
Lien upon or encumber or allow or suffer to be encumbered in any way except for
44
Permitted Encumbrances, any part of the Collateral. Each Borrower shall defend
Agent's interests in the Collateral against any and all Persons whatsoever. At
any time following demand by Agent for payment of all Obligations, Agent shall
have the right to take possession of the indicia of the Collateral and the
Collateral in whatever physical form contained, including: labels, stationery,
documents, instruments and advertising materials. If Agent exercises this right
to take possession of the Collateral, Borrowers shall, upon demand, assemble it
in the best manner possible and make it available to Agent at a place reasonably
convenient to Agent. In addition, with respect to all Collateral, Agent and
Lenders shall be entitled to all of the rights and remedies set forth herein and
further provided by the Uniform Commercial Code or other Applicable Law.
Following Agent's exercise of the right to take possession of the Collateral,
each Borrower shall, and Agent may, at its option, instruct all suppliers,
carriers, forwarders, warehousers or others receiving or holding cash, checks,
Inventory, documents or instruments in which Agent holds a security interest to
deliver same to Agent and/or subject to Agent's order and if they shall come
into any Borrower's possession, they, and each of them, shall be held by such
Borrower in trust as Agent's trustee, and such Borrower will immediately deliver
them to Agent in their original form together with any necessary endorsement.
4.7. Books and Records. Each Borrower shall (a) keep proper books of record
and account in which full, true and correct entries will be made of all dealings
or transactions of or in relation to its business and affairs; (b) set up on its
books accruals with respect to all taxes, assessments, charges, levies and
claims; and (c) on a reasonably current basis set up on its books, from its
earnings, allowances against doubtful Receivables, advances and investments and
all other proper accruals (including by reason of enumeration, accruals for
premiums, if any, due on required payments and accruals for depreciation,
obsolescence, or amortization of properties), which should be set aside from
such earnings in connection with its business. All determinations pursuant to
this subsection shall be made in accordance with, or as required by, GAAP
consistently applied in the opinion of such independent public accountant as
shall then be regularly engaged by Borrowers.
4.8. Financial Disclosure. Each Borrower hereby irrevocably authorizes and
directs all accountants and auditors employed by such Borrower at any time
during the Term to exhibit and deliver to Agent and each Lender copies of any of
such Borrower's financial statements, trial balances or other accounting records
of any sort in the accountant's or auditor's possession, and to disclose to
Agent and each Lender any information such accountants may have concerning such
Borrower's financial status and business operations. Each Borrower hereby
authorizes all Governmental Bodies to furnish to Agent and each Lender copies of
reports or examinations relating to such Borrower, whether made by such Borrower
or otherwise; however, Agent and each Lender will attempt to obtain such
information or materials directly from such Borrower prior to obtaining such
information or materials from such accountants or Governmental Bodies.
4.9. Compliance with Laws. Each Borrower shall comply with all Applicable
Laws with respect to the Collateral or any part thereof or to the operation of
such Borrower's business the non-compliance with which could reasonably be
expected to have a Material Adverse Effect. The assets of Borrowers at all times
shall be maintained in accordance with the requirements of all insurance
carriers which provide insurance with respect to the assets of Borrowers so that
such insurance shall remain in full force and effect.
4.10. Inspection of Premises. Upon forty eight (48) hours notice as long as
no Default or Event of Default has occurred hereunder, or at any time upon the
45
occurrence of a Default or Event of Default, Agent and each Lender shall have
full access to and the right to audit, check, inspect and make abstracts and
copies from each Borrower's books, records, audits, correspondence and all other
papers relating to the Collateral and the operation of each Borrower's business.
Agent, any Lender and their agents may enter upon any premises of any Borrower
at any time during business hours and at any other reasonable time, and from
time to time, for the purpose of inspecting the Collateral and any and all
records pertaining thereto and the operation of such Borrower's business;
provided that (i) Agent and its experts shall not interfere with such Borrower's
business activities and (ii) so long as no Default or Event of Default has
occurred, Borrowers shall not be responsible for the cost and expenses of more
than four such audits in any given one year period.
4.11. Insurance. The assets and properties of each Borrower at all times
shall be maintained in accordance with the requirements of all insurance
carriers which provide insurance with respect to the assets and properties of
such Borrower so that such insurance shall remain in full force and effect. Each
Borrower shall bear the full risk of any loss of any nature whatsoever with
respect to the Collateral. At each Borrower's own cost and expense in amounts
and with carriers acceptable to Agent, each Borrower shall (a) keep all its
insurable properties and properties in which such Borrower has an interest
insured against the hazards of fire, flood, sprinkler leakage, those hazards
covered by extended coverage insurance and such other hazards, and for such
amounts, as is customary in the case of companies engaged in businesses similar
to such Borrower's including business interruption insurance; (b) maintain a
bond in such amounts as is customary in the case of companies engaged in
businesses similar to such Borrower insuring against larceny, embezzlement or
other criminal misappropriation of insured's officers and employees who may
either singly or jointly with others at any time have access to the assets or
funds of such Borrower either directly or through authority to draw upon such
funds or to direct generally the disposition of such assets; (c) maintain public
and product liability insurance against claims for personal injury, death or
property damage suffered by others; (d) maintain all such worker's compensation
or similar insurance as may be required under the laws of any state or
jurisdiction in which such Borrower is engaged in business; (f) furnish Agent
with (i) copies of all policies and evidence of the maintenance of such policies
by the renewal thereof at least thirty (30) days before any expiration date, and
(ii) appropriate loss payable endorsements in form and substance satisfactory to
Agent, naming Agent as a co-insured and lender loss payee as its interests may
appear with respect to all insurance coverage referred to in clauses (a) and (c)
above, and providing (A) that all proceeds thereunder shall be payable to Agent,
(B) no such insurance shall be affected by any act or neglect of the insured or
owner of the property described in such policy, and (C) that such policy and
loss payable clauses may not be cancelled, amended or terminated unless at least
thirty (30) days' prior written notice is given to Agent. In the event of any
loss thereunder, the carriers named therein hereby are directed by Agent and the
applicable Borrower to make payment for such loss to Agent and not to such
Borrower and Agent jointly. If any insurance losses are paid by check, draft or
other instrument payable to any Borrower and Agent jointly, Agent may endorse
such Borrower's name thereon and do such other things as Agent may deem
advisable to reduce the same to cash. Agent is hereby authorized to adjust and
compromise claims under insurance coverage referred to in clauses (a) and (b)
above. All loss recoveries received by Agent upon any such insurance may be
applied to the Obligations, in such order as Agent in its sole discretion shall
determine. Any surplus shall be paid by Agent to Borrowers or applied as may be
otherwise required by law. Any deficiency thereon shall be paid by Borrowers to
Agent, on demand.
4.12. Failure to Pay Insurance. If any Borrower fails to obtain insurance
46
as hereinabove provided, or to keep the same in force, Agent, if Agent so
elects, may obtain such insurance and pay the premium therefor on behalf of such
Borrower, and charge Borrowers' Account therefor as a Revolving Advance of a
Domestic Rate Loan and such expenses so paid shall be part of the Obligations.
4.13. Payment of Taxes. Each Borrower will pay, when due, all taxes,
assessments and other Charges lawfully levied or assessed upon such Borrower or
any of the Collateral including real and personal property taxes, assessments
and charges and all franchise, income, employment, social security benefits,
withholding, and sales taxes, except to the extent such taxes, assessments or
other Charges are contested in good faith by appropriate proceedings and where
such Borrower has set aside adequate cash reserves on its books. If any tax by
any Governmental Body is or may be imposed on or as a result of any transaction
between any Borrower and Agent or any Lender which Agent or any Lender may be
required to withhold or pay or if any taxes, assessments, or other Charges
remain unpaid after the date fixed for their payment, or if any claim shall be
made which, in Agent's or any Lender's opinion, may possibly create a valid Lien
on the Collateral, Agent may without notice to Borrowers pay the taxes,
assessments or other Charges and each Borrower hereby indemnifies and holds
Agent and each Lender harmless in respect thereof. The amount of any payment by
Agent under this Section 4.13 shall be charged to Borrowers' Account as a
Revolving Advance of a Domestic Rate Loan and added to the Obligations and,
until Borrowers shall furnish Agent with an indemnity therefor (or supply Agent
with evidence satisfactory to Agent that due provision for the payment thereof
has been made), Agent may hold without interest any balance standing to
Borrowers' credit and Agent shall retain its security interest in and Lien on
any and all Collateral held by Agent.
4.14. Payment of Leasehold Obligations. Each Borrower shall at all times
pay, when and as due, its rental obligations under all leases under which it is
a tenant, and shall otherwise comply, in all material respects, with all other
terms of such leases and keep them in full force and effect and, at Agent's
request will provide evidence of having done so.
4.15. Receivables.
a. Nature of Receivables. Each of the Receivables shall be a bona fide and
valid account representing a bona fide indebtedness incurred by the Customer
therein named, for a fixed sum as set forth in the invoice relating thereto
(provided immaterial or unintentional invoice errors shall not be deemed to be a
breach hereof) with respect to an absolute sale or lease and delivery of goods
upon stated terms of a Borrower, or work, labor or services theretofore rendered
by a Borrower as of the date each Receivable is created. Same shall be due and
owing in accordance with the applicable Borrower's standard terms of sale
without dispute, setoff or counterclaim except as may be stated on the accounts
receivable schedules delivered by Borrowers to Agent.
b. Solvency of Customers. Each Customer, to each Borrower's knowledge, as
of the date each Receivable is created, is and will be solvent and able to pay
all Receivables on which the Customer is obligated in full when due or with
respect to such Customers of any Borrower who, to the knowledge of such
Borrower, are not solvent such Borrower has set up on its books and in its
financial records bad debt reserves adequate to cover such Receivables.
47
c. Location of Borrowers. Each Borrower's chief executive office is located
on Schedule 4.15(c). Until written notice is given to Agent by Borrowing Agent
of any other office at which any Borrower keeps its records pertaining to
Receivables, all such records shall be kept at such executive office.
d. Collection of Receivables. Until any Borrower's authority to do so is
terminated by Agent (which notice Agent may give at any time following the
occurrence and during the continuation of an Event of Default or a Default or
when Agent in its Permitted Discretion deems it to be in Lenders' best interest
to do so), each Borrower will, at such Borrower's sole cost and expense, but on
Agent's behalf and for Agent's account, collect as Agent's property and in trust
for Agent all amounts received on Receivables, and shall not commingle such
collections with any Borrower's funds or use the same except to pay Obligations.
To the extent required under subsection 4.15(h), each Borrower shall deposit in
the Blocked Account or Deposit Account or, upon request by Agent, deliver to
Agent, in original form and on the date of receipt thereof, all checks, drafts,
notes, money orders, acceptances, cash and other evidences of Indebtedness.
e. Notification of Assignment of Receivables. At any time, Agent shall have
the right to send notice of the assignment of, and Agent's security interest in
and Lien on, the Receivables to any and all Customers or any third party holding
or otherwise concerned with any of the Collateral. Thereafter, Agent shall have
the sole right to collect the Receivables, take possession of the Collateral, or
both. Agent's actual collection expenses, including, but not limited to,
stationery and postage, telephone and telegraph, secretarial and clerical
expenses and the salaries of any collection personnel used for collection, may
be charged to Borrowers' Account and added to the Obligations.
f. Power of Agent to Act on Borrowers' Behalf. Agent shall have the right
to receive, endorse, assign and/or deliver in the name of Agent or any Borrower
any and all checks, drafts and other instruments for the payment of money
relating to the Receivables, and each Borrower hereby waives notice of
presentment, protest and non-payment of any instrument so endorsed. Each
Borrower hereby appoints Agent or Agent's designee as such Borrower's attorney
with power: (A) at any time (i) to endorse such Borrower's name upon any notes,
acceptances, checks, drafts, money orders or other evidences of payment or
Collateral; (ii) to sign such Borrower's name on any invoice or bill of lading
relating to any of the Receivables, drafts against Customers, assignments and
verifications of Receivables; (iii) to send verifications of Receivables to any
Customer; and (iv) to sign such Borrower's name on all financing statements or
any other documents or instruments deemed reasonably necessary or appropriate by
Agent to preserve, protect, or perfect Agent's interest in the Collateral and to
file same; and (B) at any time following the occurrence and during the
continuation of a Default or Event of Default (i) to demand payment of the
Receivables; (ii) to enforce payment of the Receivables by legal proceedings or
otherwise; (iii) to exercise all of such Borrower's rights and remedies with
respect to the collection of the Receivables and any other Collateral; (iv) to
settle, adjust, compromise, extend or renew the Receivables; (v) to settle,
adjust or compromise any legal proceedings brought to collect Receivables; (vi)
to prepare, file and sign such Borrower's name on a proof of claim in bankruptcy
or similar document against any Customer; (vii) to prepare, file and sign such
Borrower's name on any notice of Lien, assignment or satisfaction of Lien or
similar document in connection with the Receivables; and (viii) to do all other
acts and things necessary to carry out this Agreement. All acts of said attorney
48
or designee are hereby ratified and approved, and said attorney or designee
shall not be liable for any acts of omission or commission nor for any error of
judgment or mistake of fact or of law, unless done maliciously or with gross
(not mere) negligence (as determined by a court of competent jurisdiction in a
final non-appealable judgment); this power being coupled with an interest is
irrevocable while any of the Obligations remain unpaid. Agent shall have the
right at any time to change the address for delivery of mail addressed to any
Borrower to such address as Agent may designate and to receive, open and dispose
of all mail addressed to any Borrower.
g. No Liability. Neither Agent nor any Lender shall, under any
circumstances or in any event whatsoever, have any liability for any error or
omission or delay of any kind occurring in the settlement, collection or payment
of any of the Receivables or any instrument received in payment thereof, or for
any damage resulting therefrom. Following the occurrence and during the
continuation of an Event of Default or Default, Agent may, without notice or
consent from any Borrower, sue upon or otherwise collect, extend the time of
payment of, compromise or settle for cash, credit or upon any terms any of the
Receivables or any other securities, instruments or insurance applicable thereto
and/or release any obligor thereof. Agent is authorized and empowered to accept,
following the occurrence and during the continuation, of an Event of Default or
Default, the return of the goods represented by any of the Receivables, without
notice to or consent by any Borrower, all without discharging or in any way
affecting any Borrower's liability hereunder.
h. Establishment of a Lockbox Account, Dominion Account. Prior to Borrowers
requesting a Revolving Advance or immediately upon the occurrence of a Default
or an Event of Default, all proceeds of Collateral shall be deposited by
Borrowers into either (i) a lockbox account, dominion account or such other
"blocked account" ("Blocked Accounts") established at a bank or banks (each such
bank, a "Blocked Account Bank") pursuant to an arrangement with such Blocked
Account Bank as may be selected by Borrowing Agent and be acceptable to Agent or
(ii) depository accounts ("Depository Accounts") established at the Agent for
the deposit of such proceeds. Each applicable Borrower, Agent and each Blocked
Account Bank shall enter into a deposit account control agreement in form and
substance satisfactory to Agent directing such Blocked Account Bank to transfer
such funds so deposited to Agent, either to any account maintained by Agent at
said Blocked Account Bank or by wire transfer to appropriate account(s) of
Agent. All funds deposited in such Blocked Accounts shall immediately become the
property of Agent and Borrowing Agent shall obtain the agreement by such Blocked
Account Bank to waive any offset rights against the funds so deposited. Neither
Agent nor any Lender assumes any responsibility for such blocked account
arrangement, including any claim of accord and satisfaction or release with
respect to deposits accepted by any Blocked Account Bank thereunder. All deposit
accounts and investment accounts of each Borrower and its Subsidiaries are set
forth on Schedule 4.15(h).
(i) Adjustments. No Borrower will, without Agent's consent, compromise or
adjust any Receivables (or extend the time for payment thereof) or accept any
returns of merchandise or grant any additional discounts, allowances or credits
thereon except for those compromises, adjustments, returns, discounts, credits
and allowances as have been heretofore customary in the business of such
Borrower.
4.16. Inventory. To the extent Inventory held for sale or lease has been
produced by any Borrower, it has been and will be produced by such Borrower in
accordance with the Federal Fair Labor Standards Act of 1938, as amended, and
all rules, regulations and orders thereunder.
49
4.17. Maintenance of Equipment. The Equipment shall be maintained in good
operating condition and repair (reasonable wear and tear excepted) and all
necessary replacements of and repairs thereto shall be made so that the value
and operating efficiency of the Equipment shall be maintained and preserved. No
Borrower shall use or operate the Equipment in violation of any law, statute,
ordinance, code, rule or regulation. Each Borrower shall have the right to sell
Equipment to the extent set forth in Section 4.3 hereof.
4.18. Exculpation of Liability. Nothing herein contained shall be construed
to constitute Agent or any Lender as any Borrower's agent for any purpose
whatsoever, nor shall Agent or any Lender be responsible or liable for any
shortage, discrepancy, damage, loss or destruction of any part of the Collateral
wherever the same may be located and regardless of the cause thereof. Neither
Agent nor any Lender, whether by anything herein or in any assignment or
otherwise, assume any of any Borrower's obligations under any contract or
agreement assigned to Agent or such Lender, and neither Agent nor any Lender
shall be responsible in any way for the performance by any Borrower of any of
the terms and conditions thereof.
4.19. Environmental Matters.
a. Borrowers shall ensure that the Real Property and all operations and
businesses conducted thereon remains in compliance with all Environmental Laws
and they shall not place or permit to be placed any Hazardous Substances on any
Real Property except as permitted by Applicable Law or appropriate governmental
authorities.
b. Borrowers shall establish and maintain a system to assure and monitor
continued compliance with all applicable Environmental Laws which system shall
include periodic reviews of such compliance.
c. Borrowers shall (i) employ in connection with the use of the Real
Property appropriate technology necessary to maintain compliance with any
applicable Environmental Laws and (ii) dispose of any and all Hazardous Waste
generated at the Real Property only at facilities and with carriers that
maintain valid permits under RCRA and any other applicable Environmental Laws.
Borrowers shall use their best efforts to obtain certificates of disposal, such
as hazardous waste manifest receipts, from all treatment, transport, storage or
disposal facilities or operators employed by Borrowers in connection with the
transport or disposal of any Hazardous Waste generated at the Real Property.
d. In the event any Borrower obtains, gives or receives notice of any
Release or threat of Release of a reportable quantity of any Hazardous
Substances at the Real Property (any such event being hereinafter referred to as
a "Hazardous Discharge") or receives any notice of violation, request for
information or notification that it is potentially responsible for investigation
or cleanup of environmental conditions at the Real Property, demand letter or
complaint, order, citation, or other written notice with regard to any Hazardous
Discharge or violation of Environmental Laws affecting the Real Property or any
Borrower's interest therein (any of the foregoing is referred to herein as an
"Environmental Complaint") from any Person, including any state agency
responsible in whole or in part for environmental matters in the state in which
the Real Property is located or the United States Environmental Protection
Agency (any such person or entity hereinafter the "Authority"), then Borrowing
Agent shall, within five (5) Business Days, give written notice of same to Agent
detailing facts and circumstances of which any Borrower is aware giving rise to
the Hazardous Discharge or Environmental Complaint. Such information is to be
50
provided to allow Agent to protect its security interest in and Lien on the Real
Property and the Collateral and is not intended to create nor shall it create
any obligation upon Agent or any Lender with respect thereto.
e. Borrowing Agent shall promptly forward to Agent copies of any request
for information, notification of potential liability, demand letter relating to
potential responsibility received by any Borrower with respect to the
investigation or cleanup of Hazardous Substances at any other site owned,
operated or used by any Borrower to dispose of Hazardous Substances and shall
continue to forward copies of correspondence between any Borrower and the
Authority regarding such claims to Agent until the claim is settled. Borrowing
Agent shall promptly forward to Agent copies of all documents and reports
concerning a Hazardous Discharge at the Real Property that any Borrower is
required to file under any Environmental Laws. Such information is to be
provided solely to allow Agent to protect Agent's security interest in and Lien
on the Real Property and the Collateral.
f. Borrowers shall respond promptly to any Hazardous Discharge or
Environmental Complaint levied against them and take all necessary action in
order to safeguard the health of any Person and to avoid subjecting the
Collateral to any lien, or the Real Property to any Lien which would affect the
Borrowers. If any Borrower shall fail to respond promptly to any Hazardous
Discharge or Environmental Complaint or any Borrower shall fail to comply with
any of the requirements of any Environmental Laws, Agent on behalf of Lenders
may, but without the obligation to do so, for the sole purpose of protecting
Agent's interest in the Collateral: (A) give such notices or (B) enter onto the
Real Property (or authorize third parties to enter onto the Real Property) and
take such actions as Agent (or such third parties as directed by Agent) deem
reasonably necessary or advisable, to clean up, remove, mitigate or otherwise
deal with any such Hazardous Discharge or Environmental Complaint. All
reasonable costs and expenses incurred by Agent and Lenders (or such third
parties) in the exercise of any such rights, including any sums paid in
connection with any judicial or administrative investigation or proceedings,
fines and penalties, together with interest thereon from the date expended at
the Default Rate for Domestic Rate Loans constituting Revolving Advances shall
be paid upon demand by Borrowers, and until paid shall be added to and become a
part of the Obligations secured by the Liens created by the terms of this
Agreement or any other agreement between Agent, any Lender and any Borrower.
g. Promptly upon the written request of Agent but not more than once per
calendar year, Borrowers shall provide Agent, at Borrowers' expense, with an
environmental site assessment or environmental audit report prepared by an
environmental engineering firm acceptable in the reasonable opinion of Agent, to
assess with a reasonable degree of certainty the existence of a Hazardous
Discharge and the potential costs in connection with abatement, cleanup and
removal of any Hazardous Substances found on, under, at or within the Real
Property. Any report or investigation of such Hazardous Discharge proposed and
acceptable to an appropriate Authority that is charged to oversee the clean-up
of such Hazardous Discharge shall be acceptable to Agent. If such estimates,
individually or in the aggregate, exceed $100,000, Agent shall have the right to
require Borrowers to post a bond, letter of credit or other security reasonably
satisfactory to Agent to secure payment of these costs and expenses.
h. Borrowers shall defend and indemnify Agent and Lenders and hold Agent,
Lenders and their respective employees, agents, directors and officers harmless
from and against all loss, liability, damage and expense, claims, costs, fines
and penalties, including attorneys' fees, suffered or incurred by Agent or
51
Lenders under or on account of any Environmental Laws, including the assertion
of any Lien thereunder, with respect to any Hazardous Discharge, the presence of
any Hazardous Substances affecting the Real Property, whether or not the same
originates or emerges from the Real Property or any contiguous real estate,
including any loss of value of the Real Property as a result of the foregoing
except to the extent such loss, liability, damage and expense is attributable to
any Hazardous Discharge resulting from actions on the part of Agent or any
Lender. Borrowers' obligations under this Section 4.19 shall arise upon the
discovery of the presence of any Hazardous Substances at the Real Property,
whether or not any federal, state, or local environmental agency has taken or
threatened any action in connection with the presence of any Hazardous
Substances. Borrowers' obligation and the indemnifications hereunder shall
survive the termination of this Agreement.
(i) For purposes of Section 4.19 and 5.7, all references to Real Property
shall be deemed to include all of each Borrower's right, title and interest in
and to its owned and leased premises; provided, however, with respect to the
applicability of subsections 4.19(a) and (b) and subsection 5.7(c) to any Real
Property leased by a Borrower, the representations and obligations of such
Borrower shall apply to such Borrower as it strictly relates to its use of such
leased premises.
4.20. Financing Statements. Except as respects the financing statements
filed by Agent and the financing statements described on Schedule 1.2, no
financing statement covering any of the Collateral or any proceeds thereof is on
file in any public office.
V. REPRESENTATIONS AND WARRANTIES.
Each Borrower represents and warrants as follows:
5.1. Authority. Each Borrower has full power, authority and legal right to
enter into this Agreement and the Other Documents and to perform all its
respective Obligations hereunder and thereunder. This Agreement, the
Subordination Agreement and the Other Documents have been duly executed and
delivered by each Borrower party thereto, and this Agreement, the Subordination
Agreement and the Other Documents constitute the legal, valid and binding
obligation of such Borrower enforceable in accordance with their terms, except
as such enforceability may be limited by any applicable bankruptcy, insolvency,
moratorium or similar laws affecting creditors' rights generally. The execution,
delivery and performance of this Agreement and of the Other Documents (a) are
within such Borrower's corporate powers, have been duly authorized by all
necessary corporate action, are not in contravention of law or the terms of such
Borrower's by-laws, certificate of incorporation or other applicable documents
relating to such Borrower's formation or to the conduct of such Borrower's
business or of any material agreement or undertaking to which such Borrower is a
party or by which such Borrower is bound, including the Subordinated Loan
Documentation, and the IRB Documentation, (b) will not conflict with or violate
any law or regulation, or any judgment, order or decree of any Governmental
Body, (c) will not require the Consent of any Governmental Body or any other
Person, except those Consents set forth on Schedule 5.1 hereto, all of which
will have been duly obtained, made or compiled prior to the Closing Date and
which are in full force and effect and (d) will not conflict with, nor result in
any breach in any of the provisions of or constitute a default under or result
52
in the creation of any Lien, except Permitted Encumbrances, upon any asset of
such Borrower under the provisions of any agreement, charter document,
instrument, by-law, or other instrument to which such Borrower is a party or by
which it or its property is a party or by which it may be bound, including under
the provisions of the Subordinated Loan Documentation and the IRB Documentation.
5.2. Formation and Qualification.
a. Each Borrower is duly incorporated and in good standing under the laws
of the state listed on Schedule 5.2(a) and is qualified to do business and is in
good standing in the states listed on Schedule 5.2(a) which constitute all
states in which qualification and good standing are necessary for such Borrower
to conduct its business and own its property and where the failure to so qualify
could reasonably be expected to have a Material Adverse Effect on such Borrower.
Each Borrower has delivered to Agent true and complete copies of its certificate
of incorporation and by-laws and will promptly notify Agent of any amendment or
changes thereto.
b. The only Subsidiaries of each Borrower are listed on Schedule 5.2(b).
5.3. Survival of Representations and Warranties. All representations and
warranties of such Borrower contained in this Agreement and the Other Documents
shall be true at the time of such Borrower's execution of this Agreement and the
Other Documents, and shall survive the execution, delivery and acceptance
thereof by the parties thereto and the closing of the transactions described
therein or related thereto.
5.4. Tax Returns. Each Borrower's federal tax identification number is set
forth on Schedule 5.4. Each Borrower has filed all federal, state and local tax
returns and other reports each is required by law to file and has paid all
taxes, assessments, fees and other governmental charges that are due and payable
except to the extent that such taxes, assessments, fees and other governmental
charges are being contested in good faith and as to which such Borrower has set
aside on its books adequate reserves. Federal income tax returns of each
Borrower have been examined and reported upon by the appropriate taxing
authority or closed by applicable statute and satisfied for all fiscal years
prior to and including the fiscal year ending December 31, 2002. The provision
for taxes on the books of each Borrower is adequate for all years not closed by
applicable statutes, and for its current fiscal year, and no Borrower has any
knowledge of any deficiency or additional assessment in connection therewith not
provided for on its books.
5.5. Financial Statements. The consolidated and consolidating balance
sheets of Borrowers, their Subsidiaries, and such other Persons described
therein (including the accounts of all Subsidiaries for the respective periods
during which a subsidiary relationship existed), as of December 31, 2004, and
the related statements of operations, changes in stockholders equity, and
changes in cash flow for the period ended on such date, all accompanied by
reports thereon, containing opinions without qualification by independent
certified public accountants, copies of which have been delivered to Agent, have
been prepared in accordance with GAAP, consistently applied (except for changes
in application in which such accountants concur and present fairly the financial
position of Borrowers and their Subsidiaries at such date, and the results of
their operations for such period). Since September 30, 2005, there has been no
change in the condition, financial or otherwise, of Borrowers or their
Subsidiaries as shown on the consolidated balance sheet as of such date, and no
change in the aggregate value of machinery, equipment and Real Property owned by
Borrowers and their respective Subsidiaries, except changes in the Ordinary
Course of Business, none of which individually or in the aggregate would
reasonably be expected to have a Material Adverse Effect.
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5.6. Entity Names. No Borrower has been known by any other corporate name
in the past five years and does not sell Inventory under any other name except
as set forth on Schedule 5.6, nor has any Borrower been the surviving
corporation of a merger or consolidation or acquired all or substantially all of
the assets of any Person during the preceding five (5) years except as set forth
on the Perfection Certificate.
5.7. O.S.H.A. and Environmental Compliance.
a. Each Borrower has duly complied with, and its facilities, business,
assets, property, leaseholds, Real Property and Equipment are in compliance in
all material respects with, the provisions of the Federal Occupational Safety
and Health Act, the Environmental Protection Act, RCRA and all other
Environmental Laws; there have been no outstanding citations, notices or orders
of non-compliance issued to any Borrower or relating to its business, assets,
property, leaseholds or Equipment under any such laws, rules or regulations.
b. Each Borrower has been issued all required federal, state and local
licenses, certificates or permits relating to all applicable Environmental Laws.
c. (i) There are no visible signs of releases, spills, discharges, leaks or
disposal (collectively referred to as "Releases") of Hazardous Substances at,
upon, under or within any Real Property or any premises leased by any Borrower;
(ii) there are no underground storage tanks or polychlorinated biphenyls on the
Real Property or, to the best of its knowledge, any premises leased by any
Borrower; (iii) to the best of its knowledge, neither the Real Property nor any
premises leased by any Borrower has ever been used as a treatment, storage or
disposal facility of Hazardous Waste; and (iv) no Hazardous Substances are
present on the Real Property or, to the best of its knowledge, any premises
leased by any Borrower, excepting such quantities as are handled in accordance
with all applicable manufacturer's instructions and governmental regulations and
in proper storage containers and as are necessary for the operation of the
commercial business of any Borrower or of its tenants.
5.8. Solvency; No Litigation, Violation, Indebtedness or Default.
a. Each Borrower is solvent, able to pay its debts as they mature, has
capital sufficient to carry on its business and all businesses in which it is
about to engage, and (i) as of the Closing Date, the fair present saleable value
of its assets, calculated on a going concern basis, is in excess of the amount
of its liabilities and (ii) subsequent to the Closing Date, the fair saleable
value of its assets (calculated on a going concern basis) will be in excess of
the amount of its liabilities.
b. Except as disclosed in Schedule 5.8(b), no Borrower has (i) any pending
or threatened litigation, arbitration, actions or proceedings which involve the
possibility of having a Material Adverse Effect, and (ii) any liabilities or
indebtedness for borrowed money other than the Obligations.
c. No Borrower is in violation of any applicable statute, law, rule,
regulation or ordinance in any respect which could reasonably be expected to
have a Material Adverse Effect, nor is any Borrower in violation of any order of
any court, Governmental Body or arbitration board or tribunal.
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d. No Borrower nor any member of the Controlled Group maintains or
contributes to any Plan other than those listed on Schedule 5.8(d) hereto: (i)
No Plan has incurred any "accumulated funding deficiency," as defined in Section
302(a)(2) of ERISA and Section 412(a) of the Code, whether or not waived, and
each Borrower and each member of the Controlled Group has met all applicable
minimum funding requirements under Section 302 of ERISA in respect of each Plan;
(ii) each Plan which is intended to be a qualified plan under Section 401(a) of
the Code as currently in effect has been determined by the Internal Revenue
Service to be qualified under Section 401(a) of the Code and the trust related
thereto is exempt from federal income tax under Section 501(a) of the Code;
(iii) neither any Borrower nor any member of the Controlled Group has incurred
any liability to the PBGC other than for the payment of premiums, and there are
no premium payments which have become due which are unpaid; (iv) no Plan has
been terminated by the plan administrator thereof nor by the PBGC, and there is
no occurrence which would cause the PBGC to institute proceedings under Title IV
of ERISA to terminate any Plan; (v) at this time, the current value of the
assets of each Plan exceeds the present value of the accrued benefits and other
liabilities of such Plan and neither any Borrower nor any member of the
Controlled Group knows of any facts or circumstances which would materially
change the value of such assets and accrued benefits and other liabilities; (vi)
neither any Borrower nor any member of the Controlled Group has breached any of
the responsibilities, obligations or duties imposed on it by ERISA with respect
to any Plan; (vii) neither any Borrower nor any member of a Controlled Group has
incurred any liability for any excise tax arising under Section 4972 or 4980B of
the Code, and no fact exists which could give rise to any such liability; (viii)
neither any Borrower nor any member of the Controlled Group nor any fiduciary
of, nor any trustee to, any Plan, has engaged in a "prohibited transaction"
described in Section 406 of the ERISA or Section 4975 of the Code nor taken any
action which would constitute or result in a Termination Event with respect to
any such Plan which is subject to ERISA; (ix) each Borrower and each member of
the Controlled Group has made all contributions due and payable with respect to
each Plan; (x) there exists no event described in Section 4043(b) of ERISA, for
which the thirty (30) day notice period has not been waived; (xi) neither any
Borrower nor any member of the Controlled Group has any fiduciary responsibility
for investments with respect to any plan existing for the benefit of persons
other than employees or former employees of any Borrower and any member of the
Controlled Group; (xii) neither any Borrower nor any member of the Controlled
Group maintains or contributes to any Plan which provides health, accident or
life insurance benefits to former employees, their spouses or dependents, other
than in accordance with Section 4980B of the Code; (xiii) neither any Borrower
nor any member of the Controlled Group has withdrawn, completely or partially,
from any Multiemployer Plan so as to incur liability under the Multiemployer
Pension Plan Amendments Act of 1980 and there exists no fact which would
reasonably be expected to result in any such liability; and (xiv) no Plan
fiduciary (as defined in Section 3(21) of ERISA) has any liability for breach of
fiduciary duty or for any failure in connection with the administration or
investment of the assets of a Plan.
5.9. Patents, Trademarks, Copyrights and Licenses. All patents, patent
applications, trademarks, trademark applications, service marks, service mark
applications, copyrights, copyright applications, design rights, tradenames,
assumed names, trade secrets and licenses owned or utilized by any Borrower are
set forth on Schedule 5.9, are valid and have been duly registered or filed with
all appropriate Governmental Bodies and constitute all of the intellectual
property rights which are necessary for the operation of its business; there is
no objection to or pending challenge to the validity of any such patent,
trademark, copyright, design rights, tradename, trade secret or license and no
Borrower is aware of any grounds for any challenge, except as set forth in
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Schedule 5.9 hereto. Each patent, patent application, patent license, trademark,
trademark application, trademark license, service mark, service mark
application, service mark license, design rights, copyright, copyright
application and copyright license owned or held by any Borrower and all trade
secrets used by any Borrower consist of original material or property developed
by such Borrower or was lawfully acquired by such Borrower from the proper and
lawful owner thereof. Each of such items has been maintained so as to preserve
the value thereof from the date of creation or acquisition thereof. With respect
to all software used by any Borrower, such Borrower is in possession of all
source and object codes related to each piece of software or is the beneficiary
of a source code escrow agreement, each such source code escrow agreement being
listed on Schedule 5.9 hereto.
5.10. Licenses and Permits. Except as set forth in Schedule 5.10, each
Borrower (a) is in compliance with and (b) has procured and is now in possession
of, all material licenses or permits required by any applicable federal, state
or local law, rule or regulation for the operation of its business in each
jurisdiction wherein it is now conducting or proposes to conduct business and
where the failure to procure such licenses or permits could have a Material
Adverse Effect.
5.11. Default of Indebtedness. No Borrower is in default in the payment of
the principal of or interest on any Indebtedness involving an aggregate
obligation of more than $50,000 or under any material instrument or agreement
under or subject to which any such Indebtedness has been issued and no event has
occurred under the provisions of any such instrument or agreement which with or
without the lapse of time or the giving of notice, or both, constitutes or would
constitute an event of default thereunder.
5.12. No Default. No Borrower is in default in the payment or performance
of any of its contractual obligations except where such default could not be
reasonably be expected to result in a Material Adverse Effect and no Default has
occurred.
5.13. No Burdensome Restrictions. No Borrower is party to any contract or
agreement the performance of which could have a Material Adverse Effect. Each
Borrower has heretofore delivered to Agent true and complete copies of all
material contracts to which it is a party or to which it or any of its
properties is subject. No Borrower has agreed or consented to cause or permit in
the future (upon the happening of a contingency or otherwise) any of its
property, whether now owned or hereafter acquired, to be subject to a Lien which
is not a Permitted Encumbrance.
5.14. No Labor Disputes. No Borrower is involved in any labor dispute;
there are no strikes or walkouts or union organization of any Borrower's
employees threatened or in existence and no labor contract is scheduled to
expire during the Term other than as set forth on Schedule 5.14 hereto.
5.15. Margin Regulations. No Borrower is engaged, nor will it engage,
principally or as one of its important activities, in the business of extending
credit for the purpose of "purchasing" or "carrying" any "margin stock" within
the respective meanings of each of the quoted terms under Regulation U of the
Board of Governors of the Federal Reserve System as now and from time to time
hereafter in effect. No part of the proceeds of any Advance will be used for
"purchasing" or "carrying" "margin stock" as defined in Regulation U of such
Board of Governors.
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5.16. Investment Company Act. No Borrower is an "investment company"
registered or required to be registered under the Investment Company Act of
1940, as amended, nor is it controlled by such a company.
5.17. Disclosure. No representation or warranty made by any Borrower in
this Agreement, the Subordinated Loan Documentation, the IRB Documentation or in
any financial statement, report, certificate or any other document furnished in
connection herewith contains any untrue statement of a material fact or omits to
state any material fact necessary to make the statements herein or therein not
misleading. There is no fact known to any Borrower which such Borrower has not
disclosed to Agent in writing with respect to the transactions contemplated by
the Subordinated Loan Documentation, the IRB Documentation or this Agreement
which could reasonably be expected to have a Material Adverse Effect.
5.18. Delivery of Subordinated Loan Documentation and IRB Documentation.
Agent has received complete copies of the Subordinated Loan Documentation and
the IRB Documentation (including all exhibits, schedules and disclosure letters
referred to therein or delivered pursuant thereto, if any) and all amendments
thereto, waivers relating thereto and other side letters or agreements affecting
the terms thereof. None of such documents and agreements has been amended or
supplemented, nor have any of the provisions thereof been waived, except
pursuant to a written agreement or instrument which has heretofore been
delivered to Agent.
5.19. Swaps. No Borrower is a party to, nor will it be a party to, any swap
agreement whereby such Borrower has agreed or will agree to swap interest rates
or currencies unless same provides that damages upon termination following an
event of default thereunder are payable on an unlimited "two-way basis" without
regard to fault on the part of either party.
5.20. Conflicting Agreements. No provision of any mortgage, indenture,
contract, agreement, judgment, decree or order binding on any Borrower or
affecting the Collateral conflicts with, or requires any Consent which has not
already been obtained to, or would in any way prevent the execution, delivery or
performance of, the terms of this Agreement or the Other Documents.
5.21. Application of Certain Laws and Regulations. Neither any Borrower
nor, to any Borrower's knowledge, any Affiliate of any Borrower is subject to
any law, statute, rule or regulation which regulates the incurrence of any
Indebtedness, including laws, statutes, rules or regulations relative to common
or interstate carriers or to the sale of electricity, gas, steam, water,
telephone, telegraph or other public utility services.
5.22. Business and Property of Borrowers. Upon and after the Closing Date,
Borrowers do not propose to engage in any business other than providing security
services and products and activities necessary to conduct the foregoing. On the
Closing Date, each Borrower will own all the property and possess all of the
rights and Consents necessary for the conduct of the business of such Borrower.
5.23. Section 20 Subsidiaries. Borrowers do not intend to use and shall not
use any portion of the proceeds of the Advances, directly or indirectly, to
purchase during the underwriting period, or for 30 days thereafter, Ineligible
Securities being underwritten by a Section 20 Subsidiary.
5.24. Anti-Terrorism Laws.
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a. General. Neither any Borrower nor, to its knowledge, any Affiliate of
any Borrower is in violation of any Anti-Terrorism Law or engages in or
conspires to engage in any transaction that evades or avoids, or has the purpose
of evading or avoiding, or attempts to violate, any of the prohibitions set
forth in any Anti-Terrorism Law.
b. Executive Order No. 13224. Neither any Borrower nor, to its knowledge,
any Affiliate of any Borrower or their respective agents acting or benefiting in
any capacity in connection with the Advances or other transactions hereunder, is
any of the following (each a "Blocked Person"):
(i) a Person that is listed in the annex to, or is otherwise subject to the
provisions of, the Executive Order No. 13224;
(ii) a Person owned or controlled by, or acting for or on behalf of, any
Person that is listed in the annex to, or is otherwise subject to the provisions
of, the Executive Order No. 13224;
(iii) a Person or entity with which any Lender is prohibited from dealing
or otherwise engaging in any transaction by any Anti-Terrorism Law;
(iv) a Person or entity that commits, threatens or conspires to commit or
supports "terrorism" as defined in the Executive Order No. 13224;
(v) a Person or entity that is named as a "specially designated national"
on the most current list published by the U.S. Treasury Department Office of
Foreign Asset Control at its official website or any replacement website or
other replacement official publication of such list, or
(vi) a Person or entity who is affiliated or associated with a Person or
entity listed above.
Neither any Borrower nor to the knowledge of any Borrower, any of its
agents acting in any capacity in connection with the Advances or other
transactions hereunder (i) conducts any business or engages in making or
receiving any contribution of funds, goods or services to or for the benefit of
any Blocked Person, or (ii) deals in, or otherwise engages in any transaction
relating to, any property or interests in property blocked pursuant to the
Executive Order No. 13224.
5.25. Trading with the Enemy. No Borrower has engaged, nor does it intend
to engage, in any business or activity prohibited by the Trading with the Enemy
Act.
5.26. Federal Securities Laws. Neither any Borrower (other than CompuDyne)
nor any of its Subsidiaries (i) is required to file periodic reports under the
Exchange Act, (ii) has any securities registered under the Exchange Act or (iii)
has filed a registration statement that has not yet become effective under the
Securities Act.
VI. AFFIRMATIVE COVENANTS.
Each Borrower shall, until payment in full of the Obligations and
termination of this Agreement:
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6.1. Payment of Fees. Pay to Agent on demand all usual and customary fees
and expenses which Agent incurs in connection with (a) the forwarding of Advance
proceeds and (b) the establishment and maintenance of any Blocked Accounts or
Depository Accounts as provided for in Section 4.15(h). Agent may, without
making demand, charge Borrowers' Account for all such fees and expenses.
6.2. Conduct of Business and Maintenance of Existence and Assets. (a)
Conduct continuously and operate actively its business according to good
business practices and maintain all of its properties useful or necessary in its
business in good working order and condition (reasonable wear and tear excepted
and except as may be disposed of in accordance with the terms of this
Agreement), including all licenses, patents, copyrights, design rights,
tradenames, trade secrets and trademarks and take all actions necessary to
enforce and protect the validity of any intellectual property right or other
right included in the Collateral; (b) keep in full force and effect its
existence and comply in all material respects with the laws and regulations
governing the conduct of its business; and (c) make all such reports and pay all
such franchise and other taxes and license fees and do all such other acts and
things as may be lawfully required to maintain its rights, licenses, leases,
powers and franchises under the laws of the United States or any political
subdivision thereof.
6.3. Violations. Notify Agent, as promptly as practicable, in writing of
any violation of any law, statute, regulation or ordinance of any Governmental
Body, or of any agency thereof, applicable to any Borrower which could
reasonably be expected to have a Material Adverse Effect.
6.4. Government Receivables. Take all steps necessary to protect Agent's
interest in the Collateral under the Uniform Commercial Code and all other
applicable state or local statutes or ordinances; and in the event any Borrower
requests Revolving Advances in excess of $1,000,000 against Receivables arising
out of contracts with the United States or any department, agency or
instrumentality thereof, take all steps necessary to protect Agent's interest in
the Collateral under the Federal Assignment of Claims Act and deliver to Agent,
appropriately endorsed, any instrument or chattel paper connected with any
Receivable arising out of such contracts.
6.5. Financial Covenants.
a. Fixed Charge Coverage Ratio. Commencing with the fiscal quarter ending
June 30, 2006 and as of the end of each fiscal quarter thereafter, cause to be
maintained, a Fixed Charge Coverage Ratio of not less than 1.1 to 1.0.
b. Unrestricted Undrawn Borrowing Base Availability. Cause to be maintained
at all times Unrestricted Undrawn Borrowing Base Availability of not less than
$5,000,000. In the event that Borrowers' Unrestricted Undrawn Borrowing Base
Availability falls below $5,000,000, at any time, Borrowers shall pledge cash
collateral or marketable securities satisfactory to Agent within two (2) days
after the Borrower became aware of such fact pursuant to an agreement or
agreements in form and substance satisfactory to Agent such that Unrestricted
Undrawn Borrowing Base Availability equals or exceeds $5,000,000; provided that,
any cash collateral or securities pledged based on this Section 6.5(b) shall not
be subsequently released without the Agent's prior written consent.
59
6.6. Execution of Supplemental Instruments. Execute and deliver to Agent
from time to time, upon demand, such supplemental agreements, statements,
assignments and transfers, or instructions or documents relating to the
Collateral, and such other instruments as Agent may request, in order that the
full intent of this Agreement may be carried into effect.
6.7. Payment of Indebtedness. Pay, discharge or otherwise satisfy at or
before maturity (subject, where applicable, to specified grace periods and, in
the case of the trade payables, to normal payment practices) all its obligations
and liabilities of whatever nature, except when the failure to do so could not
reasonably be expected to have a Material Adverse Effect or when the amount or
validity thereof is currently being contested in good faith by appropriate
proceedings and each Borrower shall have provided for such reserves as Agent may
reasonably deem proper and necessary in its Permitted Disrection, subject at all
times to any applicable subordination arrangement in favor of Lenders.
6.8. Standards of Financial Statements. Cause all financial statements
referred to in Sections 9.7, 9.8, 9.9, 9.10, 9.11, 9.12, 9.13 and 9.14 as to
which GAAP is applicable to be complete and correct in all material respects
(subject, in the case of interim financial statements, to normal year-end audit
adjustments) and to be prepared in reasonable detail and in accordance with GAAP
applied consistently throughout the periods reflected therein (except as
concurred in by such reporting accountants or officer, as the case may be, and
disclosed therein).
6.9. Federal Securities Laws. Promptly notify Agent in writing if any
Borrower (other than CompuDyne) or any of its Subsidiaries (i) is required to
file periodic reports under the Exchange Act, (ii) registers any securities
under the Exchange Act or (iii) files a registration statement under the
Securities Act.
VII. NEGATIVE COVENANTS.
No Borrower shall, until satisfaction in full of the Obligations and
termination of this Agreement:
7.1. Merger, Consolidation, Acquisition and Sale of Assets.
a. Enter into any merger, consolidation or other reorganization with or
into any other Person (other than another Borrower) or acquire all or a
substantial portion of the assets or Equity Interests of any Person (other than
another Borrower) or permit any other Person (other than another Borrower) to
consolidate with or merge with it.
b. Sell, lease, transfer or otherwise dispose of any of its properties or
assets, except (i) dispositions of Inventory in the Ordinary Course of Business,
(ii) dispositions of assets having a de minimus book value of under $1,000,
(iii) dispositions of machinery and equipment which shall not exceed $100,000 in
any fiscal year, and (iv) any other sales or dispositions expressly permitted by
this Agreement.
7.2. Creation of Liens. Create or suffer to exist any Lien or transfer upon
or against any of its property or assets now owned or hereafter acquired, except
Permitted Encumbrances.
7.3. Guarantees. Become liable upon the obligations or liabilities of any
Person by assumption, endorsement or guaranty thereof or otherwise (other than
to Lenders) except the endorsement of checks in the Ordinary Course of Business.
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7.4. Investments. Purchase or acquire obligations or Equity Interests of,
or any other interest in, any Person, except (a) obligations issued or
guaranteed by the United States of America or any agency thereof, (b) commercial
paper with maturities of not more than 180 days and a published rating of not
less than A-1 or P-1 (or the equivalent rating), (c) certificates of time
deposit and bankers' acceptances having maturities of not more than 180 days and
repurchase agreements backed by United States government securities of a
commercial bank if (i) such bank has a combined capital and surplus of at least
$500,000,000, or (ii) its debt obligations, or those of a holding company of
which it is a Subsidiary, are rated not less than A (or the equivalent rating)
by a nationally recognized investment rating agency, (d) U.S. money market funds
that invest solely in obligations issued or guaranteed by the United States of
America or an agency thereof and (e) investments as set forth on Schedule 7.4.
7.5. Loans. Make advances, loans or extensions of credit to any Person,
including any Parent, Subsidiary or Affiliate except with respect to advances,
loans or extensions of credit from one Borrower to another Borrower and to the
extension of commercial trade credit in connection with the sale of Inventory in
the Ordinary Course of Business.
7.6. Capital Expenditures. Contract for, purchase or make any expenditure
or commitments for Capital Expenditures in any fiscal year in an aggregate
amount for all Borrowers in excess of $1,750,000.
7.7. Dividends. Declare, pay or make any dividend or distribution on any
shares of the common stock or preferred stock of any Borrower (other than
dividends or distributions payable to CompuDyne or from one Borrower to another
Borrower or dividends and distributions payable in its stock, or split-ups or
reclassifications of its stock) or apply any of its funds, property or assets to
the purchase, redemption or other retirement of any common or preferred stock,
or of any options to purchase or acquire any such shares of common or preferred
stock of any Borrower.
7.8. Indebtedness. Create, incur, assume or suffer to exist any
Indebtedness (exclusive of trade debt) except in respect of (i) Indebtedness to
Lenders; (ii) Indebtedness incurred for Capital Expenditures permitted under
Section 7.6 hereof; and (iii) Indebtedness due under the Subordinated Loan
Documentation and IRB Documentation.
7.9. Nature of Business. Substantially change the nature of the business in
which it is presently engaged, nor, except as specifically permitted hereby,
purchase or invest, directly or indirectly, in any assets or property other than
in the Ordinary Course of Business for assets or property which are useful in,
necessary for and are to be used in its business as presently conducted.
7.10. Transactions with Affiliates. Directly or indirectly, purchase,
acquire or lease any property from, or sell, transfer or lease any property to,
or otherwise enter into any transaction or deal with, any Affiliate, except
transactions disclosed to the Agent, which are in the Ordinary Course of
Business, on an arm's-length basis on terms and conditions no less favorable
than terms and conditions which would have been obtainable from a Person other
than an Affiliate.
7.11. Leases. Enter as lessee into any lease arrangement for real or
personal property (unless capitalized and permitted under Section 7.6 hereof) if
after giving effect thereto, aggregate annual rental payments for all leased
property would exceed $3,000,000 in any one fiscal year in the aggregate for all
Borrowers.
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7.12. Subsidiaries.
a. Form any Subsidiary unless (i) such Subsidiary expressly joins in this
Agreement as a borrower and becomes jointly and severally liable for the
obligations of Borrowers hereunder, under the Note, and under any other
agreement between any Borrower and Lenders, (ii) the interests of such
Subsidiary are pledged to the Agent for the benefit of Lenders, and (iii) Agent
shall have received all documents, including legal opinions, it may reasonably
require to establish compliance with each of the foregoing conditions.
b. Enter into any partnership, joint venture or similar arrangement.
7.13. Fiscal Year and Accounting Changes. Change its fiscal year from
December 31 or make any change (i) in accounting treatment and reporting
practices, except as required by GAAP or (ii) in tax reporting treatment, except
as required by law.
7.14. Pledge of Credit. Now or hereafter pledge Agent's or any Lender's
credit on any purchases or for any purpose whatsoever or use any portion of any
Advance in or for any business other than such Borrower's business as conducted
on the date of this Agreement.
7.15. Amendment of Articles of Incorporation, By-Laws. Amend, modify or
waive any term or material provision of its Articles of Incorporation or By-Laws
unless required by law.
7.16. Compliance with ERISA. (i) (x) Maintain, or permit any member of the
Controlled Group to maintain, or (y) become obligated to contribute, or permit
any member of the Controlled Group to become obligated to contribute, to any
Plan, other than those Plans disclosed on Schedule 5.8(d), (ii) engage, or
permit any member of the Controlled Group to engage, in any non-exempt
"prohibited transaction", as that term is defined in section 406 of ERISA and
Section 4975 of the Code, (iii) incur, or permit any member of the Controlled
Group to incur, any "accumulated funding deficiency", as that term is defined in
Section 302 of ERISA or Section 412 of the Code, (iv) terminate, or permit any
member of the Controlled Group to terminate, any Plan where such event could
result in any liability of any Borrower or any member of the Controlled Group or
the imposition of a lien on the property of any Borrower or any member of the
Controlled Group pursuant to Section 4068 of ERISA, (v) assume, or permit any
member of the Controlled Group to assume, any obligation to contribute to any
Multiemployer Plan not disclosed on Schedule 5.8(d), (vi) incur, or permit any
member of the Controlled Group to incur, any withdrawal liability to any
Multiemployer Plan; (vii) fail promptly to notify Agent of the occurrence of any
Termination Event, (viii) fail to comply, or permit a member of the Controlled
Group to fail to comply, with the requirements of ERISA or the Code or other
Applicable Laws in respect of any Plan, (ix) fail to meet, or permit any member
of the Controlled Group to fail to meet, all minimum funding requirements under
ERISA or the Code or postpone or delay or allow any member of the Controlled
Group to postpone or delay any funding requirement with respect of any Plan.
7.17. Prepayment of Indebtedness. Except as permitted pursuant to Section
7.21 hereof, at any time, directly or indirectly, prepay any Indebtedness (other
than to Lenders), or repurchase, redeem, retire or otherwise acquire any
Indebtedness of any Borrower.
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7.18. Anti-Terrorism Laws. No Borrower shall, until satisfaction in full of
the Obligations and termination of this Agreement:
a. Conduct any business or engage in any transaction or dealing with any
Blocked Person, including the making or receiving any contribution of funds,
goods or services to or for the benefit of any Blocked Person.
b. Deal in, or otherwise engage in any transaction relating to, any
property or interests in property blocked pursuant to the Executive Order No.
13224.
c. Engage in or conspire to engage in any transaction that evades or
avoids, or has the purpose of evading or avoiding, or attempts to violate, any
of the prohibitions set forth in the Executive Order No. 13224, the USA PATRIOT
Act or any other Anti-Terrorism Law. Borrower shall deliver to Lenders any
certification or other evidence requested from time to time by any Lender in its
sole discretion, confirming Borrower's compliance with this Section.
7.19. Membership/Partnership Interests. Elect to treat or permit any of its
Subsidiaries to (x) treat its limited liability company membership interests or
partnership interests, as the case may be, as securities as contemplated by the
definition of "security" in Section 8-102(15) and by Section 8-103 of Article 8
of Uniform Commercial Code or (y) certificate its limited liability company
membership interests or partnership interests, as the case may be.
7.20. Trading with the Enemy Act. Engage in any business or activity in
violation of the Trading with the Enemy Act.
7.21. Subordinated Notes and Industrial Revenue Bonds. At any time,
directly or indirectly, pay, prepay, repurchase, redeem, retire or otherwise
acquire, or make any payment on account of any principal of, interest on or
premium payable in connection with the repayment or redemption of the
Subordinated Notes; provided that (A) if Borrowers' Unrestricted Undrawn
Borrowing Base Availability plus cash and marketable securities on hand after
giving effect to such payment is less than Fifteen Million Dollars ($15,000,000)
and no Default or Event of Default exists or would exist after giving to any
such payment, Borrowers may pay the regularly scheduled payments of interest due
on the Subordinated Notes or (B) if Borrowers' Unrestricted Undrawn Borrowing
Base Availability plus cash and marketable securities on hand after giving
effect to such payment is equal to or in excess of Fifteen Million Dollars
($15,000,000), Borrowers may pay the regularly scheduled payments of interest
due on the Subordinated Notes regardless of whether Borrowers are in compliance
with the covenant set forth in Section 6.5(a) so long as no other Default or
Event of Default exists or would exist after giving effect to such payment.
7.22. Other Agreements. Enter into any material amendment, waiver or
modification of the Subordinated Loan Documentation, IRB Documentation or any
related agreements.
VIII. CONDITIONS PRECEDENT.
8.1. Conditions to Initial Advances. The agreement of Lenders to make the
initial Advances requested to be made on the Closing Date is subject to the
satisfaction, or waiver by Agent, immediately prior to or concurrently with the
making of such Advances, of the following conditions precedent:
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a. Note. Agent shall have received the Note duly executed and delivered by
an authorized officer of each Borrower;
b. Filings, Registrations and Recordings. Each document (including any
Uniform Commercial Code financing statement) required by this Agreement, any
related agreement or under law or reasonably requested by the Agent to be filed,
registered or recorded in order to create, in favor of Agent, a perfected
security interest in or lien upon the Collateral shall have been properly filed,
registered or recorded in each jurisdiction in which the filing, registration or
recordation thereof is so required or requested, and Agent shall have received
an acknowledgment copy, or other evidence satisfactory to it, of each such
filing, registration or recordation and satisfactory evidence of the payment of
any necessary fee, tax or expense relating thereto;
c. Corporate Proceedings of Borrowers. Agent shall have received a copy of
the resolutions in form and substance reasonably satisfactory to Agent, of the
Board of Director/Sole Members of each Borrower authorizing (i) the execution,
delivery and performance of this Agreement, the Notes, the Mortgage Modification
Agreement, and any related agreements, (collectively the "Documents") and (ii)
the granting by each Borrower of the security interests in and liens upon the
Collateral in each case certified by the Secretary or an Assistant Secretary of
each Borrower as of the Closing Date; and, such certificate shall state that the
resolutions thereby certified have not been amended, modified, revoked or
rescinded as of the date of such certificate;
d. Incumbency Certificates of Borrowers. Agent shall have received a
certificate of the Secretary or an Assistant Secretary of each Borrower, dated
the Closing Date, as to the incumbency and signature of the officers of each
Borrower executing this Agreement, the Other Documents, any certificate or other
documents to be delivered by it pursuant hereto, together with evidence of the
incumbency of such Secretary or Assistant Secretary;
e. Certificate/Formation. Agent shall have received a copy of the Articles
or Certificate of Incorporation/Formation of each Borrower, and all amendments
thereto, certified by the Secretary of State or other appropriate official of
its jurisdiction of incorporation together with copies of the By-Laws and
Operating Agreements, as applicable, of each Borrower and all agreements of each
Borrower's shareholders or Members as applicable, certified as accurate and
complete by the Secretary of each Borrower;
f. Good Standing Certificates. Agent shall have received good standing
certificates for each Borrower dated not more than 30 days prior to the Closing
Date, issued by the Secretary of State or other appropriate official of each
Borrower's jurisdiction of incorporation and each jurisdiction where the conduct
of each Borrower's business activities or the ownership of its properties
necessitates qualification, except where Agent agrees otherwise;
g. Legal Opinion. Agent shall have received the executed legal opinion of
Ballard Sphar Andrews & Ingersoll, LLP and Roy S. Goldfinger, Esq. in form and
substance satisfactory to Agent which shall cover such matters incident to the
transactions contemplated by this Agreement, the Note, the Mortgage Modification
Agreement, the Other Documents, the Subordination Agreement and related
agreements as Agent may reasonably require and each Borrower hereby authorizes
and directs such counsel to deliver such opinions to Agent and Lenders;
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h. No Litigation. (i) No litigation, investigation or proceeding before or
by any arbitrator or Governmental Body shall be continuing or threatened against
any Borrower or against the officers or directors of any Borrower (A) in
connection with this Agreement, the Other Documents, the Subordinated Loan
Documentation, the IRB Documentation or any of the transactions contemplated
thereby and which, in the reasonable opinion of Agent, is deemed material or (B)
which could, in the reasonable opinion of Agent, have a Material Adverse Effect;
and (ii) no injunction, writ, restraining order or other order of any nature
materially adverse to any Borrower or the conduct of its business shall have
been issued by any Governmental Body;
i. Financial Condition Certificates. Agent shall have received an executed
Financial Condition Certificate in the form of Exhibit 8.1(k).
j. Collateral Examination. Agent shall have completed Collateral
examinations and received appraisals, the results of which shall be satisfactory
in form and substance to Lenders, of the Receivables, Inventory, General
Intangibles, Real Property, and Equipment of each Borrower and all books and
records in connection therewith;
k. Fees. Agent shall have received all fees payable to Agent and Lenders on
or prior to the Closing Date hereunder, including pursuant to Article III
hereof;
l. Reserved;
m. Subordinated Loan Documents and IRB Documents. Agent shall have received
final executed copies of the Subordinated Loan Documentation and the IRB
Documentation, and all related agreements, documents and instruments as in
effect on the Closing Date all of which shall be satisfactory in form and
substance to Agent and the transactions contemplated by such documentation shall
be consummated prior to the making of the initial Advance.
n. Subordination Agreement. Agent shall have entered into a Subordination
Agreement with Borrowers and Trustee which shall set forth the basis upon which
the "Subordinated Noteholder" and "Subordinated Bondholder" may receive, and
Borrowers may make, payments under the Subordinated Notes which basis shall be
satisfactory in form and substance to Agent in its sole discretion;
o. Insurance. Agent shall have received in form and substance satisfactory
to Agent, certified copies of Borrowers' casualty insurance policies, together
with loss payable endorsements on Agent's standard form of loss payee
endorsement naming Agent as loss payee, and certified copies of Borrowers'
liability insurance policies, together with endorsements naming Agent as a
co-insured;
p. Title Insurance. Agent shall have received fully paid mortgagee title
insurance policies (or binding commitments to issue title insurance policies,
marked to Agent's satisfaction to evidence the form of such policies to be
delivered with respect to the Mortgage Modification Agreement), in standard ALTA
form, issued by a title insurance company satisfactory to Agent, each in an
amount equal to not less than the fair market value of the Real Property subject
to the Mortgage Modification Agreement, insuring the Mortgage Modification
Agreement (and the underlying mortgages) to create a valid Lien on the Real
Property with no exceptions which Agent shall not have approved;
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q. Environmental Reports. Agent shall have received all environmental
studies and reports prepared by independent environmental engineering firms with
respect to all Real Property owned or leased by any Borrower;
r. Payment Instructions. Agent shall have received written instructions
from Borrowing Agent directing the application of proceeds of the initial
Advances made pursuant to this Agreement;
s. Blocked Accounts. In the event that Borrowers request a Revolving
Advance on the Closing Date, Agent shall have received duly executed agreements
establishing the Blocked Accounts or Depository Accounts with financial
institutions acceptable to Agent for the collection or servicing of the
Receivables and proceeds of the Collateral;
t. Consents. Agent shall have received any and all Consents necessary to
permit the effectuation of the transactions contemplated by this Agreement and
the Other Documents; and, Agent shall have received such Consents and waivers of
such third parties as might assert claims with respect to the Collateral, as
Agent and its counsel shall deem necessary;
u. No Adverse Material Change. (i) since September 30, 2005, there shall
not have occurred any event, condition or state of facts which could reasonably
be expected to have a Material Adverse Effect and (ii) no representations made
or information supplied to Agent or Lenders shall have been proven to be
inaccurate or misleading in any material respect;
v. Leasehold Agreements. Agent shall have received landlord, mortgagee or
warehouseman agreements satisfactory to Agent with respect to all premises
leased by Borrowers at which Inventory and books and records are located;
w. Mortgage Modification Agreement. Agent shall have received in form and
substance satisfactory to Lenders (i) an executed Mortgage Modification
Agreement and (ii) a title policy for the Real Property and (iii) surveys;
x. Subordinated Note Documentation. Agent shall have received final
executed copies of the Subordinated Note and all other Subordinated Loan
Documentation and the IRB Documentation which shall contain such terms and
provisions including subordination terms, satisfactory to Agent;
y. Contract Review. Agent shall have reviewed all material contracts of
Borrowers including leases, union contracts, labor contracts, vendor supply
contracts, license agreements and distributorship agreements and such contracts
and agreements shall be satisfactory in all respects to Agent;
z. Closing Certificate. Agent shall have received a closing certificate
signed by the Chief Financial Officer of each Borrower dated as of the date
hereof, stating that (i) all representations and warranties set forth in this
Agreement and the Other Documents are true and correct on and as of such date,
(ii) Borrowers are on such date in compliance with all the terms and provisions
set forth in this Agreement and the Other Documents and (iii) on such date no
Default or Event of Default has occurred or is continuing;
aa. Borrowing Base. Agent shall have received evidence from Borrowers that
the aggregate amount of the Eligible Receivables and Eligible Inventory as of
October 31, 2005 is sufficient in value and amount to support Advances in the
amount requested by Borrowers on the Closing Date;
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bb. Undrawn Availability. After giving effect to the initial Advances
hereunder, Borrowers shall have Undrawn Availability of at least $10,000,000;
and
cc. Compliance with Laws. Agent shall be reasonably satisfied that each
Borrower is in compliance with all pertinent federal, state, local or
territorial regulations, including those with respect to the Federal
Occupational Safety and Health Act, the Environmental Protection Act, ERISA and
the Trading with the Enemy Act.
dd. Securities Account Control Agreement. Agent shall have received the
fully executed Securities Account Control Agreement.
ee. Other. All corporate and other proceedings, and all documents,
instruments and other legal matters in connection with the transactions
hereunder shall be satisfactory in form and substance to Agent and its counsel.
8.2. Conditions to Each Advance. The agreement of Lenders to make any
Advance (including without limitation a request for the issuance of a Letter of
Credit) requested to be made on any date (including the initial Advance), is
subject to the satisfaction of the following conditions precedent as of the date
such Advance is made:
a. Representations and Warranties. Each of the representations and
warranties made by any Borrower in or pursuant to this Agreement, the Other
Documents and any related agreements to which it is a party, and each of the
representations and warranties contained in any certificate, document or
financial or other statement furnished at any time under or in connection with
this Agreement, the Other Documents or any related agreement shall be true and
correct in all material respects on and as of such date as if made on and as of
such date;
b. No Default. No Event of Default or Default shall have occurred and be
continuing on such date, or would exist after giving effect to the Advances
requested to be made, on such date; provided, however that Agent, in its sole
discretion, may continue to make Advances notwithstanding the existence of an
Event of Default or Default and that any Advances so made shall not be deemed a
waiver of any such Event of Default or Default;
c. Borrowing Base Certificate. Borrowers redeliver to Agent the most
recently delivered Borrowing Base Certificate at the time of such request (which
shall be adjusted to include any Advances requested since the last Borrowing
Base Certificate delivered, and which shall not be binding upon Agent, or
restrictive of Agent's rights under this Agreement); and
d. Maximum Advances. In the case of any type of Advance requested to be
made, after giving effect thereto, the aggregate amount of such type of Advance
shall not exceed the maximum amount of such type of Advance permitted under this
Agreement.
Each request for an Advance by any Borrower hereunder shall constitute a
representation and warranty by each Borrower as of the date of such Advance that
the conditions contained in this subsection shall have been satisfied.
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8.3. Conditions to Revolving Advances. Borrowers hereby acknowledge and
confirm that no Revolving Advances shall be made under this Agreement unless and
until the conditions set forth in Section 4.15(h) have been satisfied.
IX. INFORMATION AS TO BORROWERS.
Each Borrower shall, or (except with respect to Section 9.11) shall cause
Borrowing Agent on its behalf to, until satisfaction in full of the Obligations
and the termination of this Agreement:
9.1. Disclosure of Material Matters. Immediately upon learning thereof,
report to Agent all matters materially affecting the value, enforceability or
collectibility of any portion of the Collateral, including any Borrower's
reclamation or repossession of, or the return to any Borrower of, a material
amount of goods or claims or disputes asserted by any Customer or other obligor.
9.2. Schedules. Deliver to Agent on or before the thirtieth (30th) day of
each month as and for the prior month (a) accounts receivable ageings inclusive
of reconciliations to the general ledger, (b) accounts payable schedules
inclusive of reconciliations to the general ledger, (c) Inventory reports and
(d) a Borrowing Base Certificate (which shall be calculated as of the last day
of the prior month and which shall not be binding upon Agent or restrictive of
Agent's rights under this Agreement). In addition, each Borrower will deliver to
Agent at such intervals as Agent may require: (i) confirmatory assignment
schedules, (ii) copies of Customer's invoices, (iii) evidence of shipment or
delivery, and (iv) such further schedules, documents and/or information
regarding the Collateral as Agent may require including trial balances and test
verifications. Agent shall have the right to confirm and verify all Receivables
by any manner and through any medium it considers advisable and do whatever it
may deem reasonably necessary to protect its interests hereunder. The items to
be provided under this Section are to be in form satisfactory to Agent and
executed by each Borrower and delivered to Agent from time to time solely for
Agent's convenience in maintaining records of the Collateral, and any Borrower's
failure to deliver any of such items to Agent shall not affect, terminate,
modify or otherwise limit Agent's Lien with respect to the Collateral.
9.3. Environmental Reports. Furnish Agent, concurrently with the delivery
of the financial statements referred to in Sections 9.7 and 9.8, with a
certificate signed by the President of Borrowing Agent stating, to the best of
his knowledge, that each Borrower is in compliance in all material respects with
all federal, state and local Environmental Laws. To the extent any Borrower is
not in compliance with the foregoing laws, the certificate shall set forth with
specificity all areas of non-compliance and the proposed action such Borrower
will implement in order to achieve full compliance.
9.4. Litigation. Notify Agent, as promptly as practicable, in writing of
any claim, litigation, suit or administrative proceeding affecting any Borrower,
whether or not the claim is covered by insurance, if adversely determined, which
could give rise to a liability of such Borrower of $250,000 or more or which
otherwise could reasonably be expected to have a Material Adverse Effect.
9.5. Material Occurrences. Notify Agent, as promptly as practicable, in
writing upon the occurrence of (a) any Event of Default or Default; (b) any
event of default under the Subordinated Loan Documentation or IRB Documentation;
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(c) any event which with the giving of notice or lapse of time, or both, would
constitute an event of default under the Subordinated Loan Documentation or the
IRB Documentation; (d) any event, development or circumstance whereby any
financial statements or other reports furnished to Agent fail in any material
respect to present fairly, in accordance with GAAP consistently applied, the
financial condition or operating results of any Borrower as of the date of such
statements; (e) any accumulated retirement plan funding deficiency which, if
such deficiency continued for two plan years and was not corrected as provided
in Section 4971 of the Code, could subject any Borrower to a tax imposed by
Section 4971 of the Code; (f) each and every default by any Borrower which might
result in the acceleration of the maturity of any Indebtedness in excess of
$50,000, including the names and addresses of the holders of such Indebtedness
with respect to which there is a default existing or with respect to which the
maturity has been or could be accelerated, and the amount of such Indebtedness;
and (g) any other development in the business or affairs of any Borrower or any
Guarantor, which could reasonably be expected to have a Material Adverse Effect;
in each case describing the nature thereof and the action Borrowers propose to
take with respect thereto.
9.6. Government Receivables. Immediately notify Agent if any of its
Receivables included or to be included as an Eligible Receivable arises out of
contracts between any Borrower and the United States, any state, or any
department, agency or instrumentality of any of them.
9.7. Annual Financial Statements. Furnish Agent within ninety (90) days
after the end of each fiscal year of Borrowers, financial statements of
Borrowers on a consolidating and consolidated basis including, but not limited
to, statements of operations and stockholders' equity and cash flow from the
beginning of the current fiscal year to the end of such fiscal year and the
balance sheet as at the end of such fiscal year, all prepared in accordance with
GAAP applied on a basis consistent with prior practices, and in reasonable
detail and reported upon without qualification (except, to the extent
applicable, in the case of any qualifications in connection with Section 404 of
the Sarbanes-Oxley Act of 2002 related to management's assessment of internal
controls) by an Aronson & Co. (the "Accountants"). The report of the Accountants
shall be accompanied by a statement of the Accountants certifying that (i) they
have caused this Agreement to be reviewed, (ii) in making the examination upon
which such report was based either no information came to their attention which
to their knowledge constituted an Event of Default or a Default under this
Agreement or any related agreement or, if such information came to their
attention, specifying any such Default or Event of Default, its nature, when it
occurred and whether it is continuing, and such report shall contain or have
appended thereto calculations which set forth Borrowers' compliance with the
requirements or restrictions imposed by Sections 6.5, 7.4, 7.5, 7.6, 7.7, 7.8
and 7.11 hereof. In addition, the reports shall be accompanied by a Compliance
Certificate.
9.8. Quarterly Financial Statements. Furnish Agent within forty five (45)
days after the end of each fiscal quarter, an unaudited balance sheet of
Borrowers on a consolidated and consolidating basis and unaudited statements of
operations on a consolidated and consolidating basis and stockholders' equity
and cash flow of Borrowers on a consolidated basis reflecting results of
operations from the beginning of the fiscal year to the end of such quarter and
for such quarter, prepared on a basis consistent with prior practices and
complete and correct in all material respects, subject to normal and recurring
year end adjustments that individually and in the aggregate are not material to
Borrowers' business. The reports shall be accompanied by a Compliance
Certificate.
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9.9. Monthly Financial Statements. Furnish Agent within thirty (30) days
after the end of each month (other than statements that are due for the month of
January, which shall be delivered within 60 days after the end of such month,
and for the month of February which shall be delivered within 45 days after the
end of such month), an unaudited balance sheet of Borrowers on a consolidated
and consolidating basis and unaudited statements of operations on a consolidated
and consolidating basis and stockholders' equity and cash flow of Borrowers on a
consolidated basis reflecting results of operations from the beginning of the
fiscal year to the end of such month and for such month, prepared on a basis
consistent with prior practices and complete and correct in all material
respects, subject to normal and recurring year end adjustments that individually
and in the aggregate are not material to Borrowers' business.
9.10. Other Reports. Furnish Agent as soon as available, but in any event
within ten (10) days after the issuance thereof, (i) with copies of such
financial statements, reports and returns as each Borrower shall send to its
stockholders, and (ii) copies of all notices, reports, financial statements and
other materials sent pursuant to the Subordinated Loan Documentation and the IRB
Documentation.
9.11. Additional Information. Furnish Agent with such additional
information as Agent shall reasonably request in order to enable Agent to
determine whether the terms, covenants, provisions and conditions of this
Agreement and the Note have been complied with by Borrowers including, without
the necessity of any request by Agent, (a) copies of all environmental audits
and reviews, (b) at least thirty (30) days prior thereto, notice of any
Borrower's opening of any new office or place of business or any Borrower's
closing of any existing office or place of business, (c) as promptly as
practicable upon any Borrower's learning thereof, notice of any labor dispute to
which any Borrower may become a party, any strikes or walkouts relating to any
of its plants or other facilities, and the expiration of any labor contract to
which any Borrower is a party or by which any Borrower is bound, (d) copies of
all management letters received by Borrowers and (e) reports of any new
contracts in excess of $2,000,000.
9.12. Projected Operating Budget. Furnish Agent, no later than thirty (30)
days prior to the beginning of each Borrower's fiscal years commencing with
fiscal year 2007, a month by month projected operating budget and cash flow of
Borrowers on a consolidated and consolidating basis for such fiscal year
(including an income statement for each month and a balance sheet as at the end
of the last month in each fiscal quarter), such projections to be accompanied by
a certificate signed by the President or Chief Financial Officer of each
Borrower to the effect that such projections have been prepared on the basis of
sound financial planning practice consistent with past budgets and financial
statements and that such officer has no reason to question the reasonableness of
any material assumptions on which such projections were prepared.
9.13. Variances From Operating Budget. Furnish Agent, concurrently with the
delivery of the financial statements referred to in Section 9.7 and each monthly
report, a written report summarizing all material variances from budgets
submitted by Borrowers pursuant to Section 9.12 and a discussion and analysis by
management with respect to such variances.
9.14. Notice of Suits, Adverse Events. Furnish Agent with prompt written
notice of (i) any lapse or other termination of any Consent issued to any
Borrower by any Governmental Body or any other Person that is material to the
operation of any Borrower's business, (ii) any refusal by any Governmental Body
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or any other Person to renew or extend any such Consent, (iii) copies of any
material notices, communications, periodic or special reports filed by any
Borrower or any Guarantor with any Governmental Body or Person, if such reports
indicate any adverse material change in the business, operations, affairs or
condition of any Borrower or any Guarantor, or if copies thereof are requested
by Lender, and (iv) copies of any material notices and other communications from
any Governmental Body or Person which specifically relate to any Borrower or any
Guarantor.
9.15. ERISA Notices and Requests. Furnish Agent with immediate written
notice in the event that (i) any Borrower or any member of the Controlled Group
knows or has reason to know that a Termination Event has occurred, together with
a written statement describing such Termination Event and the action, if any,
which such Borrower or any member of the Controlled Group has taken, is taking,
or proposes to take with respect thereto and, when known, any action taken or
threatened by the Internal Revenue Service, Department of Labor or PBGC with
respect thereto, (ii) any Borrower or any member of the Controlled Group knows
or has reason to know that a prohibited transaction (as defined in Sections 406
of ERISA and 4975 of the Code) has occurred together with a written statement
describing such transaction and the action which such Borrower or any member of
the Controlled Group has taken, is taking or proposes to take with respect
thereto, (iii) a funding waiver request has been filed with respect to any Plan
together with all communications received by any Borrower or any member of the
Controlled Group with respect to such request, (iv) any increase in the benefits
of any existing Plan or the establishment of any new Plan or the commencement of
contributions to any Plan to which any Borrower or any member of the Controlled
Group was not previously contributing shall occur, (v) any Borrower or any
member of the Controlled Group shall receive from the PBGC a notice of intention
to terminate a Plan or to have a trustee appointed to administer a Plan,
together with copies of each such notice, (vi) any Borrower or any member of the
Controlled Group shall receive any favorable or unfavorable determination letter
from the Internal Revenue Service regarding the qualification of a Plan under
Section 401(a) of the Code, together with copies of each such letter; (vii) any
Borrower or any member of the Controlled Group shall receive a notice regarding
the imposition of withdrawal liability, together with copies of each such
notice; (viii) any Borrower or any member of the Controlled Group shall fail to
make a required installment or any other required payment under Section 412 of
the Code on or before the due date for such installment or payment; (ix) any
Borrower or any member of the Controlled Group knows that (a) a Multiemployer
Plan has been terminated, (b) the administrator or plan sponsor of a
Multiemployer Plan intends to terminate a Multiemployer Plan, or (c) the PBGC
has instituted or will institute proceedings under Section 4042 of ERISA to
terminate a Multiemployer Plan.
9.16. Additional Documents. Execute and deliver to Agent, upon request,
such documents and agreements as Agent may, from time to time, reasonably
request to carry out the purposes, terms or conditions of this Agreement.
X. EVENTS OF DEFAULT.
The occurrence of any one or more of the following events shall constitute
an "Event of Default":
10.1. Nonpayment. Failure by any Borrower to pay any principal or interest
on the Obligations when due, whether at maturity or by reason of acceleration
pursuant to the terms of this Agreement or by notice of intention to prepay, or
by required prepayment or failure to pay any other liabilities or make any other
payment, fee or charge provided for herein when due or in any Other Document;
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10.2. Breach of Representation. Any representation or warranty made or
deemed made by any Borrower or any Guarantor in this Agreement, any Other
Document or any related agreement or in any certificate, document or financial
or other statement furnished at any time in connection herewith or therewith
shall prove to have been misleading in any material respect on the date when
made or deemed to have been made;
10.3. Financial Information. Failure by any Borrower to (i) furnish
financial information when due or when requested, or (ii) permit the inspection
of its books or records;
10.4. Judicial Actions. Issuance of a notice of Lien, levy, assessment,
injunction or attachment against any Borrower's Inventory or Receivables or
against a material portion of any Borrower's other property;
10.5. Noncompliance. Except as otherwise provided for in Sections 10.1,
10.3 and 10.5(ii), (i) failure or neglect of any Borrower or any Guarantor to
perform, keep or observe any term, provision, condition, covenant herein (other
than those listed in clause (ii) below) contained, or contained in any Other
Document or any other agreement or arrangement, now or hereafter entered into
between any Borrower or any Guarantor, and Agent or any Lender, or (ii) failure
or neglect of any Borrower to perform, keep or observe any term, provision,
condition or covenant, contained in Sections 4.6, 4.7, 4.9, 6.1, 6.3, 6.4, 9.4
or 9.6 hereof which is not cured within fifteen (15) days from the occurrence of
such failure or neglect;
10.6. Judgments. Any judgment or judgments are rendered against any
Borrower or any Guarantor for an aggregate amount in excess of $250,000 or
against all Borrowers or Guarantors resulting in a liability in an aggregate
amount in excess of $250,000, (excluding any such judgment, or orders which are
fully covered by insurance, subject to any customary deductible), and under
which the applicable insurance carrier has acknowledged full coverage in
writing) and all such judgments shall have not been vacated, discharged,
settled, satisfied or paid, or styled or bonded pending appeal, within 30 days
from the entry thereof;
10.7. Bankruptcy. Any Borrower, any Subsidiary of a Borrower or any
Guarantor shall (i) apply for, consent to or suffer the appointment of, or the
taking of possession by, a receiver, custodian, trustee, liquidator or similar
fiduciary of itself or of all or a substantial part of its property, (ii) make a
general assignment for the benefit of creditors, (iii) commence a voluntary case
under any state or federal bankruptcy laws (as now or hereafter in effect), (iv)
be adjudicated a bankrupt or insolvent, (v) file a petition seeking to take
advantage of any other law providing for the relief of debtors, (vi) acquiesce
to, or fail to have dismissed, within forty-five (45) days, any petition filed
against it in any involuntary case under such bankruptcy laws, or (vii) take any
action for the purpose of effecting any of the foregoing;
10.8. Inability to Pay. Any Borrower or any Guarantor shall admit in
writing its inability, or be generally unable, to pay its debts as they become
due or cease operations of its present business;
10.9. Intentionally Omitted.
10.10. Material Adverse Effect. Any change in any Borrower's or any
Guarantor's results of operations or condition (financial or otherwise) which in
Agent's Permitted Discretion has a Material Adverse Effect;
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10.11. Lien Priority. Subject to Permitted Encumbrances, any Lien created
hereunder or provided for hereby or under any related agreement for any reason
ceases to be or is not a valid and perfected Lien having a first priority
interest;
10.12. Subordinated Loan or IRB Default. An event of default has occurred
under the Subordinated Loan Documentation, IRB Documentation or the
Subordination Agreement, which default shall not have been cured or waived
within any applicable grace period;
10.13. Cross Default. A default of the obligations of any Borrower under
any other agreement to which it is a party shall occur which adversely affects
its condition, affairs or prospects (financial or otherwise) which default if
not cured within any applicable grace period could reasonably be expected to
result in an Material Adverse Effect;
10.14. Breach of Guaranty. Termination or breach of any Guaranty or
Guaranty Security Agreement or similar agreement executed and delivered to Agent
in connection with the Obligations of any Borrower, or if any Guarantor attempts
to terminate, challenges the validity of, or its liability under, any such
Guaranty or Guaranty Security Agreement or similar agreement;
10.15. Change of Ownership. Any Change of Ownership shall occur;
10.16. Invalidity. Any material provision of this Agreement or any Other
Document shall, for any reason, cease to be valid and binding on Borrower or any
Guarantor, or any Borrower or any Guarantor shall so claim in writing to Agent
or any Lender;
10.17. Licenses. (i) Any Governmental Body shall (A) revoke, terminate,
suspend or adversely modify any material license, permit, patent trademark or
tradename of any Borrower or any Guarantor, or (B) commence proceedings to
suspend, revoke, terminate or adversely modify any such material license,
permit, trademark, tradename or patent and such proceedings shall not be
dismissed or discharged within sixty (60) days, or (c) schedule or conduct a
hearing on the renewal of any license, permit, trademark, tradename or patent
necessary for the continuation of any Borrower's or any Guarantor's business and
the staff of such Governmental Body issues a report recommending the
termination, revocation, suspension or material, adverse modification of such
material license, permit, trademark, tradename or patent; (ii) any agreement
which is necessary or material to the operation of any Borrower's or any
Guarantor's business shall be revoked or terminated and not replaced by a
substitute acceptable to Agent within thirty (30) days after the date of such
revocation or termination, and such revocation or termination and
non-replacement would reasonably be expected to have a Material Adverse Effect;
10.18. Seizures. Any portion of the Collateral shall be seized or taken by
a Governmental Body, or any Borrower or any Guarantor, or the title and rights
of any Borrower or any Guarantor which is the owner of any material portion of
the Collateral, shall have become the subject matter of claim, litigation, suit,
or other proceeding which might, in Agent's Permitted Discretion, upon final
determination, result in impairment or loss of the security provided by this
Agreement or the Other Documents;
10.19. Operations. The operations of any Borrower's or any Guarantor's
manufacturing facility are interrupted at any time for more than five (5)
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consecutive Business Days, unless such Borrower or Guarantor shall (i) be
entitled to receive for such period of interruption, proceeds of business
interruption insurance sufficient to assure that its per diem cash needs during
such period is at least equal to its average per diem cash needs for the
consecutive three month period immediately preceding the initial date of
interruption and (ii) receive such proceeds in the amount described in clause
(i) preceding not later than thirty (30) days following the initial date of any
such interruption; provided, however, that notwithstanding the provisions of
clauses (i) and (ii) of this section, an Event of Default shall be deemed to
have occurred if such Borrower or Guarantor shall be receiving the proceeds of
business interruption insurance for a period of thirty (30) consecutive days; or
10.20. Pension Plans. An event or condition specified in Sections 7.16 or
9.15 hereof shall occur or exist with respect to any Plan and, as a result of
such event or condition, together with all other such events or conditions, any
Borrower or any member of the Controlled Group shall incur, or in the opinion of
Agent be reasonably likely to incur, a liability to a Plan or the PBGC (or both)
which, in the reasonable judgment of Agent, would have a Material Adverse
Effect.
XI. LENDERS' RIGHTS AND REMEDIES AFTER DEFAULT.
11.1. Rights and Remedies.
a. Upon the occurrence of (i) an Event of Default pursuant to Section 10.7
all Obligations shall be immediately due and payable and this Agreement and the
obligation of Lenders to make Advances shall be deemed terminated; and, (ii) any
of the other Events of Default and at any time thereafter (such default not
having previously been cured), at the option of Required Lenders all Obligations
shall be immediately due and payable and Lenders shall have the right to
terminate this Agreement and to terminate the obligation of Lenders to make
Advances and (iii) a filing of a petition against any Borrower in any
involuntary case under any state or federal bankruptcy laws, all Obligations
shall be immediately due and payable and the obligation of Lenders to make
Advances hereunder shall be terminated other than as may be required by an
appropriate order of the bankruptcy court having jurisdiction over such
Borrower. Upon the occurrence of any Event of Default, Agent shall have the
right to exercise any and all rights and remedies provided for herein, under the
Other Documents, under the Uniform Commercial Code and at law or equity
generally, including the right to foreclose the security interests granted
herein and to realize upon any Collateral by any available judicial procedure
and/or to take possession of and sell any or all of the Collateral with or
without judicial process. Agent may enter any of any Borrower's premises or
other premises without legal process and without incurring liability to any
Borrower therefor, and Agent may thereupon, or at any time thereafter, in its
discretion without notice or demand, take the Collateral and remove the same to
such place as Agent may deem advisable and Agent may require Borrowers to make
the Collateral available to Agent at a convenient place. With or without having
the Collateral at the time or place of sale, Agent may sell the Collateral, or
any part thereof, at public or private sale, at any time or place, in one or
more sales, at such price or prices, and upon such terms, either for cash,
credit or future delivery, as Agent may elect. Except as to that part of the
Collateral which is perishable or threatens to decline speedily in value or is
of a type customarily sold on a recognized market, Agent shall give Borrowers
reasonable notification of such sale or sales, it being agreed that in all
events written notice mailed to Borrowing Agent at least ten (10) days prior to
such sale or sales is reasonable notification. At any public sale Agent or any
Lender may bid for and become the purchaser, and Agent, any Lender or any other
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purchaser at any such sale thereafter shall hold the Collateral sold absolutely
free from any claim or right of whatsoever kind, including any equity of
redemption and all such claims, rights and equities are hereby expressly waived
and released by each Borrower. In connection with the exercise of the foregoing
remedies, including the sale of Inventory, Agent is granted a perpetual
non-revocable, royalty free, nonexclusive license and Agent is granted
permission to use all of each Borrower's (a) trademarks, trade styles, trade
names, patents, patent applications, copyrights, service marks, licenses,
franchises and other proprietary rights which are used or useful in connection
with Inventory for the purpose of marketing, advertising for sale and selling or
otherwise disposing of such Inventory and (b) Equipment for the purpose of
completing the manufacture of unfinished goods. The cash proceeds realized from
the sale of any Collateral shall be applied to the Obligations in the order set
forth in Section 11.5 hereof. Non-cash proceeds will only be applied to the
Obligations as they are converted into cash. If any deficiency shall arise,
Borrowers shall remain liable to Agent and Lenders therefor.
b. To the extent that Applicable Law imposes duties on the Agent to
exercise remedies in a commercially reasonable manner, each Borrower
acknowledges and agrees that it is not commercially unreasonable for the Agent
(i) to fail to incur expenses reasonably deemed significant by the Agent to
prepare Collateral for disposition or otherwise to complete raw material or work
in process into finished goods or other finished products for disposition, (ii)
to fail to obtain third party consents for access to Collateral to be disposed
of, or to obtain or, if not required by other law, to fail to obtain
governmental or third party consents for the collection or disposition of
Collateral to be collected or disposed of, (iii) to fail to exercise collection
remedies against Customers or other Persons obligated on Collateral or to remove
Liens on or any adverse claims against Collateral, (iv) to exercise collection
remedies against Customers and other Persons obligated on Collateral directly or
through the use of collection agencies and other collection specialists, (v) to
advertise dispositions of Collateral through publications or media of general
circulation, whether or not the Collateral is of a specialized nature, (vi) to
contact other Persons, whether or not in the same business as any Borrower, for
expressions of interest in acquiring all or any portion of such Collateral,
(vii) to hire one or more professional auctioneers to assist in the disposition
of Collateral, whether or not the Collateral is of a specialized nature, (viii)
to dispose of Collateral by utilizing internet sites that provide for the
auction of assets of the types included in the Collateral or that have the
reasonable capacity of doing so, or that match buyers and sellers of assets,
(ix) to dispose of assets in wholesale rather than retail markets, (x) to
disclaim disposition warranties, such as title, possession or quiet enjoyment,
(xi) to purchase insurance or credit enhancements to insure the Agent against
risks of loss, collection or disposition of Collateral or to provide to the
Agent a guaranteed return from the collection or disposition of Collateral, or
(xii) to the extent deemed appropriate by the Agent, to obtain the services of
other brokers, investment bankers, consultants and other professionals to assist
the Agent in the collection or disposition of any of the Collateral. Each
Borrower acknowledges that the purpose of this Section 11.1(b) is to provide
non-exhaustive indications of what actions or omissions by the Agent would not
be commercially unreasonable in the Agent's exercise of remedies against the
Collateral and that other actions or omissions by the Agent shall not be deemed
commercially unreasonable solely on account of not being indicated in this
Section 11.1(b). Without limitation upon the foregoing, nothing contained in
this Section 11.1(b) shall be construed to grant any rights to any Borrower or
to impose any duties on Agent that would not have been granted or imposed by
this Agreement or by Applicable Law in the absence of this Section 11.1(b).
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11.2. Agent's Discretion. Agent shall have the right in its sole discretion
to determine which rights, Liens, security interests or remedies Agent may at
any time pursue, relinquish, subordinate, or modify or to take any other action
with respect thereto and such determination will not in any way modify or affect
any of Agent's or Lenders' rights hereunder.
11.3. Setoff. Subject to Section 14.12, in addition to any other rights
which Agent or any Lender may have under Applicable Law, upon the occurrence of
an Event of Default hereunder, Agent and such Lender shall have a right,
immediately and without notice of any kind, to apply any Borrower's property
held by Agent and such Lender to reduce the Obligations.
11.4. Rights and Remedies not Exclusive. The enumeration of the foregoing
rights and remedies is not intended to be exhaustive and the exercise of any
rights or remedy shall not preclude the exercise of any other right or remedies
provided for herein or otherwise provided by law, all of which shall be
cumulative and not alternative.
11.5. Allocation of Payments After Event of Default. Notwithstanding any
other provisions of this Agreement to the contrary, after the occurrence and
during the continuance of an Event of Default, all amounts collected or received
by the Agent on account of the Obligations or any other amounts outstanding
under any of the Other Documents or in respect of the Collateral may, at Agent's
discretion, be paid over or delivered as follows:
FIRST, to the payment of all reasonable out-of-pocket costs and expenses
(including reasonable attorneys' fees) of the Agent in connection with enforcing
its rights and the rights of the Lenders under this Agreement and the Other
Documents and any protective advances made by the Agent with respect to the
Collateral under or pursuant to the terms of this Document;
SECOND, to payment of any fees owed to the Agent;
THIRD, to the payment of all reasonable out-of-pocket costs and expenses
(including reasonable attorneys' fees) of each of the Lenders in connection with
enforcing its rights under this Agreement and the Other Documents or otherwise
with respect to the Obligations owing to such Lender;
FOURTH, to the payment of all of the Obligations consisting of accrued fees
and interest;
FIFTH, to the payment of the outstanding principal amount of the
Obligations (including the payment or cash collateralization of any outstanding
Letters of Credit);
SIXTH, to all other Obligations and other obligations which shall have
become due and payable under the Other Documents or otherwise and not repaid
pursuant to clauses "FIRST" through "FIFTH" above; and
SEVENTH, to the payment of the surplus, if any, to whoever may be lawfully
entitled to receive such surplus.
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In carrying out the foregoing, (i) amounts received shall be applied in the
numerical order provided until exhausted prior to application to the next
succeeding category; (ii) each of the Lenders shall receive (so long as it is
not a Defaulting Lender) an amount equal to its pro rata share (based on the
proportion that the then outstanding Advances held by such Lender bears to the
aggregate then outstanding Advances) of amounts available to be applied pursuant
to clauses "FOURTH", "FIFTH" and "SIXTH" above; and (iii) to the extent that any
amounts available for distribution pursuant to clause "FIFTH" above are
attributable to the issued but undrawn amount of outstanding Letters of Credit,
such amounts shall be held by the Agent in a cash collateral account and applied
(A) first, to reimburse the Issuer from time to time for any drawings under such
Letters of Credit and (B) then, following the expiration of all Letters of
Credit, to all other obligations of the types described in clauses "FIFTH" and
"SIXTH" above in the manner provided in this Section 11.5.
XII. WAIVERS AND JUDICIAL PROCEEDINGS.
12.1. Waiver of Notice. Each Borrower hereby waives notice of non-payment
of any of the Receivables, demand, presentment, protest and notice thereof with
respect to any and all instruments, notice of acceptance hereof, notice of loans
or advances made, credit extended, Collateral received or delivered, or any
other action taken in reliance hereon, and all other demands and notices of any
description, except such as are expressly provided for herein.
12.2. Delay. No delay or omission on Agent's or any Lender's part in
exercising any right, remedy or option shall operate as a waiver of such or any
other right, remedy or option or of any Default or Event of Default.
12.3. Jury Waiver. EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY
RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (A)
ARISING UNDER THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR (B) IN ANY WAY CONNECTED WITH
OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM
WITH RESPECT TO THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO
OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER
SOUNDING IN CONTRACT OR TORT OR OTHERWISE AND EACH PARTY HEREBY CONSENTS THAT
ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT
TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE
CONSENTS OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
XIII. EFFECTIVE DATE AND TERMINATION.
13.1. Term. This Agreement, which shall inure to the benefit of and shall
be binding upon the respective successors and permitted assigns of each
Borrower, Agent and each Lender, shall become effective on the date hereof and
shall continue in full force and effect until December 18, 2008 (the "Term")
unless sooner terminated as herein provided. Borrowers may terminate this
Agreement at any time upon ninety (90) days' prior written notice upon payment
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in full of the Obligations. In the event the Obligations are prepaid in full
prior to the last day of the Term (the date of such prepayment hereinafter
referred to as the "Early Termination Date"), Borrowers shall pay to Agent for
the benefit of Lenders an early termination fee in an amount equal to (x) two
percent (2.00%) of the Maximum Revolving Advance Amount if the Early Termination
Date occurs on or after the Closing Date to and including the date immediately
preceding the first anniversary of the Closing Date, (y) one percent (1.00%) of
the Maximum Revolving Advance Amount if the Early Termination Date occurs on or
after the first anniversary of the Closing Date to and including the date
immediately preceding the second anniversary of the Closing Date, and (z)
one-half of one percent (.5%) of the Maximum Revolving Advance Amount if the
Early Termination Date occurs on or after the second anniversary of the Closing
Date to and including the date immediately preceding the third anniversary of
the Closing Date. Notwithstanding the foregoing, if Borrowers terminate this
Agreement in connection with a refinancing with PNC Bank, National Association
or any division or Affiliate thereof, Borrowers shall not be obligated to pay
the early termination fee set forth herein.
13.2. Termination. The termination of the Agreement shall not affect any
Borrower's, Agent's or any Lender's rights, or any of the Obligations having
their inception prior to the effective date of such termination, and the
provisions hereof shall continue to be fully operative until all transactions
entered into, rights or interests created or Obligations have been fully and
indefeasibly paid, disposed of, concluded or liquidated. The security interests,
Liens and rights granted to Agent and Lenders hereunder and the financing
statements filed hereunder shall continue in full force and effect,
notwithstanding the termination of this Agreement or the fact that Borrowers'
Account may from time to time be temporarily in a zero or credit position, until
all of the Obligations of each Borrower have been indefeasibly paid and
performed in full after the termination of this Agreement or each Borrower has
furnished Agent and Lenders with an indemnification satisfactory to Agent and
Lenders with respect thereto. Accordingly, each Borrower waives any rights which
it may have under the Uniform Commercial Code to demand the filing of
termination statements with respect to the Collateral, and Agent shall not be
required to send such termination statements to each Borrower, or to file them
with any filing office, unless and until this Agreement shall have been
terminated in accordance with its terms and all Obligations have been
indefeasibly paid in full in immediately available funds. All representations,
warranties, covenants, waivers and agreements contained herein shall survive
termination hereof until all Obligations are indefeasibly paid and performed in
full.
XIV. REGARDING AGENT.
14.1. Appointment. Each Lender hereby designates PNC to act as Agent for
such Lender under this Agreement and the Other Documents. Each Lender hereby
irrevocably authorizes Agent to take such action on its behalf under the
provisions of this Agreement and the Other Documents and to exercise such powers
and to perform such duties hereunder and thereunder as are specifically
delegated to or required of Agent by the terms hereof and thereof and such other
powers as are reasonably incidental thereto and Agent shall hold all Collateral,
payments of principal and interest, fees (except the fees set forth in Section
3.4), charges and collections (without giving effect to any collection days)
received pursuant to this Agreement, for the ratable benefit of Lenders. Agent
may perform any of its duties hereunder by or through its agents or employees.
As to any matters not expressly provided for by this Agreement (including
collection of the Note) Agent shall not be required to exercise any discretion
or take any action, but shall be required to act or to refrain from acting (and
shall be fully protected in so acting or refraining from acting) upon the
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instructions of the Required Lenders, and such instructions shall be binding;
provided, however, that Agent shall not be required to take any action which
exposes Agent to liability or which is contrary to this Agreement or the Other
Documents or Applicable Law unless Agent is furnished with an indemnification
reasonably satisfactory to Agent with respect thereto.
14.2. Nature of Duties. Agent shall have no duties or responsibilities
except those expressly set forth in this Agreement and the Other Documents.
Neither Agent nor any of its officers, directors, employees or agents shall be
(i) liable for any action taken or omitted by them as such hereunder or in
connection herewith, unless caused by their gross (not mere) negligence or
willful misconduct (as determined by a court of competent jurisdiction in a
final non-appealable judgment), or (ii) responsible in any manner for any
recitals, statements, representations or warranties made by any Borrower or any
officer thereof contained in this Agreement, or in any of the Other Documents or
in any certificate, report, statement or other document referred to or provided
for in, or received by Agent under or in connection with, this Agreement or any
of the Other Documents or for the value, validity, effectiveness, genuineness,
due execution, enforceability or sufficiency of this Agreement, or any of the
Other Documents or for any failure of any Borrower to perform its obligations
hereunder. Agent shall not be under any obligation to any Lender to ascertain or
to inquire as to the observance or performance of any of the agreements
contained in, or conditions of, this Agreement or any of the Other Documents, or
to inspect the properties, books or records of any Borrower. The duties of Agent
as respects the Advances to Borrowers shall be mechanical and administrative in
nature; Agent shall not have by reason of this Agreement a fiduciary
relationship in respect of any Lender; and nothing in this Agreement, expressed
or implied, is intended to or shall be so construed as to impose upon Agent any
obligations in respect of this Agreement except as expressly set forth herein.
14.3. Lack of Reliance on Agent and Resignation. Independently and without
reliance upon Agent or any other Lender, each Lender has made and shall continue
to make (i) its own independent investigation of the financial condition and
affairs of each Borrower and each Guarantor in connection with the making and
the continuance of the Advances hereunder and the taking or not taking of any
action in connection herewith, and (ii) its own appraisal of the
creditworthiness of each Borrower and each Guarantor. Agent shall have no duty
or responsibility, either initially or on a continuing basis, to provide any
Lender with any credit or other information with respect thereto, whether coming
into its possession before making of the Advances or at any time or times
thereafter except as shall be provided by any Borrower pursuant to the terms
hereof. Agent shall not be responsible to any Lender for any recitals,
statements, information, representations or warranties herein or in any
agreement, document, certificate or a statement delivered in connection with or
for the execution, effectiveness, genuineness, validity, enforceability,
collectibility or sufficiency of this Agreement or any Other Document, or of the
financial condition of any Borrower or any Guarantor, or be required to make any
inquiry concerning either the performance or observance of any of the terms,
provisions or conditions of this Agreement, the Note, the Other Documents or the
financial condition of any Borrower, or the existence of any Event of Default or
any Default.
Agent may resign on sixty (60) days' written notice to each of Lenders and
Borrowing Agent and upon such resignation, the Required Lenders will promptly
designate a successor Agent reasonably satisfactory to Borrowers.
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Any such successor Agent shall succeed to the rights, powers and duties of
Agent, and the term "Agent" shall mean such successor agent effective upon its
appointment, and the former Agent's rights, powers and duties as Agent shall be
terminated, without any other or further act or deed on the part of such former
Agent. After any Agent's resignation as Agent, the provisions of this Article
XIV shall inure to its benefit as to any actions taken or omitted to be taken by
it while it was Agent under this Agreement.
14.4. Certain Rights of Agent. If Agent shall request instructions from
Lenders with respect to any act or action (including failure to act) in
connection with this Agreement or any Other Document, Agent shall be entitled to
refrain from such act or taking such action unless and until Agent shall have
received instructions from the Required Lenders; and Agent shall not incur
liability to any Person by reason of so refraining. Without limiting the
foregoing, Lenders shall not have any right of action whatsoever against Agent
as a result of its acting or refraining from acting hereunder in accordance with
the instructions of the Required Lenders.
14.5. Reliance. Agent shall be entitled to rely, and shall be fully
protected in relying, upon any note, writing, resolution, notice, statement,
certificate, telex, teletype or telecopier message, cablegram, order or other
document or telephone message believed by it to be genuine and correct and to
have been signed, sent or made by the proper person or entity, and, with respect
to all legal matters pertaining to this Agreement and the Other Documents and
its duties hereunder, upon advice of counsel selected by it. Agent may employ
agents and attorneys-in-fact and shall not be liable for the default or
misconduct of any such agents or attorneys-in-fact selected by Agent with
reasonable care.
14.6. Notice of Default. Agent shall not be deemed to have knowledge or
notice of the occurrence of any Default or Event of Default hereunder or under
the Other Documents, unless Agent has received notice from a Lender or Borrowing
Agent referring to this Agreement or the Other Documents, describing such
Default or Event of Default and stating that such notice is a "notice of
default". In the event that Agent receives such a notice, Agent shall give
notice thereof to Lenders. Agent shall take such action with respect to such
Default or Event of Default as shall be reasonably directed by the Required
Lenders; provided, that, unless and until Agent shall have received such
directions, Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Default or Event of
Default as it shall deem advisable in the best interests of Lenders.
14.7. Indemnification. To the extent Agent is not reimbursed and
indemnified by Borrowers, each Lender will reimburse and indemnify Agent in
proportion to its respective portion of the Advances (or, if no Advances are
outstanding, according to its Commitment Percentage), from and against any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever which
may be imposed on, incurred by or asserted against Agent in performing its
duties hereunder, or in any way relating to or arising out of this Agreement or
any Other Document; provided that, Lenders shall not be liable for any portion
of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from Agent's gross
(not mere) negligence or willful misconduct (as determined by a court of
competent jurisdiction in a final non-appealable judgment).
14.8. Agent in its Individual Capacity. With respect to the obligation of
Agent to lend under this Agreement, the Advances made by it shall have the same
rights and powers hereunder as any other Lender and as if it were not performing
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the duties as Agent specified herein; and the term "Lender" or any similar term
shall, unless the context clearly otherwise indicates, include Agent in its
individual capacity as a Lender. Agent may engage in business with any Borrower
as if it were not performing the duties specified herein, and may accept fees
and other consideration from any Borrower for services in connection with this
Agreement or otherwise without having to account for the same to Lenders.
14.9. Delivery of Documents. To the extent Agent receives financial
statements required under Sections 9.7, 9.8, 9.9, 9.12 and 9.13 or Borrowing
Base Certificates from any Borrower pursuant to the terms of this Agreement
which any Borrower is not obligated to deliver to each Lender, Agent will
promptly furnish such documents and information to Lenders.
14.10. Borrowers' Undertaking to Agent. Without prejudice to their
respective obligations to Lenders under the other provisions of this Agreement,
each Borrower hereby undertakes with Agent to pay to Agent from time to time on
demand all amounts from time to time due and payable by it for the account of
Agent or Lenders or any of them pursuant to this Agreement to the extent not
already paid. Any payment made pursuant to any such demand shall pro tanto
satisfy the relevant Borrower's obligations to make payments for the account of
Lenders or the relevant one or more of them pursuant to this Agreement.
14.11. No Reliance on Agent's Customer Identification Program. Each Lender
acknowledges and agrees that neither such Lender, nor any of its Affiliates,
participants or assignees, may rely on the Agent to carry out such Lender's,
Affiliate's, participant's or assignee's customer identification program, or
other obligations required or imposed under or pursuant to the USA PATRIOT Act
or the regulations thereunder, including the regulations contained in 31 CFR
103.121 (as hereafter amended or replaced, the "CIP Regulations"), or any other
Anti-Terrorism Law, including any programs involving any of the following items
relating to or in connection with any Borrower, its Affiliates or its agents,
this Agreement, the Other Documents or the transactions hereunder or
contemplated hereby: (1) any identity verification procedures, (2) any
record-keeping, (3) comparisons with government lists, (4) customer notices or
(5) other procedures required under the CIP Regulations or such other laws.
14.12. Other Agreements. Each of the Lenders agrees that it shall not,
without the express consent of Agent, and that it shall, to the extent it is
lawfully entitled to do so, upon the request of Agent, set off against the
Obligations, any amounts owing by such Lender to any Borrower or any deposit
accounts of any Borrower now or hereafter maintained with such Lender. Anything
in this Agreement to the contrary notwithstanding, each of the Lenders further
agrees that it shall not, unless specifically requested to do so by Agent, take
any action to protect or enforce its rights arising out of this Agreement or the
Other Documents, it being the intent of Lenders that any such action to protect
or enforce rights under this Agreement and the Other Documents shall be taken in
concert and at the direction or with the consent of Agent or Required Lenders.
XV. BORROWING AGENCY.
15.1. Borrowing Agency Provisions.
a. Each Borrower hereby irrevocably designates Borrowing Agent to be its
attorney and agent and in such capacity to borrow, sign and endorse notes, and
execute and deliver all instruments, documents, writings and further assurances
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now or hereafter required hereunder, on behalf of such Borrower or Borrowers,
and hereby authorizes Agent to pay over or credit all loan proceeds hereunder in
accordance with the request of Borrowing Agent.
b. The handling of this credit facility as a co-borrowing facility with a
borrowing agent in the manner set forth in this Agreement is solely as an
accommodation to Borrowers and at their request. Neither Agent nor any Lender
shall incur liability to Borrowers as a result thereof. To induce Agent and
Lenders to do so and in consideration thereof, each Borrower hereby indemnifies
Agent and each Lender and holds Agent and each Lender harmless from and against
any and all liabilities, expenses, losses, damages and claims of damage or
injury asserted against Agent or any Lender by any Person arising from or
incurred by reason of the handling of the financing arrangements of Borrowers as
provided herein, reliance by Agent or any Lender on any request or instruction
from Borrowing Agent or any other action taken by Agent or any Lender with
respect to this Section 15.1 except due to willful misconduct or gross (not
mere) negligence by the indemnified party (as determined by a court of competent
jurisdiction in a final and non-appealable judgment).
c. All Obligations shall be joint and several, and each Borrower shall make
payment upon the maturity of the Obligations by acceleration or otherwise, and
such obligation and liability on the part of each Borrower shall in no way be
affected by any extensions, renewals and forbearance granted to Agent or any
Lender to any Borrower, failure of Agent or any Lender to give any Borrower
notice of borrowing or any other notice, any failure of Agent or any Lender to
pursue or preserve its rights against any Borrower, the release by Agent or any
Lender of any Collateral now or thereafter acquired from any Borrower, and such
agreement by each Borrower to pay upon any notice issued pursuant thereto is
unconditional and unaffected by prior recourse by Agent or any Lender to the
other Borrowers or any Collateral for such Borrower's Obligations or the lack
thereof. Each Borrower waives all suretyship defenses.
15.2. Waiver of Subrogation. Each Borrower expressly waives any and all
rights of subrogation, reimbursement, indemnity, exoneration, contribution of
any other claim which such Borrower may now or hereafter have against the other
Borrowers or other Person directly or contingently liable for the Obligations
hereunder, or against or with respect to the other Borrowers' property
(including, without limitation, any property which is Collateral for the
Obligations), arising from the existence or performance of this Agreement, until
termination of this Agreement and repayment in full of the Obligations.
XVI. MISCELLANEOUS.
16.1. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania applied to
contracts to be performed wholly within the Commonwealth of Pennsylvania. Any
judicial proceeding brought by or against any Borrower with respect to any of
the Obligations, this Agreement, the Other Documents or any related agreement
may be brought in any court of competent jurisdiction in the Commonwealth of
Pennsylvania, United States of America, and, by execution and delivery of this
Agreement, each Borrower accepts for itself and in connection with its
properties, generally and unconditionally, the non-exclusive jurisdiction of the
aforesaid courts, and irrevocably agrees to be bound by any judgment rendered
thereby in connection with this Agreement. Each Borrower hereby waives personal
service of any and all process upon it and consents that all such service of
process may be made by registered mail (return receipt requested) directed to
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Borrowing Agent at its address set forth in Section 16.6 and service so made
shall be deemed completed five (5) days after the same shall have been so
deposited in the mails of the United States of America, or, at the Agent's
option, by service upon Borrowing Agent which each Borrower irrevocably appoints
as such Borrower's Agent for the purpose of accepting service within the
Commonwealth of Pennsylvania. Nothing herein shall affect the right to serve
process in any manner permitted by law or shall limit the right of Agent or any
Lender to bring proceedings against any Borrower in the courts of any other
jurisdiction. Each Borrower waives any objection to jurisdiction and venue of
any action instituted hereunder and shall not assert any defense based on lack
of jurisdiction or venue or based upon forum non conveniens. Each Borrower
waives the right to remove any judicial proceeding brought against such Borrower
in any state court to any federal court. Any judicial proceeding by any Borrower
against Agent or any Lender involving, directly or indirectly, any matter or
claim in any way arising out of, related to or connected with this Agreement or
any related agreement, shall be brought only in a federal or state court located
in the County of Philadelphia, Commonwealth of Pennsylvania.
16.2. Entire Understanding.
a. This Agreement and the documents executed concurrently herewith contain
the entire understanding between each Borrower, Agent and each Lender and
supersedes all prior agreements and understandings, if any, relating to the
subject matter hereof. Any promises, representations, warranties or guarantees
not herein contained and hereinafter made shall have no force and effect unless
in writing, signed by each Borrower's, Agent's and each Lender's respective
officers. Neither this Agreement nor any portion or provisions hereof may be
changed, modified, amended, waived, supplemented, discharged, cancelled or
terminated orally or by any course of dealing, or in any manner other than by an
agreement in writing, signed by the party to be charged. Each Borrower
acknowledges that it has been advised by counsel in connection with the
execution of this Agreement and Other Documents and is not relying upon oral
representations or statements inconsistent with the terms and provisions of this
Agreement.
b. The Required Lenders, Agent with the consent in writing of the Required
Lenders, and Borrowers may, subject to the provisions of this Section 16.2 (b),
from time to time enter into written supplemental agreements to this Agreement
or the Other Documents executed by Borrowers, for the purpose of adding or
deleting any provisions or otherwise changing, varying or waiving in any manner
the rights of Lenders, Agent or Borrowers thereunder or the conditions,
provisions or terms thereof of waiving any Event of Default thereunder, but only
to the extent specified in such written agreements; provided, however, that no
such supplemental agreement shall, without the consent of all Lenders:
(i) increase the Commitment Percentage, the maximum dollar commitment of
any Lender or the Maximum Revolving Advance Amount.
(ii) extend the maturity of any Note or the due date for any amount payable
hereunder, or decrease the rate of interest or reduce any fee payable by
Borrowers to Lenders pursuant to this Agreement.
(iii) alter the definition of the term Required Lenders or alter, amend or
modify this Section 16.2(b).
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(iv) release any Collateral during any calendar year (other than in
accordance with the provisions of this Agreement) having an aggregate value in
excess of $500,000.
(v) change the rights and duties of Agent.
(vi) permit any Revolving Advance to be made if after giving effect thereto
the total of Revolving Advances outstanding hereunder would exceed the Formula
Amount for more than sixty (30) consecutive Business Days or exceed one hundred
and five percent (105%) of the Formula Amount.
(vii) increase the Advance Rates above the Advance Rates in effect on the
Closing Date.
(viii) release any Guarantor.
Any such supplemental agreement shall apply equally to each Lender and
shall be binding upon Borrowers, Lenders and Agent and all future holders of the
Obligations. In the case of any waiver, Borrowers, Agent and Lenders shall be
restored to their former positions and rights, and any Event of Default waived
shall be deemed to be cured and not continuing, but no waiver of a specific
Event of Default shall extend to any subsequent Event of Default (whether or not
the subsequent Event of Default is the same as the Event of Default which was
waived), or impair any right consequent thereon.
In the event that Agent requests the consent of a Lender pursuant to this
Section 16.2 and such Lender shall not respond or reply to Agent in writing
within five (5) days of delivery of such request, such Lender shall be deemed to
have consented to the matter that was the subject of the request. In the event
that Agent requests the consent of a Lender pursuant to this Section 16.2 and
such consent is denied, then PNC may, at its option, require such Lender to
assign its interest in the Advances to PNC or to another Lender or to any other
Person designated by the Agent (the "Designated Lender"), for a price equal to
(i) the then outstanding principal amount thereof plus (ii) accrued and unpaid
interest and fees due such Lender, which interest and fees shall be paid when
collected from Borrowers. In the event PNC elects to require any Lender to
assign its interest to PNC or to the Designated Lender, PNC will so notify such
Lender in writing within forty five (45) days following such Lender's denial,
and such Lender will assign its interest to PNC or the Designated Lender no
later than five (5) days following receipt of such notice pursuant to a
Commitment Transfer Supplement executed by such Lender, PNC or the Designated
Lender, as appropriate, and Agent.
Notwithstanding (a) the existence of a Default or an Event of Default,
(b) that any of the other applicable conditions precedent set forth in Section
8.2 hereof have not been satisfied or (c) any other provision of this Agreement,
Agent may at its discretion and without the consent of the Required Lenders,
voluntarily permit the outstanding Revolving Advances at any time to exceed the
Formula Amount by up to ten percent (10%) of the Formula Amount for up to thirty
(30) consecutive Business Days (the "Out-of-Formula Loans"). If Agent is willing
in its sole and absolute discretion to make such Out-of-Formula Loans, such
Out-of-Formula Loans shall be payable on demand and shall bear interest at the
Default Rate for Revolving Advances consisting of Domestic Rate Loans; provided
that, if Lenders do make Out-of-Formula Loans, neither Agent nor Lenders shall
be deemed thereby to have changed the limits of Section 2.1(a). For purposes of
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this paragraph, the discretion granted to Agent hereunder shall not preclude
involuntary overadvances that may result from time to time due to the fact that
the Formula Amount was unintentionally exceeded for any reason, including, but
not limited to, Collateral previously deemed to be either "Eligible Receivables"
or "Eligible Inventory", as applicable, becomes ineligible, collections of
Receivables applied to reduce outstanding Revolving Advances are thereafter
returned for insufficient funds or overadvances are made to protect or preserve
the Collateral. In the event Agent involuntarily permits the outstanding
Revolving Advances to exceed the Formula Amount by more than ten percent (10%),
Agent shall use its efforts to have Borrowers decrease such excess in as
expeditious a manner as is practicable under the circumstances and not
inconsistent with the reason for such excess. Revolving Advances made after
Agent has determined the existence of involuntary overadvances shall be deemed
to be involuntary overadvances and shall be decreased in accordance with the
preceding sentence.
In addition to (and not in substitution of) the discretionary Revolving
Advances permitted above in this Section 16.2, the Agent is hereby authorized by
Borrowers and the Lenders, from time to time in the Agent's sole discretion, (A)
after the occurrence and during the continuation of a Default or an Event of
Default, or (B) at any time that any of the other applicable conditions
precedent set forth in Section 8.2 hereof have not been satisfied, to make
Revolving Advances to Borrowers on behalf of the Lenders which the Agent, in its
reasonable business judgment, deems necessary or desirable (a) to preserve or
protect the Collateral, or any portion thereof, (b) to enhance the likelihood
of, or maximize the amount of, repayment of the Advances and other Obligations,
or (c) to pay any other amount chargeable to Borrowers pursuant to the terms of
this Agreement; provided, that at any time after giving effect to any such
Revolving Advances the outstanding Revolving Advances do not exceed one hundred
and ten percent (110%) of the Formula Amount.
16.3. Successors and Assigns; Participations; New Lenders.
a. This Agreement shall be binding upon and inure to the benefit of
Borrowers, Agent, each Lender, all future holders of the Obligations and their
respective successors and assigns, except that no Borrower may assign or
transfer any of its rights or obligations under this Agreement without the prior
written consent of Agent and each Lender.
b. Each Borrower acknowledges that in the regular course of commercial
banking business one or more Lenders may at any time and from time to time sell
participating interests in the Advances to other financial institutions (each
such transferee or purchaser of a participating interest, a "Participant"). Each
Participant may exercise all rights of payment (including rights of set-off)
with respect to the portion of such Advances held by it or other Obligations
payable hereunder as fully as if such Participant were the direct holder thereof
provided that Borrowers shall not be required to pay to any Participant more
than the amount which it would have been required to pay to Lender which granted
an interest in its Advances or other Obligations payable hereunder to such
Participant had such Lender retained such interest in the Advances hereunder or
other Obligations payable hereunder and in no event shall Borrowers be required
to pay any such amount arising from the same circumstances and with respect to
the same Advances or other Obligations payable hereunder to both such Lender and
such Participant. Each Borrower hereby grants to any Participant a continuing
security interest in any deposits, moneys or other property actually or
constructively held by such Participant as security for the Participant's
interest in the Advances.
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c. Any Lender may with the consent of Agent which shall not be unreasonably
withheld or delayed sell, assign or transfer all or any part of its rights under
this Agreement and the Other Documents to one or more additional banks or
financial institutions and one or more additional banks or financial
institutions may commit to make Advances hereunder (each a "Purchasing Lender",
and together with each Participant, each a "Transferee" and collectively the
"Transferees"), in minimum amounts of not less than $3,000,000, pursuant to a
Commitment Transfer Supplement, executed by a Purchasing Lender, the transferor
Lender, and Agent and delivered to Agent for recording. Upon such execution,
delivery, acceptance and recording, from and after the transfer effective date
determined pursuant to such Commitment Transfer Supplement, (i) Purchasing
Lender thereunder shall be a party hereto and, to the extent provided in such
Commitment Transfer Supplement, have the rights and obligations of a Lender
thereunder with a Commitment Percentage as set forth therein, and (ii) the
transferor Lender thereunder shall, to the extent provided in such Commitment
Transfer Supplement, be released from its obligations under this Agreement, the
Commitment Transfer Supplement creating a novation for that purpose. Such
Commitment Transfer Supplement shall be deemed to amend this Agreement to the
extent, and only to the extent, necessary to reflect the addition of such
Purchasing Lender and the resulting adjustment of the Commitment Percentages
arising from the purchase by such Purchasing Lender of all or a portion of the
rights and obligations of such transferor Lender under this Agreement and the
Other Documents. Each Borrower hereby consents to the addition of such
Purchasing Lender and the resulting adjustment of the Commitment Percentages
arising from the purchase by such Purchasing Lender of all or a portion of the
rights and obligations of such transferor Lender under this Agreement and the
Other Documents. Borrowers shall execute and deliver such further documents and
do such further acts and things in order to effectuate the foregoing.
d. Agent shall maintain at its address a copy of each Commitment Transfer
Supplement delivered to it and a register (the "Register") for the recordation
of the names and addresses of each Lender and the outstanding principal, accrued
and unpaid interest and other fees due hereunder. The entries in the Register
shall be conclusive, in the absence of manifest error, and Borrowers, Agent and
Lenders may treat each Person whose name is recorded in the Register as the
owner of the Advance recorded therein for the purposes of this Agreement. The
Register shall be available for inspection by Borrowers or any Lender at any
reasonable time and from time to time upon reasonable prior notice. Agent shall
receive a fee in the amount of $3,500 payable by the applicable Purchasing
Lender upon the effective date of each transfer or assignment to such Purchasing
Lender.
e. Each Borrower authorizes each Lender to disclose to any Transferee and
any prospective Transferee any and all financial information in such Lender's
possession concerning such Borrower which has been delivered to such Lender by
or on behalf of such Borrower pursuant to this Agreement or in connection with
such Lender's credit evaluation of such Borrower.
16.4. Application of Payments. Agent shall have the continuing and
exclusive right to apply or reverse and re-apply any payment and any and all
proceeds of Collateral to any portion of the Obligations. To the extent that any
Borrower makes a payment or Agent or any Lender receives any payment or proceeds
of the Collateral for any Borrower's benefit, which are subsequently
invalidated, declared to be fraudulent or preferential, set aside or required to
be repaid to a trustee, debtor in possession, receiver, custodian or any other
party under any bankruptcy law, common law or equitable cause, then, to such
extent, the Obligations or part thereof intended to be satisfied shall be
revived and continue as if such payment or proceeds had not been received by
Agent or such Lender.
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16.5. Indemnity. Each Borrower shall indemnify Agent, each Lender and each
of their respective officers, directors, Affiliates, attorneys, employees and
agents from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses and disbursements of any
kind or nature whatsoever (including fees and disbursements of counsel) which
may be imposed on, incurred by, or asserted against Agent or any Lender in any
claim, litigation, proceeding or investigation instituted or conducted by any
Governmental Body or instrumentality or any other Person with respect to any
aspect of, or any transaction contemplated by, or referred to in, or any matter
related to, this Agreement or the Other Documents, whether or not Agent or any
Lender is a party thereto, except to the extent that any of the foregoing arises
out of the willful misconduct of the party being indemnified (as determined by a
court of competent jurisdiction in a final and non-appealable judgment). Without
limiting the generality of the foregoing, this indemnity shall extend to any
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses and disbursements of any kind or nature whatsoever (including
fees and disbursements of counsel) asserted against or incurred by any of the
indemnitees described above in this Section 16.5 by any Person under any
Environmental Laws or similar laws by reason of any Borrower's or any other
Person's failure to comply with laws applicable to solid or hazardous waste
materials, including Hazardous Substances and Hazardous Waste, or other Toxic
Substances. Additionally, if any taxes (excluding taxes imposed upon or measured
solely by the net income of Agent and Lenders, but including any intangibles
taxes, stamp tax, recording tax or franchise tax) shall be payable by Agent,
Lenders or Borrowers on account of the execution or delivery of this Agreement,
or the execution, delivery, issuance or recording of any of the Other Documents,
or the creation or repayment of any of the Obligations hereunder, by reason of
any Applicable Law now or hereafter in effect, Borrowers will pay (or will
promptly reimburse Agent and Lenders for payment of) all such taxes, including
interest and penalties thereon, and will indemnify and hold the indemnitees
described above in this Section 16.5 harmless from and against all liability in
connection therewith.
16.6. Notice. Any notice or request hereunder may be given to Borrowing
Agent or any Borrower or to Agent or any Lender at their respective addresses
set forth below or at such other address as may hereafter be specified in a
notice designated as a notice of change of address under this Section. Any
notice, request, demand, direction or other communication (for purposes of this
Section 16.6 only, a "Notice") to be given to or made upon any party hereto
under any provision of this Loan Agreement shall be given or made by telephone
or in writing (which includes by means of electronic transmission (i.e.,
"e-mail") or facsimile transmission or by setting forth such Notice on a site on
the World Wide Web (a "Website Posting") if Notice of such Website Posting
(including the information necessary to access such site) has previously been
delivered to the applicable parties hereto by another means set forth in this
Section 16.6) in accordance with this Section 16.6. Any such Notice must be
delivered to the applicable parties hereto at the addresses and numbers set
forth under their respective names on Section 16.6 hereof or in accordance with
any subsequent unrevoked Notice from any such party that is given in accordance
with this Section 16.6. Any Notice shall be effective:
a. In the case of hand-delivery, when delivered;
b. If given by mail, four days after such Notice is deposited with the
United States Postal Service, with first-class postage prepaid, return receipt
requested;
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c. In the case of a telephonic Notice, when a party is contacted by
telephone, if delivery of such telephonic Notice is confirmed no later than the
next Business Day by hand delivery, a facsimile or electronic transmission, a
Website Posting or an overnight courier delivery of a confirmatory Notice
(received at or before noon on such next Business Day);
d. In the case of a facsimile transmission, when sent to the applicable
party's facsimile machine's telephone number, if the party sending such Notice
receives confirmation of the delivery thereof from its own facsimile machine;
e. In the case of electronic transmission, when actually received;
f. In the case of a Website Posting, upon delivery of a Notice of such
posting (including the information necessary to access such site) by another
means set forth in this Section 16.6; and
g. If given by any other means (including by overnight courier), when
actually received.
Any Lender giving a Notice to Borrowing Agent or any Borrower shall
concurrently send a copy thereof to the Agent, and the Agent shall promptly
notify the other Lenders of its receipt of such Notice.
(A) If to Agent or PNC at: PNC Bank, National Association
100 West Road, Suite 327
Towson, Maryland 21204
Attention: Mr. James Sierakowski
Telephone: (410) 832-7554
Facsimile: (410) 825-6257
with an additional copy to: Blank Rome LLP
One Logan Square
Philadelphia, PA
Attention: Lawrence F. Flick, II, Esquire
Telephone: (215) 569-5556
Facsimile: (215) 832-5556
(B) If to a Lender other than Agent, as specified on the signature pages
hereof
(C) If to Borrowing Agent
or any Borrower: CompuDyne Corporation
2530 Riva Road, Suite 201
Annapolis, Maryland 21401
Attention: Mr. Geoffrey F. Feidelberg
Telephone: (410) 224-4415, Ext. 315
Facsimile: (410) 266-8815
with a copy to: Ballard Spahr Andrews & Ingersoll, LLP
1735 Market Street, 51st Floor
Philadelphia, PA 19103
Attention: Brian D. Doerner, Esquire
Telephone: (215) 864-8615
Facsimile: (215) 864-9043
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Provided that, failure to send a copy of such notice to Ballard Spahr
Andrews & Ingersoll, LLP, shall in no way affect, limit, or invalidate any
notice sent the Borrowing Agent or Borrowers or to exercise of any of Agent's or
Lenders' rights or remedies pursuant to a notice sent to Borrowing Agent or
Borrowers.
16.7. Survival. The obligations of Borrowers under Sections 2.2(f), 3.7,
3.8, 3.9, 4.19(h), and 16.5 and the obligations of Lenders under Section 14.7,
shall survive termination of this Agreement and the Other Documents and payment
in full of the Obligations.
16.8. Severability. If any part of this Agreement is contrary to,
prohibited by, or deemed invalid under Applicable Laws or regulations, such
provision shall be inapplicable and deemed omitted to the extent so contrary,
prohibited or invalid, but the remainder hereof shall not be invalidated thereby
and shall be given effect so far as possible.
16.9. Expenses. All costs and expenses including reasonable attorneys' fees
(including the allocated costs of in house counsel) and disbursements incurred
by Agent on its behalf or on behalf of Lenders and Lenders (a) in all efforts
made to enforce payment of any Obligation or effect collection of any
Collateral, or (b) in connection with the entering into, modification,
amendment, administration and enforcement of this Agreement, the Subordination
Agreement or any consents or waivers hereunder or thereunder and all related
agreements, documents and instruments, or (c) in instituting, maintaining,
preserving, enforcing and foreclosing on Agent's security interest in or Lien on
any of the Collateral, or maintaining, preserving or enforcing any of Agent's or
any Lender's rights hereunder, under the Subordination Agreement and under all
related agreements, documents and instruments, whether through judicial
proceedings or otherwise, or (d) in defending or prosecuting any actions or
proceedings arising out of or relating to Agent's or any Lender's transactions
with any Borrower, any Guarantor or Subordinated Lender or (e) in connection
with any advice given to Agent or any Lender with respect to its rights and
obligations under this Agreement, the Subordination Agreement and all related
agreements, documents and instruments, may be charged to Borrowers' Account and
shall be part of the Obligations.
16.10. Injunctive Relief. Each Borrower recognizes that, in the event any
Borrower fails to perform, observe or discharge any of its obligations or
liabilities under this Agreement, or threatens to fail to perform, observe or
discharge such obligations or liabilities, any remedy at law may prove to be
inadequate relief to Lenders; therefore, Agent, if Agent so requests, shall be
entitled to temporary and permanent injunctive relief in any such case without
the necessity of proving that actual damages are not an adequate remedy.
16.11. Consequential Damages. Neither Agent nor any Lender, nor any agent
or attorney for any of them, shall be liable to any Borrower, or any Guarantor
(or any Affiliate of any such Person) for indirect, punitive, exemplary or
consequential damages arising from any breach of contract, tort or other wrong
relating to the establishment, administration or collection of the Obligations
or as a result of any transaction contemplated under this Agreement or any Other
Document.
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16.12. Captions. The captions at various places in this Agreement are
intended for convenience only and do not constitute and shall not be interpreted
as part of this Agreement.
16.13. Counterparts; Facsimile Signatures. This Agreement may be executed
in any number of and by different parties hereto on separate counterparts, all
of which, when so executed, shall be deemed an original, but all such
counterparts shall constitute one and the same agreement. Any signature
delivered by a party by facsimile transmission shall be deemed to be an original
signature hereto.
16.14. Construction. The parties acknowledge that each party and its
counsel have reviewed this Agreement and that the normal rule of construction to
the effect that any ambiguities are to be resolved against the drafting party
shall not be employed in the interpretation of this Agreement or any amendments,
schedules or exhibits thereto.
16.15. Confidentiality; Sharing Information. Agent, each Lender and each
Transferee shall hold all non-public information obtained by Agent, such Lender
or such Transferee pursuant to the requirements of this Agreement in accordance
with Agent's, such Lender's and such Transferee's customary procedures for
handling confidential information of this nature; provided, however, Agent, each
Lender and each Transferee may disclose such confidential information (a) to its
examiners, Affiliates, outside auditors, counsel and other professional
advisors, (b) to Agent, any Lender or to any prospective Transferees, and (c) as
required or requested by any Governmental Body or representative thereof or
pursuant to legal process; provided, further that (i) unless specifically
prohibited by Applicable Law or court order, Agent, each Lender and each
Transferee shall use its reasonable best efforts prior to disclosure thereof, to
notify the applicable Borrower of the applicable request for disclosure of such
non-public information (A) by a Governmental Body or representative thereof
(other than any such request in connection with an examination of the financial
condition of a Lender or a Transferee by such Governmental Body) or (B) pursuant
to legal process and (ii) in no event shall Agent, any Lender or any Transferee
be obligated to return any materials furnished by any Borrower other than those
documents and instruments in possession of Agent or any Lender in order to
perfect its Lien on the Collateral once the Obligations have been paid in full
and this Agreement has been terminated. Each Borrower acknowledges that from
time to time financial advisory, investment banking and other services may be
offered or provided to such Borrower or one or more of its Affiliates (in
connection with this Agreement or otherwise) by any Lender or by one or more
Subsidiaries or Affiliates of such Lender and each Borrower hereby authorizes
each Lender to share any information delivered to such Lender by such Borrower
and its Subsidiaries pursuant to this Agreement, or in connection with the
decision of such Lender to enter into this Agreement, to any such Subsidiary or
Affiliate of such Lender, it being understood that any such Subsidiary or
Affiliate of any Lender receiving such information shall be bound by the
provisions of this Section 16.15 as if it were a Lender hereunder. Such
authorization shall survive the repayment of the other Obligations and the
termination of this Agreement.
16.16. Publicity. Each Borrower and each Lender hereby authorizes Agent to
make appropriate announcements of the financial arrangement entered into among
Borrowers, Agent and Lenders, including announcements which are commonly known
as tombstones, in such publications and to such selected parties as Agent shall
in its sole and absolute discretion deem appropriate.
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16.17. Certifications From Banks and Participants; USA PATRIOT Act. Each Lender
or assignee or participant of a Lender that is not incorporated under the Laws
of the United States of America or a state thereof (and is not excepted from the
certification requirement contained in Section 313 of the USA PATRIOT Act and
the applicable regulations because it is both (i) an affiliate of a depository
institution or foreign bank that maintains a physical presence in the United
States or foreign country, and (ii) subject to supervision by a banking
authority regulating such affiliated depository institution or foreign bank)
shall deliver to the Agent the certification, or, if applicable,
recertification, certifying that such Lender is not a "shell" and certifying to
other matters as required by Section 313 of the USA PATRIOT Act and the
applicable regulations: (1) within 10 days after the Closing Date, and (2) as
such other times as are required under the USA PATRIOT Act.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
[SIGNATURE PAGES TO FOLLOW]
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Each of the parties has signed this Agreement as of the day and year
first above written.
ATTEST: COMPUDYNE CORPORATION
By:
- ------------------------------------ ------------------------
Name:
----------------------
Title:
---------------------
ATTEST: COMPUDYNE - PUBLIC SAFETY &
JUSTICE, INC.
By:
- ------------------------------------ ------------------------
Name:
----------------------
Title:
---------------------
ATTEST: NORSHIELD CORPORATION
By:
- ------------------------------------ ------------------------
Name:
----------------------
Title:
---------------------
[SIGNATURE PAGE 1 OF 3]
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ATTEST: FIBER SENSYS, LLC
By:
- ------------------------------------ ------------------------
Name:
----------------------
Title:
---------------------
ATTEST: COMPUDYNE - INTEGRATED
ELECTRONICS DIVISION, LLC
By:
- ------------------------------------ ------------------------
Name:
----------------------
Title:
---------------------
ATTEST: CORRLOGIC, LLC
By:
- ------------------------------------ ------------------------
Name:
----------------------
Title:
--------------------
ATTEST: NORMENT SECURITY GROUP,
INC.
By:
- ------------------------------------ ------------------------
Name:
----------------------
Title:
---------------------
ATTEST: XANALYS CORPORATION
By:
- ------------------------------------ ------------------------
Name:
----------------------
Title:
---------------------
[SIGNATURE PAGE 2 OF 3]
93
PNC BANK, NATIONAL
ASSOCIATION,
as Lender and as Agent
By:
- ------------------------------------ ------------------------
Name:
----------------------
Title:
---------------------
PNC Bank, National
Association
100 West Road, Suite 327
Towson, Maryland 21204
Attention: Mr. James
Sierakowski
Commitment Percentage: 100%
[SIGNATURE PAGE 3 OF 3]
94
LIST OF EXHIBITS AND SCHEDULES
Exhibits
Exhibit 1.2 Borrowing Base Certificate
Exhibit 2.1(a) Revolving Credit Note
Exhibit 5.5(b) Financial Projections
Exhibit 8.1(k) Financial Condition Certificate
Exhibit 16.3 Commitment Transfer Supplement
Schedules
Schedule I Existing Letters of Credit
Schedule 1.2 Permitted Encumbrances
Schedule 4.5 Equipment and Inventory Locations
Schedule 4.15(c) Locations of Borrowers/Chief Executive Offices
Schedule 4.15(h) Deposit and Investment Accounts
Schedule 4.19 Real Property
Schedule 5.1 Consents
Schedule 5.2(a) States of Qualification and Good Standing
Schedule 5.2(b) Subsidiaries
Schedule 5.4 Federal Tax Identification Number
Schedule 5.6 Prior Names
Schedule 5.7 Environmental
Schedule 5.8(b) Litigation
Schedule 5.8(d) Plans
Schedule 5.9 Intellectual Property, Source Code Escrow Agreements
Schedule 5.10 Licenses and Permits
Schedule 5.14 Labor Disputes
Schedule 7.3 Guarantees
SCHEDULE "I"
EXISTING LETTERS OF CREDIT
L/C Number Beneficiary Original Amount
- ---------- ----------- ---------------
18102036-00-000 Indemnity Insurance Company $2,350,000
S261805NJY Port Authority of NY & NJ $ 500,000
00247779-00-000 Regions Bank, as Trustee $3,547,945
00243626-00-000 Regions Bank, as Trustee $1,847,300
S247356SCP Royal Bank of Canada $ 775,262