EX-10.2
EXHIBIT 10.2
FINANCING AND SECURITY AGREEMENT
THIS FINANCING AND SECURITY AGREEMENT (this “Agreement”) is made this 29th day of February,
2012, by and among
RAND WORLDWIDE, INC., a Delaware corporation (sometimes hereinafter referred to as the
“Borrower Agent” or “U.S. Borrower”) and RAND A TECHNOLOGY CORPORATION, a
corporation organized under the laws of the Province of Ontario (“Foreign Borrower”; the
U.S. Borrower and the Foreign Borrower, each a “Borrower”; the U.S. Borrower and the
Foreign Borrower, collectively, the “Borrowers”), jointly and severally;
and PNC BANK, NATIONAL ASSOCIATION, a national banking association (the “Lender”).
RECITALS
A. The Borrowers have applied to the Lender for a revolving credit facility in the maximum
principal amount of Eight Million Dollars ($8,000,000) (including a letter of credit sub-limit in
the maximum principal amount of One Million Dollars ($1,000,000), as part of that revolving credit
facility) to be used by the Borrowers for the Permitted Uses described in this Agreement.
B. The Lender is willing to make those credit facilities available jointly and severally to
the Borrowers upon the terms and subject to the conditions set forth in this Agreement.
AGREEMENTS
NOW, THEREFORE, in consideration of the premises and for other good and valuable
consideration, the receipt of which is hereby acknowledged, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Certain Defined Terms.
As used in this Agreement, the terms defined in the Preamble and Recitals hereto shall have
the respective meanings specified therein, and the following terms shall have the following
meanings:
“Account” individually and “Accounts” collectively mean all presently existing
or hereafter acquired or created accounts, accounts receivable, health-care insurance receivables,
receivables arising out of the use of a credit or charge card or information contained on or for
use with the card, contract rights, notes, drafts, instruments, acceptances, chattel paper, leases
and writings evidencing a monetary obligation or a security interest in, or a lease of, goods, all
rights to payment of a monetary obligation or other consideration under present or future contracts
(including, without limitation, all rights (whether or not earned by performance) to receive
payments under presently existing or hereafter acquired or created letters of credit), or by virtue
of property that has been sold, leased, licensed, assigned, or otherwise disposed of, services
rendered or to be rendered, loans and advances made or other considerations given, by or set forth
in or arising out of any present or future chattel paper, note, draft, lease, acceptance, writing,
bond, insurance policy (including, without limitation, the right to receive refunds of unearned
insurance premiums), instrument, document or general intangible, and all extensions and renewals of
any thereof, all rights under or arising out of present or future contracts, agreements or general
interest in goods that gave rise to any or all of the foregoing, including all commercial tort
claims, other claims or causes of action now existing or hereafter arising in connection with or
under any agreement or document or by operation of law or otherwise, all collateral security of any
kind (including, without limitation, real property mortgages and deeds of trust), Supporting
Obligations, letter-of-credit rights and letters of credit given by any Person with respect to any
of the foregoing, all books and records in whatever media (paper, electronic or otherwise) recorded
or stored, with respect to any or all of the foregoing and all equipment and general intangibles
necessary or beneficial to retain, access and/or process the information contained in those books
and records, and all proceeds (cash proceeds and non-cash proceeds) of the foregoing.
“Account Debtor” means any Person who is obligated on a Receivable and “Account
Debtors” mean all Persons who are obligated on the Receivables.
“ACH Transactions” means any cash management or related services including the
automatic clearing house transfer of funds by the Lender for the account of the Borrowers, or any
of them, pursuant to agreement or overdrafts.
“Advances” means the collective reference to each advance under the Revolving Loan
including, without limitation, those under Section 2.1.1 (Revolving Credit Facility).
“Affiliate” means, with respect to any designated Person, any other Person, (a)
directly or indirectly controlling, directly or indirectly controlled by, or under direct or
indirect common control with the Person designated, (b) directly or indirectly owning or holding
ten percent (10%) or more of any equity interest in such designated Person, or (c) ten percent
(10%) or more of whose stock or other equity interest is directly or indirectly owned or held by
such designated Person. For purposes of this definition, the term “control” (including
with correlative meanings, the terms “controlling”, “controlled by” and “under
common control with”) means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of a Person, whether through ownership of voting
securities or other equity interests or by contract or otherwise.
“Agreement” means this Financing and Security Agreement, as amended, restated,
supplemented or otherwise modified in writing in accordance with the provisions of Section 8.2
(Amendments; Waivers).
“Anti-Terrorism Order” means the Executive Order No. 13224 on Terrorist Financing,
effective September 24, 2001, and relating to Blocking Property and Prohibiting Transactions With
Persons Who Commit, Threaten to Commit, or Support Terrorism.
“Assignee” means any Person to which the Lender assigns all or any portion of its
interests under this Agreement, any Commitment, and any Loan, in accordance with the provisions of
Section 8.5 (Assignments by Lender), together with any and all successors and assigns of such
Person; “Assignees” means the collective reference to all Assignees.
“Availability” means at any time (a) the lesser of the Revolving Credit Committed
Amount or the Borrowing Base (after giving effect to provisions for Reserves and other adjustments
permitted by this Agreement) minus (b) the Revolver Usage.
“Bank Products” means any service or facility extended to the Borrowers by the Lender
or any Affiliate of the Lender including, without limitation: (a) credit cards, (b) credit card
processing services, (c) debit cards, (d) purchase cards, (e) ACH Transactions, (f) cash
management, including controlled disbursement, accounts or services, (g) demand and other deposit
accounts, (h) letters of credit, and (i) Hedge Agreements.
“Bankruptcy Code” means the United States Bankruptcy Code, as amended from time to
time, and any successor Laws.
“Borrower” means each Person defined as a “Borrower” in the preamble of this
Agreement; “Borrowers” means the collective reference to all Persons defined as
“Borrowers” in the preamble to this Agreement.
“Borrowing Base” means an amount equal to eighty-five percent (85%) of the amount of
Eligible Receivables, subject to the adjustments provided in Section 2.1 (The Revolving Credit
Facility).
“Borrowing Base Deficiency” has the meaning described in Section 2.1.3(b).
“Borrowing Base Report” has the meaning described in Section 2.1.4 (Borrowing Base
Report).
“Business Day” means any day other than a Saturday, Sunday or other day on which
commercial banks in the State are authorized or required to close.
“Canadian Dollars” means the lawful money of Canada.
“Capital Adequacy Regulation” means any guideline, request or directive of any central
bank or other Governmental Authority, or any other law, rule or regulation, whether or not having
the force of law, in each case, regarding capital adequacy of any bank or of any corporation
controlling a bank.
“Capital Expenditure” means an expenditure (whether payable in cash or other property
or accrued as a liability) for Fixed or Capital Assets, including, without limitation, the entering
into of a Capital Lease.
“Capital Lease” means any lease of real or personal property, for which the related
Lease Obligations have been or should be, in accordance with GAAP consistently applied, capitalized
on the balance sheet.
“Cash Equivalents” means (a) securities with maturities of one year or less from the
date of acquisition issued or fully guaranteed or insured by the United States Government or any
agency thereof, (b) certificates of deposit with maturities of one (1) year or less from the date
of acquisition of, or money market accounts maintained with, the Lender, any Affiliate of the
Lender, or any other domestic commercial bank having capital and surplus in excess of One Hundred
Million Dollars ($100,000,000.00) or such other domestic financial institutions or domestic
brokerage houses to the extent disclosed to, and approved by, the Lender and (c) commercial paper
of a domestic issuer rated at least either A-1 by Standard & Poor’s Corporation (or its successor)
or P-1 by Moody’s Investors Service, Inc. (or its successor) with maturities of six (6) months or
less from the date of acquisition.
“Chattel Paper” means a record or records (including, without limitation, electronic
chattel paper) that evidence both a monetary obligation and a security interest in specific goods,
a security interest in specific goods and software used in the goods, or a lease of specific
goods; all Supporting Obligations with respect thereto; any returned, rejected or repossessed goods
and software covered by any such record or records and all proceeds (in any form including, without
limitation, accounts, contract rights, documents, chattel paper, instruments and general
intangibles) of such returned, rejected or repossessed goods; and all proceeds (cash proceeds and
noncash proceeds) of the foregoing.
“Closing Date” means the date of this Agreement.
“Collateral” means all property (excluding Inventory) of each and every Borrower and
U.S. Obligor subject from time to time to the Liens of this Agreement, any of the Security
Documents and/or any of the other Financing Documents, together with any and all cash and non-cash
proceeds and products thereof.
“Collateral Assignments” means the collective reference to each collateral assignment
and security interest at any time entered into by any Person in favor or for the benefit of the
Lender to secure directly or indirectly all or any part of the Obligations, all in form and
substance as the Lender may require from time to time require to take, perfect, give notice of,
and/or enhance a security interest in or Lien on real of personal property, and/or to create,
further or enhance the Lender’s rights and remedies with respect thereto, as the same may be
amended, restated, modified, substituted, extended and renewed from time to time.
“Collection” means each check, draft, cash, money, instrument, item, and other
remittance in payment or on account of payment of the Accounts or otherwise with respect to any
Collateral, including, without limitation, cash proceeds of any returned, rejected or repossessed
goods, the sale or lease of which gave rise to an Account, and other proceeds of Collateral; and
“Collections” means the collective reference to all of the foregoing.
“Commitments” means the collective reference to the each and every commitment to
extend credit under the terms of this Agreement including, without limitation, the Revolving Credit
Commitment.
“Committed Amount” means the Lender’s Revolving Loan Committed Amount.
“Compliance Certificate” means a periodic Compliance Certificate described in Section
6.1.1 (Financial Statements).
“Credit Facility” means each credit facility now or hereafter extended under or
secured by this Agreement and “Credit Facilities” means the collective reference to any one
or more of the credit facilities included as a Credit Facility. On the Closing Date, the Credit
Facilities include the Revolving Credit Facility.
“Default” means an event that, with the giving of notice or lapse of time, or both,
could or would constitute an Event of Default under the provisions of this Agreement.
“Documents” means all documents of title or receipts, whether now existing or
hereafter acquired or created, and all proceeds (cash proceeds and noncash proceeds) of the
foregoing.
“Eligible Foreign Receivable” and “Eligible Foreign Receivables” shall mean
with respect to the Foreign Borrower, at any time of determination thereof, the invoice amount, net
of all goods and services, harmonized taxes and sales taxes (which shall be the U.S. Dollar
Equivalent at such time of any amount denominated in currency other than United States Dollars)
owing on each account of such Person (net of any returns, discounts, claims, credits, charges,
accrued rebates or other allowances, offsets, deductions, counterclaims, disputes or other defenses
and reduced by the aggregate amount of all reserves, limits and deductions provided for in this
definition and elsewhere in this Agreement), provided each account conforms and continues to
conform to the following criteria to the satisfaction of the Lender:
(a) the account arose in the ordinary course of the Foreign Borrower’s business
from a bona fide outright sale of Inventory by the Foreign Borrower or from services
performed by the Foreign Borrower, and not the subject of any cash-on-delivery term
or cash in hand or cash in transit;
(b) the account is a valid, legally enforceable obligation of the Account
Debtor and requires no further act on the part of any Person under any circumstances
to make the account payable by the Account Debtor;
(c) the account is based upon an enforceable order or contract, written or
oral, for Inventory shipped or for services performed, and the same were shipped or
performed in accordance with such order or contract;
(d) if the account arises from the sale of Inventory, the Inventory the sale of
which gave rise to the account has been shipped or delivered to the Account Debtor
on an absolute sale basis and not on a bill and hold sale basis, a consignment sale
basis, a guaranteed sale basis, a sale or return basis, or on the basis of any other
similar understanding;
(e) if the account arises from the performance of services, such services have
been fully rendered and do not relate to any warranty claim or obligation;
(f) the account does not arise from a sale of goods or services that is
prohibited by or violative of Laws (including, without limitation, licensing
requirements) or of any Intellectual Property rights of any Person;
(g) the account is evidenced by an invoice or other documentation in form
acceptable to the Lender, dated no later than the date of shipment or performance
(without giving effect to any re-aging re-billing or otherwise re-negotiation of
such date) and containing only terms normally offered by the Foreign Borrower;
(h) the amount shown on the books of the Foreign Borrower and on any invoice,
certificate, schedule or statement delivered to the Lender is owing to the Foreign
Borrower and no partial payment has been received unless reflected with that
delivery;
(i) the account is not outstanding more than ninety (90) days from the date of
the invoice therefor or past due more than sixty (60) days after its due date, which
shall not be later than thirty (30) days after the invoice date;
(j) the account is not owing by any Account Debtor for which the Lender has
deemed fifty percent (50%) or more of such Account Debtor’s other accounts (or any
portion thereof) due to the Foreign Borrower, individually, or all of the Borrowers
and the U.S. Guarantors collectively, to be non-Eligible Receivables;
(k) the account is not owing by an Account Debtor or a group of affiliated
Account Debtors to the Foreign Borrower whose then existing accounts owing to the
Foreign Borrower individually exceed in aggregate face amount fifteen percent (15%)
of the Foreign Borrower’s total Eligible Receivables and is not owing by an Account
Debtor or a group of affiliated Account Debtors whose then existing accounts to any
and all of the Borrowers and U.S. Guarantors collectively exceed in aggregate face
amount fifteen percent (15%) of the total Eligible Receivables of all Borrowers and
U.S. Guarantors;
(l) the Account Debtor has not returned, rejected or refused to retain, or
otherwise notified the Foreign Borrower of any dispute concerning, or claimed
nonconformity of, any of the Inventory or services from the sale or furnishing of
which the account arose;
(m) the account is not subject to any present or contingent (and no facts exist
that are the basis for any future) offset, claim, deduction or counterclaim, dispute
or defense in law or equity on the part of such Account Debtor, or any claim for
credits, allowances, or adjustments by the Account Debtor because of returned,
inferior, or damaged Inventory or unsatisfactory services, or for any other reason
including, without limitation, those arising on account of a breach of any express
or implied representation or warranty;
(n) the Account Debtor is not a Subsidiary or Affiliate of any Borrower or U.S.
Guarantor or an employee, officer, director or shareholder of any Borrower or U.S.
Guarantor or any Subsidiary or Affiliate of any Borrower or U.S. Guarantor;
(o) reserved;
(p) as to which none of the following events has occurred with respect to the
Account Debtor on such Account: death or judicial declaration of incompetency of an
Account Debtor who is an individual; the filing by or against the Account Debtor of
a request or petition for liquidation, reorganization, arrangement, adjustment of
debts, adjudication as a bankrupt, winding-up, or other relief under the bankruptcy,
insolvency, or similar laws of the United States, any state or territory thereof, or
any foreign jurisdiction, now or hereafter in effect; the making of any general
assignment by the Account Debtor for the benefit of creditors; the appointment of a
receiver or trustee for the Account Debtor or for any of the assets of the Account
Debtor, including, without limitation, the appointment of or taking possession by a
“custodian,” as defined in the Bankruptcy Code; the institution by or
against the Account Debtor of any other type of insolvency proceeding (under the
bankruptcy laws of the United States or otherwise) or of any formal or informal
proceeding for the dissolution or liquidation of, settlement of claims against, or
winding up of affairs of, the Account Debtor; the sale, assignment, or transfer of
all or any material part of the assets of the Account Debtor; the nonpayment
generally by the Account Debtor of its debts as they become due; or the cessation of
the business of the Account Debtor as a going concern;
(q) the Account Debtor is not a Governmental Authority, except to the extent
the Foreign Borrower is in compliance with Section 6.1.16 (Government Accounts);
(r) (i) the Account Debtor is not, and does have an Affiliate that is, a
Prohibited Person or Sanctioned Person, and (ii) the Account Debtor does not have a
location in, or is issuing payment from, a Sanctioned Country;
(s) no Borrower or U.S. Guarantor is indebted in any manner to the Account
Debtor (as creditor, lessor, supplier or otherwise), with the exception of customary
credits, adjustments and/or discounts given to an Account Debtor by a Borrower or
U.S. Guarantor in the ordinary course of its business;
(t) the account does not arise from services under or related to any warranty
obligation of a Borrower or U.S. Guarantor or out of service charges, finance
charges or other fees for the time value of money;
(u) the account is not evidenced by chattel paper or an instrument of any kind
and is not secured by any letter of credit;
(v) the title of the Foreign Borrower to the account is absolute and is not
subject to any prior assignment, claim, Lien, or security interest, except Permitted
Liens;
(w) no bond or other undertaking by a guarantor or surety has been or is
required to be obtained, supporting the performance of the Foreign Borrower or any
other obligor in respect of any of the Foreign Borrower’s agreements with the
Account Debtor;
(x) no bond or other undertaking by a guarantor or surety has been or is
required to be obtained, supporting the account and any of the Account Debtor’s
obligations in respect of the account;
(y) the Foreign Borrower has the full and unqualified right and power to assign
and grant a security interest in, and Lien on, the account to the Lender as security
and collateral for the payment of the Obligations;
(z) the account does not arise out of a contract with, or order from, an
Account Debtor that, by its terms, forbids or makes void or unenforceable the
assignment or grant of a security interest by the Foreign Borrower to the Lender,
for the benefit of the Lender, of the account arising from such contract or order;
(aa) the account is subject to a Lien in favor of the Lender, which Lien is
perfected as to the account by the filing of financing statements and which Lien
upon such filing constitutes a first priority security interest and Lien;
(bb) no part of the account represents a progress billing or a retainage;
(cc) the Lender in the exercise of its Permitted Discretion has not deemed the
account ineligible because of uncertainty as to the creditworthiness of the Account
Debtor or because the Lender otherwise considers the collateral value of such
account to the Lender to be impaired or its ability to realize such value to be
insecure; and
(dd) if the Account Debtor is located in a state requiring the filing of a
Notice of Business Activities Report or similar report in order to permit the
Foreign Borrower to seek judicial enforcement in such state of payment of such
Account, that the Foreign Borrower has qualified to do business in such state or has
filed a Notice of Business Activities Report or equivalent report for the then
current year.
In the event of any dispute, under the foregoing criteria, as to whether an account is, or has
ceased to be, an Eligible Foreign Receivable, the decision of the Lender in the exercise of its
Permitted Discretion shall control.
“Eligible Receivable” and “Eligible Receivables” shall mean, individually, an
Eligible Foreign Receivable or an Eligible U.S. Receivable and collectively, the Eligible Foreign
Receivables and the Eligible U.S. Receivables.
“Eligible U.S. Receivable” and “Eligible U.S. Receivables” shall mean with
respect to a U.S. Obligor, at any time of determination thereof, the unpaid portion of each account
(net of any returns, discounts, claims, credits, charges, accrued rebates or other allowances,
offsets, deductions, counterclaims, disputes or other defenses and reduced by the aggregate amount
of all reserves, limits and deductions provided for in this definition and elsewhere in this
Agreement) receivable in United States Dollars by a U.S. Obligor, provided each account conforms
and continues to conform to the following criteria to the satisfaction of the Lender:
(a) the account arose in the ordinary course of a U.S. Obligor’s business from
a bona fide outright sale of Inventory by such U.S. Obligor or from services
performed by such U.S. Obligor, and not the subject of any cash-on-delivery term or
cash in hand or cash in transit;
(b) the account is a valid, legally enforceable obligation of the Account
Debtor and requires no further act on the part of any Person under any circumstances
to make the account payable by the Account Debtor;
(c) the account is based upon an enforceable order or contract, written or
oral, for Inventory shipped or for services performed, and the same were shipped or
performed in accordance with such order or contract;
(d) if the account arises from the sale of Inventory, the Inventory the sale of
which gave rise to the account has been shipped or delivered to the Account Debtor
on an absolute sale basis and not on a bill and hold sale basis, a consignment sale
basis, a guaranteed sale basis, a sale or return basis, or on the basis of any other
similar understanding;
(e) if the account arises from the performance of services, such services have
been fully rendered and do not relate to any warranty claim or obligation;
(f) the account does not arise from a sale of goods or services that is
prohibited by or violative of Laws (including, without limitation, licensing
requirements) or of any Intellectual Property rights of any Person;
(g) the account is evidenced by an invoice or other documentation in form
acceptable to the Lender, dated no later than the date of shipment or performance
(without giving effect to any re-aging re-billing or otherwise re-negotiation of
such date) and containing only terms normally offered by the respective U.S.
Obligor;
(h) the amount shown on the books of a U.S. Obligor and on any invoice,
certificate, schedule or statement delivered to the Lender is owing to such U.S.
Obligor and no partial payment has been received unless reflected with that
delivery;
(i) the account is not outstanding more than ninety (90) days from the date of
the invoice therefor or past due more than sixty (60) days after its due date, which
shall not be later than thirty (30) days after the invoice date;
(j) the account is not owing by any Account Debtor for which the Lender has
deemed fifty percent (50%) or more of such Account Debtor’s other accounts (or any
portion thereof) due to a U.S. Obligor, individually, or all of the Borrowers and
the U.S. Guarantors collectively, to be non-Eligible Receivables;
(k) the account is not owing by an Account Debtor or a group of affiliated
Account Debtors to any U.S. Obligor whose then existing accounts owing to that U.S.
Obligor individually exceed in aggregate face amount fifteen percent (15%) of that
U.S. Obligor’s total Eligible Receivables and is not owing by an Account Debtor or a
group of affiliated Account Debtors whose then existing accounts to any and all of
the Borrowers and U.S. Guarantors collectively exceed in aggregate face amount
fifteen percent (15%) of the total Eligible Receivables of all Borrowers and U.S.
Guarantors;
(l) the Account Debtor has not returned, rejected or refused to retain, or
otherwise notified a Borrower or U.S. Guarantor of any dispute concerning, or
claimed nonconformity of, any of the Inventory or services from the sale or
furnishing of which the account arose;
(m) the account is not subject to any present or contingent (and no facts exist
that are the basis for any future) offset, claim, deduction or counterclaim, dispute
or defense in law or equity on the part of such Account Debtor, or any claim for
credits, allowances, or adjustments by the Account Debtor because of returned,
inferior, or damaged Inventory or unsatisfactory services, or for any other reason
including, without limitation, those arising on account of a breach of any express
or implied representation or warranty;
(n) the Account Debtor is not a Subsidiary or Affiliate of any Borrower or U.S.
Guarantor or an employee, officer, director or shareholder of any Borrower or U.S.
Guarantor or any Subsidiary or Affiliate of any Borrower or U.S. Guarantor;
(o) the Account Debtor is not incorporated or primarily conducting business or
otherwise located in any jurisdiction outside of the United States of America,
unless the Account Debtor’s obligations with respect to such account are secured by
a letter of credit, guaranty or banker’s acceptance having terms and from such
issuers and confirmation banks as are acceptable to the Lender in its sole and
absolute discretion (which letter of credit, guaranty or banker’s acceptance is
subject to the perfected Lien of the Lender);
(p) as to which none of the following events has occurred with respect to the
Account Debtor on such Account: death or judicial declaration of incompetency of an
Account Debtor who is an individual; the filing by or against the Account Debtor of
a request or petition for liquidation, reorganization, arrangement, adjustment of
debts, adjudication as a bankrupt, winding-up, or other relief under the bankruptcy,
insolvency, or similar laws of the United States, any state or territory thereof, or
any foreign jurisdiction, now or hereafter in effect; the making of any general
assignment by the Account Debtor for the benefit of creditors; the appointment of a
receiver or trustee for the Account Debtor or for any of the assets of the Account
Debtor, including, without limitation, the appointment of or taking possession by a
“custodian,” as defined in the Bankruptcy Code; the institution by or
against the Account Debtor of any other type of insolvency proceeding (under the
bankruptcy laws of the United States or otherwise) or of any formal or informal
proceeding for the dissolution or liquidation of, settlement of claims against, or
winding up of affairs of, the Account Debtor; the sale, assignment, or transfer of
all or any material part of the assets of the Account Debtor; the nonpayment
generally by the Account Debtor of its debts as they become due; or the cessation of
the business of the Account Debtor as a going concern;
(q) the Account Debtor is not a Governmental Authority, except to the extent
the applicable Borrower or U.S. Guarantor is in compliance with Section 6.1.16
(Government Accounts);
(r) (i) the Account Debtor is not, and does have an Affiliate that is, a
Prohibited Person or Sanctioned Person, and (ii) the Account Debtor does not have a
location in, or is issuing payment from, a Sanctioned Country;
(s) no Borrower or U.S. Guarantor is indebted in any manner to the Account
Debtor (as creditor, lessor, supplier or otherwise), with the exception of customary
credits, adjustments and/or discounts given to an Account Debtor by a Borrower or
U.S. Guarantor in the ordinary course of its business;
(t) the account does not arise from services under or related to any warranty
obligation of a Borrower or U.S. Guarantor or out of service charges, finance
charges or other fees for the time value of money;
(u) the account is not evidenced by chattel paper or an instrument of any kind
and is not secured by any letter of credit;
(v) the title of the respective Borrower or U.S. Guarantor to the account is
absolute and is not subject to any prior assignment, claim, Lien, or security
interest, except Permitted Liens;
(w) no bond or other undertaking by a guarantor or surety has been or is
required to be obtained, supporting the performance of any Borrower or U.S.
Guarantor or any other obligor in respect of any of such Borrower’s or U.S.
Guarantor’s agreements with the Account Debtor;
(x) no bond or other undertaking by a guarantor or surety has been or is
required to be obtained, supporting the account and any of the Account Debtor’s
obligations in respect of the account;
(y) each U.S. Obligor has the full and unqualified right and power to assign
and grant a security interest in, and Lien on, the account to the Lender as security
and collateral for the payment of the Obligations;
(z) the account does not arise out of a contract with, or order from, an
Account Debtor that, by its terms, forbids or makes void or unenforceable the
assignment or grant of a security interest by the U.S. Obligors to the Lender, for
the benefit of the Lender, of the account arising from such contract or order;
(aa) the account is subject to a Lien in favor of the Lender, which Lien is
perfected as to the account by the filing of financing statements and which Lien
upon such filing constitutes a first priority security interest and Lien;
(bb) the Inventory giving rise to the account was not, at the time of the sale
thereof, subject to any Lien, except those in favor of the Lender;
(cc) no part of the account represents a progress billing or a retainage;
(dd) the Lender in the exercise of its Permitted Discretion has not deemed the
account ineligible because of uncertainty as to the creditworthiness of the Account
Debtor or because the Lender otherwise considers the collateral value of such
account to the Lender to be impaired or its ability to realize such value to be
insecure; and
(ee) if the Account Debtor is located in a state requiring the filing of a
Notice of Business Activities Report or similar report in order to permit any U.S.
Obligor to seek judicial enforcement in such state of payment of such Account, that
U.S. Obligor has qualified to do business in such state or has filed a Notice of
Business Activities Report or equivalent report for the then current year.
In the event of any dispute, under the foregoing criteria, as to whether an account is, or has
ceased to be, an Eligible Receivable, the decision of the Lender in the exercise of its Permitted
Discretion shall control.
“Enforcement Costs” means all expenses, charges, costs and fees whatsoever (including,
without limitation, reasonable outside and allocated in-house counsel attorney’s fees and expenses)
of any nature whatsoever paid or incurred by or on behalf of the Lender (whether arising before or
after the commencement of any proceedings under the United States Bankruptcy Code or other
applicable laws related to insolvency or otherwise and whether or now allowed or allowable as a
claim in any such proceeding) in connection with (a) any or all of the Obligations, this Agreement
and/or any of the other Financing Documents, (b) the creation, perfection, collection, maintenance,
preservation, defense, protection, realization upon, disposition, sale or enforcement of all or any
part of the Collateral, this Agreement or any of the other Financing Documents, including, without
limitation, those costs and expenses more specifically enumerated in Section 3.6 (Costs) and/or
Section 8.8 (Enforcement Costs), and further including, without limitation, amounts paid to
lessors, processors, bailees, warehousemen, sureties, judgment creditors and others in possession
of or with a Lien against or claimed against the Collateral, and (c) the monitoring,
administration, processing and/or servicing of any or all of the Obligations, the Financing
Documents, and/or the Collateral.
“Equipment” means all equipment, machinery, computers, chattels, tools, parts, machine
tools, furniture, furnishings, fixtures and goods (other than inventory) of every nature
(including, without limitation, embedded software), presently existing or hereafter acquired or
created and wherever located, whether or not the same shall be deemed to be affixed to real
property, and all of such types of property leased by any of the Borrowers and all of the
Borrowers’ rights and interests with respect thereto under such leases (including, without
limitation, options to purchase), together with all accessions, additions, fittings, accessories,
special tools, and improvements thereto and substitutions therefor and all parts and equipment that
may be attached to or that are necessary or beneficial for the operation, use and/or disposition of
such personal property, all licenses, warranties, franchises and General Intangibles related
thereto or necessary or beneficial for the operation, use and/or disposition of the same, together
with all Accounts, Chattel Paper, Instruments and other consideration received by any Borrower on
account of the sale, lease or other disposition of all or any part of the foregoing, and together
with all rights under or arising out of present or future Documents and contracts relating to the
foregoing and all proceeds (cash proceeds and noncash proceeds) of the foregoing.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from
time to time.
“ERISA Affiliate” means any Person that is a member of the Borrower’s controlled
group, or under common control with the Borrower, within the meaning of Section 414 of the Internal
Revenue Code.
“Event of Default” has the meaning described in ARTICLE VII (Default and Rights and
Remedies).
“Facilities” means the collective reference to the Credit Facilities and Bank Products
now or hereafter provided to any one or more of the Borrowers by the Lender under or secured by
this Agreement.
“Fees” means the collective reference to each fee payable to the Lender under the
terms of this Agreement or under the terms of any of the other Financing Documents. As of the
Closing Date, the Fees include the following: Revolving Credit Unused Line Fees, Letter of Credit
Fees, and Field Examination Fees.
“Field Examination Fee” and “Field Examination Fees” have the meanings
described in Section 2.4.3 (Field Examination Fees).
“Financing Documents” means at any time collectively this Agreement, the Notes, the
Security Documents, the Letter of Credit Documents, all Hedge Agreements, all other agreements with
respect to Bank Products, and any other instrument, agreement or document previously,
simultaneously or hereafter executed and delivered by any Borrower, any Guarantor and/or any other
Person, singly or jointly with another Person or Persons, evidencing, securing, guarantying or in
connection with this Agreement, the Loans, Bank Products and/or any of the Facilities.
“Fiscal Year” means as to the Borrowers a fiscal year ending January 31.
“Fixed or Capital Assets” of a Person at any date means all assets that would, in
accordance with GAAP consistently applied, be classified on the balance sheet of such Person as
property, plant or equipment at such date.
“Foreign Obligations” shall mean the Obligations of the Foreign Borrower as they may
exist from time to time.
“GAAP” means generally accepted accounting principles in the United States of America
in effect from time to time.
“General Intangibles” means all general intangibles of every nature, whether presently
existing or hereafter acquired or created, and without implying any limitation of the foregoing,
further means all books and records, commercial tort claims, other claims (including without
limitation all claims for income tax and other refunds), payment intangibles, Supporting
Obligations, choses in action, causes of action in tort or equity, contract rights, judgments,
customer lists, Intellectual Property, royalty payments, licenses, letter-of-credit rights, letters
of credit, contractual rights, the right to receive refunds of unearned insurance premiums, rights
as lessee under any lease of real or personal property, amounts received as an award in or
settlement of a suit in damages, deposit accounts, interests in joint ventures, general or limited
partnerships, or limited liability companies or partnerships, rights in applications for any of the
foregoing, books and records in whatever media (paper, electronic or otherwise) recorded or stored
with respect to any or all of the foregoing, all Supporting Obligations with respect to any of the
foregoing, and all equipment and general intangibles necessary or beneficial to retain, access
and/or process the information contained in those books and records, and all proceeds (cash
proceeds and noncash proceeds) of the foregoing.
“Governing Body” means any board of directors, board of managers, board of trustees,
other similar governing body, or group of members, partners, or other equity holders with similar
responsibilities for governance of any Person.
“Governmental Authority” means any nation or government, any state or other political
subdivision thereof and any other entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government and any department, agency or
instrumentality thereof.
“Guarantor” means any Person who may at any time or from time to time be a guarantor,
surety or indemnitor with respect to all of any part of the Obligations, as the case may be, and
“Guarantors” means collective reference to any one or more of such Persons. The U.S.
Guarantors are the Guarantors as of the Closing Date.
“Guaranty” means the collective each agreement at any time entered into by any
Guarantor in favor or for the benefit of the Lender to guaranty, provide surety or indemnify with
respect to all or any part of the Obligations, all in form and substance satisfactory to the
Lender, as the same may be amended, restated, modified, substituted, extended and renewed from time
to time. The following are the Guaranties that are to be executed and delivered on the Closing
Date:
“U.S. Guaranty” means certain guaranties of payment and security agreement executed by
the U.S. Guarantors for the benefit of the Lender dated the date hereof to the Lender, as
the same may from time to time be amended, restated supplemented or otherwise modified.
“Hedge Agreement” means any and all transactions, agreements or documents now existing
or hereafter entered into, that provide for an interest rate, credit, commodity or equity swap,
cap, floor, collar, forward foreign exchange transaction, currency swap, cross currency rate swap,
currency option, or any combination of, or option with respect to, these or similar transactions,
for the purpose of hedging exposure to fluctuations in interest or exchange rates, loan, credit
exchange, security or currency valuations or commodity prices.
“Hedge Obligations” means the collective reference to the Obligations in connection
with any Hedge Agreements including, without limitation, any and all cancellations, buy backs,
reversals, terminations or assignments of any Hedge Agreement transaction.
“Hedge Reserve” means any and all Reserves that the Lender from time to time
establishes, in its Permitted Discretion, with respect to any Hedge Agreement transaction.
“Indebtedness for Borrowed Money” of a Person means at any time the sum at such time
of (a) indebtedness of such Person for borrowed money or for the deferred purchase price of
property or services, (b) any obligations of such Person in respect of letters of credit, ’banker’s
or other acceptances or similar obligations issued or created for the account of such Person, (c)
Lease Obligations of such Person with respect to Capital Leases, (d) all liabilities secured by any
Lien on any property owned by such Person, to the extent attached to such ’Person’s interest in
such property, even though such Person has not assumed or become personally liable for the payment
thereof, (e) obligations of third parties that are being guarantied or indemnified against by such
Person or that are secured by the property of such Person; (f) any obligation of such Person under
or with respect to an employee stock ownership plan or other employee benefit plan; (g) any
obligation of such Person or an ERISA Affiliate to a Multi-employer Plan; and (h) any obligations,
liabilities or indebtedness, contingent or otherwise, under or in connection with, any Hedge
Agreement transactions; but excluding trade and other accounts payable in the ordinary course of
business in accordance with customary trade terms and that are not overdue (as determined in
accordance with customary trade practices) or that are being disputed in good faith by such Person
and for which adequate reserves are being provided on the books of such Person in accordance with
GAAP.
“Indemnified Parties” has the meaning set forth in Section 8.17 (Indemnification).
“IEEPA” means the International Emergency Economic Power Act, 50 U.S.C. §1701 et.
seq.
“Instrument” means a negotiable instrument or any other writing that evidences a
right to payment of a monetary obligation and is not itself a security agreement or lease and is of
a type that in the ordinary course of business is transferred by delivery with any necessary
endorsement or assignment, and all Supporting Obligations with respect to any of the foregoing and
all proceeds (cash proceeds and non-cash proceeds) with respect to any of the foregoing.
“Intellectual Property” means the collective reference to all of Borrowers’
intellectual property, and rights, priorities and privileges relating thereto, whether now owned or
existing, or hereafter acquired or created, whether arising under United States, multinational,
foreign or other Laws, by agreement, or otherwise, and throughout the world, whether in the United
States, any other country, or otherwise, including, without limitation, any and all (a) (i)
copyrights, rights and interests in copyrights, works protectable by copyright, copyright
registrations, and copyright applications, whether registered or unregistered and whether published
or unpublished; (ii) patents and patent applications; any and all inventions and improvements
described and claimed in such patents and patent applications; reissues, divisions, continuations,
renewals, extensions and continuations-in-part of any patents and patent applications; and other
inventions, discoveries, know-how, and ideas; (iii) trademarks (including service marks), trade
names, corporate or other entity names, business names, fictitious business names, trade dress,
logos, domain names and other source or business identifiers, and all goodwill of the business
symbolized or associated therewith, now existing or hereafter adopted or acquired; (iv) franchises;
and (v) all computer programs, trade secrets, business practices and techniques, and strategies;
and (b) with respect to the foregoing, any and all (i) registrations and recordings, and
applications in connection therewith, whether in the United States Copyright Office, United States
Patent and Trademark Office, or in any similar office or agency of the United States, any State
thereof or any other country or other Governmental Authority, or otherwise, and all common law
rights related thereto; (ii) any and renewals, reissues, and extensions and rights to obtain
renewals, reissues, and extensions; and (iii) licenses (whether as a licensor or as a licensee);
and (c) with respect to the foregoing, any and all (i) rights to sue, other causes of action, make
demand, and rights other remedies, for past, present and future infringements, including, without
limitation, the right to settle suits or other actions involving claims and demands for royalties
or otherwise; and (ii) income, royalties, damages and payments now or hereafter due and/or payable,
including, without limitation, damages or payments for past, present or future infringements, and
all proceeds (cash and noncash) of the foregoing. The Lender acknowledges that Borrowers license
the majority of the intellectual property used in its businesses and that for purposes hereof
“Intellectual Property” shall exclude any intellectual property licensed or leased by Borrowers
from a third party.
“Internal Revenue Code” means the Internal Revenue Code of 1986, as amended from time
to time, and the Income Tax Regulations issued and proposed to be issued thereunder.
“Inventory” means all inventory of each Borrower and all right, title and interest of
each Borrower in and to all of its now owned and hereafter acquired goods and other personal
property (including, without limitation, embedded software) furnished under any contract of service
or intended for sale or lease, including, without limitation, all raw materials, work-in-process,
finished goods and materials and supplies of any kind, nature or description which are used or
consumed in any Borrower’s business or are or might be used in connection with the manufacture,
packing, shipping, advertising, selling or finishing of such goods and other personal property, and
all licenses, warranties, franchises, General Intangibles, personal property and all documents of
title or documents relating to the same, together with all Accounts, Chattel Paper, Instruments and
other consideration received by any Borrower on account of the sale, lease or other disposition of
all or any part of the foregoing, and together with all rights under or arising out of present or
future Documents and contracts relating to the foregoing and all proceeds (cash proceeds and
noncash proceeds) of the foregoing.
“Investment Property” means a security, whether certificated or uncertificated,
security entitlement, securities account, commodity contract, or commodity account, and all
proceeds (cash proceeds and noncash proceeds) of, and Supporting Obligations with respect to, the
foregoing.
“Item of Payment” means each check, draft, cash, money, instrument, item, wire
transfer, ACH transfer, other electronic transfer and other remittance, in any form or method
whatsoever, in payment or on account of payment of the Receivables or otherwise with respect to any
Collateral, including, without limitation, cash proceeds of any returned, rejected or repossessed
goods, the sale or lease of which gave rise to a Receivable, and other proceeds of Collateral; and
“Items of Payment” means the collective reference to all of the foregoing.
“Laws” means all ordinances, statutes, rules, regulations, orders, injunctions, writs,
decrees or demands of any Governmental Authority.
“Lease Obligations” of a Person means for any period the rental commitments of such
Person for such period under leases for real and/or personal property (net of rent from subleases
thereof, but including taxes, insurance, maintenance and similar expenses that such Person, as the
lessee, is obligated to pay under the terms of said leases, except to the extent that such taxes,
insurance, maintenance and similar expenses are payable by sublessees), including rental
commitments under Capital Leases.
“Letter of Credit” and “Letters of Credit” shall have the meanings described
in Section 2.3.1 (Letters of Credit).
“Letter of Credit Agreement” means the collective reference to each letter of credit
application and agreement substantially in the form of the Lender’s then standard form of
application for letter of credit or such other form as may be approved by the Lender, executed and
delivered by any one or more of the Borrowers in connection with the issuance of a Letter of
Credit, as the same may from time to time be amended, restated, supplemented or modified; and
“Letter of Credit Agreements” means all of the foregoing in effect at any time and from
time to time. For the avoidance of doubt, Letter of Credit Agreements are Financing Documents.
“Letter of Credit Current Obligations” has the meaning described in Section 2.3.3
(Terms of Letters of Credit).
“Letter of Credit Documents” means any and all drafts under or purporting to be under
a Letter of Credit, any Letter of Credit Agreement, and any other instrument, document or agreement
executed and/or delivered by any one or more of the Borrowers or any other Person under, pursuant
to or in connection with a Letter of Credit or any Letter of Credit Agreement. For the avoidance
of doubt, Letter of Credit Documents are the Financing Documents.
“Letter of Credit Facility” means the facility established pursuant to Section 2.3
(Letter of Credit Facility).
“Letter of Credit Fee” and “Letter of Credit Fees” have the meanings described
in Section 2.3.2 (Letter of Credit Fees).
“Letter of Credit Obligations” means the collective reference to all Obligations of
any one or more of the Borrowers with respect to the Letters of Credit and the Letter of Credit
Agreements, including, without limitation, Letter of Credit Current Obligations and Letter of
Credit Outstanding Obligations. For the avoidance of doubt, each Letter of Credit Obligations are
Obligations.
“Letter of Credit Outstanding Obligations” has the meaning described in 2.3.3 (Terms
of Letters of Credit).
“Letter of Credit Sublimit” means One Million Dollars ($1,000,000).
“Lien” means (a) any interest in property securing an obligation owed to, or a claim
by, a Person other than the owner of the property, whether such interest is based on the common
law, agreement, statute, rule of equity, judgment or other determination of Governmental Authority,
or otherwise, and includes a security interest, charge, claim, priority or lien arising from a
mortgage, deed of trust, encumbrance, pledge, hypothecation, deemed trusts, assignment, deposit
arrangement, security agreement, conditional sale, or other title retention agreement or trust
receipt or a lease, consignment, bailment or other ceding of control or possession, provision for
confession of judgment, cognovit or other similar right or other remedy, the filing of any
financing statement under the Uniform Commercial Code or of similar device to give notice of a
potential interest in property; (b) to the extent not included under clause (a), any reservation,
exception, encroachment, easement, servitude right-of-way, restriction, lease or other title
exception or encumbrance affecting property; and (c) any contingent or other agreement to provide
any of the foregoing.
“Loan” means each of the Revolving Loan or each other loan now or hereafter extended
under or secured by this Agreement, as the case may be, and “Loans” means the collective
reference to the Revolving Loan and each other loan now or hereafter extended under or secured by
this Agreement.
“Loan Notice” has the meaning described in Section 2.1.2 (Procedure for Making
Advances).
“Material Adverse Effect” means with respect to any Borrower or Other Obligor an
effect, either in any case or in the aggregate, which might result in a material adverse change (w)
in the business, prospects, condition, affairs or operations of that Borrower or Other Obligor, (x)
to the material properties or assets of that Borrower or Other Obligor, (y) in the right or ability
of that Borrower or Other Obligor to carry on a substantial portion of its operations as now
conducted or proposed to be conducted or to perform its obligations under the Financing Documents,
or (z) to the value of, or the ability of the Lender to realize upon, the Collateral.
“Maximum Foreign Revolving Advance Amount” shall mean Two Million Dollars
($2,000,000).
“Maximum Rate” has the meaning described in Section 2.5.5 (Maximum Interest Rate).
“Maximum U.S. Revolving Advance Amount” shall mean Eight Million Dollars ($8,000,000).
"Mortgages” means the collective reference to any mortgage, deed of trust, agreement,
conveyance, indenture or other security instrument at any time entered into by any Person that
conveys or evidences a Lien on any real property or any interest in real property, in favor or for
the benefit of the Lender to secure directly or indirectly all or any part of the Obligations, all
in form and substance as the Lender may require from time to time require to take, perfect, give
notice of, and/or enhance a security interest in or Lien on property, and/or to create, further or
enhance the Lender’s rights and remedies with respect thereto, as the same may be amended,
restated, modified, substituted, extended and renewed from time to time.
“Multi-employer Plan” means a Plan that is a Multi-employer plan as defined in Section
4001(a)(3) of ERISA.
“Note” means any promissory note that may from time to time evidence all or any
portion of the Obligations and “Notes” means collectively each such promissory note. On
the Closing Date, the Notes consist of the Revolving Credit Note.
“Obligations” means (a) all present and future indebtedness, duties, obligations, and
liabilities, whether now existing or contemplated or hereafter arising, of any one or more of the
Borrowers to the Lender under, arising pursuant to, in connection with the Loans, Hedge Agreements,
and/or any of the other Facilities and/or on account of the provisions of this Agreement, each
Note, each Security Document, and/or any of the other Financing Documents including, without
limitation, the principal of, and interest on, each Note, late charges, the Fees, Enforcement
Costs, prepayment fees (if any), letter of credit reimbursement obligations, letter of credit fees
or fees charged with respect to any guaranty of any letter of credit, and amounts related to
cancellations, buy backs, reversals, terminations or assignments of any Hedge Agreement
transaction; (b) all other present and future indebtedness, duties, obligations, and liabilities,
whether now existing or contemplated or hereafter arising, of any one or more of the Borrowers to
the Lender of any nature whatsoever, including, without limitation, any indebtedness, duties,
obligations, and liabilities under or in connection with, any Hedge Agreements, other Bank Products
and other Facilities; and (c) also means any and all renewals, extensions, substitutions,
amendments, restatements and rearrangements of any or all of the foregoing indebtedness, duties,
obligations, and liabilities, regardless of whether such indebtedness, duties, obligations, and
liabilities be direct, indirect, primary, secondary, joint, several, joint and several, fixed or
contingent.
“OFAC” means the United States Department of the Treasury’s Office of Foreign Assets
Control or any successor thereto.
“Organizational Documents” means, with respect to any Person, the collective reference
to each of the constituent certificates, documents and agreements governing the Person’s formation,
governance and management, as amended, restated, modified, substituted, extended and renewed from
time to time, including, without limitation, (a) with respect to a corporation, its charter and
bylaws, (b) with respect to a limited liability company, its operating agreement and articles of
organization, (c) with respect to a limited partnership, its limited partnership certificate and
its limited partnership agreement, and (d) with respect to a general partnership, its partnership
agreement.
“Other Obligor” means any Guarantor, surety, endorser, indemnitor, co-party or other
Person (except any Borrower) liable or obligated (directly or indirectly, absolutely or
contingently or in any other manner) at any time and from time to time with respect to all or any
part of the Obligations, whether under the Financing Documents or otherwise.
“PATRIOT Act” means the Uniting and Strengthening America by Providing Appropriate
Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT) Act of 2001, as amended from time
to time.
“PBGC” means the Pension Benefit Guaranty Corporation.
“Permitted Discretion” means the Lender’s good faith judgment exercised from the
perspective of a financial institution providing a commercial, asset-based revolving credit
facility against the realizable value of accounts and inventory (rather than the book value of such
assets as shown in the Borrowers’ financial statements) as collateral, which facility is of a type
that requires at least weekly reporting and periodic field examinations of those values.
“Permitted Liens” means: (a) Liens for Taxes that are not delinquent or that the
Lender has determined in the exercise of its Permitted Discretion (i) are being diligently
contested in good faith and by appropriate proceedings, and such contest operates to suspend
collection of the contested Taxes and enforcement of a Lien, (ii) the applicable Borrower has the
financial ability to pay, with all penalties and interest, at all times without a Material Adverse
Effect on that Borrower, and (iii) are not, and will not be with appropriate filing, the giving of
notice and/or the passage of time, entitled to priority over any Lien of Lender; (b) deposits or
pledges to secure obligations under workers’ compensation, social security or similar laws, or
under unemployment insurance in the ordinary course of business; (c) Liens securing the
Obligations; (d) judgment Liens to the extent the entry of such judgment does not constitute a
Default or an Event of Default under the terms of this Agreement or result in the sale or levy of,
or execution on, any of the Collateral; (e) Liens arising from the filing of Uniform Commercial
Code financing statements relating solely to leases not prohibited by this Agreement; (f) purchase
money security interests securing Indebtedness for Borrowed Money (that is not part of the
Obligations) for the purchase of Equipment in arms-length, commercially reasonable transactions
with persons who are not Affiliates of any Borrower; provided, however, that (i) the indebtedness
secured shall not exceed the unpaid purchase price of the Equipment acquired, plus reasonable
finance charges and the reasonable costs of collection (including, without limitation, reasonable
attorneys fees); (ii) each item of Equipment shall secure only its portion of the indebtedness
described in item (i); and (iii) the aggregate outstanding amount of such indebtedness outstanding
at any time shall not exceed $1,000,000; and (f) such other Liens, if any, as are set forth on
Schedule 6.2.9 attached hereto and made a part hereof.
“Permitted Uses” means (a) on the Closing Date repayment of the Borrower’s existing
revolving loan facility with the Lender payment of fees, costs and expenses in connection with this
Agreement, and (b) with respect to the Revolving Loan, the payment of expenses incurred in the
ordinary course of the Borrower’s business.
“Person” means and includes an individual, a corporation, a partnership, a joint
venture, a limited liability company or partnership, a trust, an unincorporated association, a
Governmental Authority, or any other organization or entity.
“Plan” means any pension plan that is covered by Title IV of ERISA and in respect of
that any Borrower or a ERISA Affiliate is an “employer” as defined in Section 3 of ERISA.
“Post-Default Rate” means the interest rate as set forth in the Revolving Credit Note
plus two percent (2.00%).
“PPSA” means the Personal Property Security Act in effect from time to time in the
province of Ontario or in any other jurisdiction, as applicable.
“Prohibited Person” means any Person (a) that is listed in the Annex to, or is
otherwise subject to the provisions of, the Anti-Terrorism Order; (b) that is owned or controlled
by, or acting for or on behalf of, any person or entity that is listed in the Annex to, or is
otherwise subject to the provisions of the Anti-Terrorism Order; (c) that commits, threatens or
conspires to commit or supports “terrorism” as defined in the Anti-Terrorism Order; (d) that is
named as a “specifically designated national (SDN)” on the most current list published by OFAC at
its official website, http://www.treas.gov.ofac/t11sdn.pdf or at any replacement website or other
replacement official publication of such list; (e) that is covered by IEEPA or OFAC; or (f) that is
an affiliate (including any principal, officer, immediate family member or close associate) of a
Person described in one or more of clauses (a) – (e) of this definition .
“Receivable” means one of each Borrower’s now owned and hereafter owned, acquired or
created Accounts, Chattel Paper, General Intangibles and Instruments; and “Receivables”
means all of each Borrower’s now or hereafter owned, acquired or created Accounts, Chattel Paper,
General Intangibles and Instruments, and all cash and non-cash proceeds and products thereof.
“Reportable Event” means any of the events set forth in Section 4043(c) of ERISA or
the regulations thereunder.
“Reserves” means the collective reference to reserves, in amounts and with respect to
such matters, as the Lender in its Permitted Discretion shall deem necessary or appropriate to
establish against the Borrowing Base, including, without limitation, reserves with respect to (i)
reserves required by this Agreement or the other Financing Documents, (ii) sums that the Borrowers
are required to pay (such as taxes, assessments, insurance premiums, or, in the case of leased
assets, rents or other amounts payable under such leases) and has failed to pay under any provision
of this Agreement, any of the other Financing Documents or any of the other Obligations, and (iii)
amounts owing by the Borrowers to any Person to the extent secured by a Lien on, or trust over, any
of the Collateral, which Lien or trust as the Lender in its Permitted Discretion deems likely to
have a priority superior to Liens of the Lender (such as Liens or trusts in favor of landlords,
warehousemen, carriers, mechanics, materialmen, laborers, or suppliers, or Liens or trusts for ad
valorem, excise, sales, or other taxes where given priority under applicable law) in all or any
part of the Collateral; it being understood and agreed that Reserves are established solely for the
benefit of the Lender and no other Person, including, without limitation, the Borrowers, shall have
any rights or interests with respect to the establishment or failure to establish Reserves.
“Responsible Officer” means for each Borrower, its chief executive officer or
president or, with respect to financial matters, its chief financial officer.
“Revolver Usage” means, as of any date of determination, the aggregate of the
outstanding principal balance of the Revolving Loan plus, with respect to Letters of Credit, the
aggregate face amount of all outstanding Letters of Credit plus the amount of all drafts drawn
thereon to the extent the same have not been the subject of an Advance.
“Revolving Credit Commitment” means the agreement of the Lender relating to the making
of Advances subject to and in accordance with the provisions of this Agreement.
“Revolving Credit Commitment Period” means the period of time from the Closing Date to
the Business Day preceding the Revolving Credit Termination Date.
“Revolving Credit Committed Amount” means Eight Million Dollars ($8,000,000).
“Revolving Credit Expiration Date” means February 28, 2014.
“Revolving Credit Facility” means the facility established by the Lender pursuant to
Section 2.1 (Revolving Credit Facility) and includes, without limitation, the Letter of Credit
Facility.
“Revolving Credit Note” and “Revolving Credit Notes” have the meanings
described in Section 2.1.5 (Revolving Credit Notes).
“Revolving Credit Termination Date” means the earlier of (a) the Revolving Credit
Expiration Date, or (b) the date on which the Revolving Credit Commitment is terminated pursuant to
Section 7.2 (Remedies) or otherwise.
“Revolving Credit Unused Line Fee” and “Revolving Credit Unused Line Fees”
have the meanings described in Section 2.1.7 (Revolving Credit Unused Line Fee).
“Revolving Loan” has the meaning described in Section 2.1.1 (Revolving Credit
Facility).
“Sanctioned Country” means a country subject to the sanctions program identified on
the list maintained by OFAC and available at
http://www.treas.gov/offices/eotffc/ofac/sanctions/index.html or as otherwise published
from time to time.
“Sanctioned Person” means (a) a Person named on the list of Specially Designated
Nationals or Blocked Persons maintained by OFAC available at
http://www.treas.gov/offices/eotffc/ofac/sdn/index.html or as otherwise published from time
to time, or (ii) (A) an agency of the government of a Sanctioned Country, (b) an organization
controlled by a Sanctioned Country, or (c) a Person resident in a Sanctioned Country, to the extent
subject to a sanctions program administered by OFAC.
“Security Documents” means collectively any assignment, pledge agreement, security
agreement, mortgage, deed of trust, deed to secure debt, financing statement and any similar
instrument, document or agreement under or pursuant to which a Lien is now or hereafter granted to,
or for the benefit of, the Lender on any real or personal property of any Person to secure all or
any portion of the Obligations, all as the same may from time to time be amended, restated,
supplemented or otherwise modified, including, without limitation, this Agreement, the Guaranties,
the Mortgages, and the Collateral Assignments.
“Solvent” means when used with respect to any Person that at the time of determination
(a) the assets of such Person, at a fair valuation, are in excess of the total amount of its debts
(including, without limitation, contingent liabilities); (b) the present fair saleable value of its
assets is greater than its probable liability on its existing debts as such debts become absolute
and matured; (c) it is then able and expects to be able to pay its debts (including, without
limitation, contingent debts and other commitments) as they mature; and (d) it has capital
sufficient to carry on its business as conducted and as proposed to be conducted. For purposes of
determining whether a Person is Solvent, the amount of any contingent liability 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.
“State” means the State of Maryland.
“Subordinated Debt Documents” means any and all promissory notes, agreements,
documents or instruments now or at any time evidencing, securing, guarantying or otherwise executed
and delivered in connection with the Subordinated Debt, as the same may from time to time be
amended, restated, supplemented or modified.
“Subordinated Indebtedness” means all indebtedness, including, without limitation, the
Subordinated Debt, incurred at any time by any one or more of the Borrowers, which is in amounts,
subject to repayment terms, and subordinated to the Obligations, as set forth in one or more
written agreements, all in form and substance satisfactory to the Lender in its sole and absolute
discretion.
“Subordination Agreement” means that certain Subordination Agreement by and among
Autodesk, Inc., the Borrowers and the Lender, as the same may be from time to time amended,
restated, supplemented or modified.
“Subsidiary” means, collectively, Rand A Technology Corporation, Rand Worldwide
Foreign Holdings, Inc. and Rand Worldwide Subsidiary, Inc.
“Supporting Obligation” means a letter-of-credit right, secondary obligation, or
obligation of a secondary obligor, or secondary obligation that supports the payment or performance
of an account, chattel paper, a document, a general intangible, an instrument, or investment
property.
“Taxes” means all taxes and assessments whether general or special, ordinary or
extraordinary, or foreseen or unforeseen, of every character (including all penalties or interest
thereon), that at any time may be assessed, levied, confirmed or imposed by any Governmental
Authority on any or all of the Borrowers or any of its or their properties or assets or any part
thereof or in respect of any of its or their franchises, businesses, income or profits.
“Uniform Commercial Code” means, unless otherwise provided in this Agreement, the
Uniform Commercial Code as adopted by and in effect from time to time in the State or in any other
jurisdiction, as applicable.
“U.S. Dollar Equivalent” shall mean, at the date of determination, the amount of U.S.
Dollars that the Lender could purchase, in accordance with its normal practice, with a specified
amount of Canadian Dollars based on the Bank of Canada noon spot rate on such date.
“U.S. Guarantors” means the collective reference to RAND WORLDWIDE FOREIGN HOLDINGS,
INC., a Delaware corporation and RAND WORLDWIDE SUBSIDIARY, INC., a Delaware corporation.
“U.S. Obligations” shall mean the aggregate of the Obligations of the U.S. Borrower as
they may exist from time to time other than the Foreign Obligations.
“U.S. Obligors” means the collective reference to the U.S. Borrower and the U.S.
Guarantors.
“Wholly Owned Subsidiary” means any domestic United States corporation all the shares
of stock of all classes of which (other than directors’ qualifying shares) at the time are owned
directly or indirectly by a Borrower and/or by one or more Wholly Owned Subsidiaries of a Borrower.
Section 1.2 Accounting Terms and Other Definitional Provisions.
Unless otherwise defined herein, as used in this Agreement and in any certificate, report or
other document made or delivered pursuant hereto, accounting terms not otherwise defined herein,
and accounting terms only partly defined herein, to the extent not defined, shall have the
respective meanings given to them under GAAP, as consistently applied to the applicable Person.
All terms used herein which are defined by the Uniform Commercial Code shall have the same meanings
as assigned to them by the Uniform Commercial Code unless and to the extent varied by this
Agreement. The words “include”, “includes” and “including” shall be deemed to be followed by the
phrase “without limitation”. The words “hereof”, “herein” and “hereunder”
and words of similar import when used in this Agreement shall refer to this Agreement as a whole
and not to any particular provision of this Agreement, and article, section, subsection, schedule
and exhibit references are references to articles, sections or subsections of, or schedules or
exhibits to, as the case may be, this Agreement unless otherwise specified. As used herein, the
singular number shall include the plural, the plural the singular and the use of the masculine,
feminine or neuter gender shall include all genders, as the context may require. Reference to any
one or more of the Financing Documents shall mean the same as the foregoing may from time to time
be amended, restated, substituted, extended, renewed, supplemented or otherwise modified.
Reference in this Agreement and the other Financing Documents to the “Borrower”, the
“Borrowers”, “each Borrower” or otherwise with respect to any one or more of the
Borrowers shall mean each and every Borrower and any one or more of the Borrowers, jointly and
severally, unless a specific Borrower is expressly identified.
Section 1.3 Interpretive Provisions.
(a) The terms “sign,” “signed” and signatures” shall have their ordinary
meanings except that, to limited extent the Lender in an authenticated record expressly agrees
otherwise from time to time in the exercise of its Permitted Discretion, the terms may also include
other methods used to authenticate.
(b) The headings in this Agreement are included herein for convenience only, shall not
constitute a part of this Agreement for any other purpose, and shall not be deemed to affect the
meaning or construction of any of the provisions hereof.
(c) This Agreement and the other Financing Documents are the result of negotiations among and
have been reviewed by counsel to the Lender, the Borrowers and the other parties, and are the
products of all parties. Accordingly, they shall not be construed against the Lender merely
because of the involvement of the Lender and its counsel in their preparation.
(d) In this Agreement and the other Financing Documents, (i) any term defined in this
Agreement by reference to the “Uniform Commercial Code” shall also have any extended, alternative
or analogous meaning given to such term in applicable Canadian personal property security and other
laws (including, without limitation, the Personal Property Security Act (Ontario), the Bills of
Exchange Act (Canada), and the Depository Bills and Notes Act (Canada)), in all cases for the
extension, preservation or betterment of the security and rights of the Lender, (ii) all references
in this Agreement to “Article 8 of the Code” or “Article 8 of the Uniform Commercial Code” shall be
deemed to refer also to applicable Canadian securities transfer laws (including, without
limitation, the Securities Transfer Act, 2006 (Ontario)), (iii) all references in this Agreement to
the United States Copyright Office or the United States Patent and Trademark Office shall be deemed
to refer also to the Canadian Intellectual Property Office, (iv) all references in this Agreement
to a financing statement, continuation statement, amendment or termination statement shall be
deemed to refer also to the analogous documents used under applicable Canadian personal property
security laws, (v) all references to the United States of America, or to any subdivision,
department, agency or instrumentality thereof shall be deemed to refer also to Canada or to any
subdivision, department, agency or instrumentality thereof, (vi) all references to federal or state
securities law of the United States shall be deemed to refer also to analogous federal and
provincial securities laws of Canada, (vii) all references to “state or federal bankruptcy laws”
shall be deemed to refer also to any insolvency proceeding occurring in Canada or under Canadian
law, and (viii) all calculations of U.S. Dollar amounts which utilize amounts expressed in Canadian
Dollars shall be made using the U.S. Dollar Equivalent of such Canadian Dollar amounts in a manner
reasonably calculated by the Lender.
ARTICLE II
THE CREDIT FACILITIES
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The Revolving Credit Facility. |
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2.1.1 |
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Revolving Credit Facility. |
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(a) Subject to and upon the provisions of this Agreement, the Lender establishes during the
Revolving Credit Commitment Period a revolving credit facility in favor of the Borrowers (sometimes
referred to in this Agreement as the “Revolving Loan”) in an amount at any one time
outstanding not to exceed the lesser of (i) the Revolving Credit Committed Amount or (ii) the
Borrowing Base.
(b) Subject to and upon the provisions of this Agreement, the Borrowers may request Advances
during the Revolving Credit Commitment Period in accordance with the provisions of this Agreement;
provided that after giving effect to the Borrowers’ request, the aggregate Revolver Usage would not
exceed the Revolving Credit Committed Amount and:
(i) With respect to the Foreign Borrower, the aggregate Revolver Usage would not exceed
the lesser of (A) the Maximum Foreign Revolving Advance Amount or (B) the Borrowing Base as
calculated with respect to Eligible Foreign Receivables; and
(ii) With respect to the U.S. Obligors, the aggregate Revolver Usage would not exceed
the lesser of (A) the Maximum U.S. Revolving Advance Amount or (B) the Borrowing Base as
calculated with respect to Eligible U.S. Receivables.
(c) Unless sooner paid, the unpaid Revolving Loan, together with interest accrued and unpaid
thereon, and all other Obligations shall be due and payable in full on the Revolving Credit
Expiration Date.
(d) If at any time the Revolver Usage exceeds the Revolving Credit Committed Amount in effect
from time to time, the Borrower shall pay such excess to the Lender ON DEMAND.
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2.1.2 |
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Procedure for Making Advances Under the Revolving Loan;
Lender Protection Loans. |
The Borrowers may borrow under the Revolving Credit Facility on any Business Day. Advances
under the Revolving Loan shall be withdrawn by Borrowers from their sweep account with the Lender
or shall be otherwise applied by Lender as directed by the Borrowers, which direction the Lender
may require to be in writing.
2.1.3 Computation of Borrowing Base.
(a) The Borrowing Base shall be computed based on the Borrowing Base Report most recently
delivered to and accepted by the Lender in its Permitted Discretion. The Borrowing Base shall be
calculated separately with respect to the Foreign Borrower based upon Eligible Foreign Receivables
and the U.S. Obligors based upon Eligible U.S. Receivables. In the event the Borrowers fail to
furnish a Borrowing Base Report required by Section 2.1.4 (Borrowing Base Report), or in the event
the Lender believes that a Borrowing Base Report is no longer accurate, the Lender may, in its sole
and absolute discretion exercised from time to time and without limiting other rights and remedies
under this Agreement, suspend the making of or limit advances under the Revolving Loan. The amount
of the Borrowing Base shall be subject to reduction by the amount of Reserves applicable from time
to time and by the amount of any Receivable that was included in the Borrowing Base but that the
Lender determines fails to meet the respective criteria applicable from time to time for Eligible
Receivables.
(b) If at any time the aggregate Revolver Usage exceeds the Borrowing Base for the Foreign
Borrower or the U.S. Obligors, a borrowing base deficiency (“Borrowing Base Deficiency”)
shall exist. Each time a Borrowing Base Deficiency exists, the Borrowers at the sole and absolute
discretion of the Lender exercised from time to time shall pay the Borrowing Base Deficiency ON
DEMAND to Lender.
(c) Without implying any limitation on the Lender’s discretion with respect to the Borrowing
Base, the criteria for Eligible Receivables contained in the respective definitions of Eligible
Receivables are in part based upon the business operations of the Borrowers existing on or about
the Closing Date and upon information and records furnished to the Lender by the Borrowers. If at
any time or from time to time hereafter, the business operations of the Borrowers change or such
information and records furnished to the Lender is incorrect or misleading, the Lender in its sole
and absolute discretion, may at any time and from time to time during the duration of this
Agreement change such criteria or add new criteria. The Lender shall communicate such changed or
additional criteria to the Borrowers from time to time either orally or in writing.
2.1.4 Borrowing Base Report.
The Borrowers will furnish to the Lender no less frequently than monthly within twenty (20)
days after the end of each month and at such other times as may be requested by the Lender a report
of the Borrowing Base (each a “Borrowing Base Report”; collectively, the “Borrowing
Base Reports”) in the form required from time to time by the Lender, appropriately completed
and duly signed. The Borrowing Base Report shall contain the amount and payments on the
Receivables and the calculations of the Borrowing Base, all in such detail, and accompanied by such
supporting and other information, as the Lender may from time to time request. Upon the Lender’s
request and upon the creation of any Receivables, or at such intervals as the Lender may require,
the Borrowers will provide the Lender with (a) confirmatory assignment schedules; (b) copies of
Account Debtor invoices; (c) evidence of shipment or delivery; and (d) such further schedules,
documents and/or information regarding the Receivables as the Lender may reasonably require. The
items to be provided under this subsection shall be in form satisfactory to the Lender, and
certified as true and correct by a Responsible Officer (or, to the extent acceptable to the Lender
from time to time, by any other officers or employees of the Borrower whom a Responsible Officer
from time to time authorizes in writing to do so), and delivered to the Lender from time to time
solely for the Lender’s convenience in maintaining records of the Collateral. Any Borrower’s
failure to deliver any of such items to the Lender shall not affect, terminate, modify, or
otherwise limit the Liens of the Lender in the Collateral.
2.1.5 Revolving Credit Note.
The obligation of the Borrowers to pay the Revolving Loan, with interest, shall be evidenced
by a promissory note (as from time to time extended, amended, restated, supplemented or otherwise
modified, the “Revolving Credit Note”) substantially in the form of EXHIBIT A
attached hereto and made a part hereof, with appropriate insertions. The Revolving Credit Note
shall be dated as of the Closing Date, shall be payable to the order of the Lender at the times
provided in the Revolving Credit Note, and shall be in the principal amount of the Revolving Credit
Committed Amount. Each of the Borrowers acknowledges and agrees that, if the outstanding principal
balance of the Revolving Loan outstanding from time to time exceeds the face amount of the
Revolving Credit Note, the excess shall bear interest at the rates provided from time to time for
advances under the Revolving Loan evidenced by the Revolving Credit Note and shall be payable, with
accrued interest, ON DEMAND. The Revolving Credit Note shall not operate as a novation of any of
the Obligations or nullify, discharge, or release any such Obligations or the continuing
contractual relationship of the parties hereto in accordance with the provisions of this Agreement.
2.1.6 Prepayments of Revolving Loan.
(a) The Borrower shall have the option, at any time and from time to time, to prepay
(each a “Revolving Loan Optional Prepayment” and collectively the “Revolving
Loan Optional Prepayments”) the Revolving Loan, in whole or in part without premium or
penalty.
(b) The Borrower shall make the mandatory prepayments (each a “Revolving Loan
Mandatory Prepayment” and collectively, the “Revolving Loan Mandatory
Prepayments”) of the Revolving Loan at any time and from time to time in such amounts
requested by the Lender pursuant to Section 2.1.3 (Computation of Borrowing Base) in order
to cover any Borrowing Base Deficiency and as otherwise requested or demanded by the Lender
pursuant the other terms of this Agreement.
2.1.7 Revolving Credit Unused Line Fee.
The Borrowers shall pay to the Lender a revolving credit facility fee (collectively, the
“Revolving Credit Unused Line Fees” and individually, a “Revolving Credit Unused Line
Fee”) in an amount equal to one-quarter of one percent (0.25%) per annum on the average daily
unused and undisbursed portion of the Revolving Credit Committed Amount in effect from time to time
accruing during each calendar month. The accrued and unpaid portion of the Revolving Credit Unused
Line Fee shall be paid by the Borrowers to the Lender on the first day of each calendar quarter, in
arrears, commencing on April 1, 2012, and on the Revolving Credit Termination Date.
2.1.8 Required Availability.
At no time shall Availability be less than zero ($0.00). By requesting and by accepting an
Advance or other Revolver Usage, the Borrowers shall thereby represent and warrant that the
Borrowers are in compliance with this Section both immediately before and immediately after the
making of the Advance or other Revolver Usage requested.
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| Section 2.2
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Reserved. |
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| Section 2.3
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The Letter of Credit Facility. |
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2.3.1 |
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Letters of Credit. |
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Subject to and upon the provisions of this Agreement, and as a part of the Revolving Credit
Commitment, each of the Borrowers, upon the prior approval of the Lender, may obtain standby and
commercial letters of credit (as the same may from time to time be amended, supplemented or
otherwise modified, each a “Letter of Credit” and collectively the “Letters of
Credit”) from the Lender from time to time from the Closing Date until the Business Day
preceding the Revolving Credit Termination Date. The Borrowers will not be entitled to obtain a
Letter of Credit unless (a) after giving effect to the request, the aggregate Revolver Usage would
not exceed the lesser of (i) the Revolving Credit Committed Amount, or (ii) the most current
Borrowing Base (b) the sum of the aggregate face amount of the then outstanding Letters of Credit
(including the face amount of the requested Letter of Credit) does not exceed the Letter of Credit
Sublimit, and (c) the purpose of such Letter of Credit shall be reasonably acceptable to the
Lender.
2.3.2 Letter of Credit Fees.
Prior to or simultaneously with the opening of each Letter of Credit, the Borrowers shall pay
to the Lender, a letter of credit fee (each a “Letter of Credit Fee” and collectively the
“Letter of Credit Fees”) in an amount equal to one and one-half percent (1.5%) of the face
amount of the Letter of Credit. The Letter of Credit Fees shall be paid upon the opening of each
Letter of Credit and upon each quarter thereafter, in advance, so that Borrowers shall pay
one-fourth of the annual Letter of Credit Fee each quarter. In addition, the Borrowers shall pay
to the Lender, for its own account, any and all additional issuance, negotiation, processing,
transfer or other fees to the extent and as and when required by the provisions of any Letter of
Credit Agreement. All such additional fees are included in and are a part of the “Fees”
payable by the Borrowers under the provisions of this Agreement and are for the sole and exclusive
benefit of the Lender and are a part of the Obligations.
2.3.3 Terms of Letters of Credit.
Each Letter of Credit shall (a) be opened pursuant to a Letter of Credit Agreement and (b)
expire on a date not later than thirty (30) days preceding the Revolving Credit Expiration Date;
provided, however, if any Letter of Credit does have an expiration date later than thirty (30) days
preceding the Revolving Credit Termination Date (each a “Post-Expiration Date Letter of
Credit” and collectively, the “Post-Expiration Date Letters of Credit”), effective as
of the Business Day preceding the Revolving Credit Termination Date and without prior notice to or
the consent of the Borrowers, the Lender may, in the exercise of its sole and absolute discretion
from time to time, make advances under the Revolving Loan for the account of the Borrowers in the
aggregate face amount of one hundred five percent (105%) of all such Letters of Credit. The Lender
shall deposit the proceeds of such advances into one or more interest bearing accounts with and in
the name of the Lender and over which the Lender alone shall have exclusive power of access and
withdrawal (collectively, the “Letter of Credit Cash Collateral Account”). The Letter of
Credit Cash Collateral Account is to be held by the Lender as additional collateral and security
for any Letter of Credit Obligations relating to the Post-Expiration Date Letters of Credit. Each
Borrower hereby assigns, pledges, grants and sets over to the Lender a first priority security
interest in, and Lien on, all of the funds on deposit in the Letter of Credit Cash Collateral
Account, together with any and all proceeds (cash and non-cash) and products thereof as additional
collateral and security for the Letter of Credit Obligations relating to the Post-Expiration Date
Letters of Credit and all other Obligations. Each Borrower acknowledges and agrees that the Lender
shall be entitled to fund any draw or draft on any Post-Expiration Date Letter of Credit from the
monies on deposit in the Letter of Credit Cash Collateral Account without notice to or consent of
any Borrower or the Lender. Each Borrower further acknowledges and agrees that the Lender’s
election to fund any draw or draft on any Post-Expiration Date Letter of Credit from the Letter of
Credit Cash Collateral shall in no way limit, impair, lessen, reduce, release or otherwise
adversely affect its obligation to pay any Letter of Credit Obligations under or relating to the
Post-Expiration Date Letters of Credit. At such time as all Post-Expiration Date Letters of Credit
have expired and all Letter of Credit Obligations relating to the Post-Expiration Date Letters of
Credit have been paid in full, the Lender agrees (i) to apply the amount of any remaining funds on
deposit in the Letter of Credit Cash Collateral Account to the then unpaid balance of the
Obligations in such order and manner as the Lender shall determine in its sole and absolute
discretion in accordance with the provisions of this Agreement, or (ii) to release the remaining
funds to Borrowers if there are no outstanding Obligations. For the avoidance of doubt, the Lender
shall have no obligation to release (pursuant to Section 3.7 (Release) or otherwise) all or any
Collateral that secures the Letter of Credit Obligations (whether or not then due and whether or
not fixed or contingent) until all Letter of Credit Obligations have been indefeasibly paid in full
in cash and all commitments to provide further Letters of Credit have been terminated.
The aggregate face amount of all Letters of Credit at any one time outstanding and issued by
the Lender pursuant to the provisions of this Agreement, including, without limitation, any and all
Post-Expiration Date Letters of Credit, plus the amount of any unpaid Letter of Credit Fees accrued
or scheduled to accrue thereon, and less the aggregate amount of all drafts issued under or
purporting to have been issued under such Letters of Credit that have been paid by the Lender and
for which the Lender has been reimbursed by the Borrowers in full in accordance with Section 2.3.5
below and the Letter of Credit Agreements, and for which the Lender has no further obligation or
commitment to restore all or any portion of the amounts drawn and reimbursed, is herein called the
“Outstanding Letter of Credit Obligations”.
2.3.4 Procedures for Letters of Credit.
The Borrowers shall give the Lender written notice at least five (5) Business Days prior to
the date on which the Borrower desires the Lender to issue a Letter of Credit. Such notice shall
be accompanied by a duly executed Letter of Credit Agreement specifying, among other things: (a)
the name and address of the intended beneficiary of the Letter of Credit, (b) the requested face
amount of the Letter of Credit, (c) whether the Letter of Credit is to be revocable or irrevocable,
(d) the Business Day on which the Letter of Credit is to be opened and the date on which the Letter
of Credit is to expire, (e) the terms of payment of any draft or drafts which may be drawn under
the Letter of Credit, and (f) any other terms or provisions the Borrowers desire to be contained in
the Letter of Credit. Such notice shall also be accompanied by such other information,
certificates, confirmations, and other items as the Lender may require to assure that the Letter of
Credit is to be issued in accordance with the provisions of this Agreement and a Letter of Credit
Agreement. In the event of any conflict between the provisions of this Agreement and the
provisions of a Letter of Credit Agreement, the provisions of this Agreement shall prevail and
control unless otherwise expressly provided in the Letter of Credit Agreement. Upon (x) receipt of
such notice, (y) payment of all Letter of Credit Fees and all other Fees payable in connection with
the issuance of such Letter of Credit, and (z) receipt of a duly executed Letter of Credit
Agreement, the Lender shall process such notice and Letter of Credit Agreement in accordance with
its customary procedures and open such Letter of Credit on the Business Day specified in such
notice.
2.3.5 Payments of Letters of Credit.
The Borrowers hereby promise to pay to the Lender, ON DEMAND and in United States Dollars, the
following which are herein collectively referred to as the “Letter of Credit Current
Obligations”:
(a) the amount which the Lender has paid or will be required to pay under each draft or draw
on a Letter of Credit, whether such demand be in advance of the Lender’s payment or for
reimbursement for such payment;
(b) any and all reasonable charges and expenses which the Lender may pay or incur relative to
the Letter of Credit and/or such draws or drafts; and
(c) interest on the amounts described in (a) and (b) not paid by the Borrowers as and when due
and payable under the provisions of (a) and (b) above from the day the same are due and payable
until paid in full (subject to any applicable notice or grace period) at a rate per annum equal to
Post-Default Rate for the Revolving Loan.
In addition, the Borrowers hereby promise to pay any and all other Letter of Credit
Obligations as and when due and payable in accordance with the provisions of this Agreement and the
Letter of Credit Agreements. The obligation of the Borrowers to pay Letter of Credit Current
Obligations and all other Letter of Credit Obligations shall be absolute and unconditional under
any and all circumstances and irrespective of any setoff, counterclaim or defense to payment which
the Borrowers or any other account party may have or have had against the beneficiary of such
Letter of Credit, the Lender, or any other Person, including, without limitation, any defense based
on the failure of any draft or draw to conform to the terms of such Letter of Credit, any draft or
other document proving to be forged, fraudulent or invalid, or the legality, validity, regularity
or enforceability of such Letter of Credit, any draft or other documents presented with any draft,
any Letter of Credit Agreement, this Agreement, or any of the other Financing Documents, unless the
Lender had actual knowledge of the same, and irrespective of any Collateral, security or guarantee
therefor or right of offset with respect thereto and irrespective of any other circumstances
whatsoever which constitutes, or might be construed to constitute, an equitable or legal discharge
of the Borrowers for any Letter of Credit Obligations, in bankruptcy or otherwise;
provided, however, that the Borrowers shall not be obligated to reimburse the
Lender for any wrongful payment under such Letter of Credit made as a result of the Lender’s gross
negligence or willful misconduct. The obligation of the Borrowers to pay the Letter of Credit
Obligations shall not be conditioned or contingent upon the pursuit by the Lender or any other
Person at any time of any right or remedy against any Person which may be or become liable in
respect of all or any part of such obligation or against any Collateral, security or guarantee
therefor or right of offset with respect thereto.
The Letter of Credit Obligations shall continue to be effective, or be reinstated, as the case
may be, if at any time payment of all or any portion of the Letter of Credit Obligations is
rescinded or must otherwise be restored or returned by the Lender upon the insolvency, bankruptcy,
dissolution, liquidation or reorganization of any Person, or upon or as a result of the appointment
of a receiver, intervenor, or conservator of, or trustee or similar officer for, any Person, or any
substantial part of such Person’s property, all as though such payments had not been made.
2.3.6 Change in Law; Increased Cost.
If any change in any law or regulation or in the interpretation thereof by any court or other
Governmental Authority charged with the administration thereof shall either (a) impose, modify or
deem applicable any reserve, special deposit or similar requirement against Letters of Credit
issued by the Lender, or (b) impose on the Lender any other condition regarding this Agreement or
any Letter of Credit, and the result of any event referred to in clauses (a) or (b) above shall be
to increase the cost to the Lender of issuing, maintaining or extending the Letter of Credit or the
cost to the Lender of funding any obligation under or in connection with the Letter of Credit
(which increase in cost shall be the result of the Lender’s reasonable allocation of the aggregate
of such cost increases resulting from such events), then, upon demand by the Lender, the Borrowers
shall immediately pay to the Lender from time to time as specified by the Lender, additional
amounts that shall be sufficient to compensate the Lender for such increased cost, together with
interest on each such amount from the date demanded until payment in full thereof at a rate per
annum equal to the then highest current non-default rate of interest on the Revolving Loan. A
certificate as to such increased cost incurred by the Lender, submitted by the Lender to the
Borrowers, shall be conclusive, absent manifest error.
2.3.7 General Letter of Credit Provisions.
The Borrowers hereby instruct the Lender to pay any draft complying with the terms of any
Letter of Credit irrespective of any instructions of the Borrowers to the contrary. The Borrowers
assume all risks of the acts and omissions of the beneficiary and other users of any Letter of
Credit. The Lender and its respective branches, Affiliates and/or correspondents shall not be
responsible for and the Borrowers hereby indemnify and hold the Lender and its respective branches,
Affiliates and/or correspondents harmless from and against all liability, loss and expense
(including reasonable attorney’s fees and costs) incurred by the Lender and/or their respective
branches, Affiliates and/or correspondents relative to and/or as a consequence of (a) any failure
by the Borrowers to perform the agreements hereunder and under any Letter of Credit Agreement, (b)
any Letter of Credit Agreement, this Agreement, any Letter of Credit and any draft, draw and/or
acceptance under or purported to be under any Letter of Credit, (c) any action taken or omitted by
the Lender and/or any of its respective branches, Affiliates and/or correspondents at the request
of the Borrowers, (d) any failure or inability to perform in accordance with the terms of any
Letter of Credit by reason of any control or restriction rightfully or wrongfully exercised by any
de facto or de jure Governmental Authority, group or individual asserting or
exercising governmental or paramount powers, and/or (e) any consequences arising from causes beyond
the control of the Lender and/or any of its respective branches, Affiliates and/or correspondents;
provided, however, that the Borrowers shall not be obligated to indemnify Lender
for any actions, consequences or losses attributable to Lender’s gross negligence or willful
misconduct. Each of the Borrowers acknowledges and agrees that this indemnification shall survive
the termination of this Agreement and the Commitments and the payment and performance of all of the
other Obligations.
Except for gross negligence or willful misconduct, the Lender and its respective branches,
Affiliates and/or correspondents, shall not be liable or responsible in any respect for any (a)
error, omission, interruption or delay in transmission, dispatch or delivery of any one or more
messages or advices in connection with any Letter of Credit, whether transmitted by cable,
telegraph, mail or otherwise and despite any cipher or code which may be employed, and/or (b)
action, inaction or omission which may be taken or suffered by it or them in good faith or through
inadvertence in identifying or failing to identify any beneficiary or otherwise in connection with
any Letter of Credit.
Any Letter of Credit may be amended, modified or revoked only upon the receipt by the Lender
from the Borrowers and the beneficiary (including any transferee and/or assignee of the original
beneficiary), of a written consent and request therefor.
If any Laws, order of court and/or ruling or regulation of any Governmental Authority of the
United States (or any state thereof) and/or any country other than the United States permits a
beneficiary under a Letter of Credit to require the Lender and/or any of its respective branches,
Affiliates and/or correspondents to pay drafts under or purporting to be under a Letter of Credit
after the expiration date of the Letter of Credit, the Borrowers shall reimburse the Lender, as
appropriate, for any such payment pursuant to provisions of Section 2.3.6 (Change in Law; Increased
Cost).
Except as may otherwise be specifically provided in a Letter of Credit or Letter of Credit
Agreement, the laws of the State and the Uniform Customs and Practice for Documentary Credits, 1993
Revision, International Chamber of Commerce Publication No. 500 (the “UCP”) shall govern
commercial Letters of Credit and the International Standby Practices, 1998, International Chamber
of Commerce Publication No. 590 (the “ISP”) shall govern standby letters of credit. The
provisions of the UCP and ISP are hereby incorporated by reference. In the event of a conflict
between the UCP and ISP and the laws of the State, the UCP and ISP shall prevail.
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| Section 2.4
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Interest. |
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2.4.1 |
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Applicable Interest Rates. |
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(a) The Revolving Loan shall bear interest at the rate set forth in the Revolving Credit Note.
(b) Following the occurrence of an Event of Default, the Loans and other Obligations shall, at
the option of the Lender from time to time, bear interest at the Post-Default Rate.
(c) For purposes of the Interest Act (Canada) and disclosure thereunder, whenever any interest
or any fee to be paid hereunder or in connection herewith is to be calculated on the basis of a
360-day year, the yearly rate of interest to which the rate used in such calculation is equivalent
is the rate so used multiplied by the actual number of days in the calendar year in which the same
is to be ascertained and divided by 360. The rates of interest under this Agreement are nominal
rates, and not effective rates or yields. The principle of deemed reinvestment of interest does
not apply to any interest calculation under this Agreement.
(d) Any provision of this Agreement that would oblige the Foreign Borrower to pay any fine,
penalty, or rate of interest on any arrears of principal or interest secured by a mortgage on real
property or hypothec or immovable that has the effect of increasing the charge on arrears beyond
the rate of interest payable on principal money not in arrears shall not apply to such Foreign
Borrower, which shall be required to pay interest on money in arrears at the same rate of interest
payable on principal money not in arrears.
(e) If any provision of this Agreement would oblige a Foreign Borrower to make any payment of
interest or other amount payable to any Lender in an amount or calculated at a rate which would be
prohibited by law or would result in a receipt by that Lender of “interest” at a “criminal rate”
(as such terms are construed under the Criminal Code (Canada)), then, notwithstanding such
provision, such amount or rate shall be deemed to have been adjusted with retroactive effect to the
maximum amount or rate of interest, as the case may be, as would not be so prohibited by applicable
law or so result in a receipt by that Lender of “interest” at a “criminal rate,” such adjustment to
be effected, to the extent necessary (but only to the extent necessary), as follows:
(i) first, by reducing the amount or rate of interest; and
(ii) thereafter, by reducing any fees, commissions, costs, expenses,
premiums and other amounts required to be paid which would constitute
interest for purposes of section 347 of the Criminal Code (Canada).
2.4.2 Payment of Interest.
Unpaid and accrued interest on any portion of the Loans which consists of a Base Rate Loan
shall be due and payable paid monthly, in arrears, on the first day of each calendar month,
commencing on the first such date after the date of this Agreement, and on the first day of each
calendar month thereafter, and at maturity (whether by acceleration, declaration, extension or
otherwise).
2.4.3 Field Examination Fees.
The Borrowers shall pay to the Lender a field examination fee (collectively, the “Field
Examination Fees” and individually a “Field Examination Fee”), which Field Examination
Fees shall be payable at the time of each field examination in an amount equal to the sum of a $300
administrative fee plus $850 per field examiner per day plus reimbursement of all out-of-pocket
expenses and costs or in such other amounts as customarily charged by the Lender for the type of
field examination conducted.
2.4.4 Computation of Interest and Fees.
All applicable Fees and interest shall be calculated on the basis of a year of 360 days for
the actual number of days elapsed. Any change in the interest rate on any of the Obligations
resulting from a change in the Daily LIBOR Rate shall become effective as of the opening of
business on the day on which such change in the Daily LIBOR Rate is announced.
2.4.5 Maximum Interest Rate.
In no event shall any interest rate provided for hereunder exceed the maximum rate permissible
for corporate borrowers under applicable law for loans of the type provided for hereunder (the
“Maximum Rate”). If, in any month, any interest rate, absent such limitation, would have
exceeded the Maximum Rate, then the interest rate for that month shall be the Maximum Rate, and, if
in future months, that interest rate would otherwise be less than the Maximum Rate, then that
interest rate shall remain at the Maximum Rate until such time as the amount of interest paid
hereunder equals the amount of interest that would have been paid if the same had not been limited
by the Maximum Rate. In the event that, upon payment in full of the Obligations, the total amount
of interest paid or accrued under the terms of this Agreement is less than the total amount of
interest that would, but for this Section, have been paid or accrued if the interest rates
otherwise set forth in this Agreement had at all times been in effect, then the Borrowers shall, to
the extent permitted by applicable law, pay the Lender, an amount equal to the excess of (a) the
lesser of (i) the amount of interest that would have been charged if the Maximum Rate had, at all
times, been in effect or (ii) the amount of interest that would have accrued had the interest rates
otherwise set forth in this Agreement, at all times, been in effect over (b) the amount of interest
actually paid or accrued under this Agreement. In the event that a court determines that the
Lender has received interest and other charges hereunder in excess of the Maximum Rate, such excess
shall be deemed received on account of, and shall automatically be applied to reduce, the
Obligations other than interest, in the inverse order of maturity, and if there are no Obligations
outstanding, the Lender shall refund to the Borrowers such excess.
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| Section 2.5
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General Financing Provisions. |
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2.5.1 |
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Borrowers’ Representatives. |
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(a) The Borrowers hereby represent and warrant to the Lender that each of them will derive
benefits, directly and indirectly, from each Loan and Revolver Usage, both in their separate
capacity and as a member of the integrated group to which each of the Borrowers belong and because
the successful operation of the integrated group is dependent upon the continued successful
performance of the functions of the integrated group as a whole, because (a) the terms of the
consolidated financing provided under this Agreement are more favorable than would otherwise would
be obtainable by the Borrowers individually, and (b) the Borrowers’ additional administrative and
other costs and reduced flexibility associated with individual financing arrangements which would
otherwise be required if obtainable would substantially reduce the value to the Borrowers of the
financing. The Borrowers in the discretion of their respective managements are to agree among
themselves as to the allocation of the proceeds of Loans and the benefits of Revolver Usage,
provided, however, that the Borrowers shall be deemed to have represented and warranted to the
Lender at the time of allocation that each benefit and use of proceeds is a Permitted Use.
(b) For administrative convenience, each Borrower hereby irrevocably appoints the Borrower
Agent as the Borrower’s attorney-in-fact, with power of substitution (with the prior written
consent of the Lender in the exercise of its sole and absolute discretion), in the name of the
Borrower Agent or in the name of the Borrower or otherwise to take any and all actions with respect
to the this Agreement, the other Financing Documents, the Obligations and/or the Collateral
(including, without limitation, the proceeds thereof) as the Borrower Agent may so elect from time
to time, including, without limitation, actions to (i) request advances under the Loans and other
Credit Facilities, apply for and direct the benefits of Bank Products, and direct the Lender to
disburse or credit the proceeds of any Loan or other Credit Facility directly to an account of the
Borrower Agent, any one or more of the Borrowers or otherwise, which direction shall evidence the
making of such Loan or other Credit Facility and shall constitute the acknowledgement by each of
the Borrowers of the receipt of the proceeds of such Loan or other Credit Facility or the benefit
of such Bank Products, (ii) enter into, execute, deliver, amend, modify, restate, substitute,
extend and/or renew this Agreement, any other Financing Documents, security agreements, mortgages,
deposit account agreements, instruments, certificates, waivers, letter of credit applications,
releases, documents and agreements from time to time, and (iii) endorse any check or other item of
payment in the name of the Borrower or in the name of the Borrower Agent. The foregoing
appointment is coupled with an interest, cannot be revoked without the prior written consent of the
Lender, and may be exercised from time to time through the Borrower Agent’s duly authorized
officer, officers or other Person or Persons designated by the Borrower Agent to act from time to
time on behalf of the Borrower Agent.
(c) Each of the Borrowers hereby irrevocably authorizes the Lender to make Loans or other
Credit Facilities to any one or more of the Borrowers, and hereby irrevocably authorizes the Lender
to issue or cause to be issued letters of credit or other Bank Products for the account of any or
all of the Borrowers, pursuant to the provisions of this Agreement or otherwise upon the written,
oral or telephone request of any one or more of the Persons who is from time to time a Responsible
Officer of a Borrower under the provisions of the most recent certificate of resolutions and/or
incumbency of the Borrowers on file with the Lender and also upon the written, oral or telephone
request of any one of the Persons who is from time to time a Responsible Officer of the Borrower
Agent under the provisions of the most recent certificate of resolutions and/or incumbency for the
Borrower Agent on file with the Lender.
(d) The Lender assumes no responsibility or liability for any errors, mistakes, and/or
discrepancies in the oral, telephonic, written or other transmissions of any instructions, orders,
requests and confirmations between the Lender and the Borrowers in connection with the Credit
Facilities, any Loan, any other Facilities, or any other transaction in connection with the
provisions of this Agreement. Without implying any limitation on the joint and several nature of
the Obligations, the Lender agrees that, notwithstanding any other provision of this Agreement, the
Borrowers may create reasonable inter-company indebtedness between or among the Borrowers with
respect to the allocation of the benefits and proceeds of the advances and Credit Facilities under
this Agreement. The Borrowers agree among themselves, and the Lender consents to that agreement,
that each Borrower shall have rights of contribution from all of the other Borrowers to the extent
such Borrower incurs Obligations in excess of the proceeds of the Loans or other benefits received
by, or allocated to purposes for the direct benefit of, such Borrower. All such indebtedness and
rights shall be, and are hereby agreed by the Borrowers to be, subordinate in priority and payment
to the indefeasible repayment in full in cash of the Obligations, and, unless the Lender agrees in
writing otherwise, shall not be exercised or repaid in whole or in part until all of the
Obligations have been indefeasibly paid in full in cash. The Borrowers agree that all of such
inter-company indebtedness and rights of contribution are part of the Collateral and secure the
Obligations. Each Borrower hereby waives all rights of counterclaim, recoupment and offset between
or among themselves arising on account of that indebtedness and otherwise. Each Borrower shall not
evidence the inter-company indebtedness or rights of contribution by note or other instrument, and
shall not secure such indebtedness or rights of contribution with any Lien or security.
Notwithstanding anything contained in this Agreement to the contrary, the amount covered by each
Borrower under the Obligations (including, without limitation, Section 2.5.11 (Guaranty)) shall be
limited to an aggregate amount (after giving effect to any collections from, rights to receive
contribution from or payments made by or on behalf of any other Borrower in respect of the
Obligations) which, together with other amounts owing by such Borrowers to the Lender under the
Obligations, is equal to the largest amount that would not be subject to avoidance under the
Bankruptcy Code or any applicable provisions of any applicable, comparable state or other Laws.
2.5.2 Use of Proceeds of the Loans.
The proceeds of each advance under the Loans shall be used by the Borrowers for Permitted
Uses, and for no other purposes except as may otherwise be agreed by the Lender in writing.
2.5.3 Payments.
All payments of the Obligations, including, without limitation, principal, interest,
Prepayments, and Fees, shall be paid by the Borrower without setoff, recoupment or counterclaim to
the Lender in immediately available funds not later than 12:00 noon (Eastern Time) on the due date
of such payment from Borrowers’ sweep account at the Lender. If there are insufficient funds in
Borrowers’ sweep account to make any required payment to Lender, all such payments shall be made to
the Lender’s office at such location as the Lender may at any time and from time to time specify to
the Borrowers. Alternatively, at its sole and absolute discretion, the Lender may charge any
deposit account of any Borrower at the Lender or any Affiliate of the Lender with all or any part
of any amount due to the Lender under this Agreement or any of the other Financing Documents to the
extent that the Borrowers shall have not otherwise tendered payment to the Lender. Except as
provided elsewhere in this Agreement of in the other Financing Documents, all payments shall be
applied first to any and all accrued and unpaid late charges and Enforcement Costs, second to any
unpaid Fees, third to any and all accrued and unpaid interest on the Obligations, and then to the
then unpaid principal balance of the Obligations, all in such order and manner as shall be
determined by the Lender in its sole and absolute discretion.
2.5.4 Computation of Interest and Fees.
All applicable Fees and interest shall be calculated on the basis of a year of 360 days for
the actual number of days elapsed. Any change in the interest rate on any of the Obligations
resulting from a change in the Daily LIBOR Rate shall become effective as of the opening of
business on the day on which such change in the Daily LIBOR Rate is announced.
2.5.5 Maximum Interest Rate.
In no event shall any interest rate provided for hereunder exceed the maximum rate permissible
for corporate borrowers under applicable law for loans of the type provided for hereunder (the
“Maximum Rate”). If, in any month, any interest rate, absent such limitation, would have
exceeded the Maximum Rate, then the interest rate for that month shall be the Maximum Rate, and, if
in future months, that interest rate would otherwise be less than the Maximum Rate, then that
interest rate shall remain at the Maximum Rate until such time as the amount of interest paid
hereunder equals the amount of interest that would have been paid if the same had not been limited
by the Maximum Rate. In the event that, upon payment in full of the Obligations, the total amount
of interest paid or accrued under the terms of this Agreement is less than the total amount of
interest that would, but for this Section, have been paid or accrued if the interest rates
otherwise set forth in this Agreement had at all times been in effect, then the Borrowers shall, to
the extent permitted by applicable law, pay the Lender, an amount equal to the excess of (a) the
lesser of (i) the amount of interest that would have been charged if the Maximum Rate had, at all
times, been in effect or (ii) the amount of interest that would have accrued had the interest rates
otherwise set forth in this Agreement, at all times, been in effect over (b) the amount of interest
actually paid or accrued under this Agreement. In the event that a court determines that the
Lender has received interest and other charges hereunder in excess of the Maximum Rate, such excess
shall be deemed received on account of, and shall automatically be applied to reduce, the
Obligations other than interest, in the inverse order of maturity, and if there are no Obligations
outstanding, the Lender shall refund to the Borrowers such excess.
2.5.6 Liens; Setoff.
The Borrowers hereby grant to the Lender a continuing Lien for all of the Obligations upon any
and all monies, securities, and other property of the Borrowers and the proceeds thereof, now or
hereafter held or received by or in transit to, the Lender, and/or any Affiliate of the Lender,
from or for the Borrowers, and also upon any and all deposit accounts (general or special) and
credits of the Borrowers, if any, with the Lender or any Affiliate of the Lender, at any time
existing, excluding any deposit accounts held by the Borrowers in their capacity as trustee for
Persons who are not Borrowers or Affiliates of the Borrowers. Without implying any limitation on
any other rights the Lender may have under the Financing Documents or applicable Laws, during the
continuance of an Event of Default, the Lender is hereby authorized by the Borrowers at any time
and from time to time, without notice to the Borrowers, to set off, appropriate and apply any or
all items hereinabove referred to against all Obligations then outstanding (whether or not then
due), all in such order and manner as shall be determined by the Lender in its sole and absolute
discretion. The Lender shall have no obligation, however, to apply to the Obligations any proceeds
from Receivables, any other Collateral, other obligation or property of any kind due from, owed by
or belonging to, a Sanctioned Person.
2.5.7 Requirements of Law.
In the event that the Lender shall have determined in good faith that (a) the adoption of any
Capital Adequacy Regulation, or (b) any change in any Capital Adequacy Regulation or in the
interpretation or application thereof or (c) compliance by the Lender or any corporation
controlling the Lender with any request or directive regarding capital adequacy (whether or not
having the force of law) from any Governmental Authority or central bank, does or shall have the
effect of reducing the rate of return on the capital of the Lender or such controlling corporation,
as a consequence of the Lender’s obligations under this Agreement to a level below that which the
Lender or such corporation would have achieved but for such adoption, change or compliance (taking
into consideration the policies of the Lender and its controlling corporation, with respect to
capital adequacy) by an amount deemed by the Lender, in its and absolute discretion, to be
material, then from time to time, after submission by the Lender to the Borrower of a written
request therefor and a statement of the basis for the Lender’s determination, the Borrower shall
pay to the Lender ON DEMAND such additional amount or amounts in order to compensate the Lender or
its controlling corporation for any such reduction.
2.5.8 [Intentionally Omitted].
2.5.9 Prepayment on Certain Events.
Unless the Lender agrees otherwise from time to time and except as provided in Section 6.2.18
(Disposition of Collateral) or as expressly provided in other Financing Documents, upon the sale or
other disposition by any Borrower of Equipment or of any other assets outside of the ordinary
course of business or upon the sale or other disposition of any real property that is subject to a
Lien in favor of the Lender, or if any such Equipment, other assets or real property are damaged,
destroyed or taken by condemnation in whole or in part, the proceeds thereof may be utilized by
Borrower to replace such Equipment up to Two Hundred Thousand Dollars ($200,000.00) of proceeds.
If the proceeds exceed Two Hundred Thousand Dollars ($200,000.00), the proceeds shall be paid by
such Borrower to the Lender as a mandatory prepayment of the Obligations in such order or to the
reduction of Commitments, or be released to Borrower to replace the Equipment, or a combination of
both, as the Lender may elect from time to time in its sole discretion. Further notwithstanding
the foregoing, nothing in this Section shall be deemed to imply or require the Lender’s consent to
any action or event described above that is otherwise prohibited, limited, or subject to consent by
the terms of this Agreement, the other Financing Documents, or under other applicable Laws.
2.5.10 PATRIOT Act Notice.
The Lender hereby gives the Borrowers notice that pursuant to the requirements of the PATRIOT
Act, the Lender is required to obtain, verify and record information that identifies the Borrowers,
which information includes the name and address of the Borrowers and other information that will
allow the Lender to identify the Borrowers in accordance with the PATRIOT Act.
2.5.11 Guaranty.
(a) Each Borrower hereby unconditionally and irrevocably, guarantees to the Lender:
(i) the due and punctual payment in full (and not merely the
collectibility) by the other Borrowers of the Obligations, including unpaid
and accrued interest thereon, in each case when due and payable, all
according to the terms of this Agreement, the Notes and the other Financing
Documents;
(ii) the due and punctual payment in full (and not merely the
collectibility) by the other Borrowers of all other sums and charges which
may at any time be due and payable in accordance with this Agreement, the
Notes or any of the other Financing Documents;
(iii) the due and punctual performance by the other Borrowers of all of
the other terms, covenants and conditions contained in the Financing
Documents; and
(iv) all the other Obligations of the other Borrowers.
(b) The obligations and liabilities of each Borrower as a guarantor under this Section 2.5.11
shall be absolute and unconditional and joint and several, irrespective of the genuineness,
validity, priority, regularity or enforceability of this Agreement, any of the Notes or any of the
Financing Documents or any other circumstance which might otherwise constitute a legal or equitable
discharge of a surety or guarantor. Each Borrower in its capacity as a guarantor expressly agrees
that the Lender may, in its sole and absolute discretion, without notice to or further assent of
such Borrower and without in any way releasing, affecting or in any way impairing the joint and
several obligations and liabilities of such Borrower as a guarantor hereunder:
(i) waive compliance with, or any defaults under, or grant any other
indulgences under or with respect to any of the Financing Documents;
(ii) modify, amend, change or terminate any provisions of any of the
Financing Documents;
(iii) grant extensions or renewals of or with respect to the Credit
Facilities, the Notes or any of the other Financing Documents;
(iv) effect any release, subordination, compromise or settlement in
connection with this Agreement, any of the Notes or any of the other
Financing Documents;
(v) agree to the substitution, exchange, release or other disposition
of the Collateral or any part thereof, or any other collateral for the Loan
or to the subordination of any lien or security interest therein;
(vi) make advances for the purpose of performing any term, provision or
covenant contained in this Agreement, any of the Notes or any of the other
Financing Documents with respect to which the Borrowers shall then be in
default;
(vii) make future advances pursuant to the Financing Agreement or any
of the other Financing Documents;
(viii) assign, pledge, hypothecate or otherwise transfer the
Commitments, the Obligations, the Notes, any of the other Financing
Documents or any interest therein, all as and to the extent permitted by the
provisions of this Agreement;
(ix) deal in all respects with the other Borrowers as if this Section
2.5.11 were not in effect;
(x) effect any release, compromise or settlement with any of the other
Borrowers, whether in their capacity as a Borrower or as a guarantor under
this Section 2.5.11, or any other guarantor; and
(xi) provide debtor-in-possession financing or allow use of cash
collateral in proceedings under the Bankruptcy Code, it being expressly
agreed by all Borrowers that any such financing and/or use would be part of
the Obligations.
(c) The obligations and liabilities of each Borrower, as guarantor under this Section 2.5.11,
shall be primary, direct and immediate, shall not be subject to any counterclaim, recoupment, set
off, reduction or defense based upon any claim that a Borrower may have against any one or more of
the other Borrowers, the Lender, and/or any other guarantor and shall not be conditional or
contingent upon pursuit or enforcement by the Lender of any remedies it may have against the
Borrowers with respect to this Agreement, the Notes or any of the other Financing Documents,
whether pursuant to the terms thereof or by operation of law. Without limiting the generality of
the foregoing, the Lender shall not be required to make any demand upon any of the Borrowers, or to
sell the Collateral or otherwise pursue, enforce or exhaust its remedies against the Borrowers or
the Collateral either before, concurrently with or after pursuing or enforcing its rights and
remedies hereunder. Any one or more successive or concurrent actions or proceedings may be brought
against each Borrower under this Section 2.5.11, either in the same action, if any, brought against
any one or more of the Borrowers or in separate actions or proceedings, as often as the Lender may
deem expedient or advisable. Without limiting the foregoing, it is specifically understood that
any modification, limitation or discharge of any of the liabilities or obligations of any one or
more of the Borrowers, any other guarantor or any obligor under any of the Financing Documents,
arising out of, or by virtue of, any bankruptcy, arrangement, reorganization or similar proceeding
for relief of debtors under federal or state law initiated by or against any one or more of the
Borrowers, in their respective capacities as borrowers and guarantors under this Section 2.5.11, or
under any of the Financing Documents shall not modify, limit, lessen, reduce, impair, discharge, or
otherwise affect the liability of each Borrower under this Section 2.5.11 in any manner whatsoever,
and this Section 2.5.11 shall remain and continue in full force and effect. It is the intent and
purpose of this Section 2.5.11 that each Borrower shall and does hereby waive all rights and
benefits which might accrue to any other guarantor by reason of any such proceeding, and the
Borrowers agree that they shall be liable for the full amount of the obligations and liabilities
under this Section 2.5.11, regardless of, and irrespective to, any modification, limitation or
discharge of the liability of any one or more of the Borrowers, any other guarantor or any obligor
under any of the Financing Documents, that may result from any such proceedings.
(d) Each Borrower, as guarantor under this Section 2.5.11, hereby unconditionally, jointly and
severally, irrevocably and expressly waives:
(i) presentment and demand for payment of the Obligations and protest
of non-payment;
(ii) notice of acceptance of this Section 2.5.11 and of presentment,
demand and protest thereof;
(iii) notice of any default hereunder or under the Notes or any of the
other Financing Documents and notice of all indulgences;
(iv) notice of any increase in the amount of any portion of or all of
the indebtedness guaranteed by this Section 2.5.11;
(v) demand for observance, performance or enforcement of any of the
terms or provisions of this Section 2.5.11, the Notes or any of the other
Financing Documents;
(vi) all errors and omissions in connection with the Lender’s
administration of all indebtedness guaranteed by this Section 2.5.11, except
errors and omissions resulting from acts of bad faith;
(vii) any right or claim of right to cause a marshaling of the assets
of any one or more of the other Borrowers;
(viii) any act or omission of the Lender which changes the scope of the
risk as guarantor hereunder; and
(ix) all other notices and demands otherwise required by law which the
Borrower may lawfully waive.
Within ten (10) days following any request of the Lender so to do, each Borrower will furnish
the Lender and such other persons as the Lender may direct with a written certificate, duly
acknowledged stating in detail whether or not any credits, offsets or defenses exist with respect
to this Section 2.5.11.
ARTICLE III
THE COLLATERAL
Section 3.1 Debt and Obligations Secured.
All property and Liens assigned, pledged or otherwise granted under or in connection with this
Agreement (including, without limitation, those under Section 3.2 (Grant of Liens)) or any of the
Financing Documents shall secure (a) the payment of all of the Obligations, including, without
limitation, any and all Hedge Obligations, and (b) the performance, compliance with and observance
by the Borrowers of the provisions of this Agreement and all of the other Financing Documents or
otherwise under the Obligations.
Section 3.2 Grant of Liens.
Each of the Borrowers hereby assigns, pledges and grants to the Lender, and agrees that the
Lender shall have a perfected and continuing security interest in, and Lien on, all of the personal
property of the Borrower (but specifically excluding all Inventory), whether now owned or existing
or hereafter acquired or created and wherever situated and including, without limitation, (a) all
of the Borrowers’ Accounts, Chattel Paper, Documents, Instruments, Equipment, Investment Property,
and General Intangibles and all of the Borrowers’ deposit accounts, whether now owned or existing
or hereafter acquired or arising, (b) all returned, rejected or repossessed goods, the sale or
lease of which shall have given or shall give rise to an Account or Chattel Paper, (c) all
insurance policies relating to the foregoing, (d) all books and records in whatever media (paper,
electronic or otherwise) recorded or stored, with respect to the foregoing and all equipment and
general intangibles necessary or beneficial to retain, access and/or process the information
contained in those books and records, and all of the Borrower’s other personal property of any kind
or nature whatsoever, and (e) all cash proceeds and noncash proceeds and products of the foregoing.
Each of the Borrowers further agrees that the Lender shall have in respect thereof all of the
rights and remedies of a secured party under the Uniform Commercial Code, the Personal Property
Security Act, as well as those provided in this Agreement, under each of the other Financing
Documents and under applicable Laws.
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Section 3.3
Section 3.4
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[Intentionally Omitted].
Personal Property. |
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The Borrowers acknowledge and agree that it is the intention of the parties to this Agreement
that the Lender shall have a first priority, perfected Lien, in form and substance satisfactory to
the Lender and its counsel, on all of the Borrowers’ personal property of any kind and nature
whatsoever, whether now owned or hereafter acquired, subject only to the Permitted Liens, if any.
In furtherance of the foregoing:
3.4.1 Investment Property, Chattel Paper, Promissory Notes, etc.
On the Closing Date and without implying any limitation on the scope of Section 3.2 (Grant of
Liens), each of the Borrowers shall deliver to the Lender all originals of all of the Borrower’s
letters of credit, Investment Property, Chattel Paper, Documents and Instruments and, if the Lender
so requires, shall execute and deliver a separate pledge, assignment and security agreement in form
and content acceptable to the Lender, which pledge, assignment and security agreement shall assign,
pledge and grant a Lien to the Lender on all of each Borrower’s letters of credit, Investment
Property, Chattel Paper, Documents and Instruments.
In the event that any of the Borrowers shall acquire after the Closing Date any letters of
credit, Investment Property, Chattel Paper, Documents or Instruments, each such Borrower shall
promptly so notify the Lender and deliver the originals of all of the foregoing to the Lender
promptly and in any event within ten (10) days of each acquisition.
All letters of credit, Investment Property, Chattel Paper, Documents and Instruments shall be
delivered to the Lender endorsed and/or assigned as required by the pledge, assignment and security
agreement and/or as the Lender may require and, if applicable, shall be accompanied by blank
irrevocable and unconditional stock or bond powers.
3.4.2 Intellectual Property.
On the Closing Date and from time to time thereafter, without implying any limitation on the
scope of Section 3.2 (Grant of Liens), the Borrowers shall execute and deliver all Financing
Documents and take all actions requested by the Lender in order to perfect a first priority
assignment of Intellectual Property, to the extent assignable.
Section 3.5 Record Searches.
As of the Closing Date and thereafter at the time any Financing Document is executed and
delivered by the Borrowers pursuant to this Section, the Lender shall have received, in form and
substance satisfactory to the Lender, such Lien or record searches with respect to all of the
Borrowers and/or any other Person, as appropriate, and the property covered by such Financing
Document showing that the Lien of such Financing Document will be a perfected first priority Lien
on the property covered by such Financing Document subject only to Permitted Liens or to such other
matters as the Lender may approve.
Section 3.6 Costs.
The Borrowers agree to pay, as part of the Enforcement Costs and to the fullest extent
permitted by applicable Laws, on demand all costs, fees and expenses incurred by the Lender in
connection with the taking, perfection, preservation, protection and/or release of a Lien on the
Collateral, including, without limitation:
(a) fees and expenses incurred by the Lender in preparing, reviewing,
negotiating and finalizing the Financing Documents from time to time (including,
without limitation, reasonable attorneys’ fees incurred in connection with
preparing, reviewing, negotiating, and finalizing any of the Financing Documents,
including, any amendments and supplements thereto);
(b) all filing and/or recording taxes or fees;
(c) all costs of Lien and record searches;
(d) reasonable attorneys’ fees in connection with all legal opinions required;
and
(e) all related costs, fees and expenses.
Section 3.7 Release.
Upon the indefeasible repayment in full in cash of the Obligations and performance of all
Obligations of the Borrowers and all obligations and liabilities of each other Person, other than
the Lender, under this Agreement and all other Financing Documents, the termination and/or
expiration of all of the Commitments, at the Borrowers’ sole cost and expense, the Lender shall
release and/or terminate any Financing Document but only if and provided that there is no
commitment or obligation (whether or not conditional) of the Lender to re-advance amounts that
would be secured thereby.
Section 3.8 Canadian Attachment.
The Foreign Borrower acknowledges that (i) value has been given, (ii) it has rights in the
Collateral (other than after-acquired Collateral), (iii) it has not agreed to postpone the time of
attachment of the security interest granted herein, and (iv) it has received a copy of this
Agreement. The security interest granted herein shall not attach to (i) any consumer goods of a
Foreign Borrower, or (ii) the last day of any real property lease, or any agreement to lease, to
which a Foreign Borrower is now or becomes a party as lessee, provided that any such last day shall
be held in trust by a Foreign Borrower for the Lender and, on the exercise by the Lender of its
rights and remedies hereunder, shall be assigned by the Foreign Borrower as directed by the Lender.
Notwithstanding anything to the contrary contained herein, the Lender shall only have a security
interest in, and not a present assignment of, any Canadian trademarks forming part of the
Collateral.
Section 3.9 Inconsistent Provisions.
In the event that the provisions of any Financing Document directly conflict with any
provision of this Agreement, the provisions of this Agreement govern. Notwithstanding any other
provision contained in this Agreement, with respect to the Foreign Borrower, if a “secured
creditor” (as that term is defined under the Bankruptcy and Insolvency Act (Canada)) is determined
by a court of competent jurisdiction not to include a person to whom obligations are owed on a
joint or joint and several basis, then the obligations of the Foreign Borrower under this
Agreement, to the extent such obligations are secured, only shall be several obligations and not
joint or joint and several obligations.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.1 Representations and Warranties.
The Borrowers, for themselves and for each other, represent and warrant to the Lender, as
follows:
4.1.1 Subsidiaries.
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4.1.2 |
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Good Standing. |
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Each Borrower (a) is a duly organized, existing and in good standing under the laws of the
jurisdiction of its formation and is organized in no other jurisdiction, (b) has the entity power
to own its property and to carry on its business as now being conducted, and (c) is duly qualified
to do business and is in good standing in each jurisdiction in which the character of the
properties owned by it therein or in which the transaction of its business makes such qualification
necessary.
4.1.3 Power and Authority.
Each Borrower has full entity power and authority to execute and deliver this Agreement, and
the other Financing Documents and the Purchase Agreement Documents to which it is a party, to make
the borrowings and incur other Revolver Usage under this Agreement, and to incur and perform the
Obligations whether under this Agreement, the other Financing Documents or otherwise, all of which
have been duly authorized by all proper and necessary entity action. No consent or approval of
equityholders or any creditors of any Borrower, and no consent, approval, filing or registration
with or notice to any Governmental Authority on the part of any Borrower, is required as a
condition to the execution, delivery, validity or enforceability of this Agreement, or any of the
other Financing Documents or the performance by any Borrower of the Obligations.
4.1.4 Binding Agreements.
This Agreement and the other Financing Documents executed and delivered by the Borrowers have
been properly executed and delivered and constitute the valid and legally binding obligations of
the Borrowers and are fully enforceable against each of the Borrowers in accordance with their
respective terms, subject to bankruptcy, insolvency, reorganization, moratorium and other laws of
general application affecting the rights and remedies of creditors and secured parties, and general
principles of equity regardless of whether applied in a proceeding in equity or at law.
4.1.5 No Conflicts.
There is no provision of any Organizational Documents or other document pertaining to the
organization, power or authority of any Borrower, no provision of any existing agreement, mortgage,
indenture or contract binding on any Borrower or affecting its property, and no Laws which would
conflict with or in any way prevent the execution, delivery or carrying out of the terms of this
Agreement and/or any of the other Financing Documents, or and the execution, delivery and
performance by any Borrower of its obligations under the Financing Documents will not result in the
creation or imposition of any Lien under any other such material existing agreement, mortgage,
indenture or contract, except for Permitted Liens.
4.1.6 No Defaults, Violations.
(a) No Default or Event of Default has occurred and is continuing.
(b) To the best of Borrowers’ knowledge, none of the Borrowers nor any of their respective
Subsidiaries is in default under or with respect to any obligation under any existing mortgage,
indenture, contract or agreement binding on it or affecting its property in any respect that would
reasonably be expected to have a Material Adverse Effect..
4.1.7 Compliance with Laws.
To the best of Borrowers’ knowledge, none of the Borrowers nor any of their respective
Subsidiaries is in violation of any applicable Laws (including, without limitation, any Laws
relating to employment practices, to environmental, occupational and health standards and controls)
or order, writ, injunction, decree or demand of any court, arbitrator, or any Governmental
Authority affecting any Borrower, or any Subsidiary, or any of its properties, the violation of
which, considered in the aggregate, would reasonably be expected to have a Material Adverse Effect.
4.1.8 Margin Stock.
None of the proceeds of the Loans will be used, directly or indirectly, by any Borrower or any
Subsidiary for the purpose of purchasing or carrying, or for the purpose of reducing or retiring
any indebtedness that was originally incurred to purchase or carry, any “margin stock”
within the meaning of Regulation U (12 CFR Part 221), of the Board of Governors of the Federal
Reserve System or for any other purpose that might make the transactions contemplated in this
Agreement a “purpose credit” within the meaning of Regulation U, or cause this Agreement to
violate any other regulation of the Board of Governors of the Federal Reserve System or the
Securities Exchange Act of 1934 or the Small Business Investment Act of 1958, as amended, or any
rules or regulations promulgated under any of such statutes.
4.1.9 Investment Company Act; Margin Securities.
None of the Borrowers nor any of their respective Subsidiaries is an investment company within
the meaning of the Investment Company Act of 1940, as amended, nor is it, directly or indirectly,
controlled by or acting on behalf of any Person which is an investment company within the meaning
of said Act. None of the Borrowers nor any of their respective Subsidiaries is engaged
principally, or as one of its important activities, in the business of extending credit for the
purpose of purchasing or carrying “margin stock” within the meaning of Regulation U (12 CFR
Part 221), of the Board of Governors of the Federal Reserve System.
4.1.10 Intellectual Property.
Title to all Intellectual Property owned by each Borrower is held by the Borrower free and
clear of all Liens, adverse claims, restrictions or other encumbrances. Each Borrower owns or
possesses adequate licenses or other rights to use Intellectual Property to entitle the Borrower to
conduct its business as presently being conducted. There is no pending or, to the knowledge of any
Borrower, threatened infringement action, lawsuit, claim or complaint which asserts that the
Borrower’s operations violate or infringe the Intellectual Property of others with respect to any
apparatus or method of the Borrower or any adversely held trademarks, trade names, trademark
registrations, service names, service marks or copyrights, and the Borrower is not in any way
making use of any confidential information or trade secrets of any person, except with the consent
of such person. Each Borrower has taken reasonable steps to protect its proprietary information
(except disclosure of source codes pursuant to licensing agreements) and is the lawful owner of the
proprietary information free and clear of any material claim of any third party. As used herein,
“proprietary information” includes without limitation, (i) any computer programming
language, software, hardware, firmware or related documentation, inventions, technical and
non-technical data related thereto and (ii) other documentation, inventions and data related to
patterns, plans, methods, techniques, drawings, finances, customer lists, suppliers, products,
special pricing and cost information, designs, processes, procedures, formulas, research data owned
or used by any Borrower or marketing studies conducted by the Borrower, all of which any Borrower
considers to be commercially important and competitively sensitive and which generally has not been
disclosed to third parties. Any and all obligations to pay royalties or other charges with respect
to such properties and assets are properly reflected on the financial statements described in
Section 4.1.12 (Financial Condition).
4.1.11 Litigation.
Except as otherwise disclosed on Schedule 4.1.11 attached hereto and made a part
hereof, there are no proceedings, actions or investigations pending or, so far as any Borrower
knows, threatened before or by any court, arbitrator or any Governmental Authority that, in any one
case or in the aggregate, if determined adversely to the interests of any Borrower or any
Subsidiary, would reasonably be expected to have a Material Adverse Effect.
4.1.12 Financial Condition.
The consolidated financial statements of the Borrowers dated September 30, 2011, are complete
and correct and fairly present the financial position of each of the Borrowers and its Subsidiaries
and the results of their operations and transactions in their surplus accounts as of the date and
for the period referred to and have been prepared in accordance with GAAP applied on a consistent
basis throughout the period involved. There are no liabilities, direct or indirect, fixed or
contingent, of any Borrower or any Subsidiary as of the date of such financial statements that are
not reflected therein or in the notes thereto. There has been no material adverse change in the
financial condition or operations of any Borrower or any Subsidiary since the date of such
financial statements and to the Borrowers’ knowledge no such adverse change is pending or
threatened. None of the Borrowers nor any Subsidiary has guaranteed the obligations of, or made
any investment in or advances to, any Person, except as disclosed in such financial statements.
4.1.13 Full Disclosure.
The financial statements referred to in Section 4.1.12 (Financial Condition) of this
Agreement, the Financing Documents (including, without limitation, this Agreement), and the
statements, reports or certificates furnished by any Borrower in connection with the Financing
Documents (a) do not contain any untrue statement of a material fact and (b) when taken in their
entirety, do not omit any material fact necessary to make the statements contained therein not
misleading. There is no fact known to any Borrower which such Borrower has not disclosed to the
Lender in writing prior to the date of this Agreement with respect to the transactions contemplated
by the Financing Documents which would reasonably be expected to have a Material Adverse Effect.
4.1.14 Indebtedness for Borrowed Money.
Except for the Obligations and except as set forth in Schedule 4.1.14 attached hereto
and made a part hereof, the Borrowers have no Indebtedness for Borrowed Money. The Lender has
received photocopies of all promissory notes evidencing any Indebtedness for Borrowed Money set
forth in Schedule 4.1.14, together with any and all subordination agreements, other
agreements, documents, or instruments securing, evidencing, guarantying or otherwise executed and
delivered in connection therewith.
4.1.15 Subordinated Debt.
None of the Subordinated Debt Documents has been amended, supplemented, restated or otherwise
modified except as otherwise disclosed to the Lender in writing on or before the effective date of
any such amendment, supplement, restatement or other modification. In addition, there does not
exist any default or any event that upon notice or lapse of time or both would constitute a default
under the terms of any of the Subordinated Debt Documents.
4.1.16 Taxes.
Each of the Borrowers and its Subsidiaries has filed all returns, reports and forms for Taxes
which, to the knowledge of the Borrowers, are required to be filed, and has paid all Taxes as shown
on such returns or on any assessment received by it, to the extent that such Taxes have become due,
unless and to the extent only that such Taxes, assessments and governmental charges are currently
contested in good faith and by appropriate proceedings by a Borrower, such Taxes are not the
subject of any Liens other than Permitted Liens, and adequate reserves therefor have been
established as required under GAAP. All tax liabilities of the Borrowers were as of the date of
audited financial statements referred to in Section 4.1.12 (Financial Condition), and are now,
adequately provided for on the books of the Borrowers and their Subsidiaries, as appropriate. No
tax liability has been asserted by the Internal Revenue Service or any state or local authority
against any Borrower for Taxes in excess of those already paid.
4.1.17 ERISA.
With respect to any Plan that is maintained or contributed to by any Borrower and/or by any
ERISA Affiliate or as to which any of the Borrowers retains material liability: (a) no
“accumulated funding deficiency” as defined in Code §412 or ERISA §302 has occurred,
whether or not that accumulated funding deficiency has been waived; (b) no Reportable Event has
occurred other than events for which reporting has been waived or that are unlikely to result in
material liability for any of the Borrowers; (c) no termination of any plan subject to Title IV of
ERISA has occurred; (d) neither any Borrower nor any ERISA Affiliate has incurred a “complete
withdrawal” within the meaning of ERISA §4203 from any Multi-employer Plan that is likely to
result in material liability for one or more of the Borrowers; (e) neither any Borrower nor any
ERISA Affiliate has incurred a “partial withdrawal” within the meaning of ERISA §4205 with
respect to any Multi-employer Plan that is likely to result in material liability for one or more
of the Borrowers; (f) no Multi-employer Plan to which any Borrower or any ERISA Affiliate has an
obligation to contribute is to the knowledge of the Borrowers, in “reorganization” within
the meaning of ERISA §4241 nor has notice been received by any Borrower or any ERISA Affiliate that
such a Multi-employer Plan will be placed in “reorganization.”
4.1.18 Title to Properties.
The Borrowers have good and marketable title to all of their respective properties, including,
without limitation, the Collateral and the properties and assets reflected in the balance sheets
described in Section 4.1.12 (Financial Condition). The Borrowers have legal, enforceable and
uncontested rights to use freely such property and assets. All of such properties, including,
without limitation, the Collateral that were purchased, were purchased for fair consideration and
reasonably equivalent value in the ordinary course of business of both the seller and the Borrowers
and not, by way of example only, as part of a bulk sale.
4.1.19 Employee Relations.
Except as disclosed on Schedule 4.1.19 attached hereto and made a part hereof, (a) no
Borrower nor any Subsidiary thereof nor any of the Borrower’s or Subsidiary’s employees is subject
to any collective bargaining agreement, (b) no petition for certification or union election is
pending with respect to the employees of any Borrower or any Subsidiary and no union or collective
bargaining unit has sought such certification or recognition with respect to the employees of a
Borrower, and (c) there are no strikes, slowdowns, work stoppages or controversies pending or, to
the best knowledge of the Borrowers after due inquiry, threatened between any Borrower and its
employees. Hours worked and payments made to the employees of any one or more of the Borrowers
have not been in violation of the Fair Labor Standards Act or any other applicable law dealing with
such matters. All payments due from any one or more of the Borrowers or for which any claim may be
made against a Borrower, on account of wages and employee and retiree health and welfare insurance
and other benefits have been paid or accrued as a liability on its books. The consummation of the
transactions contemplated by the Financing Agreement or any of the other Financing Documents, will
not give rise to a right of termination or right of renegotiation on the part of any union under
any collective bargaining agreement to which any Borrower is a party or by which it is bound.
4.1.20 OFAC Matters.
None of any Borrower, any of its Subsidiaries, the Guarantors, nor any Affiliates of the
foregoing is (i) is a Sanctioned Person or (ii) does business in a Sanctioned Country or with a
Sanctioned Person in violation of the economic sanctions of the United States administered by OFAC.
The proceeds of any Loan will not be used to fund any operation in, finance any investments or
activities in or make any payments to, a Sanctioned Person or a Sanctioned Country. None of any
Borrower, any of its Subsidiaries, the Guarantors, nor any Affiliates of the foregoing is a
Prohibited Person. None of any Borrower, any of their Subsidiaries, the Guarantors, nor any of
their Affiliates, to their knowledge, has engaged directly or indirectly in any transaction that
evades or avoids, or has the purpose of evading or avoiding, or violates in any material respect
the requirements or prohibitions set forth in the Anti-Terrorism Order or the PATRIOT Act. Neither
the making of the Loans hereunder or the use of proceeds thereof will violate the Trading with the
Enemy Act, as amended, or any of the foreign assets control regulations of the United States
Treasury Department or any enabling legislation or executive order relating thereto. Neither any
Borrower nor any Guarantor engages in any dealings or transactions with a Person described or
designated in the Specially Designation Nationals and Blocked Persons List of the Office of Foreign
Assets Control or in Section 1 of the Anti-Terrorism Order in violation of any Law. Each Borrower
is in compliance, in all material respects, with the PATRIOT Act.
4.1.21 Perfection and Priority of Collateral.
The Lender has, or upon execution and recording of this Agreement and the Security Documents
will have, and will continue to have as security for the Obligations, a valid and perfected Lien on
and security interest in all Collateral, free of all other Liens, claims and rights of third
parties whatsoever except Permitted Liens, including, without limitation, those described on
Schedule 4.1.20 attached hereto and made a part hereof.
4.1.22 Places of Business and Location of Collateral.
The proper and only places to file financing statements with respect to the Collateral within
the meaning of the Uniform Commercial Code are the filing offices for the jurisdiction in which
each of the Borrowers is organized and the local real property filing office for any location at
which any the Borrower has fixtures.
4.1.23 Business Information.
In the five (5) years preceding the date hereof, no Borrower has changed its name, state of
organization, identity or organizational structure, has conducted business under any name other
than its current name, and has conducted its business in any jurisdiction other than those
disclosed to the Lender.
4.1.24 Equipment.
All Equipment is personalty and is not and will not be affixed to real estate in such manner
as to become a fixture or part of such real estate. No equipment is held by any Borrower on a sale
on approval basis.
4.1.25 [Intentionally Omitted].
4.1.26 Accounts.
With respect to all Accounts and to the best of the Borrowers’ knowledge (a) they are genuine,
and in all respects what they purport to be, and are not evidenced by a judgment, an Instrument, or
Chattel Paper (unless such judgment has been assigned and such Instrument or Chattel Paper has been
endorsed and delivered to the Lender); (b) they represent bona fide transactions completed in
accordance with the terms and provisions contained in the invoices, purchase orders and other
contracts relating thereto, and the underlying transaction therefor is in accordance with all
applicable Laws; (c) the amounts shown on the respective Borrower’s books and records, with respect
thereto are actually and absolutely owing to that Borrower and are not contingent or subject to
reduction for any reason other than regular discounts, credits or adjustments allowed by that
Borrower in the ordinary course of its business; (d) no payments have been or shall be made thereon
except payments turned over to the Lender by the Borrowers; (e) all Account Debtors thereon have
the capacity to contract; and (f) the goods sold, leased or transferred or the services furnished
giving rise thereto are not subject to any Liens except the security interest granted to the Lender
by this Agreement and Permitted Liens.
4.1.27 Compliance with Eligibility Standards.
Each Account included in the calculation of the Borrowing Base does and will at all times meet
and comply with all of the standards for Eligible Receivables. With respect to those Accounts that
the Lender has deemed Eligible Receivables (a) there are no facts, events or occurrences that in
any way impair the validity, collectibility or enforceability thereof or tend to reduce the amount
payable thereunder; and (b) there are no proceedings or actions known to any Borrower which are
threatened or pending against any Account Debtor that might result in any material adverse change
in the Borrowing Base.
Section 4.2 Survival; Updates of Representations and Warranties.
All representations and warranties contained in or made under or in connection with this
Agreement and the other Financing Documents shall survive the Closing Date, the making of any
advance under the Loans and extension of credit made hereunder, and the incurring of any other
Obligations and shall be deemed to have been made at the time of each request for, and again at the
time of the making of, each advance under the Loans or other extension of credit made hereunder,
except that the representations and warranties that relate to the financial statements which are
referred to in Section 4.1.12 (Financial Condition), shall also be deemed to cover financial
statements furnished from time to time to the Lender pursuant to Section 6.1.1 (Financial
Statements).
ARTICLE V
CONDITIONS PRECEDENT
Section 5.1 Conditions to the Initial Advance.
The initial advance under the Loans and other Revolver Usage is subject to the fulfillment on
or before the Closing Date of the following conditions precedent in a manner satisfactory in form
and substance to the Lender and its counsel:
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Organizational Documents — Borrower. |
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The Lender shall have received: |
(a) a certificate of good standing certified by the Secretary of State, or other appropriate
Governmental Authority, of the state of organization of the Borrower;
(b) a certified copy from the appropriate Governmental Authority under which the Borrower is
organized, of the Borrower’s recorded Organizational Documents and all recorded amendments thereto;
(c) a certificate of qualification to do business for the Borrower certified by the Secretary
of State or other Governmental Authority of each state in which the Borrower conducts business;
(d) a certificate dated as of the Closing Date from the Secretary of the Borrower, or other
representative of the Borrower acceptable to the Lender covering:
(i) true and complete copies of the Borrower’s Organizational
Documents;
(ii) true and complete copies of the resolutions and proceedings of its
Governing Body authorizing (A) the execution, delivery and performance of
the Financing Documents to which it is a party, (B) the borrowings
hereunder, and (C) the granting of the Liens contemplated by this Agreement
and the Financing Documents to which the Borrower is a party; and
(iii) the incumbency, authority and signatures of the officers or other
representatives of the Borrower authorized to sign this Agreement and the
other Financing Documents to which the Borrower is a party.
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The Lender shall have received: |
(a) a certificate of good standing certified by the Secretary of State, or other appropriate
Governmental Authority, of the state of organization of each U.S. Guarantor;
(b) a certified copy from the appropriate Governmental Authority under which each Corporate
Guarantor is organized, of such U.S. Guarantor’s recorded Organizational Documents and all recorded
amendments thereto;
(c) a certificate of qualification to do business for the U.S. Guarantor certified by the
Secretary of State or other Governmental Authority of each state in which the U.S. Guarantor
conducts business;
(d) a certificate dated as of the Closing Date from the Secretary of each U.S. Guarantor, or
other representative of such U.S. Guarantor acceptable to the Lender, covering:
(i) true and complete copies of such U.S. Guarantor’s Organizational
Documents;
(ii) true and complete copies of the resolutions and proceedings of its
Governing Body authorizing (A) the execution, delivery and performance of
the Financing Documents to which it is a party and (B) the granting of the
Liens contemplated by this Agreement and the Financing Documents to which
such U.S. Guarantor is a party; and
(iii) the incumbency, authority and signatures of the officers or other
representatives of such U.S. Guarantor authorized to sign the Financing
Documents to which such U.S. Guarantor is a party.
5.1.3 Opinion of Borrowers’ and U.S. Guarantors’ Counsel.
The Lender shall have received the favorable opinion of counsel for the Borrowers and the U.S.
Guarantors addressed to the Lender in form satisfactory to the Lender, which shall cover, among
other things, an opinion from local counsel to the Foreign Borrower relating to due authorization
and execution of the Financing Documents to which it is a party, the enforceability of the
Financing Documents to which it is a party, and the perfection of the Lender’s security interests
with respect to the Foreign Borrower under applicable Canadian law.
5.1.4 Consents, Licenses, Approvals, Etc.
The Lender shall have received copies of all consents, licenses and approvals, required in
connection with the execution, delivery, performance, validity and enforceability of the Financing
Documents, and such consents, licenses and approvals shall be in full force and effect.
5.1.5 Notes.
The Lender shall have received the Revolving Credit Note, conforming to the requirements
hereof and executed by a Responsible Officer of each Borrower and attested by a duly authorized
representative of each Borrower.
5.1.6 Guaranties.
Each U.S. Guarantor shall have executed and delivered the Guaranties to be executed by it, and
shall have delivered original Chattel Paper, Instruments, Investment Property, and related
Collateral and all opinions, title insurance, and other documents contemplated by such Guaranties.
5.1.7 Financing Documents and Collateral.
Each Borrower shall have executed and delivered the Financing Documents to be executed by it,
and shall have delivered original Chattel Paper, Instruments, Investment Property, and related
Collateral and all opinions, title insurance, and other documents contemplated by Article III (The
Collateral).
5.1.8 Other Financing Documents.
In addition to the Financing Documents to be delivered by the Borrowers, the Lender shall have
received the Financing Documents duly executed and delivered by Persons other than the Borrowers.
5.1.9 Other Documents, Etc.
The Lender shall have received such other certificates, opinions, documents and instruments
confirmatory of or otherwise relating to the transactions contemplated hereby as may have been
reasonably requested by the Lender.
5.1.10 Payment of Fees.
The Lender shall have received payment of any Fees due on or before the Closing Date.
5.1.11 Recordings and Filings.
Each Borrower shall have: (a) executed and delivered all Financing Documents (including,
without limitation, UCC-1 and UCC-3 statements) required to be filed, registered or recorded in
order to create, in favor of the Lender, a perfected Lien in the Collateral (subject only to the
Permitted Liens) in form and in sufficient number for filing, registration, and recording in each
office in each jurisdiction in which such filings, registrations and recordations are required, and
(b) delivered such evidence as the Lender may deem satisfactory that all necessary filing fees and
all recording and other similar fees, and all Taxes and other expenses related to such filings,
registrations and recordings will be or have been paid in full.
5.1.12 Insurance Certificate.
The Lender shall have received an insurance certificate in accordance with the provisions of
Section 6.1.8 (Insurance) and Section 6.1.21 (Insurance With Respect to Equipment and Inventory).
5.1.13 Landlord’s Waiver.
The Lender shall have received a landlord’s waiver from the landlord at Borrowers’ Owings
Mills, Maryland premises, which landlord’s waiver must be reasonably acceptable to the Lender and
its counsel in their sole and absolute discretion.
5.1.14 [Intentionally Omitted].
5.1.15 Subordination Agreement.
The Lender shall have received the fully executed Subordination Agreement in form and content
acceptable to the Lender. The Lender shall have received and approved copies of the fully executed
Subordinated Debt Documents, all of which must be in form and content acceptable to the Lender.
Section 5.2 Conditions to all Extensions of Credit.
The making of all advances under the Loans and other Revolver Usage is subject to the
fulfillment of the following conditions precedent in a manner satisfactory in form and substance to
the Lender and its counsel:
5.2.1 Compliance.
Each Borrower shall have complied and shall then be in compliance with all terms, covenants,
conditions and provisions of this Agreement and the other Financing Documents that are binding upon
it.
5.2.2 Borrowing Base.
The Borrowers shall have furnished all Borrowing Base Reports required by Section 2.1.4
(Borrowing Base Report), there shall exist no Borrowing Base Deficiency and the Borrower shall meet
the other conditions and requirements of Section 2.1 (The Revolving Credit Facility) for each
Advance and Revolver Usage, and as evidence thereof, each Borrower shall have furnished to the
Lender such reports, schedules, certificates, records and other papers as may be requested by the
Lender, and the Borrowers shall be in compliance with the provisions of this Agreement both
immediately before and immediately after the making of the Advance or other Revolver Usage
requested.
5.2.3 Default.
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5.2.4 |
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Representations and Warranties. |
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The representations and warranties of each of the Borrowers contained among the provisions of
this Agreement shall be true and with the same effect as though such representations and warranties
had been made at the time of the making of, and of the request for, each advance under the Loans or
other Revolver Usage, except that the representations and warranties which relate to financial
statements which are referred to in Section 4.1.12 (Financial Condition), shall also be deemed to
cover financial statements furnished from time to time to the Lender pursuant to Section 6.1.1
(Financial Statements).
5.2.5 Adverse Change.
No adverse change shall have occurred in the condition (financial or otherwise), operations or
business of any Borrower that would, in the good faith judgment of the Lender, materially impair
the ability of that Borrower to pay or perform any of the Obligations.
5.2.6 Legal Matters.
All legal documents incident to each advance under the Loans or other Revolver Usage shall be
reasonably satisfactory to counsel for the Lender.
ARTICLE VI
COVENANTS OF THE BORROWERS
Section 6.1 Affirmative Covenants.
So long as any of the Obligations or any Commitments shall be outstanding hereunder, the
Borrowers agree jointly and severally with the Lender as follows:
6.1.1 Financial Statements.
The Borrowers shall furnish to the Lender:
(a) Annual Statements and Certificates. The Borrowers shall furnish to the Lender as
soon as available, but in no event more than one hundred twenty (120) days after the close of the
Borrowers’ fiscal years, (i) a copy of the annual financial statement in reasonable detail
satisfactory to the Lender relating to the Borrowers and their Subsidiaries, prepared in accordance
with GAAP and examined and certified by independent certified public accountants reasonably
satisfactory to the Lender, which financial statement shall include a consolidated and
consolidating balance sheet of the Borrowers and their Subsidiaries as of the end of such fiscal
year and consolidated and consolidating statements of income, cash flows and changes in
shareholders equity of the Borrowers and their Subsidiaries for such fiscal year, and (ii) a
Compliance Certificate, in substantially the form attached to this Agreement as EXHIBIT B,
as may be amended by the Lender from time to time, signed by the Borrowers’ chief financial
officer, containing a detailed computation of each financial covenant in this Agreement that is
applicable for the period reported, a certification that the financial statements fairly present in
all material respects the financial condition and results of operations of the Borrowers on a
consolidated and consolidating basis in accordance with GAAP consistently applied, and a statement
whether any event has occurred which constitutes a Default or an Event of Default hereunder, and,
if so, stating the facts with respect thereto, and (iii) a management letter in the form prepared
by the Borrowers’ independent certified public accountants.
(b) Annual Opinion of Accountant. The Borrowers shall furnish to the Lender as soon
as available, but in no event more than one hundred twenty (120) days after the close of the
Borrowers’ fiscal years, an opinion of the accountant who examined and certified the annual
financial statement relating to the Borrowers and their Subsidiaries (i) stating whether anything
in such accountant’s examination has revealed the occurrence of a Default or an Event of Default
hereunder, and, if so, stating the facts with respect thereto and (ii) acknowledging that the
Lender will rely on the statement and that the Borrowers know of the intended reliance by the
Lender.
(c) Quarterly Statements and Certificates. The Borrowers shall furnish to the Lender
as soon as available, but in no event more than forty-five (45) days after the close of the
Borrowers’ fiscal quarters, consolidated and consolidating balance sheets of the Borrowers and
their Subsidiaries as of the close of such period, consolidated and consolidating income, cash
flows and changes in shareholders equity statements for such period, projected cash flow on a month
to month basis and projected income statements, each prepared by the chief financial officer of the
Borrowers in accordance with GAAP consistently applied, and a Compliance Certificate, in
substantially the form attached to this Agreement as EXHIBIT B, signed by the Borrowers
chief financial officer, containing a detailed computation of each financial covenant in this
Agreement that is applicable for the period reported, a certification that the financial statements
fairly present in all material respects the financial condition and results of operations of the
Borrowers on a consolidated and consolidating basis in accordance with GAAP consistently applied,
subject to normal year-end audit adjustments and the absence of footnotes, and that the projections
represent management’s best estimate of the future operations of the Borrowers and are based on
reasonable assumptions, and a statement whether any event has occurred which constitutes a Default
or an Event of Default hereunder, and, if so, stating the facts with respect thereto.
(d) Monthly reports. The Borrowers shall furnish to the Lender within twenty (20)
days after the end of each month, a report containing the following information:
(i) a detailed aging schedule of all Receivables by Account Debtor, in
such detail, and accompanied by such supporting information, as the Lender
may from time to time reasonably request;
(ii) a detailed aging of all accounts payable by supplier, in such
detail, and accompanied by such supporting information, as the Lender may
from time to time reasonably request; and
(iii) such other information as the Lender may reasonably request.
(e) Additional Reports and Information. The Borrowers shall furnish to the Lender
promptly, such additional information, reports or statements as the Lender may from time to time
reasonably request.
6.1.2 Reports to SEC and to Stockholders.
The Borrowers will furnish to the Lender, promptly upon the filing or making thereof, at least
one (1) copy of all financial statements, reports, notices and proxy statements sent by any
Borrower to its stockholders, and of all regular and other reports filed by any Borrower with any
securities exchange or with the Securities and Exchange Commission.
6.1.3 Recordkeeping, Rights of Inspection, Field Examination, Etc.
(a) Each of the Borrowers shall, and shall cause each of its Subsidiaries to, maintain (i) a
standard system of accounting in accordance with GAAP, and (ii) proper books of record and account
in which full, true and correct entries are made of all dealings and transactions in relation to
its properties, business and activities.
(b) Each of the Borrowers shall, and shall cause each of its Subsidiaries to, permit
authorized representatives of the Lender to visit and inspect the properties of the Borrowers and
their Subsidiaries, to review, audit, check and inspect the Collateral at any time with or without
notice, to review, audit, check and inspect the Borrowers’ other books of record at any time with
or without notice and to make abstracts and photocopies thereof, and to discuss the affairs,
finances and accounts of the Borrowers and their Subsidiaries, with the officers, directors,
employees and other representatives of the Borrowers and their Subsidiaries and their respective
accountants, all at such times during normal business hours and other reasonable times and as often
as the Lender may reasonably request.
(c) Upon a Default hereunder, each of the Borrowers hereby irrevocably authorizes and directs
all accountants and auditors employed by any of the Borrowers and/or any of their Subsidiaries at
any time prior to the repayment in full of the Obligations to exhibit and deliver to the Lender
copies of any and all of the financial statements, trial balances, management letters, or other
accounting records of any nature of any or all of the Borrowers and/or any or all of their
respective Subsidiaries in the accountant’s or auditor’s possession, and to disclose to the Lender
any information they may have concerning the financial status and business operations of any or all
of the Borrowers and/or any or all of their respective Subsidiaries. Further, each of the
Borrowers hereby authorizes all Governmental Authorities to furnish to the Lender copies of reports
or examinations relating to any and all of the Borrowers and/or any or all Subsidiaries, whether
made by the Borrowers or otherwise.
6.1.4 Entity Existence.
Each of the Borrowers shall maintain, and cause each of its Subsidiaries to maintain, its
entity existence in good standing in the jurisdiction in which it is organized and in each other
jurisdiction where it is required to register or qualify to do business if the failure to do so in
such other jurisdiction would reasonably be expected to have a Material Adverse Effect.
6.1.5 Compliance with Laws.
Each of the Borrowers shall comply, and cause each of its Subsidiaries to comply, with all
applicable Laws and observe the valid requirements of Governmental Authorities, the noncompliance
with or the nonobservance of which would reasonably be expected to have a Material Adverse Effect.
Without limiting the generality of the foregoing, the Borrower and its Subsidiaries shall be in
compliance in all material respects with all orders, rules, regulations issued by, and
recommendations of, the U.S. Department of the Treasury and OFAC pursuant to IEEPA, the PATRIOT
Act, other legal requirements relating to money laundering or terrorism and any executive orders
related thereto, which at the time apply to them.
6.1.6 Preservation of Properties.
Each of the Borrowers will, and will cause each of its Subsidiaries to, at all times (a)
maintain, preserve, protect and keep its properties, whether owned or leased, in good operating
condition, working order and repair (ordinary wear and tear excepted), and from time to time will
make all proper repairs, maintenance, replacements, additions and improvements thereto needed to
maintain such properties in good operating condition, working order and repair, and (b) do or cause
to be done all things necessary to preserve and to keep in full force and effect its material
franchises, leases of real and personal property, trade names, patents, trademarks and permits that
are necessary for the orderly continuance of its business.
6.1.7 Line of Business.
Each of the Borrowers will continue to engage substantially only in the business of providing
technology solutions and professional services to other companies.
6.1.8 Insurance.
Each of the Borrowers will, and will cause each of its Subsidiaries to, at all times maintain,
with financially sound and reputable insurers having a rating of at least A-VII or better by Best
Rating Guide or other comparable rating chosen by the Lender, such insurance as is required by
applicable Laws and such other insurance, in such amounts, of such types and against such risks,
hazards, liabilities, casualties and contingencies as are usually insured against in the same
geographic areas by business entities engaged in the same or similar business. Without limiting
the generality of the foregoing, each of the Borrowers will, and will cause each of its
Subsidiaries to, keep adequately insured all of its property against loss or damage resulting from
fire or other risks insured against by extended coverage and maintain public liability insurance
against claims for personal injury, death or property damage occurring upon, in or about any
properties occupied or controlled by it, or arising in any manner out of the businesses carried on
by it, all in such amounts not less than the Lender shall reasonably determine from time to time.
Each of the Borrowers shall deliver to the Lender on the Closing Date (and thereafter on each date
there is a material change in the insurance coverage) a certificate of a Responsible Officer of the
Borrowers containing a detailed list of the insurance then in effect and stating the names of the
insurance companies, the types, the amounts and rates of the insurance, dates of the expiration
thereof and the properties and risks covered thereby. Within thirty (30) days after notice in
writing from the Lender, the Borrowers will obtain such additional insurance as the Lender may
reasonably request.
6.1.9 Taxes.
Except to the extent that the validity or amount thereof is being contested in good faith and
by appropriate proceedings, each of the Borrowers will, and will cause each of its Subsidiaries, to
pay and discharge all Taxes prior to the date when any interest or penalty would accrue for the
nonpayment thereof. Each of the Borrowers shall furnish to the Lender at such times as the Lender
may require proof satisfactory to the Lender of the making of payments or deposits required by
applicable Laws including, without limitation, payments or deposits with respect to amounts
withheld by any of the Borrowers from wages and salaries of employees and amounts contributed by
any of the Borrowers on account of federal and other income or wage taxes and amounts due under the
Federal Insurance Contributions Act, as amended.
6.1.10 ERISA.
Each Borrower will, and will cause each of its ERISA Affiliates to, comply with the funding
requirements of ERISA with respect to Plans for its respective employees. No Borrower will permit
with respect to any Plan (a) any prohibited transaction or transactions under ERISA or the Internal
Revenue Code, that results, or may result, in any material liability of the Borrower, or (b) any
Reportable Event if, upon termination of the plan or plans with respect to which one or more such
Reportable Events shall have occurred, there is or would be any material liability of the Borrower
to the PBGC. Upon the Lender’s request, each Borrower will deliver to the Lender a copy of the
most recent actuarial report, financial statements and annual report completed with respect to any
Plan.
6.1.11 Notification of Events of Default and Adverse Developments.
Each of the Borrowers shall promptly notify the Lender upon obtaining knowledge of the
occurrence of:
(a) any Event of Default;
(b) any Default;
(c) any litigation instituted or threatened against any of the Borrowers or any of their
Subsidiaries and of the entry of any judgment or Lien (other than any Permitted Liens) against any
of the assets or properties of any of the Borrowers or any Subsidiary where the claims against any
Borrower or any Subsidiary exceed Three Hundred Thousand Dollars ($300,000) and are not covered by
insurance;
(d) any event, development or circumstance whereby the financial statements furnished
hereunder fail in any material respect to present fairly, in accordance with GAAP, the financial
condition and operational results of any of the Borrowers or any of their respective Subsidiaries;
(e) any judicial, administrative or arbitral proceeding pending against any of the Borrowers
or any of their respective Subsidiaries and any judicial or administrative proceeding known by any
of the Borrowers to be threatened against any Borrower or any Subsidiary that, if adversely
decided, would reasonably be expected to have a Material Adverse Effect;
(f) the receipt by any of the Borrowers or any Subsidiary of any notice, claim or demand from
any Governmental Authority that alleges that any of the Borrowers or any Subsidiary is in violation
of any of the terms of, or has failed to comply with any applicable Laws regulating its operation
and business, including, but not limited to, the Occupational Safety and Health Act and the
Environmental Protection Act; and
(g) any other development in the business or affairs of any of the Borrowers or any of their
respective Subsidiaries which would reasonably be expected to have a Material Adverse Effect;
in each case describing in detail satisfactory to the Lender the nature thereof and the action the
Borrowers propose to take with respect thereto.
6.1.12 Disclosure of Significant Transactions.
Each of the Borrowers shall deliver to the Lender a written notice describing in detail each
transaction by it involving the purchase, sale, lease, or other acquisition or loss or casualty to
or disposition of an interest in Fixed or Capital Assets which exceeds Three Hundred Thousand
Dollars ($300,000), said notices to be delivered to the Lender within thirty (30) days of the
occurrence of each such transaction.
6.1.13 Financial Covenants.
(a) Financial Covenant Definitions. As used in this Agreement, the term:
“EBITDA” means as to the Borrowers for any period of determination thereof, the
sum of (a) the net profit (or loss), plus (b) interest expense and income tax provisions for
such period, plus (c) depreciation and amortization of assets for such period, plus (d)
one-time non-cash expenses (including, without limitation, any expenses relating to FAS 123
transactions), less (e) one-time non-cash gains, each item in clauses (a) through (e)
calculated pursuant to GAAP for such period.
“Fixed Charges” means for any period of determination, the scheduled or
required payments (including, without limitation, principal and interest) on all
Indebtedness for Borrowed Money of the Borrowers and their Subsidiaries, plus unfunded
Capital Expenditures of the Borrowers and their Subsidiaries, plus cash Taxes paid, plus
dividends declared or paid by the Borrowers and their Subsidiaries.
“Fixed Charge Coverage Ratio” means for the period of any determination thereof
the ratio of (a) EBITDA to (b) Fixed Charges.
“Funded Debt” means at any date, the aggregate of all Indebtedness for Borrowed
Money of the Borrowers and their Subsidiaries, whether secured or unsecured.
(b) Funded Debt to EBITDA Ratio. The Borrowers will maintain, tested as of the end of each of
the Borrowers’ fiscal quarters for the twelve-month period ending on the test date, a ratio of
Funded Debt to EBITDA that is less than or equal to 2.25 to 1.0.
(c) Fixed Charge Coverage Ratio. The Borrowers will maintain, tested as of the last day of
each of the Borrowers’ fiscal quarters for the twelve-month period ending on that date, a Fixed
Charge Coverage Ratio of greater than or equal to 1.50 to 1.0.
6.1.14 Collection of Receivables.
Until such time that the Lender shall notify the Borrowers of the revocation of such
privilege, the Borrowers and their Subsidiaries shall at their own expense have the privilege for
the account of, and in trust for, the Lender of collecting their Receivables and receiving in
respect thereto all Items of Payment and shall otherwise completely service all of the Receivables
including (a) the billing, posting and maintaining of complete records applicable thereto, (b) the
taking of such action with respect to the Receivables as the Lender may request or in the absence
of such request, as each of the Borrowers and each of the Subsidiaries may deem advisable; and (c)
the granting, in the ordinary course of business, to any Account Debtor, any rebate, refund or
adjustment to which the Account Debtor may be lawfully entitled, and may accept, in connection
therewith, the return of goods, the sale or lease of which shall have given rise to a Receivable
and may take such other actions relating to the settling of any Account Debtor’s claim as may be
commercially reasonable. The Lender may, at its option, at any time or from time to time after and
during the continuance of an Event of Default hereunder, revoke the collection privilege given in
this Agreement to any one or more of the Borrowers and each of the Subsidiaries by either giving
notice of its assignment of, and Lien on the Collateral to the Account Debtors or giving notice of
such revocation to the Borrowers. The Lender shall not have any duty to, and the Borrowers hereby
release the Lender from all claims of loss or damage caused by the delay or failure to collect or
enforce any of the Receivables or to preserve any rights against any other party with an interest
in the Collateral. The Lender shall be entitled at any time and from time to time to confirm and
verify Receivables.
6.1.15 Assignments of Receivables.
Each Borrower will promptly, upon request, execute and deliver to the Lender written
assignments, in form and content acceptable to the Lender, of specific Receivables or groups of
Receivables; provided, however, the Lien and/or security interest granted to the Lender under this
Agreement shall not be limited in any way to or by the inclusion or exclusion of Receivables within
such assignments. Receivables so assigned shall secure payment of the Obligations and are not sold
to the Lender whether or not any assignment thereof, that is separate from this Agreement, is in
form absolute. The Borrowers agree that neither any assignment to the Lender nor any other
provision contained in this Agreement or any of the other Financing Documents shall impose on the
Lender any obligation or liability of any of the Borrowers with respect to that which is assigned
and the Borrowers hereby agree jointly and severally to indemnify the Lender and hold the Lender
harmless from any and all claims, actions, suits, losses, damages, costs, expenses, fees,
obligations and liabilities that may be incurred by or imposed upon the Lender by virtue of the
assignment of and Lien on any Borrower’s rights, title and interest in, to, and under the
Collateral. Each of the Borrowers acknowledges and agrees that this indemnification shall survive
the termination of this Agreement and the Commitments and the payment and performance of all of the
other Obligations.
6.1.16 Government Accounts.
The Borrowers will immediately notify the Lender if any of the Receivables arise out of
contracts with the United States or with any other Governmental Authority. If the Lender so
requires, the applicable Borrowers shall execute any documents and take any steps required by the
Lender in order that all moneys due and to become due under such contracts shall be assigned to the
Lender and notice thereof given to the Governmental Authority under the Federal Assignment of
Claims Act or any other applicable Laws.
6.1.17 Notices Related to Intellectual Property.
The Borrower will immediately notify the Lender in writing of: (i) any material changes in
and to the ownership of, or rights to use, any material Intellectual Property owned or licensed by
the Borrower; (ii) any trademark, service mark, trade dress, domain names, or copyright application
or registration, or any patent application or letters patent of the Borrower or a material change
in status of any of the foregoing; (iii) the receipt of any knowledge regarding any infringement or
misappropriation of any material Intellectual Property owned or licensed by the Borrower by any
Person; (iv) the receipt of any written claim, demand or threat, or the institution of any
proceeding, relating to any material Intellectual Property owned or licensed by the Borrower; or
(v) any other event that could reasonably be expected to materially and adversely affect any
material Intellectual Property owned or licensed by the Borrower.
6.1.18 Notice of Returned Goods, etc.
The Borrowers will promptly notify, and will cause the Subsidiaries to promptly notify, the
Lender of the return, rejection or repossession of any goods sold or delivered in respect of any
Receivables, and of any claims made in regard thereto to the extent that the aggregate purchase
price of any such goods in any given calendar month exceeds in the aggregate One Hundred Thousand
Dollars ($100,000.00) for such month.
6.1.19 Notice of Commercial Tort Claims.
Each Borrower shall promptly notify the Lender in writing in the event the Borrower shall
have, receive or otherwise obtain a commercial tort claim, as plaintiff or otherwise in its favor
against any third party and, without implying any limitation on the provisions of Section 6.1.24
(Further Assurances; Defense of Title), confirm that the Lender is authorized to file additional,
and to amend, financing statements and do such other acts or things deemed necessary or desirable
by the Lender to grant the Lender a first priority, perfected security interest in any such
commercial tort claim, including, without limitation executing an assignment of such commercial
tort claim.
6.1.20 [Intentionally Omitted].
6.1.21 Insurance With Respect to Equipment.
The Borrowers will (a) maintain and cause each of their Subsidiaries to maintain hazard
insurance with fire and extended coverage and naming the Lender as an additional insured with loss
payable to the Lender as its respective interest may appear on the Equipment and Inventory in an
amount at least equal to the lesser amount of the outstanding principal amount of the Obligations
or the fair market value of the Equipment and Inventory (but in any event sufficient to avoid any
co-insurance obligations) and with a specific endorsement to each such insurance policy pursuant to
which the insurer agrees to give the Lender at least thirty (30) days written notice before any
alteration or cancellation of such insurance policy and that no act or default of any of the
Borrowers shall affect the right of the Lender to recover under such policy in the event of loss or
damage; (b) file, and cause each of their Subsidiaries to file, with the Lender, upon its request,
a detailed list of the insurance then in effect and stating the names of the insurance companies,
the amounts and rates of the insurance, dates of the expiration thereof and the properties and
risks covered thereby; and (c) within thirty (30) days after notice in writing from the Lender,
obtain, and cause each of their Subsidiaries to obtain, such additional insurance as the Lender may
reasonably request.
6.1.22 Maintenance of the Collateral.
The Borrowers will maintain the Collateral in good working order, saving and excepting
ordinary wear and tear, and will not permit anything to be done to the Collateral which may
materially impair the value thereof. Each Borrower shall take all steps necessary to prosecute,
maintain, preserve, defend and protect, and, when necessary, renew (a) all franchises, licenses,
permits, patent applications, patents, trademarks, service marks, trade dress, domain names, trade
names, trade secrets, copyrights and other general intangibles and Intellectual Property owned or
licensed which are material to the business of the Borrower, including but not limited to the
payment of all necessary maintenance fees and the filing of all statutory declarations, and (b) all
agreements that are necessary to conduct the Borrower’s business. The Lender, or an agent
designated by the Lender, shall be permitted to enter the premises of each of the Borrowers and
their Subsidiaries and examine, audit and inspect the Collateral at any reasonable time and from
time to time without notice. The Lender shall not have any duty to, and the Borrowers hereby
release the Lender from all claims of loss or damage caused by the delay or failure to collect or
enforce any of the Receivables or to, preserve any rights against any other party with an interest
in the Collateral.
6.1.23 Equipment.
The Borrowers shall (a) maintain all Equipment as personalty, (b) not affix any Equipment to
any real estate in such manner as to become a fixture or part of such real estate, and (c) shall
hold no Equipment on a sale on approval basis. The Borrowers hereby declare their intent that,
notwithstanding the means of attachment, no goods of the Borrowers hereafter attached to any realty
shall be deemed a fixture, which declaration shall be irrevocable, without the Lender’s consent,
until all of the Obligations have been paid in full and the Commitments have been terminated or
have expired.
6.1.24 Further Assurances; Defense of Title.
At their expense, the Borrowers will defend the title to the Collateral (and any part
thereof), and will immediately execute, acknowledge and deliver any financing statement, other
notice, renewal, affidavit, deed, assignment, continuation statement, security agreement,
certificate or other document which the Lender may require in order to perfect, preserve, maintain,
continue, protect and/or extend the Lien or security interest granted to the Lender under this
Agreement, under any of the other Financing Documents and the first priority of that Lien, subject
only to the Permitted Liens. The Borrowers will from time to time do whatever the Lender may
require by way of obtaining, executing, delivering, and/or filing financing statements, landlords’
or mortgagees’ waivers, notices of assignment and other notices and amendments and renewals thereof
and the Borrowers will take any and all steps and observe such formalities as the Lender may
require, in order to create and maintain a valid Lien upon, pledge of, or paramount security
interest in, the Collateral, subject to the Permitted Liens. Without implying any limitation on
the foregoing, with respect to the Collateral that may be perfected by control, each Borrowers
shall take such steps as the Lender may require in order that Lender may have such control. The
Borrowers shall pay to the Lender on demand all taxes, costs and expenses incurred by the Lender in
connection with the preparation, execution, recording and filing of any such document or
instrument. To the extent that the proceeds of any of the Accounts or Receivables of the Borrowers
are expected to become subject to the control of, or in the possession of, a party other than the
Borrowers or the Lender, the Borrowers shall cause all such parties to execute and deliver on the
Closing Date security documents, financing statements or other documents as requested by the Lender
and as may be necessary to evidence and/or perfect the security interest of the Lender in those
proceeds. Each Borrower agrees that a copy of a fully executed security agreement and/or financing
statement shall be sufficient to satisfy for all purposes the requirements of a financing statement
as set forth in Article 9 of the applicable Uniform Commercial Code. Further, to the extent
permitted by applicable Laws, the Lender may file, without any Borrower’s signature, one or more
financing statements or other notices disclosing the Lender’s liens and other security interests.
All financing statements and notices may describe the Lender’s collateral as all assets or all
personal property of Borrower. Each Borrower hereby irrevocably appoints the Lender as the
Borrower’s attorney-in-fact, with power of substitution, in the name of the Lender or in the name
of the Borrower or otherwise, for the use and benefit of the Lender, but at the cost and expense of
the Borrowers and without notice to the Borrowers, to execute and deliver any and all of the
instruments and other documents and take any action which the Lender may require pursuant the
foregoing provisions of this Section 6.1.24. Each Borrower hereby ratifies and confirms the
validity of any and all financing statements filed by the Lender prior to the date of this
Agreement.
6.1.25 Business Information.
Each Borrower will notify and cause each of the Subsidiaries to notify the Lender not less
than thirty (30) days prior to (a) any change in its name or in the name under which the Borrower
or the applicable Subsidiary conducts its business, (b) any change of the state of organization,
identity or organizational structure of the applicable Borrower or Subsidiary, (c) any change to
the location of the chief executive office of the applicable Borrower or Subsidiary, and (d) the
opening of any new place of business or the closing of any existing place of business, and any
change in the location of the places where the Collateral, or any part thereof, or the books and
records, or any part thereof, are kept.
6.1.26 [Intentionally Omitted].
6.1.27 Use of Premises and Equipment.
The Borrowers agree that until the Obligations are fully paid and the Commitments have been
terminated or have expired, the Lender (a) after and during the continuance of an Event of Default,
may use any of the Borrowers’ owned or leased lifts, hoists, trucks and other facilities or
equipment for handling or removing the Collateral; and (b) shall have, and is hereby granted, a
right of ingress and egress to the places where the Collateral is located, and may proceed over and
through any of the Borrowers’ owned or leased property.
6.1.28 Protection of Collateral.
The Borrowers agree that the Lender may at any time following an Event of Default take such
steps as the Lender deems reasonably necessary to protect the interest of the Lender in, and to
preserve the Collateral, including, without limitation, the hiring of such security guards, the
placing of other security protection measures, and otherwise restricting access to owned or leased
locations where Collateral is located, all as the Lender deems appropriate from time to time, may
employ and maintain at any of the Borrowers’ premises a custodian who shall have full authority to
do all acts necessary to protect the interests of the Lender in the Collateral and may lease
warehouse facilities to which the Lender may move all or any part of the Collateral to the extent
commercially reasonable. The Borrowers agree to cooperate fully with the Lender’s efforts to
preserve the Collateral and will take such actions to preserve the Collateral as the Lender may
reasonably direct. All of the Lender’s expenses of preserving the Collateral, including any
reasonable expenses relating to the compensation and bonding of a custodian, shall be part of the
Enforcement Costs.
Section 6.2 Negative Covenants.
So long as any of the Obligations or any Commitments shall be outstanding hereunder, unless
Borrowers’ have received Lender’s prior written consent, the Borrowers agree with the Lender that:
6.2.1 Capital Structure, Merger, Acquisition or Sale of Assets.
None of the Borrowers will alter or amend their capital structure, authorize any additional
class of equity, enter into any merger or consolidation or amalgamation, change its State of
organization, organize in any additional State, wind up or dissolve themselves (or suffer any
liquidation or dissolution) or acquire all or substantially all the assets of any Person, or sell,
lease or otherwise dispose of any of its assets (except Inventory disposed of in the ordinary
course of business prior to an Event of Default). Any consent of the Lender to the disposition of
any assets may be conditioned on a specified use of the proceeds of disposition.
6.2.2 Subsidiaries.
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6.2.3
6.2.4
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[Intentionally Omitted].
Purchase or Redemption of Securities, Dividend Restrictions. |
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None of the Borrowers will purchase, redeem or otherwise acquire any shares of its capital
stock or warrants now or hereafter outstanding, declare or pay any dividends thereon (other than
stock dividends or required payments to preferred stockholders as approved by Lender), apply any of
its property or assets to the purchase, redemption or other retirement of, set apart any sum for
the payment of any dividends on, or for the purchase, redemption, or other retirement of, make any
distribution by reduction of capital or otherwise in respect of, any shares of any class of capital
stock of any Borrower, or any warrants, permit any Subsidiary to purchase or acquire any shares of
any class of capital stock of, or warrants issued by, any Borrower, make any distribution to
stockholders or set aside any funds for any such purpose, and not prepay, purchase or redeem any
Indebtedness for Borrowed Money other than the Obligations.
6.2.5 Indebtedness.
None of the Borrowers will create, incur, assume or suffer to exist any Indebtedness for
Borrowed Money in excess of Three Hundred Thousand Dollars ($300,000.00) or permit any Subsidiary
to do so, except:
(a) the Obligations;
(b) current accounts payable arising in the ordinary course;
(c) indebtedness secured by Permitted Liens;
(d) Subordinated Indebtedness; and
(e) indebtedness of the Borrowers existing on the date hereof and reflected on
the financial statements furnished pursuant to Section 4.1.12 (Financial Condition).
In addition, no Borrower will enter into or be subject to any agreement (other than this
Agreement), that prohibits, limits or is breached by the incurrence by the Borrower of Indebtedness
for Borrowed Money.
6.2.6 Investments, Loans and Other Transactions.
Except as otherwise provided in this Agreement, none of the Borrowers will, and will permit
any of its Subsidiaries to, (a) make, assume, acquire or continue to hold any investment in any
real property (unless used in connection with its business and treated as a Fixed or Capital Asset
of any Borrower or any Subsidiary) or any Person, whether by stock purchase, capital contribution,
acquisition of indebtedness of such Person or otherwise (including, without limitation, investments
in any joint venture or partnership), (b) guaranty or otherwise become contingently liable for the
indebtedness, liabilities and other obligations of any Person, or (c) make any loans or advances,
or otherwise extend credit to any Person, except:
(i) any advance to an officer or employee of any Borrower or any
Subsidiary for travel or other business expenses in the ordinary course of
business, provided that the aggregate amount of all such advances by all of
the Borrowers and their Subsidiaries (taken as a whole) outstanding at any
time shall not exceed One Hundred Thousand Dollars ($100,000);
(ii) the endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of business;
(iii) any investment in Cash Equivalents, which are pledged to the
Lender as collateral and security for the Obligations; and
(iv) trade credit extended to customers in the ordinary course of
business.
6.2.7 Stock of Subsidiaries.
None of the Borrowers will sell or otherwise dispose of any shares of capital stock of any
Subsidiary (except in connection with a merger or consolidation of a Wholly Owned Subsidiary into
any of the Borrowers or another Wholly Owned Subsidiary of any of the Borrowers or with the
dissolution of any Subsidiary) or permit any Subsidiary to issue any additional shares of its
capital stock except pro rata to its stockholders.
6.2.8 Subordinated Indebtedness.
None of the Borrowers will, nor will permit any Subsidiary to make:
(a) any payment of principal of, or interest on, any of the Subordinated Indebtedness,
including, without limitation, the Subordinated Debt, if a Default or an Event of Default then
exists hereunder or would result from such payment;
(b) any payment of the principal or interest due on the Subordinated Indebtedness as a result
of acceleration thereunder or a mandatory prepayment thereunder;
(c) any amendment or modification of or supplement to the documents evidencing or securing the
Subordinated Indebtedness; and
(d) payment of principal or interest on the Subordinated Indebtedness other than when due
(without giving effect to any acceleration of maturity or mandatory prepayment).
6.2.9 Liens.
Each Borrower agrees that it (a) will not create, incur, assume or suffer to exist any Lien
upon any of its properties or assets, whether now owned or hereafter acquired, or permit any
Subsidiary so to do, except for Liens securing the Obligations and Permitted Liens, (b) will not
agree to, assume or suffer to exist any provision in any instrument or other document for
confession of judgment, cognovit or other similar right or remedy, (c) will not enter into or be
subject to any agreement (other than this Agreement), that prohibits, limits or is breached by the
incurrence of Permitted Liens, (d) will not allow or suffer to exist any Permitted Liens to be
superior to Liens securing the Obligations, (e) will not enter into any contracts for the
consignment of goods, (f) will not execute or suffer the filing of any financing statements or the
posting of any signs giving notice of consignments, (g) will not, as a material part of its
business, engage in the sale of goods belonging to others, and (h) will not allow or suffer to
exist the failure of any Lien described in the Security Documents to attach to, and/or remain at
all times perfected on, any of the property described in the Security Documents.
6.2.10 Transactions with Affiliates.
None of the Borrowers nor any of their Subsidiaries will enter into or participate in any
transaction with any Affiliate or, except in the ordinary course of business, with the officers,
directors, employees and other representatives of any Borrower and/or any Subsidiary.
6.2.11 Other Businesses.
None of the Borrowers nor any of their Subsidiaries will engage directly or indirectly in any
business other than its current line of business described elsewhere in this Agreement, without
Lender’s prior written consent, which consent shall not be unreasonably withheld.
6.2.12 ERISA Compliance.
None of the Borrowers nor any ERISA Affiliate shall: (a) engage in or permit any
“prohibited transaction” (as defined in ERISA); (b) cause any “accumulated funding
deficiency” as defined in ERISA and/or the Internal Revenue Code; (c) terminate any pension
plan in a manner that could result in the imposition of a lien on the property of any Borrower
pursuant to ERISA; (d) terminate or consent to the termination of any Multi-employer Plan; or (e)
incur a complete or partial withdrawal with respect to any Multi-employer Plan.
6.2.13 Amendments.
None of the Borrowers will amend or terminate or agree to amend or terminate the describe any
essential agreements, e.g., franchise, license, partnership agreement, material operating
agreements, leases, construction contracts, etc. or consent to or waive any material provisions
thereof, which would have a material adverse impact on the operation of Borrower’s business or its
financial condition.
6.2.14 Method of Accounting; Fiscal Year.
Each Borrower agrees that:
(a) it shall not change the method of accounting employed in the preparation of any financial
statements furnished to the Lender under the provisions of Section 6.1.1 (Financial Statements),
unless required to conform to GAAP and on the condition that the Borrowers’ accountants shall
furnish such information as the Lender may request to reconcile the changes with the Borrowers’
prior financial statements
(b) it will not change its fiscal year from a year ending on January 31.
6.2.15 Compensation.
None of the Borrowers nor any Subsidiary will pay any bonuses, fees, compensation,
commissions, salaries, drawing accounts, or other payments (cash and non-cash), whether direct or
indirect, to any stockholders of any Borrower or any Subsidiary, or any Affiliate of any Borrower
or any Subsidiary, other than reasonable compensation for actual services rendered by stockholders
in their capacity as officers or employees.
6.2.16 Transfer of Collateral.
None of the Borrowers nor any of their Subsidiaries will transfer, or permit the transfer, to
another location of any of the Collateral or the books and records related to any of the Collateral
until Borrowers or their Subsidiaries have provided Lender with thirty (30) days’ prior written
notice thereof.
6.2.17 Sale and Leaseback.
None of the Borrowers nor any of the Subsidiaries will directly or indirectly enter into any
arrangement to sell or transfer all or any substantial part of its fixed assets and thereupon or
within one year thereafter rent or lease the assets so sold or transferred.
6.2.18 Disposition of Collateral.
None of the Borrowers will sell, discount, allow credits or allowances, transfer, assign,
extend the time for payment on, convey, lease, license, sublicense, assign, transfer or otherwise
dispose of the Collateral, except, prior to an Event of Default, dispositions expressly permitted
elsewhere in this Agreement, the sale of Inventory in the ordinary course of business, and the sale
of unnecessary or obsolete Equipment, but only if the proceeds of the sale of such Equipment are
(a) used to purchase similar Equipment to replace the unnecessary or obsolete Equipment or (b)
immediately turned over to the Lender for application to the Obligations in accordance with the
provisions of this Agreement.
ARTICLE VII
DEFAULT AND RIGHTS AND REMEDIES
Section 7.1 Events of Default.
The occurrence of any one or more of the following events shall constitute an “Event of
Default” under the provisions of this Agreement:
7.1.1 Failure to Pay.
The failure of the Borrowers to pay any of the Obligations as and when due and payable in
accordance with the provisions of this Agreement, the Notes and/or any of the other Financing
Documents; provided, however, that Lender shall provide written notice of any such failure to pay
one time during each calendar year hereunder and Borrower shall have five (5) days thereafter
within which to cure such failure before it shall constitute an Event of Default hereunder.
7.1.2 Breach of Representations and Warranties.
Any representation or warranty made in this Agreement or in any report, statement, schedule,
certificate, opinion (including any opinion of counsel for the Borrowers), financial statement or
other document furnished in connection with this Agreement, any of the other Financing Documents,
or the Obligations, shall prove to have been false or misleading when made (or, if applicable, when
reaffirmed) in any material respect.
7.1.3 Failure to Comply with Covenants.
The failure of the Borrowers to perform, observe or comply with any covenant, condition or
agreement contained in this Agreement if the Borrowers do not remedy such failure within thirty
(30) days following receipt of written notice thereof from the Lender, or if such failure is not
susceptible of being cured within a thirty-day period, then if Borrowers fail to promptly commence
and thereafter diligently pursue until completion the remedy of such failure (but in no event shall
such cure period be extended more than a total of sixty (60) days following the delivery of the
initial written notice of the failure from the Lender to the Borrowers). Notwithstanding the
foregoing, the Lender shall not be required to provide written notice and an opportunity to
cure a failure by the Borrowers to perform, observe or comply with any covenants contained in
Section 6.2 (Negative Covenants), Section 6.1.8 (Insurance) or Section 6.1.21 (Insurance With
Respect to Equipment).
7.1.4 Default Under Other Financing Documents or Obligations.
A default shall occur under any of the other Financing Documents or under any other
Obligations, and such default is not cured within any applicable grace period provided therein.
7.1.5 Receiver; Bankruptcy.
Any Borrower or any Subsidiary shall (a) apply for or consent to the appointment of a
receiver, trustee or liquidator of itself or any of its property, (b) admit in writing its
inability to pay its debts as they mature, (c) make a general assignment for the benefit of
creditors, (d) be adjudicated a bankrupt or insolvent, (e) file a voluntary petition in bankruptcy
or a petition or an answer seeking or consenting to reorganization or an arrangement with creditors
or to take advantage of any bankruptcy, reorganization, insolvency, readjustment of debt,
dissolution or liquidation law or statute, or an answer admitting the material allegations of a
petition filed against it in any proceeding under any such law, or take entity action for the
purposes of effecting any of the foregoing, (f) by any act indicate its consent to, approval of or
acquiescence in any such proceeding or the appointment of any receiver of or trustee for any of its
property, or suffer any such receivership, trusteeship or proceeding to continue undischarged for a
period of sixty (60) days, or (g) by any act indicate its consent to, approval of or acquiescence
in any order, judgment or decree by any court of competent jurisdiction or any Governmental
Authority enjoining or otherwise prohibiting the operation of a material portion of any Borrower’s
or any Subsidiary’s business or the use or disposition of a material portion of any Borrower’s or
any Subsidiary’s assets.
7.1.6 Involuntary Bankruptcy, etc.
(a) An order for relief shall be entered in any involuntary case brought against any Borrower
or any Subsidiary under the Bankruptcy Code, or (b) any such case shall be commenced against any
Borrower or any Subsidiary and shall not be dismissed within sixty (60) days after the filing of
the petition, or (c) an order, judgment or decree under any other Law is entered by any court of
competent jurisdiction or by any other Governmental Authority on the application of a Governmental
Authority or of a Person other than any Borrower or any Subsidiary (i) adjudicating any Borrower,
or any Subsidiary bankrupt or insolvent, or (ii) appointing a receiver, trustee or liquidator of
any Borrower or of any Subsidiary, or of a material portion of any Borrower’s or any Subsidiary’s
assets, or (iii) enjoining, prohibiting or otherwise limiting the operation of a material portion
of any Borrower’s or any Subsidiary’s business or the use or disposition of a material portion of
any Borrower’s or any Subsidiary’s assets, and such order, judgment or decree continues unstayed
and in effect for a period of thirty (30) days from the date entered.
7.1.7 Judgment.
Unless adequately insured in the opinion of the Lender, the entry of a final judgment for the
payment of money involving more than Three Hundred Thousand Dollars ($300,000) against any Borrower
or any Subsidiary, and the failure by such Borrower or such Subsidiary to discharge the same, or
cause it to be discharged, within thirty (30) days from the date of the order, decree or process
under which or pursuant to which such judgment was entered, or to secure a stay of execution
pending appeal of such judgment, unless such judgment is covered by Borrowers’ or the Subsidiary’s
insurance.
7.1.8 Execution; Attachment.
Any execution or attachment shall be levied against the Collateral, or any part thereof, and
such execution or attachment shall not be set aside, discharged or stayed within thirty (30) days
after the same shall have been levied.
7.1.9 Default Under Other Borrowings.
Default shall be made with respect to any Indebtedness for Borrowed Money of any of the
Borrowers (other than the Loans) if the effect of such default is to accelerate the maturity of
such Indebtedness for Borrowed Money or to permit the holder or obligee thereof or other party
thereto to cause such Indebtedness for Borrowed Money to become due prior to its stated maturity.
7.1.10 Challenge to Agreements.
Any Borrower or any Guarantor shall challenge the validity and binding effect of any provision
of any of the Financing Documents or shall state its intention to make such a challenge of any of
the Financing Documents or any of the Financing Documents shall for any reason (except to the
extent permitted by its express terms) cease to be effective or to create a valid and perfected
first priority Lien (except as expressly permitted by Section 6.2.9 (Liens) on, or security
interest in, any of the Collateral purported to be covered thereby.
7.1.11 Material Adverse Effect.
The Lender, in its Permitted Discretion, determines that an event has occurred that has a
Material Adverse Effect.
7.1.12 Change in Ownership.
Any change shall occur in the ownership of any of the Borrowers or the Subsidiaries and the
Borrowers fail to notify Lender in writing of such change promptly thereafter.
7.1.13 Liquidation, Termination, Dissolution, Change in Management, etc.
Any Borrower shall liquidate, dissolve or terminate its existence or shall suspend or
terminate a substantial portion of its business operations or any change occurs in the management
or control of any Borrower without the prior written consent of the Lender.
Section 7.2 Remedies.
Upon the occurrence of any Event of Default, the Lender may, in the exercise of its sole and
absolute discretion from time to time, at any time thereafter exercise any one or more of the
following rights, powers or remedies.
7.2.1 Acceleration.
The Lender may declare any or all of the Obligations to be immediately due and payable,
notwithstanding anything contained in this Agreement or in any of the other Financing Documents to
the contrary, without presentment, demand, protest, notice of protest or of dishonor, or other
notice of any kind, all of which the Borrowers hereby waive.
7.2.2 Further Advances.
The Lender may from time to time without notice to the Borrowers suspend, terminate or limit
any further Advances, loans or other extensions of credit under the Commitments, under this
Agreement and/or under any of the other Financing Documents. Further, upon the occurrence of an
Event of Default or Default specified in Sections 7.1.5 (Receiver; Bankruptcy) or 7.1.6
(Involuntary Bankruptcy, etc.), the Revolving Credit Commitment and any agreement in any of the
Financing Documents to provide additional credit (including, without limitation, that with respect
to letters of credit) shall immediately and automatically terminate and the unpaid principal amount
of the Notes (with accrued interest thereon) and all other Obligations then outstanding, shall
immediately become due and payable without further action of any kind and without presentment,
demand, protest or notice of any kind, all of which are hereby expressly waived by the Borrowers.
7.2.3 Uniform Commercial Code; Personal Property Security Act
The Lender shall have all of the rights and remedies of a secured party under the applicable
Uniform Commercial Code, Personal Property Security Act, and other applicable Laws. Upon demand by
the Lender, the Borrowers shall assemble the Collateral and make it available to the Lender, at a
place designated by the Lender. The Lender or its agents may without notice from time to time
enter upon any Borrower’s premises to take possession of the Collateral, to remove it, to render it
unusable, to process it or otherwise prepare it for sale, or to sell or otherwise dispose of it.
The remedies of the Lender shall include, without limitation, the appointment by instrument in
writing of a receiver (which term as used in this Agreement includes a receiver and manager) or
agent of all or any part of the Collateral and removal or replacement from time to time of any
receiver or agent.
Any written notice of the sale, disposition or other intended action by the Lender with
respect to the Collateral that is sent by regular mail, postage prepaid, to the Borrowers at the
address set forth in Section 8.1 (Notices), or such other address of the Borrowers that may from
time to time be shown on the Lender’s records, at least ten (10) days prior to such sale,
disposition or other action, shall, to the extent permitted by law, constitute commercially
reasonable notice to the Borrowers. The Lender may alternatively or additionally give such notice
in any other commercially reasonable manner. Nothing in this Agreement shall require the Lender to
give any notice not required by applicable Laws.
If any consent, approval, or authorization of any state, municipal or other Governmental
Authority or of any other Person or of any Person having any interest therein, should be necessary
to effectuate any sale or other disposition of the Collateral, the Borrowers agree to execute all
such applications and other instruments, and to take all other action, as may be required in
connection with securing any such consent, approval or authorization.
The Borrowers recognize that the Lender may be unable to effect a public sale of all or a part
of the Collateral consisting of Investment Property by reason of certain prohibitions contained in
the Securities Act of 1933, as amended, and other applicable Federal and state Laws. The Lender
may, therefore, in its sole and absolute discretion, take such steps as it may deem appropriate to
comply with such Laws and may, for example, at any sale of the Collateral consisting of securities
restrict the prospective bidders or purchasers as to their number, nature of business and
investment intention, including, without limitation, a requirement that the Persons making such
purchases represent and agree to the satisfaction of the Lender that they are purchasing such
securities for their account, for investment, and not with a view to the distribution or resale of
any thereof. The Borrowers covenant and agree to do or cause to be done promptly all such acts and
things as the Lender may request from time to time and as may be necessary to offer and/or sell the
securities or any part thereof in a manner that is valid and binding and in conformance with all
applicable Laws. Upon any such sale or disposition, the Lender shall have the right to deliver,
assign and transfer to the purchaser thereof the Collateral consisting of securities so sold.
7.2.4 Specific Rights With Regard to Collateral.
In addition to all other rights and remedies provided hereunder or as shall exist at law or in
equity from time to time, the Lender may (but shall be under no obligation to), without notice to
any of the Borrowers, and each Borrower hereby irrevocably appoints the Lender as its
attorney-in-fact, with power of substitution, in the name of the Lender and/or in the name of any
or all of the Borrowers or otherwise, for the use and benefit of the Lender, but at the cost and
expense of the Borrowers and without notice to the Borrowers:
(a) request any Account Debtor obligated on any of the Accounts to make
payments thereon directly to the Lender, with the Lender taking control of the cash
and non-cash proceeds thereof;
(b) compromise, extend or renew any of the Collateral or deal with the same as
it may deem advisable;
(c) make exchanges, substitutions or surrenders of all or any part of the
Collateral;
(d) copy, transcribe, or remove from any place of business of any Borrower or
any Subsidiary all books, records, ledger sheets, correspondence, invoices and
documents, relating to or evidencing any of the Collateral or without cost or
expense to the Lender, make such use of any Borrower’s or any Subsidiary’s place(s)
of business as may be reasonably necessary to administer, control and collect the
Collateral;
(e) repair, alter or supply goods if necessary to fulfill in whole or in part
the purchase order of any Account Debtor;
(f) demand, collect, receipt for and give renewals, extensions, discharges and
releases of any of the Collateral;
(g) institute and prosecute legal and equitable proceedings to enforce
collection of, or realize upon, any of the Collateral;
(h) settle, renew, extend, compromise, compound, exchange or adjust claims in
respect of any of the Collateral or any legal proceedings brought in respect
thereof;
(i) endorse or sign the name of any Borrower upon any items of payment,
certificates of title, instruments, securities, stock powers, documents, documents
of title, financing statements, assignments, notices or other writing relating to or
part of the Collateral and on any proof of claim in bankruptcy against an Account
Debtor;
(j) clear Inventory through customs in the Lender’s or any Borrower’s name and
to sign and deliver to customs officials powers of attorney in that Borrower’s name
for such purpose;
(k) notify the Post Office authorities to change the address for the delivery
of mail to the Borrowers to such address or Post Office Box as the Lender may
designate and receive and open all mail addressed to any of the Borrowers; and
(l) take any other action necessary or beneficial to realize upon or dispose of
the Collateral or to carry out the terms of this Agreement.
7.2.5 Application of Proceeds.
Any proceeds of sale or other disposition of the Collateral will be applied by the Lender to
the payment of any and all Enforcement Costs, and any balance of such proceeds will be applied to
the Obligations in such order and manner as the Lender may from time to time in its sole and
absolute discretion determine. If the sale or other disposition of the Collateral fails to fully
satisfy the Obligations, the Borrowers shall remain liable to the Lender for any deficiency.
7.2.6 Performance by Lender.
If the Borrowers shall fail to pay the Obligations or otherwise fail to perform, observe or
comply with any of the conditions, covenants, terms, stipulations or agreements contained in this
Agreement or any of the other Financing Documents, the Lender without notice to or demand upon the
Borrowers and without waiving or releasing any of the Obligations or any Default or Event of
Default, may (but shall be under no obligation to) at any time thereafter make such payment or
perform such act for the account and at the expense of the Borrowers, and may enter upon the
premises of the Borrowers for that purpose and take all such action thereon as the Lender may
consider necessary or appropriate for such purpose and each of the Borrowers hereby irrevocably
appoints the Lender as its attorney-in-fact to do so, with power of substitution, in the name of
the Lender, in the name of any or all of the Borrowers or otherwise, for the use and benefit of the
Lender, but at the cost and expense of the Borrowers and without notice to the Borrowers. All sums
so paid or advanced by the Lender together with interest thereon from the date of payment, advance
or incurring until paid in full at the Post-Default Rate and all costs and expenses, shall be
deemed part of the Enforcement Costs, shall be paid by the Borrowers to the Lender on demand, and
shall constitute and become a part of the Obligations.
7.2.7 Other Remedies.
The Lender may from time to time proceed to protect or enforce the rights of the Lender by an
action or actions at law or in equity or by any other appropriate proceeding, whether for the
specific performance of any of the covenants contained in this Agreement or in any of the other
Financing Documents, or for an injunction against the violation of any of the terms of this
Agreement or any of the other Financing Documents, or in aid of the exercise or execution of any
right, remedy or power granted in this Agreement, the Financing Documents, and/or applicable Laws.
The Lender is authorized to offset and apply to all or any part of the Obligations all moneys,
credits and other property of any nature whatsoever of any or all of the Borrowers now or at any
time hereafter in the possession of, in transit to or from, under the control or custody of, or on
deposit with, the Lender or any Affiliate of the Lender.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Notices.
All notices, requests and demands to or upon the parties to this Agreement shall be in writing
and shall be deemed to have been given or made when delivered by hand on a Business Day, or two (2)
days after the date when deposited in the mail, postage prepaid by certified mail, return receipt
requested, or when sent by overnight courier, on the Business Day next following the day on which
the notice is delivered to such overnight courier, addressed as follows:
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| Borrowers:
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Rand Worldwide, Inc.
11201 Dolfield Boulevard
Suites 112-115
Owings Mills, Maryland 21117
Attention:Lawrence Rychlak, President |
| with a copy to:
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Peter Rosenwald, Esquire
Gordon Feinblatt, LLC
233 E. Redwood Street
Baltimore, MD 21202 |
| Lender:
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PNC Bank, National Association
Two Hopkins Plaza
Baltimore, Maryland 21201
Attention:Timothy Naylon, Senior Vice President |
| with a copy to:
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J. Michael Brennan, Esq. |
Miles & Stockbridge P. C.
One West Pennsylvania Avenue, Suite 900
Towson, Maryland 21204
By written notice, each party to this Agreement may change the address to which notice is
given to that party, provided that such changed notice shall include a street address to which
notices may be delivered by overnight courier in the ordinary course on any Business Day.
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| Section 8.2
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Amendments; Waivers. |
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8.2.1 |
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In General. |
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This Agreement and the other Financing Documents may not be amended, modified, or changed in
any respect except by an agreement in writing signed by the Lender and the Borrowers. No waiver of
any provision of this Agreement or of any of the other Financing Documents, nor consent to any
departure by the Borrowers therefrom, shall in any event be effective unless the same shall be in
writing signed by the Lender. No course of dealing between the Borrowers and the Lender and no act
or failure to act from time to time on the part of the Lender shall constitute a waiver, amendment
or modification of any provision of this Agreement or any of the other Financing Documents or any
right or remedy under this Agreement, under any of the other Financing Documents or under
applicable Laws. Without implying any limitation on the foregoing:
(a) Any waiver or consent shall be effective only in the specific instance, for the
terms and purpose for which given, subject to such conditions as the Lender may specify in
any such instrument.
(b) No waiver of any Default or Event of Default shall extend to any subsequent or
other Default or Event of Default, or impair any right consequent thereto.
(c) No notice to or demand on the Borrowers in any case shall entitle the Borrowers
to any other or further notice or demand in the same, similar or other circumstance.
(d) No failure or delay by the Lender to insist upon the strict performance of any
term, condition, covenant or agreement of this Agreement or of any of the other Financing
Documents, or to exercise any right, power or remedy consequent upon a breach thereof,
shall constitute a waiver, amendment or modification of any such term, condition, covenant
or agreement or of any such breach or preclude the Lender from exercising any such right,
power or remedy at any time or times.
(e) By accepting payment after the due date of any amount payable under this
Agreement or under any of the other Financing Documents, the Lender shall not be deemed to
waive the right either to require prompt payment when due of all other amounts payable
under this Agreement or under any of the other Financing Documents, or to declare a
default for failure to effect such prompt payment of any such other amount.
Section 8.3 Cumulative Remedies.
The rights, powers and remedies provided in this Agreement and in the other Financing
Documents are cumulative, may be exercised concurrently or separately, may be exercised from time
to time and in such order as the Lender shall determine and are in addition to, and not exclusive
of, rights, powers and remedies provided by existing or future applicable Laws, all without regard
to any right of the Borrowers or any other Person to the marshaling of assets, which right the
Borrowers and any other Person (including, without limitation, any Guarantor) who may be liable (by
endorsement, guaranty, indemnity or otherwise) for all or any part of the Obligations hereby waive
to the extent permitted by applicable Laws. In order to entitle the Lender to exercise any remedy
reserved to it in this Agreement, it shall not be necessary to give any notice, other than such
notice as may be expressly required in this Agreement. Without limiting the generality of the
foregoing and subject to the terms of this Agreement, the Lender may: (a) proceed against any one
or more of the Borrowers with or without proceeding against any other Person (including, without
limitation, any Guarantor) who may be liable (by endorsement, guaranty, indemnity or otherwise) for
all or any part of the Obligations; (b) proceed against any one or more of the Borrowers with or
without proceeding under any of the other Financing Documents or against any Collateral or other
collateral and security for all or any part of the Obligations; (c) without reducing or impairing
the obligation of the Borrowers and without notice, release or compromise with any guarantor or
other Person liable for all or any part of the Obligations under the Financing Documents or
otherwise; and (d) without reducing or impairing the obligations of the Borrowers and without
notice thereof: (i) fail to perfect the Lien in any or all Collateral or to release any or all the
Collateral or to accept substitute Collateral; (ii) approve the making of Advances under the
Revolving Loan under this Agreement; (iii) waive any provision of this Agreement or the other
Financing Documents; (iv) exercise or fail to exercise rights of set-off or other rights; or (v)
accept partial payments or extend from time to time the maturity of all or any part of the
Obligations.
Section 8.4 Severability.
In case one or more provisions, or part thereof, contained in this Agreement or in the other
Financing Documents shall be invalid, illegal or unenforceable in any respect under any Law, then
without need for any further agreement, notice or action:
(a) the validity, legality and enforceability of the remaining provisions shall remain
effective and binding on the parties thereto and shall not be affected or impaired thereby;
(b) the obligation to be fulfilled shall be reduced to the limit of such validity;
(c) if such provision or part thereof pertains to repayment of the Obligations, then, at the
sole and absolute discretion of the Lender, all of the Obligations of the Borrowers to the Lender
shall become immediately due and payable; and
(d) if the affected provision or part thereof does not pertain to repayment of the
Obligations, but operates or would prospectively operate to invalidate this Agreement in whole or
in part, then such provision or part thereof only shall be void, and the remainder of this
Agreement shall remain operative and in full force and effect.
Section 8.5 Assignments by Lender.
The Lender may, without notice to, or consent of, the Borrowers, sell, assign or transfer to
or participate with any Person or Persons all or any part of the Obligations, and each such Person
or Persons shall have the right to enforce the provisions of this Agreement and any of the other
Financing Documents as fully as the Lender, provided that the Lender shall continue to have the
unimpaired right to enforce the provisions of this Agreement and any of the other Financing
Documents as to so much of the Obligations that the Lender has not sold, assigned or transferred.
In connection with the foregoing, the Lender shall have the right to disclose to any such actual or
potential purchaser, assignee, transferee or participant all financial records, information,
reports, financial statements and documents obtained in connection with this Agreement and any of
the other Financing Documents or otherwise.
Section 8.6 Successors and Assigns.
This Agreement and all other Financing Documents shall be binding upon and inure to the
benefit of the Borrowers and the Lender and their respective heirs, personal representatives,
successors and assigns, except that the Borrowers shall not have the right to assign their rights
hereunder or any interest herein without the prior written consent of the Lender.
Section 8.7 Continuing Agreements.
All covenants, agreements, representations and warranties made by the Borrowers in this
Agreement, in any of the other Financing Documents, and in any certificate delivered pursuant
hereto or thereto shall survive the making by the Lender of the Loans, the issuance of letters of
credit by the Lender and the execution and delivery of the Notes, shall be binding upon the
Borrowers regardless of how long before or after the date hereof any of the Obligations were or are
incurred, and shall continue in full force and effect so long as any of the Obligations are
outstanding and unpaid. From time to time upon the Lender’s request, and as a condition of the
release of any one or more of the Security Documents, the Borrowers and other Persons obligated
with respect to the Obligations shall provide the Lender with such acknowledgments and agreements
as the Lender may require to the effect that there exists no defenses, rights of setoff or
recoupment, claims, counterclaims, actions or causes of action of any kind or nature whatsoever
against the Lender and/or any of its agents and others, or to the extent there are, the same are
waived and released.
Section 8.8 Enforcement Costs.
The Borrowers agree to pay to the Lender on demand all Enforcement Costs, together with
interest thereon from the date incurred or advanced until paid in full at a per annum rate of
interest equal at all times to the Post-Default Rate. Enforcement Costs shall be immediately due
and payable at the time advanced or incurred, whichever is earlier. Without implying any
limitation on the foregoing, the Borrowers agree, as part of the Enforcement Costs, to pay upon
demand any and all stamp and other Taxes and fees payable or determined to be payable in connection
with the execution and delivery of this Agreement and the other Financing Documents and to save the
Lender harmless from and against any and all liabilities with respect to or resulting from any
delay in paying or omission to pay any Taxes or fees referred to in this Section. The provisions
of this Section shall survive the execution and delivery of this Agreement, the repayment of the
other Obligations and shall survive the termination of this Agreement.
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| Section 8.9
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Applicable Law; Jurisdiction. |
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8.9.1 |
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Applicable Law. |
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The Borrowers acknowledge and agree that the Financing Documents, including, this Agreement,
shall be governed by the Laws of the State, as if each of the Financing Documents and this
Agreement had each been executed, delivered, administered and performed solely within the State
even though for the convenience and at the request of the Borrowers, one or more of the Financing
Documents may be executed elsewhere. The Lender acknowledges, however, that remedies under certain
of the Financing Documents which relate to property outside the State may be subject to the laws of
the state in which the property is located.
8.9.2 Submission to Jurisdiction.
The Borrowers irrevocably submit to the jurisdiction of any state or federal court sitting in
the State over any suit, action or proceeding arising out of or relating to this Agreement or any
of the other Financing Documents. Each of the Borrowers irrevocably waives, to the fullest extent
permitted by law, any objection that it may now or hereafter have to the laying of the venue of any
such suit, action or proceeding brought in any such court and any claim that any such suit, action
or proceeding brought in any such court has been brought in an inconvenient forum. Final judgment
in any such suit, action or proceeding brought in any such court shall be conclusive and binding
upon the Borrowers and may be enforced in any court in which the Borrowers are subject to
jurisdiction, by a suit upon such judgment, provided that service of process is effected upon the
Borrowers in one of the manners specified in this Section or as otherwise permitted by applicable
Laws.
8.9.3 Appointment of Agent for Service of Process.
The Borrowers hereby irrevocably designate and appoint The Corporation Trust Incorporated, 300
E. Lombard Street, Baltimore, Maryland 21202, as the Borrowers’ authorized agent to receive on the
Borrowers’ behalf service of any and all process that may be served in any suit, action or
proceeding of the nature referred to in this Section in any state or federal court sitting in the
State. If such agent shall cease so to act, the Borrowers shall irrevocably designate and appoint
without delay another such agent in the State satisfactory to the Lender and shall promptly deliver
to the Lender evidence in writing of such other agent’s acceptance of such appointment and its
agreement that such appointment shall be irrevocable.
8.9.4 Service of Process.
Each of the Borrowers hereby consents to process being served in any suit, action or
proceeding of the nature referred to in this Section by (a) the mailing of a copy thereof by
registered or certified mail, postage prepaid, return receipt requested, to the Borrower at the
Borrower’s address designated in or pursuant to Section 8.1 (Notices), and (b) serving a copy
thereof upon the agent, if any, designated and appointed by the Borrower as the Borrower’s agent
for service of process by or pursuant to this Section. The Borrowers irrevocably agree that such
service (y) shall be deemed in every respect effective service of process upon the Borrowers in any
such suit, action or proceeding, and (z) shall, to the fullest extent permitted by law, be taken
and held to be valid personal service upon the Borrowers. Nothing in this Section shall affect the
right of the Lender to serve process in any manner otherwise permitted by law or limit the right of
the Lender otherwise to bring proceedings against the Borrowers in the courts of any jurisdiction
or jurisdictions.
Section 8.10 Limitation on Liability of Foreign Borrower.
It is the intent of the parties and the parties hereby agree that, notwithstanding any
provision of this Agreement or any other Financing Document, Foreign Borrower shall not be liable
for any U.S. Obligations, the present and future assets of Foreign Borrower shall not be subject to
any Charges, claim or action by the Lender to satisfy any U.S. Obligations, and the Lender shall
not have any recourse under this Agreement or any other Financing Document against Foreign Borrower
or its assets in respect of any U.S. Obligations. All amounts paid by Foreign Borrower and all
value derived from its assets shall be applied only to Obligations of the Foreign Borrower. As and
when the Obligations owing in respect of Advances due and owing from Foreign Borrower have been
reduced to zero, and the agreement the Lender to make any further Advances to the Foreign Borrower
shall have been irrevocably terminated, then the Foreign Borrower shall cease to be a Borrower and
shall be entitled to be released and discharged from all obligations under this Agreement and the
other Financing Documents, the Lender shall have no further claim against the Foreign Borrower or
its assets and all provisions of this Agreement that relate to the Foreign Borrower, other than
provisions which generally apply to Subsidiaries or foreign Subsidiaries shall cease to have
further force and effect. Any references in this Agreement or in any other Financing Document to
specific statutes or to governmental agencies of the United States of America, shall be, when
applied to the Foreign Borrower, deemed to refer to the applicable provisions or governmental
agencies of Canada, as the case may be, if any, provided, however, that Sections 6.1.10 and 6.2.12
shall be inapplicable to the Foreign Borrower. Any reference in a financial covenant or otherwise
to any U.S. Dollar figure shall be deemed, when applied to the Foreign Borrower, to refer to the
U.S. Dollar Equivalent of the applicable foreign currency.
Section 8.11 Duplicate Originals and Counterparts.
This Agreement may be executed in any number of duplicate originals or counterparts, each of
such duplicate originals or counterparts shall be deemed to be an original and all taken together
shall constitute but one and the same instrument.
Section 8.12 No Agency.
Nothing herein contained shall be construed to constitute the Borrowers as the agent of the
Lender for any purpose whatsoever or to permit the Borrowers to pledge any of the credit of the
Lender. The Lender shall not be responsible or liable for any shortage, discrepancy, damage, loss
or destruction of any part of the Collateral wherever the same may be located and regardless of the
cause thereof. The Lender shall not, by anything herein or in any of the Financing Documents or
otherwise, assume any of the Borrowers’ obligations under any contract or agreement assigned to the
Lender, and the Lender shall not be responsible in any way for the performance by the Borrowers of
any of the terms and conditions thereof.
Section 8.13 Date of Payment.
Should the principal of or interest on the Notes become due and payable on other than a
Business Day, the maturity thereof shall be extended to the next succeeding Business Day and in the
case of principal, interest shall be payable thereon at the rate per annum specified in the Notes
during such extension.
Section 8.14 Entire Agreement.
This Agreement is intended by the Lender and the Borrowers to be a complete, exclusive and
final expression of the agreements contained herein. Neither the Lender nor the Borrowers shall
hereafter have any rights under any prior agreements pertaining to the matters addressed by this
Agreement but shall look solely to this Agreement for definition and determination of all of their
respective rights, liabilities and responsibilities under this Agreement.
Section 8.15 Waiver of Trial by Jury.
THE BORROWERS AND THE LENDER HEREBY JOINTLY AND SEVERALLY WAIVE TRIAL BY JURY IN ANY ACTION OR
PROCEEDING TO WHICH THE BORROWERS AND THE LENDER MAY BE PARTIES, ARISING OUT OF OR IN ANY WAY
PERTAINING TO (A) THIS AGREEMENT, (B) ANY OF THE FINANCING DOCUMENTS, OR (C) THE COLLATERAL. THIS
WAIVER CONSTITUTES A WAIVER OF TRIAL BY JURY OF ALL CLAIMS AGAINST ALL PARTIES TO SUCH ACTIONS OR
PROCEEDINGS, INCLUDING CLAIMS AGAINST PARTIES WHO ARE NOT PARTIES TO THIS AGREEMENT. EACH BORROWER
AGREES THAT IT WILL NOT ASSERT ANY CLAIM AGAINST THE LENDER OR ANY OTHER PERSON INDEMNIFIED UNDER
THIS AGREEMENT ON ANY THEORY OF LIABILITY FOR SPECIAL, INDIRECT, CONSEQUENTIAL, INCIDENTAL OR
PUNITIVE DAMAGES.
This waiver is knowingly, willingly and voluntarily made by the Borrowers and the Lender, and
the Borrowers and the Lender hereby represent that no representations of fact or opinion have been
made by any individual to induce this waiver of trial by jury or to in any way modify or nullify
its effect. The Borrowers and the Lender further represent that they have been represented in the
signing of this Agreement and in the making of this waiver by independent legal counsel, selected
of their own free will, and that they have had the opportunity to discuss this waiver with counsel.
Section 8.16 Liability of the Lender.
The Borrowers hereby agree that the Lender shall not be chargeable for any negligence,
mistake, act or omission of any accountant, examiner, agency or attorney employed by the Lender in
making examinations, investigations or collections, or otherwise in perfecting, maintaining,
protecting or realizing upon any lien or security interest or any other interest in the Collateral
or other security for the Obligations.
By inspecting the Collateral or any other properties of the Borrowers or by accepting or
approving anything required to be observed, performed or fulfilled by the Borrowers or to be given
to the Lender pursuant to this Agreement or any of the other Financing Documents, the Lender shall
not be deemed to have warranted or represented the condition, sufficiency, legality, effectiveness
or legal effect of the same, and such acceptance or approval shall not constitute any warranty or
representation with respect thereto by the Lender.
Section 8.17 Indemnification.
The Borrowers agrees to indemnify and hold harmless, Lender, the respective parent and
Affiliates of the Lender and the respective parent’s and Affiliates’ officers, directors,
shareholders, employees and agents (each an “Indemnified Party,” and collectively, the
“Indemnified Parties”), from and against any and all claims, liabilities, losses, damages,
costs and expenses (whether or not such Indemnified Party is a party to any litigation), including
without limitation, reasonable attorney’s fees and costs and costs of investigation, document
production, attendance at depositions or other discovery, incurred by any Indemnified Party with
respect to, arising out of or as a consequence of (a) this Agreement or any of the other Financing
Documents, including without limitation, any failure of the Borrowers to pay when due (at maturity,
by acceleration or otherwise) any principal, interest, fee or any other amount due under this
Agreement or the other Loan documents, or any other Event of Default; (b) the use by the Borrowers
of any proceeds advanced hereunder; (c) the transactions contemplated hereunder; (d) any civil
penalty or fine assessed by OFAC against the Lender or any Affiliate of the Lender and all
reasonable costs and expense (including counsel fees and disbursements) incurred in connection with
defense thereof by the Lender or such Affiliate, as a result of the funding of Loans or the
extension of credit, the acceptance of payments due under the Financing Documents or any Hedge
Agreement or acceptance of Collateral; or (e) any claim, demand, action or cause of action being
asserted against (i) the Borrowers or any of their Affiliates by any other Person, or (ii) any
Indemnified Party by the Borrowers in connection with the transactions contemplated hereunder.
Notwithstanding anything herein or elsewhere to the contrary, the Borrowers shall not be obligated
to indemnify or hold harmless any Indemnified Party from any liability, loss or damage resulting
from the gross negligence or willful misconduct (as determined by a final non-appealable order by a
court of competent jurisdiction) of such Indemnified Party. Any amount payable to the Lender under
this Section will bear interest at the Post- Default Rate from the due date until paid. Each of
the Borrowers acknowledges and agrees that this indemnification shall survive the termination of
this Agreement and the Commitments and the payment and performance of all of the other Obligations.
[Signatures Follow On The Next Page.]
1
BORROWERS’ SIGNATURE PAGE TO FINANCING AND SECURITY AGREEMENT
IN WITNESS WHEREOF, each of the parties hereto has executed and delivered this Agreement under
their respective seals as of the day and year first written above.
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WITNESS OR ATTEST:
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RAND WORLDWIDE, INC. |
/s/ Theresa Whalen
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By: /s/ Lawrence Rychlak (Seal) |
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Title: President and Chief Financial Officer |
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WITNESS OR ATTEST:
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RAND A TECHNOLOGY CORPORATION |
/s/ Theresa Whalen
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By: /s/ Lawrence Rychlak (Seal) |
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Title: President and Chief Financial Officer |
[Lender’s Signature Follows on Next Page]
2
LENDER’S SIGNATURE PAGE TO FINANCING AND SECURITY AGREEMENT
IN WITNESS WHEREOF, each of the parties hereto have executed and delivered this Agreement
under their respective seals as of the day and year first written above.
WITNESS OR ATTEST: PNC BANK, NATIONAL ASSOCIATION
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By: /s/ Timothy Naylon
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(Seal) |
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Title:
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Senior Vice President |
3
LIST OF EXHIBITS
A Revolving Credit Note
B. Form of Compliance Certificate
LIST OF SCHEDULES
EXHIBIT B
COMPLIANCE CERTIFICATE
THIS CERTIFICATE is made as of , 2012, by RAND WORLDWIDE, INC., a
corporation organized under the laws of the State of Delaware (the “Borrower Agent”), and
RAND A TECHNOLOGY CORPORATION, a corporation organized under the laws of the Province of Ontario
(the “Borrowers”), jointly and severally, to PNC BANK, NATIONAL ASSOCIATION, a national
banking association (the “Lender”), pursuant to Section 6.1.1 of the Financing and Security
Agreement dated February 2012, (as amended, modified, restated, substituted, extended
and renewed at any time and from time to time, the “Financing Agreement”) by and between
the Borrowers and the Lender.
I, , hereby certify that I am the of the Borrowers and am a
Responsible Officer (as that term is defined in the Financing Agreement) authorized to certify to
the Lender on behalf the Borrowers as follows:
This Certificate is given to induce the Lender to make advances to the Borrowers under the
Financing Agreement.
This Certificate accompanies the financial statements for the period ended
, 201 (the “Current Financials”) that the Borrowers is
furnishing to the Lender pursuant to Section 6.1.1 of the Financing Agreement. The Current
Financials have been prepared in accordance with GAAP (as that term is defined in the Financing
Agreement).
As required by Section 6.1.1 of the Financing Agreement, I have set forth on Schedule
1 to this Certificate a detailed computation of each financial covenant in Financing Agreement
and a cash flow projection report.
Also without implying any limitation on the foregoing, the Borrower(s) have not changed the
State or Province of their organization or organized under the laws of an additional State or
Province.
As of the date hereof, there exists no Default or Event of Default, as defined in the Article
7 of the Financing Agreement, nor any event that, upon notice or the lapse of time, or both, would
constitute such an Event of Default.
On the date hereof, the representations and warranties contained in Article 4 of the Financing
Agreement are true with the same effect as though such representations and warranties had been made
on the date hereof.
WITNESS my signature this day of , 201 .
Name:
Title:
TABLE OF CONTENTS
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| ARTICLE I DEFINITIONS |
Section 1.1
Section 1.2
Section 1.3
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Certain Defined Terms.
Accounting Terms and Other Definitional Provisions.
Interpretive Provisions. |
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| ARTICLE II THE CREDIT FACILITIES |
Section 2.1
2.1.1
2.1.2
2.1.3
2.1.4
2.1.5
2.1.6
2.1.7
2.1.8
Section 2.2
Section 2.3
2.3.1
2.3.2
2.3.3
2.3.4
2.3.5
2.3.6
2.3.7
Section 2.4
2.4.1
2.4.2
2.4.3
2.4.4
2.4.5
Section 2.5
2.5.1
2.5.2
2.5.3
2.5.4
2.5.5
2.5.6
2.5.7
2.5.8
2.5.9
2.5.10
2.5.11
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The Revolving Credit Facility.
Revolving Credit Facility.
Procedure for Making Advances Under the Revolving Loan; Lender Protection Loans.
Computation of Borrowing Base.
Borrowing Base Report.
Revolving Credit Note.
Prepayments of Revolving Loan.
Revolving Credit Unused Line Fee.
Required Availability.
Reserved.
The Letter of Credit Facility.
Letters of Credit.
Letter of Credit Fees.
Terms of Letters of Credit.
Procedures for Letters of Credit.
Payments of Letters of Credit.
Change in Law; Increased Cost.
General Letter of Credit Provisions.
Interest.
Applicable Interest Rates.
Payment of Interest.
Field Examination Fees.
Computation of Interest and Fees.
Maximum Interest Rate.
General Financing Provisions.
Borrowers’ Representatives.
Use of Proceeds of the Loans.
Payments.
Computation of Interest and Fees.
Maximum Interest Rate.
Liens; Setoff.
Requirements of Law.
[Intentionally Omitted].
Prepayment on Certain Events.
PATRIOT Act Notice.
Guaranty. |
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| ARTICLE III THE COLLATERAL |
Section 3.1
Section 3.2
Section 3.3
Section 3.4
3.4.1
3.4.2
Section 3.5
Section 3.6
Section 3.7
Section 3.8
Section 3.9
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Debt and Obligations Secured.
Grant of Liens.
[Intentionally Omitted].
Personal Property.
Investment Property, Chattel Paper, Promissory Notes, etc.
Intellectual Property.
Record Searches.
Costs.
Release.
Canadian Attachment.
Inconsistent Provisions. |
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| ARTICLE IV REPRESENTATIONS AND WARRANTIES |
Section 4.1
4.1.1
4.1.2
4.1.3
4.1.4
4.1.5
4.1.6
4.1.7
4.1.8
4.1.9
4.1.10
4.1.11
4.1.12
4.1.13
4.1.14
4.1.15
4.1.16
4.1.17
4.1.18
4.1.19
4.1.20
4.1.21
4.1.22
4.1.23
4.1.24
4.1.25
4.1.26
4.1.27
Section 4.2
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Representations and Warranties.
Subsidiaries.
Good Standing.
Power and Authority.
Binding Agreements.
No Conflicts.
No Defaults, Violations.
Compliance with Laws.
Margin Stock.
Investment Company Act; Margin Securities.
Intellectual Property.
Litigation.
Financial Condition.
Full Disclosure.
Indebtedness for Borrowed Money.
Subordinated Debt.
Taxes.
ERISA.
Title to Properties.
Employee Relations.
OFAC Matters.
Perfection and Priority of Collateral.
Places of Business and Location of Collateral.
Business Information.
Equipment.
[Intentionally Omitted].
Accounts.
Compliance with Eligibility Standards.
Survival; Updates of Representations and Warranties. |
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| ARTICLE V CONDITIONS PRECEDENT |
Section 5.1
5.1.1
5.1.2
5.1.3
5.1.4
5.1.5
5.1.6
5.1.7
5.1.8
5.1.9
5.1.10
5.1.11
5.1.12
5.1.13
5.1.14
5.1.15
Section 5.2
5.2.1
5.2.2
5.2.3
5.2.4
5.2.5
5.2.6
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Conditions to the Initial Advance.
Organizational Documents — Borrower.
Organizational Documents — Corporate Guarantor.
Opinion of Borrowers’ and U.S. Guarantors’ Counsel.
Consents, Licenses, Approvals, Etc.
Notes.
Guaranties.
Financing Documents and Collateral.
Other Financing Documents.
Other Documents, Etc.
Payment of Fees.
Recordings and Filings.
Insurance Certificate.
Landlord’s Waiver.
[Intentionally Omitted].
Subordination Agreement.
Conditions to all Extensions of Credit.
Compliance.
Borrowing Base.
Default.
Representations and Warranties.
Adverse Change.
Legal Matters. |
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| ARTICLE VI COVENANTS OF THE BORROWERS |
Section 6.1
6.1.1
6.1.2
6.1.3
6.1.4
6.1.5
6.1.6
6.1.7
6.1.8
6.1.9
6.1.10
6.1.11
6.1.12
6.1.13
6.1.14
6.1.15
6.1.16
6.1.17
6.1.18
6.1.19
6.1.20
6.1.21
6.1.22
6.1.23
6.1.24
6.1.25
6.1.26
6.1.27
6.1.28
Section 6.2
6.2.1
6.2.2
6.2.3
6.2.4
6.2.5
6.2.6
6.2.7
6.2.8
6.2.9
6.2.10
6.2.11
6.2.12
6.2.13
6.2.14
6.2.15
6.2.16
6.2.17
6.2.18
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Affirmative Covenants.
Financial Statements.
Reports to SEC and to Stockholders.
Recordkeeping, Rights of Inspection, Field Examination, Etc.
Entity Existence.
Compliance with Laws.
Preservation of Properties.
Line of Business.
Insurance.
Taxes.
ERISA.
Notification of Events of Default and Adverse Developments.
Disclosure of Significant Transactions.
Financial Covenants.
Collection of Receivables.
Assignments of Receivables.
Government Accounts.
Notices Related to Intellectual Property.
Notice of Returned Goods, etc.
Notice of Commercial Tort Claims.
[Intentionally Omitted].
Insurance With Respect to Equipment.
Maintenance of the Collateral.
Equipment.
Further Assurances; Defense of Title.
Business Information.
[Intentionally Omitted].
Use of Premises and Equipment.
Protection of Collateral.
Negative Covenants.
Capital Structure, Merger, Acquisition or Sale of Assets.
Subsidiaries.
[Intentionally Omitted].
Purchase or Redemption of Securities, Dividend Restrictions.
Indebtedness.
Investments, Loans and Other Transactions.
Stock of Subsidiaries.
Subordinated Indebtedness.
Liens.
Transactions with Affiliates.
Other Businesses.
ERISA Compliance.
Amendments.
Method of Accounting; Fiscal Year.
Compensation.
Transfer of Collateral.
Sale and Leaseback.
Disposition of Collateral. |
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| ARTICLE VII DEFAULT AND RIGHTS AND REMEDIES |
Section 7.1
7.1.1
7.1.2
7.1.3
7.1.4
7.1.5
7.1.6
7.1.7
7.1.8
7.1.9
7.1.10
7.1.11
7.1.12
7.1.13
Section 7.2
7.2.1
7.2.2
7.2.3
7.2.4
7.2.5
7.2.6
7.2.7
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Events of Default.
Failure to Pay.
Breach of Representations and Warranties.
Failure to Comply with Covenants.
Default Under Other Financing Documents or Obligations.
Receiver; Bankruptcy.
Involuntary Bankruptcy, etc.
Judgment.
Execution; Attachment.
Default Under Other Borrowings.
Challenge to Agreements.
Material Adverse Effect.
Change in Ownership.
Liquidation, Termination, Dissolution, Change in Management, etc.
Remedies.
Acceleration.
Further Advances.
Uniform Commercial Code.
Specific Rights With Regard to Collateral.
Application of Proceeds.
Performance by Lender.
Other Remedies. |
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| ARTICLE VIII MISCELLANEOUS |
Section 8.1
Section 8.2
8.2.1
Section 8.3
Section 8.4
Section 8.5
Section 8.6
Section 8.7
Section 8.8
Section 8.9
8.9.1
8.9.2
8.9.3
8.9.4
Section 8.10
Section 8.11
Section 8.12
Section 8.13
Section 8.14
Section 8.15
Section 8.16
Section 8.17
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Notices.
Amendments; Waivers.
In General.
Cumulative Remedies.
Severability.
Assignments by Lender.
Successors and Assigns.
Continuing Agreements.
Enforcement Costs.
Applicable Law; Jurisdiction.
Applicable Law.
Submission to Jurisdiction.
Appointment of Agent for Service of Process.
Service of Process.
Limitation on Liability of Foreign Borrower.
Duplicate Originals and Counterparts.
No Agency.
Date of Payment.
Entire Agreement.
Waiver of Trial by Jury.
Liability of the Lender.
Indemnification. |
LIST OF SCHEDULES
FINANCING AND SECURITY AGREEMENT
Dated
February 28, 2012
By and Between
RAND WORLDWIDE, INC.
RAND A TECHNOLOGY CORPORATION
And
PNC BANK, NATIONAL ASSOCIATION
4
Committed Line of Credit Note
Working Cash®, Line of
Credit,