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EXHIBIT 10.10
Loan and Security Agreement
between
AVATECH SOLUTIONS SUBSIDIARY, INC.,
A Delaware Corporation
"Borrower"
and
KEY BANK AND TRUST,
"Lender"
$2,000,000.00 Revolving Line Of credit
Dated: September , 2003
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LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT is dated as of September , 2003 by and
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between AVATECH SOLUTIONS SUBSIDIARY, INC., a Delaware corporation ("BORROWER")
and KEY BANK AND TRUST ("LENDER").
RECITALS
The BORROWER has requested that the LENDER extend various credit
accommodations to the BORROWER. The LENDER is willing to provide the requested
credit accommodations upon the terms and conditions of this Loan And Security
Agreement, and upon the granting by the BORROWER to the LENDER of the security
interests, liens, and other assurances of payment provided for in this Loan And
Security Agreement.
NOW, THEREFORE, in consideration of these premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
As used in this Loan And Security Agreement, the terms set forth in this
Article 1 have the meanings set forth below, unless the specific context of this
Loan And Security Agreement clearly requires a different meaning. Terms defined
in this Article 1 or elsewhere in this Loan And Security Agreement are in all
capital letters throughout this Loan And Security Agreement. The singular use of
any defined term includes the plural and the plural use includes the singular.
Section 1.1. Account Debtor. The term "ACCOUNT DEBTOR" means collectively
each PERSON: (a) to or for whom the BORROWER has provided or has agreed to
provide any goods or services; or (b) which owes the BORROWER any sum of money
as a result of goods sold or services provided by the BORROWER; or (c) which is
the maker or endorser on any INSTRUMENT payable to the BORROWER or otherwise
owes the BORROWER any sum of money on account of any loan or other payment
obligation. With respect to each RECEIVABLE which is payable by any governmental
authority, "ACCOUNT DEBTOR" includes, without limitation, the agency,
instrumentality or official which has the duty of remitting or causing the
remittance of the amounts owing on such ACCOUNT or other RECEIVABLE.
Section 1.2. Account, Chattel Paper, Deposit Account, Document, Equipment,
Fixtures, General Intangibles, Goods, Instrument, Inventory, Investment Property
and Letter-Of-Credit Right. The terms "ACCOUNT," "CHATTEL PAPER," "DEPOSIT
ACCOUNT," "DOCUMENT," "EQUIPMENT," "FIXTURES," "GENERAL INTANGIBLES," "GOODS,"
"INSTRUMENT," "INVENTORY," "INVESTMENT PROPERTY" and "LETTER-OF-CREDIT RIGHT"
shall have the same respective meanings as are given to those terms in the
Uniform Commercial Code, as adopted and in effect in the State of Maryland.
Section 1.3. Affiliate. The term "AFFILIATE" means collectively any PERSON:
(a) that directly or indirectly, through one or more intermediaries, controls or
is controlled by, or is under common control with the BORROWER, including,
without limitation, the officers, managers and directors of the BORROWER; (b)
that directly or beneficially owns or holds ten percent (10%) or
more of any equity interests in the BORROWER; or (c) ten percent (10%) or more
of whose equity interests are owned directly or controlled by the BORROWER. As
used herein, the term "control" (including, with correlative meanings, the terms
"controlled by" and "under common control with") shall mean possession, directly
or indirectly, of the power to direct the management or policies of a PERSON,
whether through ownership of equity interests, by contract or otherwise.
Section 1.4. Agreement. The term "AGREEMENT" means this Loan And Security
Agreement, as amended, extended, or modified from time to time by the parties
hereto, as well as all schedules, exhibits and attachments hereto.
Section 1.5. Borrowing Base. The term "BORROWING BASE" means an amount
equal to: (a) seventy-five percent (75%) of the face amount (less maximum
discounts, credits and allowances which may be taken by or are granted to
ACCOUNT DEBTORS in connection therewith) of billed ELIGIBLE ACCOUNTS of the
BORROWER; minus (b) such reserves as the LENDER deems appropriate from time to
time.
Section 1.6. Business Day. The term "BUSINESS DAY" means any day other than
a Saturday, Sunday, or other day on which commercial banking institutions in the
State of Maryland are required to be closed.
Section 1.7. Capital Lease. The term "CAPITAL LEASE" means a lease with
respect to which the lessee's obligations thereunder should, in accordance with
G.A.A.P., be capitalized and reflected as a liability on the balance sheet of
the lessee.
Section 1.8. Capital Lease Obligations. The term "CAPITAL LEASE
OBLIGATIONS" means any indebtedness incurred as a lessee pursuant to a CAPITAL
LEASE.
Section 1.9. Closing. The term "CLOSING" means the execution and delivery
of this AGREEMENT, the NOTE, and various other LOAN DOCUMENTS. The date of
CLOSING is the date written above as the date of this AGREEMENT.
Section 1.10. Code. The term "CODE" means the Internal Revenue Code of
1986, as amended, and all Treasury regulations, revenue rulings, revenue
procedures or announcements issued thereunder.
Section 1.11. Collateral. The term "COLLATERAL" means all of the tangible
and intangible assets and personal property of the BORROWER, wherever located,
whether now owned or hereafter acquired by the BORROWER, together with all
substitutions therefor, and all replacements and renewals thereof, and all
accessions, additions, replacement parts, manuals, warranties and packaging
relating thereto, including but not limited to the following tangible and
intangible assets and property rights of the BORROWER: (a) ACCOUNTS; (b) CHATTEL
PAPER; (c) DEPOSIT ACCOUNTS; (d) DOCUMENTS; (e) EQUIPMENT; (f) FIXTURES; (g)
GENERAL INTANGIBLES; (h) GOODS; (i) INSTRUMENTS; (j) INVENTORY, including
returned, rejected, or repossessed INVENTORY and rights of reclamation and
stoppage in transit with respect to INVENTORY; (k) INVESTMENT PROPERTY; (l)
LETTER-OF-CREDIT RIGHTS; (m) RECEIVABLES; (n) copyrights, trademarks, patents,
and all pending applications thereof; and (o) all RECORDS relating to or
pertaining to any of the above listed COLLATERAL.
Section 1.12. Collection Account. The term "COLLECTION ACCOUNT" means a
bank account designated by the LENDER from which the LENDER alone has power of
access and withdrawal.
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Section 1.13. Commercial Account. The term "COMMERCIAL ACCOUNT" means the
commercial checking account to be established and maintained by the BORROWER
with the LENDER and which may be utilized as the means of advancing funds under
the LOAN.
Section 1.14. Default. The term "DEFAULT" means any event, occurrence or
omission which, with the giving of notice, the passage of time, or both, would
constitute an EVENT OF DEFAULT.
Section 1.15. Dollar Cap. The term "DOLLAR CAP" means Two Million Dollars
($2,000,000.00).
Section 1.16. Eligible Accounts. The term "ELIGIBLE ACCOUNTS" means those
ACCOUNTS which are acceptable to the LENDER. The criteria for eligibility may be
fixed and revised from time to time by the LENDER in its discretion. An ACCOUNT
in no event shall be deemed eligible unless: (a) the ACCOUNT arises from goods
sold or leased or from services performed in the ordinary course of business of
the BORROWER; (b) the delivery of the goods or the performance of the services
(other than installation of goods sold or leased) has been completed except to
the extent the LENDER specifically agrees to make certain progress billings
eligible; (c) no return, rejection, or repossession has occurred; (d) the goods
delivered or the services performed have been finally and unconditionally
accepted by the ACCOUNT DEBTOR without dispute, objection, complaint, offset,
defense, counterclaim, adjustment or allowance; (e) the ACCOUNT DEBTOR'S
obligation to pay the ACCOUNT is not subject to any repurchase obligation or
return right, as with sales made on a bill-and-hold, guaranteed sale,
sale-and-return, sale on approval (except with respect to ACCOUNTS in connection
with which ACCOUNT DEBTORS are entitled to return INVENTORY solely on the basis
of the quality of such INVENTORY) or consignment basis; (f) no more than ninety
(90) days have elapsed from the billing or invoice date; (g) no prior,
contemporaneous, or subsequent assignment, claim, lien, or security interest,
other than that of the LENDER, applies to the ACCOUNT; (h) no bankruptcy or
insolvency proceedings or payment moratoriums of any kind apply to the ACCOUNT;
(i) the ACCOUNT DEBTOR is not, in the LENDER'S sole opinion, unlikely to pay
because of death, incompetency, disappearance, potential bankruptcy, insolvency,
damage to or disposition of the goods, default, or any other reason whatsoever;
(j) the LENDER has not, by notice to the BORROWER, in the LENDER'S sole
discretion, deemed the ACCOUNT unsatisfactory for any reason; (k) no bonding
company or surety asserts or has the ability to assert any claim based upon the
legal doctrine of equitable subrogation, or under any other right to claim a
lien into or right to payment of the ACCOUNT; (l) the ACCOUNT does not arise
from or pertain to any transaction with any AFFILIATE or employee; (m) the
ACCOUNT is not payable from any ACCOUNT DEBTOR located outside of the geographic
boundaries of the United States of America (unless such ACCOUNT is fully secured
by a letter of credit or credit insurance acceptable to the LENDER); (n) the
BORROWER is legally empowered to collect the ACCOUNT against the ACCOUNT DEBTOR
in the jurisdiction in which the ACCOUNT DEBTOR is located; (o) the ACCOUNT is
not payable by an ACCOUNT DEBTOR with respect to which more than fifty percent
(50%) of the dollar amount of that ACCOUNT DEBTOR'S RECEIVABLES to the BORROWER
are more than ninety (90) days from the date of invoice; (p) the ACCOUNT does
not arise from any contract with any federal, state, local or foreign government
unless such governmental authority is the United States of America or an agency
or representative thereof and either the LENDER has obtained full compliance to
its complete satisfaction with all provisions necessary to protect the LENDER'S
interests under The Assignment of Claims Act of 1940, as amended, and all
regulations promulgated thereunder, and all other applicable federal procurement
laws and regulations; or the payments under the contract giving rise to such
ACCOUNT cannot be assigned under The Assignment of Claims Act; and (q) the
LENDER has a perfected first priority security interest therein. An ACCOUNT
which otherwise satisfies the
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LENDER'S criteria for eligibility shall also be subject to the following
eligibility limitations: (i) if the ACCOUNT is payable by an ACCOUNT DEBTOR to
whom the BORROWER owes money, only the portion of the ACCOUNT in excess of the
amount owed by any or the BORROWER to the ACCOUNT DEBTOR may be eligible; (ii)
to the extent the ACCOUNT contains finance charges, such finance charges shall
not be eligible; and (iii) if the BORROWER has unearned income in regard to an
ACCOUNT DEBTOR or has received a deposit from an ACCOUNT DEBTOR the amount of
ELIGIBLE ACCOUNTS owed from such ACCOUNT DEBTOR shall be reduced by the amount
of such unearned income or deposit. In determining the aggregate amount of
ACCOUNTS owed by an ACCOUNT DEBTOR which are ineligible due to being more than
ninety (90) days from the billing date credit balances in excess of ninety (90)
days shall not reduce such aggregate amount of ineligible ACCOUNTS.
Section 1.17. Employee Benefit Plan. The term "EMPLOYEE BENEFIT PLAN" means
an "employee benefit plan" as defined in Section 3(3) of ERISA.
Section 1.18. Environmental Laws. The term "ENVIRONMENTAL LAWS" means
individually or collectively any local, state or federal LAW, statute, rule,
regulation, order, ordinance, common law, permit or license term or condition,
or state superlien or environmental clean-up or disclosure statutes pertaining
to the environment or to environmental contamination, regulation, management,
control, treatment, storage, disposal, containment, removal, clean-up,
reporting, or disclosure, including, but not limited to, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as now or
hereafter amended (including, but not limited to, the Superfund Amendments and
Reauthorization Act); the Resource Conservation and Recovery Act, as now or
hereafter amended (including, but not limited to, the Hazardous and Solid Waste
Amendments of 1984); the Toxic Substances Control Act, as now or hereafter
amended; the Clean Water Act, as now or hereafter amended; the Safe Drinking
Water Act, as now or hereafter amended; or the Clean Air Act, as now or
hereafter amended.
Section 1.19. EPA Permit. The term "EPA PERMIT" has the meaning given that
term in Section 4.23 of this AGREEMENT.
Section 1.20. ERISA. The term "ERISA" means the Employee Retirement Income
Security Act of 1974 and regulations issued thereunder, as amended from time to
time and any successor statute.
Section 1.21. ERISA Affiliate. The term "ERISA AFFILIATE" means, in
relation to any PERSON, any trade or business (whether or not incorporated)
which is a member of a group of which that PERSON is a member and which is under
common control within the meaning of the regulations promulgated under Section
414 of the CODE.
Section 1.22. ERISA Liabilities. The term "ERISA LIABILITIES" means the
aggregate of all unfunded vested benefits under any employee pension benefit
plan, within the meaning of Section 3(2) of ERISA, of the BORROWER or any ERISA
AFFILIATE of the BORROWER under any plan covered by ERISA that is not a
MULTIEMPLOYER PLAN and all potential withdrawal liabilities of the BORROWER or
any ERISA AFFILIATE under all MULTIEMPLOYER PLANS.
Section 1.23. Event Of Default. The term "EVENT OF DEFAULT" means any of
the events set forth in Article 7 of this AGREEMENT, provided that any
requirement for the giving of notice, the lapse of time, or both, or any other
expressly stated condition, has been satisfied.
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Section 1.24. Facilities. The term "FACILITIES" means all real property and
the improvements thereon used or occupied or leased by the BORROWER or otherwise
used at any time by the BORROWER in the operation of its business or for the
manufacture, storage, or location of any of the COLLATERAL.
Section 1.25. Fiscal Year. The term "FISCAL YEAR" means the fiscal year of
the BORROWER which is the twelve (12) month accounting period commencing July
1st of each calendar year and ending June 30th of the following calendar year.
Section 1.26. G.A.A.P. The term "G.A.A.P." means, with respect to any date
of determination, generally accepted accounting principles as used by the
Financial Accounting Standards Board and/or the American Institute of Certified
Public Accountants consistently applied and maintained throughout the periods
indicated.
Section 1.27. Guaranteed Pension Plan. The term "GUARANTEED PENSION PLAN"
means any pension plan maintained by the BORROWER or an ERISA AFFILIATE of the
BORROWER, or to which the BORROWER or an ERISA AFFILIATE contributes, some or
all of the benefits under which are guaranteed by the United States Pension
Benefit Guaranty Corporation.
Section 1.28. Guarantors. The term "GUARANTORS" means collectively, AVATECH
SOLUTIONS, INC., a Delaware corporation, and Technical Learningware Company,
Inc., a Delaware corporation.
Section 1.29. Guaranty Agreements. The term "GUARANTY AGREEMENTS" means
collectively the Guaranty Agreements executed by the GUARANTORS for the benefit
of the LENDER.
Section 1.30. Guaranty Indebtedness. The term "GUARANTY INDEBTEDNESS" means
any obligation, contingent or otherwise, of any referenced PERSON directly or
indirectly guaranteeing any debt or obligation of any other PERSON and, without
limiting the generality of the foregoing, any obligation, direct or indirect,
contingent or otherwise, of such PERSON: (a) to purchase or pay (or advance or
supply funds for the purchase or payment of) such debt or obligation (whether
arising by virtue of partnership arrangements, by agreement to keep-well, to
purchase assets, goods, securities or services, to take-or-pay, or to maintain
financial statement conditions or otherwise, other than agreements to purchase
goods at an arm's length price in the ordinary course of business); or (b)
entered into for the purpose of assuring in any other manner the holder of such
debt or obligation of the payment thereof or to protect such holder against loss
in respect thereof (in whole or in part). The term GUARANTY INDEBTEDNESS shall
not include endorsements for collection or deposit in the ordinary course of
business.
Section 1.31. Indebtedness. The term "INDEBTEDNESS" means, as to any
referenced PERSON (determined without duplication): (a) indebtedness of such
PERSON for borrowed money (whether by loan or by the issuance and sale of debt
securities), or for the deferred purchase or acquisition price of property or
services (other than accounts payable incurred in the ordinary course of
business); (b) obligations of such PERSON in respect of letters of credit or
similar instruments issued or accepted by financial institutions for the account
of such PERSON (whether or not such obligations are contingent); (c) CAPITAL
LEASE OBLIGATIONS of such PERSON; (d) obligations of such PERSON to redeem or
otherwise retire equity interests in such PERSON; (e) indebtedness of others of
the type described in clause (a), (b), (c) or (d) above secured by a lien on any
of the property of such PERSON, whether or not the respective obligation so
secured has been assumed by such PERSON; and (f) GUARANTY INDEBTEDNESS.
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Section 1.32. Insolvency Proceedings. The term "INSOLVENCY PROCEEDINGS"
means, with respect to any referenced PERSON, any case or proceeding commenced
by or against such PERSON, under any provision of the United States Bankruptcy
Code, as amended, or under any other federal or state bankruptcy or insolvency
law, or any assignments for the benefit of creditors, formal or informal
moratoriums, receiverships, compositions or extensions with some or all
creditors with respect to any indebtedness of such PERSON.
Section 1.33. Interest Rate Protection Agreement. The term "INTEREST RATE
PROTECTION AGREEMENT" means, with respect to any referenced PERSON, an interest
rate swap, hedge, cap or collar agreement or similar arrangement between such
PERSON and one or more financial institutions providing for the transfer or
mitigation of interest risks either generally or under specific contingencies.
Section 1.34. Inventory. The term "INVENTORY" shall have the same meaning
as provided to such term in the Uniform Commercial Code, as adopted and in
effect in the State of Maryland, together with all of the BORROWER'S goods,
merchandise, materials, raw materials, goods in process, finished goods, work in
progress, bindings or component materials, packaging and shipping materials and
other tangible or intangible personal property, now owned or hereafter acquired
and held for sale or lease or furnished or to be furnished under contracts of
service or which contribute to the finished products or the sale, promotion,
storage and shipment thereof, whether located at facilities owned or leased by
the BORROWER, in the course of transport to or from ACCOUNT DEBTORS, used for
demonstration, placed on consignment, or held at storage locations.
Section 1.35. Laws. The term "LAWS" means all ordinances, statutes, rules,
regulations, orders, injunctions, writs or decrees of any government or
political subdivision or agency thereof, or any court or similar entity
established by any thereof.
Section 1.36. Lender Expenses. The term "LENDER EXPENSES" means the
reasonable out-of-pocket expenses or costs incurred by the LENDER arising out
of, pertaining to, or in any way connected with this AGREEMENT, any of the other
LOAN DOCUMENTS or the OBLIGATIONS, or any documents executed in connection
herewith or transactions hereunder. The term "LENDER EXPENSES" shall include,
without limitation: (a) the reasonable costs or expenses required to be paid by
the BORROWER pursuant to this AGREEMENT or any of the LOAN DOCUMENTS; (b) taxes
and insurance premiums advanced or otherwise paid by the LENDER in connection
with the COLLATERAL or on behalf of the BORROWER; (c) filing, recording, title
insurance, environmental and consulting fees, audit fees, search fees and other
expenses paid or incurred by the LENDER in connection with the LENDER'S
transactions with the BORROWER; (d) reasonable costs and expenses incurred by
the LENDER in the collection of the ACCOUNTS (with or without the institution of
legal action), or to enforce any provision of this AGREEMENT, or in gaining
possession of, maintaining, handling, evaluating, preserving, storing, shipping,
selling, preparing for sale and/or advertising to sell the COLLATERAL or any
other property of the BORROWER whether or not a sale is consummated; (e)
reasonable costs and expenses of litigation incurred by the LENDER, or any
participant of the LENDER in any of the OBLIGATIONS, in enforcing or defending
this AGREEMENT or any portion hereof or in collecting any of the OBLIGATIONS;
(f) reasonable attorneys' fees and expenses incurred by the LENDER in obtaining
advice or the services of its attorneys with respect to the structuring,
drafting, negotiating, reviewing, amending, terminating, enforcing or defending
of this AGREEMENT, or any portion hereof or any agreement or matter related
hereto, whether or not litigation is instituted; and (g) reasonable travel
expenses related to any of the foregoing. Notwithstanding anything contained
above, the BORROWER shall not be required to pay any LENDER EXPENSES until the
GUARANTOR receives copies of invoices, bills,
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receipts or other documentation evidencing the LENDER EXPENSES for which the
LENDER is requesting payment.
Section 1.37. Loan. The term "LOAN" means the revolving credit facility
extended by the LENDER to the BORROWER in accordance with the terms set forth in
this AGREEMENT.
Section 1.38. Loan Documents. The term "LOAN DOCUMENTS" means all
agreements, instruments and documents, including without limitation each
document listed as a "Loan Document" on a Closing Index of even date herewith,
together with all other loan agreements (including without limitation this
AGREEMENT), notes (including without limitation the NOTE), guarantees,
subordination agreements, intercreditor agreements, pledges, affidavits, powers
of attorney, consents, assignments, landlord and mortgage waivers, legal
opinions, collateral assignments, reimbursement agreements, contracts, notices,
leases, financing statements, mortgages, deeds of trust, assignments of rents or
contract proceeds, intellectual property security agreements, pledges, letter of
credit applications, INTEREST RATE PROTECTION AGREEMENTS, and all other written
matter, whether heretofore, now or hereafter executed by or on behalf of the
BORROWER, the GUARANTOR, or by any other PERSON in connection with any of the
OBLIGATIONS.
Section 1.39. Lock Box. The term "LOCK BOX" has the meaning given that term
in Section 3.5 of this AGREEMENT.
Section 1.40. Material Adverse Event. The term "MATERIAL ADVERSE EVENT"
means the occurrence of any event, condition, or omission which the LENDER in
the good faith reasonable exercise of the LENDER'S discretion determines could
be expected to have a material adverse effect upon: (a) the condition (financial
or otherwise), results of operations, properties, assets, liabilities
(including, without limitation, tax liabilities, liabilities under ENVIRONMENTAL
LAWS, and ERISA LIABILITIES), businesses, operations, capitalization, equity,
licenses or franchises of the BORROWER or of the GUARANTOR; (b) the ability of
the BORROWER or the GUARANTOR to perform any of the OBLIGATIONS when and as
required by the terms of the LOAN DOCUMENTS; (c) the rights and remedies of the
LENDER as provided by the LOAN DOCUMENTS; or (d) the value, condition, use, or
availability of any of the COLLATERAL or upon any of the LENDER'S liens and
security interests securing the OBLIGATIONS.
Section 1.41. Maximum Loan Amount. The term "MAXIMUM LOAN AMOUNT" means the
lesser of the BORROWING BASE or the DOLLAR CAP.
Section 1.42. Multiemployer Plan. The term "MULTIEMPLOYER PLAN" means a
"multiemployer plan" as defined in Section 4001(a)(3) of ERISA which is
maintained for employees of the BORROWER, or any ERISA AFFILIATE of the
BORROWER.
Section 1.43. Note. The term "NOTE" means the Demand Promissory Note of
even date herewith from the BORROWER as maker thereof which is payable to the
order of the LENDER in the stated principal amount of Two Million Dollars
($2,000,000.00).
Section 1.44. Obligations. The term "OBLIGATIONS" means collectively all of
the obligations of the BORROWER to pay to the LENDER: (a) sums due to the LENDER
arising out of or in connection with the LOAN or otherwise pursuant to the terms
of the LOAN DOCUMENTS; (b) indemnification obligations owed by the BORROWER to
the LENDER in accordance with the terms of the LOAN DOCUMENTS; (c) LENDER
EXPENSES; (d) overdrafts of the BORROWER upon any accounts with the LENDER; (e)
payments, duties or obligations owed to the LENDER
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arising from or with respect to INTEREST RATE PROTECTION AGREEMENTS, foreign
exchange facilities or currency transactions, existing or arising from time to
time; (f) any sums owed to the LENDER arising out of or relating to any letters
of credit including, without limitation, all reimbursement and indemnification
obligations, and obligations to pay fees; (g) all duties of payment and
performance owed to the LENDER in connection with any guaranties; (h) all other
indebtedness or liability of the BORROWER to the LENDER, whether direct or
indirect, joint or several, absolute or contingent, contemplated or not
presently contemplated, now existing or hereafter arising; and (i) any
indebtedness or liability which may exist or arise as a result of any payment
made by or for the benefit of the BORROWER being avoided or set aside for any
reason including, without limitation, any payment being avoided as a preference
under Sections 547 and 550 of the United States Bankruptcy Code, as amended, or
under any state law governing insolvency or creditors' rights.
Section 1.45. Perfection Certificate. The term "PERFECTION CERTIFICATE"
means the Perfection Certificate executed by the BORROWER and attached hereto as
Exhibit A.
Section 1.46. Permitted Liens. The term "PERMITTED LIENS" means: (a) liens
for taxes, assessments, or similar charges incurred in the ordinary course of
business that are not yet due and payable; (b) liens in favor of the LENDER; (c)
any existing liens specifically described on Schedule 1.46 hereof; (d) any lien
on specifically allocated money or securities to secure payments under workmen's
compensation, unemployment insurance, social security and other similar LAWS, or
to secure the performance of bids, tenders or contracts (other than for the
repayment of borrowed money) or to secure statutory obligations or appeal bonds,
or to secure indemnity, performance or other similar bonds in the ordinary
course of business; (e) purchase money security interests for EQUIPMENT not to
exceed in aggregate amount outstanding at any one time the sum of One Hundred
Thousand Dollars ($100,000.00), provided that such purchase money security
interests do not attach to any to any assets other than the specific item(s) of
EQUIPMENT acquired with the proceeds of the loan secured by such purchase money
security interests; (f) liens securing SUBORDINATED DEBT provided such liens are
specifically subordinated to the liens of the LENDER securing the OBLIGATIONS
pursuant to terms acceptable to the LENDER; and (g) subsequently arising liens
which are expressly approved in advance of the creation of any such liens by the
LENDER in writing.
Section 1.47. Person. The term "PERSON" means any individual, corporation,
partnership, limited liability company, association, joint-stock company, trust,
estate, unincorporated organization, joint venture, court, government or
political subdivision or agency thereof, or other legal entity.
Section 1.48. Receivables. The term "RECEIVABLES" means all of the
ACCOUNTS, INSTRUMENTS, DOCUMENTS, GENERAL INTANGIBLES, CHATTEL PAPER, notes,
notes receivable, drafts, acceptances, and choses in action, of the BORROWER,
now existing or hereafter created or acquired, and all proceeds and products
thereof, and all rights thereto, arising from the sale or lease of or the
providing of INVENTORY, GOODS, or services by the BORROWER to ACCOUNT DEBTORS,
as well as all other rights, contingent or non-contingent, of any kind of the
BORROWER to receive payment, benefit, or credit from any PERSON.
Section 1.49. Records. The term "RECORDS" means correspondence, memoranda,
tapes, discs, papers, books and other documents, or transcribed information of
any type, whether expressed in ordinary, computer or machine language.
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Section 1.50. Regulated Substance. The term "REGULATED SUBSTANCE" means any
substance which, pursuant to any ENVIRONMENTAL LAW, is identified as a hazardous
substance (or other term having similar import) or is otherwise subject to
special requirements in connection with the use, storage, transportation,
disposition or other handling thereof.
Section 1.51. Release. The term "RELEASE" means a "release" as defined in
Section 101(22) of the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as now or hereafter amended.
Section 1.52. Restricted Payment. The term "RESTRICTED PAYMENT" means
collectively: (a) any dividend or other payment or distribution, direct or
indirect, on account of any equity interest in the BORROWER now or hereafter
outstanding, except a dividend or distribution payable solely in the same class
or type of equity interest to the holders of that class or type; (b) any
redemption, conversion, exchange, retirement, sinking fund or similar payment,
purchase or other acquisition for value, direct or indirect, by the BORROWER of
any equity interest in the BORROWER now or hereafter outstanding; (c) any
payment made by the BORROWER to retire, or to obtain the surrender of, any
outstanding warrants, options or other rights to acquire equity interests in the
BORROWER now or hereafter outstanding; (d) any payment by the BORROWER of any
management, consulting or similar fees which are not salary payments in amounts
comparable to sums paid in the marketplace for similar services to unrelated
employees for services actually performed; or (e) any payment by the BORROWER
with respect to SUBORDINATED DEBT which is not permitted by the terms of the
Subordination Agreement relating to such SUBORDINATED DEBT which was executed by
the LENDER.
Section 1.53. Solvent. The term "SOLVENT" means, as to any referenced
PERSON, that as of the date of determination both: (a) (i) the then fair
saleable value of the property of such PERSON is greater than the total amount
of liabilities (including contingent liabilities) of such PERSON and is not less
than the amount that will be required to pay the probable liabilities on such
PERSON'S then existing debts as they become absolute and matured considering all
financing alternatives and potential asset sales reasonably available to such
PERSON; (ii) such PERSON'S capital is not unreasonably small in relation to its
business or any contemplated or undertaken transaction; and (iii) such PERSON
does not intend to incur, or believe (nor should it reasonably believe) that it
will incur, debts beyond its ability to pay such debts as they become due; and
(b) such PERSON is "solvent" within the meaning given that term and similar
terms under applicable laws relating to fraudulent transfers and conveyances.
For purposes of this definition, the amount of any contingent liability at any
time shall be computed as the amount that, in light of all the facts and
circumstances existing at such time, represents the amount that can reasonably
be expected to become an actual or matured liability.
Section 1.54. Subordinated Debt. The term "SUBORDINATED DEBT" means the
INDEBTEDNESS of the BORROWER described on Schedule 1.54 which has been
subordinated to the OBLIGATIONS pursuant to a written agreement executed by the
holder of such INDEBTEDNESS and the LENDER.
Section 1.55. Subsidiary. The term "SUBSIDIARY" means, with respect to any
PERSON, any other PERSON of which securities or other ownership interests
representing an aggregate of fifty percent (50%) or more of the equity or the
ordinary voting power are, at the time as of which any determination is being
made, owned or controlled directly, or indirectly through one or more
intermediaries, by such PERSON.
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Section 1.56. Termination Event. The term "TERMINATION EVENT" means: (a) a
"Reportable Event" described in Section 4043 of ERISA and the regulations issued
thereunder, but not including any such event for which the 30-day notice
requirement has been waived by applicable regulation; (b) the withdrawal of the
BORROWER or an ERISA AFFILIATE of the BORROWER from a GUARANTEED PENSION PLAN
during a plan year in which it was a "substantial employer" as defined in
Section 4001(a)(2) of ERISA; (c) the filing of a notice of intent to terminate a
GUARANTEED PENSION PLAN or the treatment of a GUARANTEED PENSION PLAN amendment
as a termination under Section 4041 of ERISA; (d) the institution of proceedings
to terminate a GUARANTEED PENSION PLAN by the Pension Benefit Guaranty
Corporation; (e) the withdrawal or partial withdrawal of the BORROWER or an
ERISA AFFILIATE of the BORROWER from a MULTIEMPLOYER PLAN; or (f) any other
event or condition which might reasonably be expected to constitute grounds
under ERISA for the termination of, or the appointment of a trustee to
administer, any GUARANTEED PENSION PLAN.
ARTICLE 2
TERMS OF THE LOAN
Section 2.1. Agreement To Extend The Loan. Subject to the terms and
conditions stated herein, the LENDER agrees to extend the LOAN to the BORROWER.
The LENDER shall advance proceeds of the LOAN to the BORROWER by depositing into
the COMMERCIAL ACCOUNT or in accordance with such other procedures as may be
mutually agreed to between the LENDER and the BORROWER, such sums as the
BORROWER may request, provided that the aggregate outstanding principal balance
of the LOAN shall never exceed at any time the MAXIMUM LOAN AMOUNT. The BORROWER
shall not request or permit any advance of proceeds of the LOAN which would
cause the aggregate amount of advances made to or for the BORROWER and
outstanding under the LOAN DOCUMENTS to exceed the MAXIMUM LOAN AMOUNT. In the
event that the principal balance outstanding under the LOAN ever exceeds the
MAXIMUM LOAN AMOUNT, the BORROWER shall immediately, upon the demand of the
LENDER, reduce the principal balance of the LOAN to an amount which is not in
excess of the MAXIMUM LOAN AMOUNT. Any termination of the LOAN by the LENDER
shall relieve the LENDER of the LENDER'S obligation to lend money or to make
financial accommodations to or for the BORROWER and the BORROWER'S accounts, and
shall in no way release, terminate, discharge or excuse the BORROWER from its
absolute duty to pay or perform the OBLIGATIONS.
Section 2.1.1. Conditions Precedent To Each Advance. The obligation of
the LENDER to make any advances under the LOAN, including the initial advance,
shall be subject to each of the following conditions precedent:
a. No Defaults Or Events Of Default. No event shall have occurred
on or prior to such date and be continuing on such date, and no condition shall
exist on such date, which constitutes a DEFAULT or EVENT OF DEFAULT.
b. Continuing Accuracy Of Representations And Warranties. Each of
the representations and warranties made by or on behalf of the BORROWER and the
GUARANTOR to the LENDER in the LOAN DOCUMENTS shall be true and correct in all
material respects when made.
c. Receipt Of Reports. The LENDER shall be in receipt of all
reports, financial statements, financial information and financial disclosures
required by the LOAN DOCUMENTS, except to the extent that the LENDER has waived
the receipt thereof.
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d. No Illegalities. It shall not be unlawful for the LENDER to
perform any of the agreements or obligations imposed upon the LENDER by any of
the LOAN DOCUMENTS or for the BORROWER or the GUARANTORS to perform any of their
respective agreements or obligations as provided by the LOAN DOCUMENTS.
e. No Material Adverse Event. No MATERIAL ADVERSE EVENT shall
have occurred and be then continuing.
Section 2.1.2. Interest And Lender's Records. All sums advanced under
the LOAN shall be evidenced by, and shall be repaid with interest in accordance
with, the provisions of the NOTE, the terms and conditions of which are
incorporated herein by reference. The date and amounts of each advance made by
the LENDER and each payment made by the BORROWER shall be recorded by the LENDER
on the books and records of the LENDER, but any failure to record such dates or
amounts shall not relieve the BORROWER of its duties and obligations under the
LOAN DOCUMENTS. Interest accrued upon the LOAN shall be computed on outstanding
balances as reflected on the LENDER'S books and records.
Section 2.1.3. Facility Fee. On each annual anniversary of the date of
CLOSING, while the LOAN is in existence and has not been terminated, until the
termination of the LOAN, the BORROWER shall pay to the LENDER a facility fee of
one-quarter of one percent (1/4%) of the DOLLAR CAP. The facility fee is not to
be considered a fee being paid by the BORROWER to the LENDER as an inducement to
the LENDER to make advances, nor shall it be considered to modify or limit the
ability of the LENDER to terminate in accordance with the provisions of this
AGREEMENT the ability of the BORROWER to borrow under the LOAN, but is instead
intended as part of the compensation which is earned by the LENDER for agreeing
to provide the LOAN in accordance with the terms of the LOAN DOCUMENTS.
Section 2.1.4. Commitment Fee. The BORROWER shall pay to the LENDER on
or before CLOSING a non-refundable and unconditional commitment fee of Twenty
Thousand Dollars ($20,000.00), which shall be the absolute property of the
LENDER upon payment. The commitment fee shall not be considered to be a payment
of any of the LENDER'S expenses incurred in connection with the LOAN and shall
be paid independent of the amount of proceeds of the LOAN ultimately advanced to
the BORROWER, even if that amount is less than the stated principal amount of
the LOAN.
Section 2.1.5. Administration Fee. On the first day of each month
until the LOAN is terminated and paid in full, the BORROWER shall pay to the
LENDER an administration fee of Five Hundred Dollars ($500.00) per month.
Section 2.1.6. Term. All sums outstanding under the LOAN shall be paid
in full on the earlier of: (a) the demand of the LENDER at any time following an
EVENT OF DEFAULT; or (b) sixty (60) calendar days after the demand of the LENDER
made when there are no EVENTS OF DEFAULT.
Section 2.1.7. Purpose. The proceeds of the LOAN shall be used by the
BORROWER solely for funding the general working capital needs of the BORROWER.
Section 2.2. Payments. All payments received by the LENDER which are to be
applied to reduce the OBLIGATIONS shall be credited to the balances due from the
BORROWER pursuant to the normal and customary practices of the LENDER, but shall
be provisional and shall not be considered final unless and until such payment
is not subject to avoidance under any provision of
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the United States Bankruptcy Code, as amended, including Sections 547 and 550,
or any state law governing insolvency or creditors' rights. If any payment is
avoided or set aside under any provision of the United States Bankruptcy Code,
including Sections 547 and 550, or any state law governing insolvency or
creditors' rights, the payment shall be considered not to have been made for all
purposes of this AGREEMENT and the LENDER shall adjust its records to reflect
the fact that the avoided payment was not made and has not been credited against
the OBLIGATIONS.
Section 2.3. Advancements. If the BORROWER fails to materially perform any
of its agreements or covenants contained in this AGREEMENT or if the BORROWER
fails to protect or preserve the COLLATERAL or the status and priority of the
security interest of the LENDER in the COLLATERAL, the LENDER may make advances
to perform the same on behalf of the BORROWER to protect or preserve the
COLLATERAL or the status and priority of the security interest of the LENDER in
the COLLATERAL, and all sums so advanced shall immediately upon advance become
secured by the security interests granted in this AGREEMENT, and shall become
part of the principal amount owed to the LENDER with interest to be assessed at
the applicable rate thereon in accordance with the NOTE and subject to the terms
and provisions of this AGREEMENT and all of the LOAN DOCUMENTS. The BORROWER
shall repay on demand all sums so advanced on the BORROWER'S behalf, plus all
expenses or costs incurred by the LENDER, including reasonable legal fees, with
interest thereon at the highest rate authorized in the NOTE. The provisions of
this Section shall not be construed to prevent the institution of the rights and
remedies of the LENDER upon the occurrence of an EVENT OF DEFAULT. The
authorization contained in this Section is not intended to impose any duty or
obligation on the LENDER to perform any action or make any advancement on behalf
of the BORROWER and is intended to be for the sole benefit and protection of the
LENDER.
Section 2.4. Automatic Debit. The BORROWER hereby irrevocably authorizes
the LENDER to debit the COMMERCIAL ACCOUNT to make payment of any and all sums
due under the NOTE when and as such sums are due and payable.
ARTICLE 3
SECURITY FOR THE OBLIGATIONS
The payment, performance and satisfaction of the OBLIGATIONS shall be
secured by the following assurances of payment and security.
Section 3.1. Grant Of Security Interest. In order to secure the repayment
and performance of all OBLIGATIONS, both currently existing and arising in the
future, the BORROWER grants to the LENDER an immediate and continuing security
interest in and to the COLLATERAL. The BORROWER further pledges, hypothecates
and grants to the LENDER a continuing security interest in and to, all amounts
that may be owing at any time and from time to time by the LENDER to the
BORROWER in any capacity, including but not limited to any balance or share
belonging to the BORROWER of any deposit or other account with the LENDER, which
security interest shall be independent of and in addition to any right of
set-off to which the LENDER may be entitled. The LENDER shall have the right to
require the BORROWER to pledge and grant a security interest to the LENDER in
such additional security as the LENDER may request from time to time in the
event that the LENDER deems itself to be insecure.
Section 3.2. Proceeds And Products. The LENDER'S security interests
provided for herein shall apply to the proceeds, including but not limited to
insurance proceeds, and the products of the COLLATERAL.
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Section 3.3. Priority Of Security Interests. Each of the security
interests, pledges, and liens granted by the BORROWER to the LENDER pursuant to
any of the LOAN DOCUMENTS shall be perfected first priority security interests,
pledges, and liens, except for: (a) the security interest in the BORROWER'S
INVENTORY which will be subordinate to the security interest of AutoDesk, Inc.
in the BORROWER'S INVENTORY; and (b) the LENDER'S liens will be subject to the
existing liens set forth on Schedule 1.46 hereof.
Section 3.4. Future Advances. The security interests, liens, and pledges
granted by the BORROWER to the LENDER pursuant to the LOAN DOCUMENTS shall
secure all current and all future advances made by the LENDER to the BORROWER,
or for the account or benefit of the BORROWER, and the LENDER may advance or
readvance upon repayment by the BORROWER all or any portion of the sums loaned
to the BORROWER and any such advance or readvance shall be fully secured by the
security interests, liens, and pledges created by the LOAN DOCUMENTS.
Section 3.5. Receivable Collections. The BORROWER shall establish a lock
box in the control of a financial institution acceptable to the LENDER ("LOCK
BOX") who will agree to deposit all items of payment received in the LOCK BOX to
a blocked account in which the LENDER shall have control for purposes of
perfecting its interest in such account ("LOCK-BOX ACCOUNT"). The BORROWER shall
move the LOCK BOX to a different financial institution selected by the LENDER
within thirty (30) days after the written request of the LENDER which request
may be made at any time. All funds deposited in the LOCK-BOX ACCOUNT shall be
transferred to the COLLECTION ACCOUNT each BUSINESS DAY. The BORROWER shall
deposit into the COLLECTION ACCOUNT, immediately upon receipt thereof, all cash,
checks, drafts, and other instruments for the payment of money, properly
endorsed, which have been received by it in full or partial payment of any
RECEIVABLE. Prior to any such deposit by the BORROWER into the COLLECTION
ACCOUNT the BORROWER will commingle such items of payment with any of its other
funds or property but will hold them separate and apart. The LENDER, from time
to time, shall apply all of the collected funds held in the COLLECTION ACCOUNT
toward payment of all or any part of the OBLIGATIONS, whether or not then due,
in such order of application as the LENDER may determine. The LENDER shall have
no obligation to provide any provisional or other credit for any deposited funds
which are not collected funds free of any rights of return.
Section 3.6. Collection Of Receivables By Lender. The LENDER shall have the
right during any continuing DEFAULT or EVENT OF DEFAULT to send notices of
assignment or notices of the LENDER'S security interest to any and all ACCOUNT
DEBTORS or any third party holding or otherwise concerned with any of the
COLLATERAL, and thereafter the LENDER shall have the sole right to collect the
RECEIVABLES and to take possession of the COLLATERAL and RECORDS relating
thereto. All of the LENDER'S collection expenses shall be charged to the
BORROWER'S accounts and added to the OBLIGATIONS. During any continuing DEFAULT
or EVENT OF DEFAULT the LENDER shall have the right to receive, indorse, assign
and deliver in the LENDER'S name or the BORROWER'S name any and all checks,
drafts and other instruments for the payment of money relating to the
RECEIVABLES, and the BORROWER hereby waives notice of presentment, protest and
non-payment of any instrument so endorsed. If the LENDER is collecting the
RECEIVABLES, the BORROWER hereby constitutes the LENDER or the LENDER'S designee
as its attorney-in-fact with power with respect to the RECEIVABLES: (a) to
indorse its name upon all notes, acceptances, checks, drafts, money orders or
other evidences of payment of COLLATERAL that may come into the LENDER'S
possession; (b) to sign its name on any invoices relating to any of the
RECEIVABLES, drafts against ACCOUNT DEBTORS, assignments and verifications of
RECEIVABLES and notices to ACCOUNT DEBTORS; (c) to send verifications of
RECEIVABLES to any ACCOUNT DEBTOR; (d) to notify the Post Office to change the
address for delivery of mail addressed to it to such address as the LENDER may
designate; (e) to receive
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and open all mail addressed to it and to remove therefrom all cash, checks,
drafts and other payments of money; and (f) to do all other acts and things
reasonably necessary, proper, or convenient to carry out the terms and
conditions and purposes and intent of this AGREEMENT. All acts of such attorney
or designee are hereby ratified and approved, and such 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 law in accordance with this AGREEMENT, with the
exception of acts arising from actual fraud, wilful or wanton misconduct or
gross negligence. The power of attorney hereby granted, being coupled with an
interest, is irrevocable while any of the OBLIGATIONS remain unpaid. The LENDER,
without notice to or consent from the BORROWER, may sue upon or otherwise
collect, extend the time of payment of or compromise or settle for cash, credit
or otherwise upon any terms, any of the RECEIVABLES or any securities,
instruments or insurances applicable thereto or release the obligor thereon. The
LENDER is authorized and empowered to accept the return of the goods represented
by any of the RECEIVABLES, without notice to or consent by the BORROWER, all
without discharging or in any way affecting the liability of the BORROWER under
the LOAN DOCUMENTS. The LENDER does not, by anything herein or in any assignment
or otherwise, assume any of the obligations of the BORROWER under any contract
or agreement assigned to the LENDER, and the LENDER shall not be responsible in
any way for the performance by the BORROWER of any of the terms and conditions
thereof.
Section 3.7. Maintenance Of Principal Accounts. As further security for the
OBLIGATIONS, the BORROWER shall maintain its principal transaction accounts with
the LENDER.
Section 3.8. Guaranty Agreement. The GUARANTORS shall execute and deliver a
GUARANTY AGREEMENTS which shall guarantee, among other things, the absolute full
payment and performance by the BORROWER of the OBLIGATIONS.
Section 3.9. Subordination Agreements. The BORROWER shall deliver to the
LENDER Subordination And Intercreditor Agreements in form and substance
acceptable to the LENDER with respect to the SUBORDINATED DEBT.
Section 3.10. Warrants. In consideration of the LENDER providing the LOAN
to the BORROWER, Avatech Solutions, Inc. shall grant to the LENDER warrants to
acquire 15,000 shares of the common stock of Avatech Solutions, Inc. for a
purchase price of $.01 per share, all pursuant to terms and provisions of a
warrant agreement in the form attached hereto as Exhibit B.
Section 3.11. Landlord Agreements. The BORROWER shall deliver to the LENDER
Landlord Agreements in form and substance acceptable to the LENDER with respect
to the properties described on Schedule 3.11 to this AGREEMENT.
Section 3.12. Further Assurances. The BORROWER will, at its expense,
promptly execute and deliver all further instruments and documents and take all
further action that may be necessary or desirable and that the LENDER may
reasonably request in writing from time to time in order: (a) to perfect and
protect the security interests to be created hereby; (b) to enable the LENDER to
exercise and enforce its rights and remedies hereunder in respect of the
COLLATERAL; or (c) otherwise to effect the purposes of this AGREEMENT,
including, without limitation: (i) upon the BORROWER'S acquisition thereof,
delivering to the LENDER each item of CHATTEL PAPER of the BORROWER, (ii) if any
RECEIVABLES are evidenced by an INSTRUMENT delivering and pledging to the LENDER
such INSTRUMENT duly endorsed and accompanied by executed instruments of
transfer or assignment, all in form and substance satisfactory to the LENDER,
(iii) executing and filing such financing statements or amendments
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thereto as may be necessary or desirable or that the LENDER may request in order
to perfect and preserve the security interests purported to be created hereby,
(iv) upon the acquisition after the date hereof by the BORROWER of any EQUIPMENT
covered by a certificate of title or ownership, cause the LENDER to be listed as
the lienholder on such certificate of title and within sixty (60) days of the
acquisition thereof deliver evidence of the same to the LENDER, and (v) upon the
acquisition after the date hereof of any asset for which an assignment, pledge,
mortgage, or other document is required to be filed in order to grant or perfect
a lien therein for the benefit of the LENDER, execute and deliver to the LENDER
such assignment, pledge, mortgage, or other INSTRUMENT within thirty (30) days
of the acquisition thereof. If the BORROWER fails to execute any instrument or
document described above within five (5) BUSINESS DAYS of being requested to do
so by the LENDER, the BORROWER hereby appoints the LENDER or any officer of the
LENDER as the BORROWER'S attorney in fact for purposes of executing such
instruments or documents in the BORROWER'S name, place and stead, which power of
attorney shall be considered as coupled with an interest and irrevocable.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
To induce the LENDER to extend the LOAN and to enter into this AGREEMENT,
the BORROWER makes the representations and warranties set forth in this Article
4. The BORROWER acknowledges the LENDER'S justifiable right to rely upon these
representations and warranties.
Section 4.1. Accuracy Of Information. All information submitted by or on
behalf of the BORROWER or the GUARANTORS in connection with any of the
OBLIGATIONS is true, accurate and, to the best of the BORROWER'S knowledge,
complete in all material respects as of the date made and contain no knowingly
false, incomplete or misleading statements.
Section 4.2. No Litigation. There are no actions, suits, investigations, or
proceedings pending or, to the knowledge of the BORROWER, threatened against the
BORROWER or the assets of the BORROWER, except as specifically disclosed on
Schedule 4.2 attached hereto.
Section 4.3. No Liability Or Adverse Change. The BORROWER has no direct or
contingent liability known to the BORROWER and not previously disclosed to the
LENDER, nor does the BORROWER know of or have any reason to expect any material
adverse change in the BORROWER'S assets, liabilities, properties, business, or
condition, financial or otherwise.
Section 4.4. Title To Collateral. The BORROWER has good and marketable
title to the COLLATERAL. The liens granted by the BORROWER to the LENDER in the
COLLATERAL will have the priority provided by the LOAN DOCUMENTS.
Section 4.5. Authority; Approvals And Consents.
Section 4.5.1. Authority. The BORROWER has the legal authority to
enter into each of the LOAN DOCUMENTS and to perform, observe and comply with
all of the BORROWER'S agreements and obligations thereunder, including, without
limitation the borrowings contemplated hereby.
Section 4.5.2. Approvals. The execution and delivery by the BORROWER
of each of the LOAN DOCUMENTS, the performance by the BORROWER of all of its
agreements and
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obligations under the LOAN DOCUMENTS, and the borrowings contemplated by this
AGREEMENT, have been duly authorized by all necessary action on the part of the
BORROWER and do not and will not (i) contravene any provision of the
organizational documents of the BORROWER; (ii) conflict with, or result in a
breach of the terms, conditions or provisions of, or constitute a default under,
or result in the creation of any lien upon any of the property of the BORROWER
under any agreement, trust deed, indenture, mortgage or other instrument to
which the BORROWER is a party or by which the BORROWER or any property of the
BORROWER is bound or affected (except for liens created for the benefit of the
LENDER); (iii) violate or contravene any provision of any LAW, rule or
regulation (including, without limitation, Regulations G, T, U or X of the Board
of Governors of the Federal Reserve System) or any order, ruling or
interpretation thereunder or any decree, order of judgment of any court or
governmental or regulatory authority, bureau, agency or official (all as from
time to time in effect and applicable to the BORROWER); or (iv) require any
waivers, consents or approvals by any of the creditors of the BORROWER.
Section 4.5.3. Consents. Other than filings and recordings required to
perfect the security interests and liens granted hereunder, no approval,
consent, order, authorization or license by, or giving notice to, or taking any
other action with respect to, any governmental or regulatory authority or agency
is required for the execution and delivery by the BORROWER of the LOAN DOCUMENTS
or for the performance by the BORROWER of any of the agreements and obligations
thereunder.
Section 4.6. Binding Effect Of Documents, Etc. Each of the LOAN DOCUMENTS
which the BORROWER has executed and delivered as contemplated and required to be
executed and delivered as of the date of CLOSING by this AGREEMENT, has been
duly executed and delivered by the BORROWER and is the legal, valid and binding
obligation of the BORROWER and is enforceable against the BORROWER in accordance
with all stated terms.
Section 4.7. Other Names. The BORROWER has not changed its name, been the
surviving entity in a merger, or changed the location of its chief executive
office within the last twelve (12) years, except as is disclosed on the
PERFECTION CERTIFICATE. The BORROWER does not trade under any trade or
fictitious names except as set forth on the PERFECTION CERTIFICATE.
Section 4.8. No Events Of Default. There is not currently existing any
action, event, or condition which presently constitutes a DEFAULT or an EVENT OF
DEFAULT.
Section 4.9. Guaranty Agreements. The GUARANTY AGREEMENTS are the valid and
binding obligation of the GUARANTORS and are fully enforceable against the
GUARANTORS in accordance with all outstanding terms.
Section 4.10. Taxes. The BORROWER: (a) has filed all federal, state and
local tax returns and other reports which the BORROWER is required by LAW to
file prior to the date hereof and which are material to the conduct of the
business of the BORROWER; (b) has paid or caused to be paid all taxes,
assessments and other governmental charges that are due and payable prior to the
date hereof; and (c) has made adequate provision for the payment of such taxes,
assessments or other charges accruing but not yet payable. The BORROWER has no
knowledge of any deficiency or additional assessment in connection with any
taxes, assessments or charges not provided for on the BORROWER'S books of
account or reflected in the BORROWER'S financial statements.
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Section 4.11. Compliance With Laws. The BORROWER has complied in all
material respects with all applicable LAWS, including, but not limited to, all
LAWS with respect to: (a) all restrictions, specifications, or other
requirements pertaining to products that it sells or to the services it
performs; (b) the conduct of its business; and (c) the use, maintenance, and
operation of the real and personal properties owned or leased by it in the
conduct of its business.
Section 4.12. Chief Place Of Business. The chief executive office, chief
place of business, and the place where the BORROWER keeps its RECORDS concerning
the COLLATERAL is 11400 Cronridge Drive, Suite A, Owings Mills, Maryland 21117.
Section 4.13. Location Of Inventory. The INVENTORY is and shall be kept
solely at the BORROWER'S locations set forth in the PERFECTION CERTIFICATE and
shall not be moved, sold or otherwise disposed of without prior notification to
the LENDER, except for sales of INVENTORY to ACCOUNT DEBTORS in the ordinary
course of the BORROWER'S businesses. None of the INVENTORY is currently stored
with or in the possession of any bailee, warehouseman, or other similar PERSON,
except as specifically disclosed on the Perfection Certificate delivered to the
LENDER.
Section 4.14. No Subsidiaries. The BORROWER has no SUBSIDIARIES other than
Technical Learningware Company, Inc.
Section 4.15. No Labor Agreements. The BORROWER is not subject to any
collective bargaining agreement or any agreement, contract, decree or order
requiring it to recognize, deal with or employ any PERSONS organized as a
collective bargaining unit or other form of organized labor.
Section 4.16. Eligible Accounts. Each ACCOUNT which the BORROWER contends
should be included in the calculation of the BORROWING BASE from time to time
will be an ELIGIBLE ACCOUNT. At the time each ELIGIBLE ACCOUNT is listed on or
included in (whether singularly or in the aggregate with other ELIGIBLE
ACCOUNTS) a schedule or report delivered to the LENDER to be included in the
calculation of the BORROWING BASE, all of such ELIGIBLE ACCOUNTS will have been
generated in compliance with the BORROWER'S normal credit policies as
historically in effect (or as modified from time to time on prior written notice
of the LENDER), or on such other reasonable terms disclosed in writing to the
LENDER in advance of the creation of such ACCOUNTS, and such terms shall be
expressly set forth on the face of all invoices.
Section 4.17. Approvals. The BORROWER possesses all franchises, approvals,
licenses, contracts, merchandising agreements, merchandising contracts and
governmental approvals, registrations and exemptions necessary for it lawfully
to conduct its business and operation as presently conducted and as anticipated
to be conducted after CLOSING.
Section 4.18. Financial Statements. The financial statements of the
BORROWER which have been delivered to the LENDER prior to the date of this
AGREEMENT, fairly present the financial condition of the BORROWER as of the
respective dates thereof and the results and operations of the BORROWER for the
fiscal periods ended on such respective dates, all in accordance with G.A.A.P.
The BORROWER has no direct or contingent liability or obligation known to the
BORROWER and not disclosed on the financial statements delivered to the LENDER.
There has been no adverse change in the financial condition of the BORROWER
since the financial statements of the BORROWER most recently delivered to the
LENDER, and the BORROWER does not know of or have any reason to expect any
material adverse change in the assets, liabilities, properties, business, or
condition, financial or otherwise, of the BORROWER.
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Section 4.19. Solvency. The BORROWER will be SOLVENT both before and after
CLOSING, after giving full effect to the OBLIGATIONS and all of the BORROWER'S
liabilities.
Section 4.20. Fair Labor Standards Act. The BORROWER has complied in all
material respects with the Fair Labor Standards Act of 1938, as amended.
Section 4.21. Employee Benefit Plans.
Section 4.21.1. Compliance. The BORROWER and its ERISA AFFILIATES are
in compliance in all material respects with all applicable provisions of ERISA
and the regulations thereunder and of the CODE with respect to all EMPLOYEE
BENEFIT PLANS.
Section 4.21.2. Absence Of Termination Event. No TERMINATION EVENT has
occurred or is reasonably expected to occur with respect to any GUARANTEED
PENSION PLAN.
Section 4.21.3. Actuarial Value. The actuarial present value (as
defined in Section 4001 of ERISA) of all benefit commitments (as defined in
Section 4001 of ERISA) under each GUARANTEED PENSION PLAN does not exceed the
assets of that plan.
Section 4.21.4. No Withdrawal Liability. Neither the BORROWER nor any
of its ERISA AFFILIATES has incurred or reasonably expects to incur any
withdrawal liability under ERISA in connection with any MULTIEMPLOYER PLANS.
Section 4.22. Environmental Conditions.
Section 4.22.1. Existence Of Permits. The BORROWER has obtained all
legally required permits, licenses, variances, clearances and all other
necessary approvals (collectively, the "EPA PERMITS") for use of the FACILITIES
and the operation and conduct of its business from all applicable federal,
state, and local governmental authorities, utility companies or
development-related entities including, but not limited to, any and all
appropriate Federal or State environmental protection agencies and other county
or city departments, public water works and public utilities in regard to the
use of the FACILITIES, the operation and conduct of its business, and the
handling, transporting, treating, storage, disposal, discharge, or RELEASE of
REGULATED SUBSTANCES, if any, into, on or from the environment (including, but
not limited to, any air, water, or soil).
Section 4.22.2. Compliance With Permits. Each issued EPA PERMIT is in
full force and effect, has not expired or been suspended, denied or revoked, and
is not under challenge by any PERSON. The BORROWER is in compliance in all
material aspects with each issued EPA PERMIT.
Section 4.22.3. No Litigation. Neither the BORROWER nor any of the
FACILITIES are subject to any private or governmental litigation, or to the
knowledge of the BORROWER, threatened litigation, lien or judicial or
administrative notice, order or action involving the BORROWER or any of the
FACILITIES relating to REGULATED SUBSTANCES or environmental problems,
impairments or liabilities.
Section 4.22.4. No Releases. To the best knowledge of the BORROWER,
there has been no RELEASE into, on or from any of the FACILITIES and no
REGULATED SUBSTANCES are located on or have been treated, stored, processed,
disposed of, handled or transported to or from, any of the FACILITIES in
violation of any ENVIRONMENTAL LAWS. To the best knowledge
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of the BORROWER, no REGULATED SUBSTANCES have been treated, stored, disposed,
RELEASED, located, discharged, possessed, managed, processed, or otherwise
handled in the operation or conduct of the BORROWER'S business in violation of
any ENVIRONMENTAL LAWS. The BORROWER has complied in all material respects with
all ENVIRONMENTAL LAWS affecting the FACILITIES and the BORROWER'S businesses.
Section 4.22.5. Transportation. The BORROWER does not transport, in
any manner, any REGULATED SUBSTANCES except in the ordinary course of the
BORROWER'S business in material compliance with all ENVIRONMENTAL LAWS.
Section 4.22.6. No Violation Notices. The BORROWER has not received
any notices that any REGULATED SUBSTANCES transported from any FACILITY have
been disposed of in violation of any ENVIRONMENTAL LAWS.
Section 4.22.7. No Notice Of Violations. The BORROWER has not received
written notice of any circumstances which would be likely to result in any
obligation under any ENVIRONMENTAL LAW to investigate or remediate any REGULATED
SUBSTANCES in, on or under any of the FACILITIES.
ARTICLE 5
AFFIRMATIVE COVENANTS
The BORROWER agrees during the term of this AGREEMENT and while any
OBLIGATIONS are outstanding and unpaid to do and perform each of the acts and
promises set forth in this Article 5:
Section 5.1. Payment. All OBLIGATIONS shall be paid in full when and as
due.
Section 5.2. Insurance. The BORROWER shall obtain and maintain such
insurance coverages as are reasonable, customary and prudent for businesses
engaged in activities similar to the business activities of the BORROWER.
Without limitation to the foregoing, the BORROWER shall maintain for all of its
assets and properties, whether real, personal, or mixed and including but not
limited to the COLLATERAL, fire and extended coverage casualty insurance in
amounts satisfactory to the LENDER and sufficient to prevent any co-insurance
liability (which amount shall be the full insurable value of the assets and
properties insured unless the LENDER in writing agrees to a lesser amount),
naming the LENDER as sole loss payee with respect to the COLLATERAL, with
insurance companies and upon policy forms containing standard mortgagee clauses
which are acceptable to and approved by the LENDER. The BORROWER shall submit to
the LENDER the originals of the casualty insurance policies and paid receipts
evidencing payment of the premiums due on the same. The casualty insurance
policies shall be endorsed so as to make them noncancellable unless thirty (30)
days prior notice of cancellation is provided to the LENDER. The proceeds of any
insured loss shall be applied by the LENDER to the OBLIGATIONS, in such order of
application as determined by the LENDER, unless the LENDER in its sole
discretion permits the use thereof to repair or replace damaged or destroyed
COLLATERAL.
Section 5.3. Books And Records. The BORROWER shall notify the LENDER in
writing if the BORROWER modifies or changes its method of accounting or enters
into, modifies, or terminates any agreement presently existing, or at any time
hereafter entered into with any third party accounting firm for the preparation
and/or storage of the BORROWER'S accounting records.
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Section 5.4. Collection Of Accounts; Sale Of Inventory. The BORROWER shall
only collect its RECEIVABLES and sell its INVENTORY in the ordinary course of
the BORROWER'S business.
Section 5.5. Notice Of Litigation And Proceedings. The BORROWER shall give
prompt notice to the LENDER of any action, suit, citation, violation, direction,
notice or proceeding before any court or governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, affecting the
BORROWER, or the assets or properties thereof, which, if determined adversely to
the BORROWER: (a) could require the BORROWER to pay over more than Twenty-Five
Thousand Dollars ($25,000.00) or deliver assets the value of which exceeds that
sum (whether or not the claim is considered to be covered by insurance); or (b)
could reasonably be expected to have a material adverse effect upon the
financial condition or business operations of the BORROWER.
Section 5.6. Payment Of Liabilities To Third Persons. The BORROWER shall
pay when and as due, or within applicable grace periods, all liabilities due to
third persons, except when the amount thereof is being contested in good faith
by appropriate proceedings and with adequate reserves therefor being set aside
by the BORROWER.
Section 5.7. Notice Of Change Of Business Location. The BORROWER shall
notify the LENDER thirty (30) days in advance of: (a) any change in the location
of its existing offices or place of business; (b) the establishment of any new,
or the discontinuation of any existing, place of business; and (c) any change in
or addition to the locations at which the COLLATERAL is kept. Prior to moving
any COLLATERAL to any location not owned by the BORROWER (other than deliveries
to ACCOUNT DEBTORS of sold or leased items), the BORROWER shall obtain and
deliver to the LENDER an agreement, in the form attached hereto as Exhibit C
executed by the owner of such location. In the event any COLLATERAL is stored
with a warehousemen or other bailee, and the COLLATERAL is evidenced by a
negotiable document of title, the BORROWER shall immediately deliver the
document of title to the LENDER.
Section 5.8. Payment Of Taxes. The BORROWER shall pay or cause to be paid
when and as due all taxes, assessments and charges or levies imposed upon it or
on any of its property or which it is required to withhold and pay over to the
taxing authority or which it must pay on its income, except where contested in
good faith, by appropriate proceedings and at its own cost and expense;
provided, however, that the BORROWER shall not be deemed to be contesting in
good faith by appropriate proceedings unless: (a) such proceedings operate to
prevent the taxing authority from attempting to collect the taxes, assessments
or charges; (b) the COLLATERAL is not subject to sale, forfeiture or loss during
such proceedings; (c) the BORROWER'S contest does not subject the LENDER to any
claim by the taxing authority or any other person; (d) the BORROWER establishes
appropriate reserves, satisfactory to the LENDER in its sole discretion, for the
payment of all taxes, assessments, charges, levies, legal fees, court costs and
other expenses for which the BORROWER would be liable if unsuccessful in the
contest; (e) the BORROWER prosecutes the contest continuously to its final
conclusion; and (f) at the conclusion of the proceedings, the BORROWER promptly
pays all amounts determined to be payable, including but not limited to all
taxes, assessments, charges, levies, legal fees and court costs.
Section 5.9. Inspections Of Records. The BORROWER shall permit
representatives of the LENDER access to the BORROWER'S places of business, at
intervals and at such times as determined by the LENDER, to inspect the
COLLATERAL and to review and make extracts from or photocopies of the books and
records of the BORROWER; provided, however, that prior to an EVENT OF DEFAULT,
the LENDER shall provide the BORROWER with at least twenty-four (24)
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hours prior notice before entering the BORROWER'S place of business, shall not
be there prior to 8:00 A.M. or stay later than 6:00 P.M., and shall not
materially interfere with the BORROWER'S business. The BORROWER agrees to pay to
the LENDER a Two Thousand Dollar ($2,000.00) fee for each field examination
conducted by the LENDER, as well as reimburse the LENDER for all reasonable
expenses incurred by the LENDER in connection with any field examinations
conducted at any of the BORROWER'S locations outside of the State of Maryland.
Section 5.10. Notice Of Events Affecting Collateral; Compromise Of
Receivables; Returned Or Repossessed Goods. The BORROWER shall promptly report
to the LENDER: (a) any reclamation, return or repossession of goods; (b) all
claims or disputes asserted by any ACCOUNT DEBTOR or other obligor involving in
excess of Twenty-Five Thousand Dollars ($25,000.00); and (c) all matters
materially affecting the value, enforceability or collectibility of any of the
COLLATERAL. Without the LENDER'S consent, the BORROWER shall not compromise or
adjust any of the RECEIVABLES which have been included by the BORROWER in the
determination of the BORROWING BASE, extend the time for payment thereof, or
grant any additional discounts, allowances or credits thereon; provided,
however, that the BORROWER may grant, in the ordinary course of business, to any
party obligated on any of the RECEIVABLES, any rebate, refund, or adjustment to
which such party may be lawfully entitled, and may accept, in connection
therewith, the return of goods, sale, or lease of which shall have given rise to
such RECEIVABLES. If any goods, the sale of which has resulted in RECEIVABLES
included in determining the BORROWING BASE, are returned by the ACCOUNT DEBTOR
for credit or repossessed by the BORROWER, the BORROWER shall receive and hold
such goods as trustee for the LENDER and as additional security for the payment
of the OBLIGATIONS, and make disposition thereof as required by the LENDER.
Section 5.11. Documentation Of Collateral. The BORROWER agrees that upon
the request of the LENDER, the BORROWER will provide the LENDER with: (a)
written statements or schedules identifying and describing the COLLATERAL, and
all additions, substitutions, and replacements thereof, in such detail as the
LENDER may reasonably require; (b) copies of ACCOUNT DEBTORS' invoices or
billing statements; (c) evidence of shipment or delivery of goods or merchandise
to or performance of services for ACCOUNT DEBTORS; and (d) such other schedules
and information as the LENDER reasonably may require. The items to be provided
under this Section shall be in form satisfactory to the LENDER and are to be
executed and delivered to the LENDER from time to time solely for the LENDER'S
convenience in maintaining RECORDS of the COLLATERAL. The failure of the
BORROWER to give any of such items to the LENDER shall not affect, terminate,
modify or otherwise limit the LENDER'S security interests in the COLLATERAL. The
LENDER shall have the right, at any time and from time to time, to verify the
eligibility of the BORROWER' RECEIVABLES, including obtaining verification of
the RECEIVABLES directly from ACCOUNT DEBTORS. The LENDER agrees to comply with
the nondisclosure requirements of Sections 1-301, 1-302, 1-303, 1-304 and 1-305
of the Financial Institutions Article, Annotated Code of Maryland.
Section 5.12. Reporting Requirements. The BORROWER shall submit the
following items to the LENDER:
Section 5.12.1. Inventory Reports. On the 15th day of each calendar
month, reports of INVENTORY on such reporting forms as are required by the
LENDER from time to time, certified to be accurate and correct by the chief
financial officer of the BORROWER, which reports shall be compiled in a manner
acceptable to the LENDER.
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Section 5.12.2. Receivables And Accounts Payable Reports. On or before
the 15th day of each calendar month: (i) a RECEIVABLES report and aging,
together with a calculation of ineligible RECEIVABLES; and (ii) an accounts
payable report and aging, both in form reasonably acceptable to the LENDER and
containing such information as the LENDER may specify from time to time. Such
reports shall be accompanied by such reports, copies of sales journals,
remittance reports, and other documentation as the LENDER may reasonably request
from time to time.
Section 5.12.3. Borrowing Base Report. Once each week (on the same day
each week) as well as on the last day of each month, or more frequently if
requested by the LENDER, a collateral and loan report in such form and context
as may be specified by the LENDER from time to time. This report shall include
updated ACCOUNTS balance and LOAN balance figures as well as detail on the
activity which resulted in the updated ACCOUNTS and LOAN balance figures as of
the date of the report.
Section 5.12.4. Monthly Financial Statements. As soon as available and
in any event within thirty (30) calendar days after the end of each calendar
month, the BORROWER shall submit to the LENDER a consolidated and consolidating
balance sheet of the BORROWER and its SUBSIDIARIES as of the end of such month
and a consolidated and consolidating statement of income and retained earnings
of the BORROWER and its SUBSIDIARIES for such month, and a consolidated and
consolidating statement of cash flow of the BORROWER and its SUBSIDIARIES for
such month, all in reasonable detail and stating in comparative form the
respective consolidated and consolidating figures for the corresponding date and
period in the previous FISCAL YEAR and all prepared in accordance with G.A.A.P.
and certified by the Chief Financial Officer of the BORROWER (subject to
year-end adjustment).
Section 5.12.5. SEC Reports. Within forty-five (45) days after the end
of each fiscal quarter, the BORROWER shall deliver to the LENDER a copy of the
10Q report filed by Avatech Solutions, Inc. for such fiscal quarter; and within
one hundred twenty (120) days after the end of each FISCAL YEAR the BORROWER
shall deliver to the LENDER a copy of the 10K report filed by Avatech Solutions,
Inc.
Section 5.12.6. Annual Financial Statements. As soon as available and
in any event within one hundred twenty (120) calendar days after the end of each
FISCAL YEAR of the BORROWER, the BORROWER shall submit to the LENDER a
consolidated and consolidating balance sheet of the BORROWER and its
SUBSIDIARIES as of the end of such FISCAL YEAR and a consolidated and
consolidating statement of income and retained earnings of the BORROWER and its
SUBSIDIARIES for such FISCAL YEAR, and a consolidated and consolidating
statement of cash flow of the BORROWER and its SUBSIDIARIES for such FISCAL
YEAR, all in reasonable detail and stating in comparative form the respective
consolidated and consolidating figures for the corresponding date and period in
the prior FISCAL YEAR and all prepared in accordance with G.A.A.P. and
accompanied by an audited opinion thereon acceptable to the LENDER by
independent accountants selected by the BORROWER and acceptable to the LENDER.
Section 5.12.7. Budget. Within thirty (30) days prior to the end of
each FISCAL YEAR, the BORROWER shall submit to the LENDER an annual budget and
cash flow forecast for the next FISCAL YEAR.
Section 5.12.8. Tax Returns. Within five (5) days after filing with
the Internal Revenue Service which shall be no more than one hundred fifty (150)
days after the end of the applicable FISCAL YEAR end, the BORROWER shall deliver
to the LENDER copies of the BORROWER'S income tax returns together with all
schedules thereto.
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Section 5.12.9. Management Letters. Promptly upon receipt thereof, the
BORROWER shall submit to the LENDER copies of any reports submitted to the
BORROWER or any SUBSIDIARY by independent certified public accountants in
connection with the examination of the financial statements of the BORROWER or
any SUBSIDIARY made by such accountants.
Section 5.12.10. Reports To Other Creditors. Promptly after the
furnishing thereof, the BORROWER shall submit to the LENDER copies of any
statement or report furnished to any other PERSON pursuant to the terms of any
indenture, loan, or credit or similar agreement and not otherwise required to be
furnished to the LENDER pursuant to any other provisions of this AGREEMENT.
Section 5.12.11. Management Changes. The BORROWER shall notify the
LENDER immediately of any changes in the personnel holding the positions of
Chief Executive Officer, President or Chief Financial Officer of the BORROWER.
Section 5.12.12. General Information. In addition to the items set
forth in subparagraphs 5.12.1 through 5.12.10 above, the BORROWER agrees to
submit to the LENDER such other information respecting the condition or
operations, financial or otherwise, of the BORROWER as the LENDER may reasonably
request from time to time.
Section 5.13. Employee Benefit Plans And Guaranteed Pension Plans. The
BORROWER will, and will cause each of its ERISA AFFILIATES to: (a) comply with
all requirements imposed by ERISA and the CODE, applicable from time to time to
any of its GUARANTEED PENSION PLANS or EMPLOYEE BENEFIT PLANS; (b) make full
payment when due of all amounts which, under the provisions of EMPLOYEE BENEFIT
PLANS or under applicable LAW, are required to be paid as contributions thereto;
(c) not permit to exist any material accumulated funding deficiency, whether or
not waived; (d) file on a timely basis all reports, notices and other filings
required by any governmental agency with respect to any of its EMPLOYEE BENEFITS
PLANS; (e) make any payments to MULTIEMPLOYER PLANS required to be made under
any agreement relating to such MULTIEMPLOYER PLANS, or under any LAW pertaining
thereto; (f) not amend or otherwise alter any GUARANTEED PENSION PLAN if the
effect would be to cause the actuarial present value of all benefit commitments
under any GUARANTEED PENSION PLAN to be less than the current value of the
assets of such GUARANTEED PENSION PLAN allocable to such benefit commitments;
(g) furnish to all participants, beneficiaries and employees under any of the
EMPLOYEE BENEFIT PLANS, within the periods prescribed by LAW, all reports,
notices and other information to which they are entitled under applicable LAW;
and (h) take no action which would cause any of the EMPLOYEE BENEFIT PLANS to
fail to meet any qualification requirement imposed by the CODE. As used in this
Section, the term "accumulated funding deficiency" has the meaning specified in
Section 302 of ERISA and Section 412 of the CODE, and the terms "actuarial
present value", "benefit commitments" and "current value" have the meaning
specified in Section 4001 of ERISA.
Section 5.14. Maintenance Of Fixed Assets. The BORROWER shall maintain and
preserve all of its fixed assets in a state of good and efficient working order.
Section 5.15. Federal Assignment Of Claims Act. The BORROWER shall notify
the LENDER if any RECEIVABLE arises out of a contract with the United States of
America, or any department, agency or instrumentality thereof, and shall execute
all documents or instruments and shall take all steps or actions required by the
LENDER so that all monies due or to become due under such contract are assigned
to the LENDER and notice given thereof to the United States in accordance with
the requirements of the Federal Assignment of Claims Act, as amended.
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Section 5.16. Compliance With Laws. The BORROWER shall comply in all
material respects with all applicable LAWS, including, but not limited to, all
LAWS with respect to: (a) all restrictions, specifications, or other
requirements pertaining to products that it sells or to the services it
performs; (b) the conduct of its business; (c) the use, maintenance, and
operation of the real and personal properties owned or leased by it in the
conduct of its business; and (d) the obtaining and maintenance of all necessary
licenses, franchises, permits and governmental approvals, registrations and
exemptions necessary to engage in its business. Without limiting the generality
of the preceding sentence, the BORROWER shall: (i) comply in all material
respects with, and ensure such compliance by all tenants and subtenants, if any,
with, all applicable ENVIRONMENTAL LAWS and obtain and comply in all material
respects with and maintain, and ensure that all tenants and subtenants obtain
and comply with and maintain, any and all licenses, approvals, notifications,
registrations or permits required by applicable ENVIRONMENTAL LAWS; (ii) conduct
and complete all investigations, studies, sampling and testing, and all
remedial, removal and other actions required under ENVIRONMENTAL LAWS, and
promptly comply with all lawful orders and directives of any governmental
authority regarding ENVIRONMENTAL LAWS; and (iii) defend, indemnify and hold
harmless the LENDER, and its employees, agents, officers and directors, from and
against any claims, demands, penalties, fines, liabilities, settlements,
damages, costs and expenses of whatever kind or nature known or unknown,
contingent or otherwise, arising out of, or in any way relating to the violation
of, noncompliance with or liability under any ENVIRONMENTAL LAWS applicable to
the operations of the BORROWER, or any orders, requirements or demands of
governmental authorities related thereto, including, without limitation,
reasonable attorney's and consultant's fees, investigation and laboratory fees,
response costs, court costs and litigation expenses, except to the extent that
any of the foregoing directly result from the gross negligence or willful
misconduct of the party seeking indemnification therefor. The BORROWER agrees to
promptly notify the LENDER of any RELEASE of a REGULATED SUBSTANCE on, to or
from any FACILITY in violation of any ENVIRONMENTAL LAWS or of any notice
received by the BORROWER that the BORROWER or any FACILITY is not in compliance
with any ENVIRONMENTAL LAWS.
Section 5.17. Depository Accounts. The BORROWER shall maintain its
principal depository and operating accounts with the LENDER.
ARTICLE 6
NEGATIVE COVENANTS
The BORROWER covenants while any OBLIGATIONS are outstanding and unpaid not
to do or to permit to be done or to occur any of the acts or occurrences set
forth in this Article 6 without the prior written authorization of the LENDER,
which shall not be unreasonably withheld.
Section 6.1. No Change Of Name, Merger, Etc. The BORROWER shall not change
its name or enter into any merger, consolidation, reorganization or
recapitalization.
Section 6.2. No Sale Or Transfer Of Assets. The BORROWER shall not sell,
transfer, lease or otherwise dispose of all or any part of the COLLATERAL, or
all or any part of any of its other assets, except that INVENTORY may be sold to
ACCOUNT DEBTORS in the ordinary course of the BORROWER'S business.
Section 6.3. No Encumbrance Of Assets. The BORROWER shall not mortgage,
pledge, grant or permit to exist a security interest in or lien upon any of its
assets of any kind, now owned or hereafter acquired, except for PERMITTED LIENS.
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Section 6.4. No Indebtedness. The BORROWER shall not incur, create, assume,
or permit to exist any INDEBTEDNESS except: (a) the OBLIGATIONS; (b)
INDEBTEDNESS secured by PERMITTED LIENS; and (c) the SUBORDINATED DEBT.
Section 6.5. Restricted Payments. The BORROWER shall not make any
RESTRICTED PAYMENTS.
Section 6.6. No Amendments Of Subordinated Debt. The BORROWER shall not
modify any material terms of any of the SUBORDINATED DEBT.
Section 6.7. Transactions With Affiliates. The BORROWER shall not make any
contract for the purchase of any items from any AFFILIATE or the performance of
any services (including employment services) by any AFFILIATE, unless such
contract is on terms which fairly represent generally available terms to be
obtained in transactions of a similar nature with independent third PERSONS.
Section 6.8. Loans, Investments And Sale-Leasebacks. The BORROWER shall not
make any advance, loan, investment, or material acquisition of assets or enter
into any sale-leaseback transactions.
Section 6.9. No Acquisition Of Equity In Or Assets Of Third Persons. The
BORROWER shall not acquire any equity interests in, or all or substantially all
of the assets of, any PERSON.
Section 6.10. No Assignment. The BORROWER shall not assign or attempt to
assign its rights under this AGREEMENT.
Section 6.11. No Alteration Of Structure Or Operations. The BORROWER shall
not amend or change materially its capital structure or its line or scope of
business, nor shall it engage in business ventures other than those in which it
is presently engaged.
Section 6.12. Unpermitted Uses Of Loan Proceeds. The BORROWER shall not use
any part of the proceeds of the LOAN hereunder for any purpose which constitutes
a violation of, or is inconsistent with, regulations of the Board of Governors
of the Federal Reserve System, including without limitation, the purchase or
carrying of (or refinancing of indebtedness originally incurred to purchase or
carry) margin securities.
Section 6.13. Changes In Fiscal Year. The BORROWER shall not change its
FISCAL YEAR.
Section 6.14. Limitation On Issuance Of Equity Interests. The BORROWER
shall not issue or sell any equity interest in the BORROWER that, by its terms
or by the terms of any security into which it is convertible or exchangeable,
is, or upon the happening of an event or passage of time would be: (a)
convertible or exchangeable into a liability of the BORROWER; or (b) required to
be redeemed or repurchased, including at the option of the holder, in whole or
in part, or has, or upon the happening of an event or passage of time would
have, a redemption or similar payment due.
ARTICLE 7
EVENTS OF DEFAULT
The occurrence of any of the following events shall constitute an EVENT OF
DEFAULT.
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Section 7.1. Failure To Pay. The failure by the BORROWER to pay any of the
OBLIGATIONS when and as due.
Section 7.2. Violation Of Covenants. The failure by the BORROWER to perform
or a violation of any of the covenants or agreements provided in this AGREEMENT
or in any of the other LOAN DOCUMENTS.
Section 7.3. Representation Or Warranty. The failure of any representation
or warranty made by the BORROWER or by a GUARANTOR to be true in any material
respect, as of the date made.
Section 7.4. Default Under Loan Documents. A breach of or default by the
BORROWER under the terms, covenants, and conditions set forth in any other LOAN
DOCUMENT.
Section 7.5. Cross-Default. A breach of or default under the terms,
covenants, or conditions of any agreement, loan, guaranty, or other transaction
of the BORROWER or the GUARANTOR with the LENDER or with any other lender,
including without limitation, the SUBORDINATED DEBT.
Section 7.6. Judgments. The BORROWER or a GUARANTOR shall suffer final
judgments for the payment of money aggregating in excess of Ten Thousand Dollars
($10,000.00) and shall not discharge the same within a period of thirty (30)
days unless, pending further proceedings, execution has not been commenced or if
commenced has been effectively stayed.
Section 7.7. Levy By Judgment Creditor. A judgment creditor of the BORROWER
shall obtain possession of any of the COLLATERAL by any means, including but not
limited to levy, distraint, replevin or self-help, and the BORROWER shall not
remedy same within thirty (30) days thereof; or a writ of garnishment is served
on the LENDER relating to any of the accounts of the BORROWER maintained by the
LENDER.
Section 7.8. Failure To Pay Liabilities. The BORROWER shall fail to pay any
of its debts, in any material amount, due any third PERSON and such failure
shall continue beyond any applicable grace period, unless the applicable
BORROWER holds a good faith defense to payment and has set aside reasonable
reserves for the payment thereof.
Section 7.9. Involuntary Insolvency Proceedings. The institution of
involuntary INSOLVENCY PROCEEDINGS against the BORROWER and the failure of any
such INSOLVENCY PROCEEDINGS to be dismissed before the earliest to occur of: (a)
the date which is ninety (90) days after the institution of such INSOLVENCY
PROCEEDINGS; (b) the entry of any order for relief in the INSOLVENCY PROCEEDING
or any order adjudicating the BORROWER insolvent; or (c) the impairment (as to
validity, priority or otherwise) of any security interest or lien of the LENDER
in any of the COLLATERAL.
Section 7.10. Voluntary Insolvency Proceedings. The commencement by the
BORROWER of INSOLVENCY PROCEEDINGS.
Section 7.11. Insolvency Proceedings Pertaining To Guarantor. The
occurrence of any of the events listed in Sections 7.9 and 7.10 above to either
GUARANTOR.
Section 7.12. Material Adverse Event. The occurrence of a MATERIAL ADVERSE
EVENT.
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Section 7.13. Default By Guarantor. The failure by either GUARANTOR to
satisfy any obligation imposed upon either GUARANTOR in the GUARANTY AGREEMENTS
or any other document executed in connection therewith.
Section 7.14. Attempt To Terminate Guaranties. The receipt by the LENDER of
notice from a GUARANTOR that such GUARANTOR is attempting to terminate or limit
any portion of its obligations under a GUARANTY AGREEMENT.
Section 7.15. ERISA. If any TERMINATION EVENT shall occur and as of the
date thereof or any subsequent date, the sum of the various liabilities of the
BORROWER and its ERISA AFFILIATES (such liabilities to include, without
limitation, any liability to the Pension Benefit Guaranty Corporation (or any
successor thereto) or to any other party under Sections 4062, 4063, or 4064 of
ERISA or any other provision of LAW and to be calculated after giving effect to
the tax consequences thereof) resulting from or otherwise associated with such
event exceeds Twenty-Five Thousand Dollars ($25,000.00); or the BORROWER or any
of its ERISA AFFILIATES as an employer under any MULTIEMPLOYER PLAN shall have
made a complete or partial withdrawal from such MULTIEMPLOYER PLANS and the plan
sponsors of such MULTIEMPLOYER PLANS shall have notified such withdrawing
employer that such employer has incurred a withdrawal liability requiring a
payment in an amount exceeding Twenty-Five Thousand Dollars ($25,000.00).
Section 7.16. Indictment Of Borrower Or Guarantor. The indictment of the
BORROWER or of either GUARANTOR for a felony under any federal, state or other
LAW.
Section 7.17. Injunction. The issuance of any injunction against the
BORROWER which enjoins or restrains the BORROWER from continuing to conduct any
material part of the BORROWER'S business affairs.
ARTICLE 8
RIGHTS AND REMEDIES ON THE OCCURRENCE
OF AN EVENT OF DEFAULT
Section 8.1. Lender's Specific Rights And Remedies. In addition to all
other rights and remedies provided by LAW and the LOAN DOCUMENTS, upon the
occurrence of any EVENT OF DEFAULT, the LENDER may: (a) accelerate and call
immediately due and payable all or any part of the OBLIGATIONS; (b) seek
specific performance or injunctive relief to enforce performance of the
undertakings, duties, and agreements provided in the LOAN DOCUMENTS, whether or
not a remedy at law exists or is adequate; and (c) exercise any rights of a
secured creditor under the Uniform Commercial Code, as adopted and amended in
Maryland, including the right to take possession of the COLLATERAL without the
use of judicial process or hearing of any kind and the right to require the
BORROWER to assemble the COLLATERAL at such place as the LENDER may specify.
Section 8.2. Automatic Acceleration. Upon the occurrence of an EVENT OF
DEFAULT as described in Sections 7.9 or 7.10 of this AGREEMENT, the OBLIGATIONS
shall be automatically accelerated and due and payable without any notice,
demand or action of any type on the part of the LENDER.
Section 8.3. Sale Of Collateral. In addition to any other remedy provided
herein, upon the occurrence of an EVENT OF DEFAULT, the LENDER, in a
commercially reasonable fashion, may sell at public or private sale or otherwise
realize upon, in Baltimore, Maryland, or elsewhere,
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the whole or, from time to time, any part of all COLLATERAL which is personal
property, or any interest which the BORROWER may have therein. Pending any such
action, the LENDER may collect and liquidate the COLLATERAL. After deducting
from the proceeds of sale or other disposition of such COLLATERAL all expenses,
including all reasonable expenses for legal services, the LENDER shall apply
such proceeds toward the satisfaction of the OBLIGATIONS. Any remainder of the
proceeds after satisfaction in full of the OBLIGATIONS shall be distributed as
required by applicable LAW. Notice of any sale or other disposition (other than
sales or other dispositions of COLLATERAL which is perishable or threatens to
decline speedily in value or is of a type customarily sold on a recognized
market) shall be given to the BORROWER not less than ten (10) calendar days
before the time of any intended public sale or of the time after which any
intended private sale or other disposition of the COLLATERAL is to be made,
which the BORROWER hereby agrees shall be commercially reasonable notice of such
sale or other disposition. The BORROWER shall assemble, or shall cause to be
assembled, at the BORROWER'S own expense, the COLLATERAL at such place or places
as the LENDER shall designate. At any such sale or other disposition, the LENDER
may, to the extent permissible under applicable law, purchase the whole or any
part of the COLLATERAL, free from any right of redemption on the part of the
BORROWER, which right is hereby waived and released to the extent lawfully
permitted. Without limiting the generality of any of the rights and remedies
conferred upon the LENDER under this Section, the LENDER may, to the full extent
permitted by applicable law: (a) enter upon the premises of the BORROWER,
exclude therefrom the BORROWER or any PERSON connected therewith, and take
immediate possession of the COLLATERAL, either personally or by means of a
receiver appointed by a court of competent jurisdiction, using all necessary
force to do so; (b) at the LENDER'S option, use, operate, manage, and control
the COLLATERAL in any lawful manner; (c) collect and receive all income,
revenue, earnings, issues, and profits therefrom; and (d) maintain, alter or
remove the COLLATERAL as the LENDER may determine in the LENDER'S discretion.
Section 8.4. Remedies Cumulative. The rights and remedies provided in this
AGREEMENT and in the other LOAN DOCUMENTS or otherwise under applicable LAWS
shall be cumulative and the exercise of any particular right or remedy shall not
preclude the exercise of any other rights or remedies in addition to, or as an
alternative of, such right or remedy.
ARTICLE 9
GENERAL CONDITIONS AND TERMS
Section 9.1. Obligations Are Unconditional. The payment and performance of
the OBLIGATIONS shall be the absolute and unconditional duty and obligation of
the BORROWER, and shall be independent of any defense or any rights of set-off,
recoupment or counterclaim which the BORROWER might otherwise have against the
LENDER. The BORROWER shall pay the payments of the principal and interest to be
made upon the OBLIGATIONS, free of any deductions and without abatement,
diminution or set-off other than those herein expressly provided. Until such
time as the OBLIGATIONS have been fully paid and performed, the BORROWER shall
not: (a) suspend or discontinue any payments required by the LOAN DOCUMENTS; and
(b) fail to perform and observe all of the BORROWER'S covenants and agreements
set forth in the LOAN DOCUMENTS.
Section 9.2. Indemnity. The BORROWER agrees to defend, indemnify and hold
harmless the LENDER and the entities affiliated with the LENDER and all of the
LENDER'S and its affiliated entities' employees, agents, officers and directors,
from and against any losses, penalties, fines, liabilities, settlements,
damages, costs and expenses, suffered in connection with any claim,
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investigation, litigation or other proceeding (whether or not the LENDER or an
affiliated entity is a party thereto) and the prosecution and defense thereof,
arising out of or in any way connected with any LOAN DOCUMENT, including without
limitation reasonable attorneys' and consultant's fees, except to the extent
that any of the foregoing directly result from the gross negligence or willful
misconduct of the party seeking indemnification therefor. Notwithstanding any
termination of this AGREEMENT or payment and performance of the OBLIGATIONS, the
indemnities provided for herein shall continue in full force and effect and
shall protect all of the above-described PERSONS against events arising after
such termination, payment or performance as well as before.
Section 9.3. Lender Expenses. All LENDER EXPENSES shall be paid by the
BORROWER, whether incurred prior to or after CLOSING, such that the subject
transactions shall at all times be cost free to the LENDER.
Section 9.4. Authorization To Obtain Financial Information. The BORROWER
hereby irrevocably authorizes its accounting firm to provide the LENDER from
time to time with such information as may be requested by the LENDER, and hereby
authorizes the LENDER to contact directly such accounting firm in order to
obtain such information.
Section 9.5. Incorporation; Construction Of Inconsistent Provisions. The
terms and conditions of the LOAN DOCUMENTS are incorporated by reference and
made a part hereof, as if fully set forth herein. In the event of any
inconsistency between this AGREEMENT and any other LOAN DOCUMENT, such
inconsistency shall be construed, interpreted, and resolved so as to benefit the
LENDER, independent of whether this AGREEMENT or another LOAN DOCUMENT controls,
and the LENDER'S election of which interpretation or construction is for the
LENDER'S benefit shall govern.
Section 9.6. Waivers. The LENDER at any time or from time to time may waive
all or any rights under this AGREEMENT or any other LOAN DOCUMENT, but any
waiver or indulgence by the LENDER at any time or from time to time shall not
constitute a future waiver of performance or exact performance by the BORROWER.
Section 9.7. Continuing Obligation Of Borrower. The terms, conditions, and
covenants set forth herein and in the LOAN DOCUMENTS shall survive CLOSING and
shall constitute a continuing obligation of the BORROWER during the course of
the transactions contemplated herein. The security interests, liens and other
security provided by this AGREEMENT shall remain in effect so long as any
OBLIGATION, whether direct or contingent, is outstanding, unpaid or unsatisfied.
Upon the full and absolute payment (which payment is not subject to any possible
challenge or contest) of all of the OBLIGATIONS, the termination of any
agreement or relationship which may give rise to any future OBLIGATIONS, the
termination of any commitment or agreement of the LENDER to provide additional
credit to the BORROWER and the written request of the BORROWER, the LENDER shall
execute any document reasonably requested by BORROWER to authorize the BORROWER
to file terminations of all UCC-1 financing statements recorded evidencing the
liens granted herein, and terminate all of the LOAN DOCUMENTS, at which time the
BORROWER shall have no further duties or obligations to the LENDER thereunder.
Section 9.8. Choice Of Law. The laws of the State of Maryland (excluding,
however, conflict of law principles) shall govern and be applied to determine
all issues relating to this AGREEMENT and the rights and obligations of the
parties hereto, including the validity, construction, interpretation, and
enforceability of this AGREEMENT and its various provisions and the consequences
and legal effect of all transactions and events which resulted in the execution
of this
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AGREEMENT or which occurred or were to occur as a direct or indirect result of
this AGREEMENT having been executed.
Section 9.9. Submission To Jurisdiction; Venue; Actions Against Lender. For
purposes of any action, in law or in equity, which is based directly or
indirectly on this AGREEMENT, any other LOAN DOCUMENT or any matter related to
this AGREEMENT or any other LOAN DOCUMENT, including any action for recognition
or enforcement of any of the LENDER'S rights under the LOAN DOCUMENTS or any
judgment obtained by the LENDER in respect thereof, the BORROWER hereby:
Section 9.9.1. Jurisdiction. Irrevocably submits to the non-exclusive
general jurisdiction of the courts of the State of Maryland and, if a basis for
federal jurisdiction exists at any time, the courts of the United States of
America for the District of Maryland.
Section 9.9.2. Venue. Agrees that venue shall be proper in the Circuit
Court for Baltimore City, Maryland, the Circuit Court for any county in the
state of Maryland, as selected by the LENDER, and, if a basis for federal
jurisdiction exists, the courts of the United States of America for the District
of Maryland.
Section 9.9.3. Waiver Of Objections To Venue. Waives any right to
object to the maintenance of any suit in any of the courts specified in Section
9.9.2 above on the basis of improper venue or convenience of forum. The BORROWER
further agrees that it shall not institute any suit or other action against the
LENDER, in law or in equity, which is based directly or indirectly on this
AGREEMENT, any other LOAN DOCUMENT or any matter related to this AGREEMENT or
any other LOAN DOCUMENT, in any court other than a court specified in Section
9.9.2 above; provided, that in any instance in which there is then pending a
suit instituted by the LENDER against the BORROWER in a court other than a court
specified in Section 9.9.2 above, the BORROWER may file in such suit any
counterclaim which it has against the LENDER but only if such counterclaim is a
compulsory counterclaim and would be barred if not filed as a counterclaim in
such suit. The BORROWER agrees that any suit brought by it against the LENDER
not in accordance with this paragraph should be forthwith dismissed or
transferred to a court specified in Section 9.9.2 above.
Section 9.10. Notices. Any notice required or permitted by or in connection
with this AGREEMENT shall be in writing and shall be made by facsimile
(confirmed on the date the facsimile is sent by one of the other methods of
giving notice provided for in this Section) or by electronic mail, by hand
delivery, by Federal Express, or other similar overnight delivery service, or by
certified mail, unrestricted delivery, return receipt requested, postage
prepaid, addressed to the LENDER or the BORROWER at the appropriate address set
forth below or to such other address as may be hereafter specified by written
notice by the LENDER or the BORROWER. Notice shall be considered given as of the
date of the facsimile or the hand delivery, as of the date of receipt of
confirmation that the electronic mail was received and opened, one (1) calendar
day after delivery to Federal Express or similar overnight delivery service, or
three (3) calendar days after the date of mailing, independent of the date of
actual delivery or whether delivery is ever in fact made, as the case may be,
provided the giver of notice can establish the fact that notice was given as
provided herein. If notice is tendered pursuant to the provisions of this
Section and is refused by the intended recipient thereof, the notice,
nevertheless, shall be considered to have been given and shall be effective as
of the date herein provided.
If to the LENDER:
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KEY BANK AND TRUST
7F Gwynns Mill Court
Owings Mills, Maryland 21117
Attention: Commercial Lending Division
Fax No.: (410) 363-3569
E-Mail: pkillpatrick@keyb-t.com with a mandatory copy to
shough@keyb-t.com
If to the BORROWER:
AVATECH SOLUTIONS SUBSIDIARY, INC.
11400 Cronridge Drive, Suite A
Owings Mills, Maryland 21117
Attn.: Donald R. Walsh, Chief Executive Officer
Fax No.: (____)
--------------
E-Mail: swalsh@avat.com
Section 9.11. Participations. The LENDER reserves the right to assign all
or any portion of its interests in any of the OBLIGATIONS or the LOAN DOCUMENTS
or to participate with other lending institutions any of the OBLIGATIONS and the
LOAN DOCUMENTS on such terms and at such times as the LENDER may determine from
time to time, all without any consent thereto or notice thereof to the BORROWER.
The BORROWER hereby grants to each participating lending institution, to the
full extent of the OBLIGATIONS, the right to set off deposit accounts maintained
by the BORROWER with such institution, and the BORROWER agrees to pay the LENDER
EXPENSES of any such participating lending institution which arise or are
incurred as a result of the occurrence of an EVENT OF DEFAULT.
Section 9.12. Miscellaneous Provisions. The parties agree that: (a) this
AGREEMENT shall be effective as of the date first above written, independent of
the date of execution or delivery hereof; (b) this AGREEMENT shall be binding
upon the parties and their successors and assigns, contains the final and entire
agreement and understanding of the parties, and may neither be amended or
altered except by a writing signed by the parties; (c) time is strictly of the
essence of this AGREEMENT; (d) as used herein, the singular includes the plural
and the plural includes the singular, the use of any gender applies to all
genders; (e) the captions contained herein are for purposes of convenience only
and are not a part of this AGREEMENT; (f) a carbon, photographic, photocopy or
other reproduction of a security agreement and financing statement shall be
sufficient as a financing statement; (g) this AGREEMENT may be delivered by
facsimile, and a facsimile of any party's signature to this AGREEMENT shall be
deemed an original signature for all purposes; and (h) this AGREEMENT may be
executed in several counterparts, each of which shall be an original, but all of
which, when taken together, shall constitute one and the same document.
Section 9.13. Waiver Of Trial By Jury. Each party to this AGREEMENT agrees
that any suit, action, or proceeding, whether claim or counterclaim, brought or
instituted by either party hereto or any successor or assign of any party on or
with respect to this AGREEMENT or any other LOAN DOCUMENT or which in any way
relates, directly or indirectly, to the OBLIGATIONS or any event, transaction,
or occurrence arising out of or in any way connected with any of the
OBLIGATIONS, or the dealings of the parties with respect thereto, shall be tried
only by a court and not by a jury. EACH PARTY HEREBY EXPRESSLY WAIVES ANY RIGHT
TO A TRIAL BY JURY IN ANY SUCH SUIT, ACTION, OR PROCEEDING.
IN WITNESS WHEREOF, the LENDER and the BORROWER have duly executed this
AGREEMENT under seal as of the date first above written.
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WITNESS/ATTEST: KEY BANK AND TRUST
By: (SEAL)
- ----------------------------- ------------------------------
Patrick Killpatrick,
Vice President
AVATECH SOLUTIONS SUBSIDIARY, INC.,
A Delaware Corporation
By: (SEAL)
- ----------------------------- ------------------------------
Donald R. Walsh
Chief Executive Officer
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