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Exhibit
10.7
LOAN
AGREEMENT
BY
AND BETWEEN
SOUTHPEAK
INTERACTIVE, L.L.C.,
SOUTHPEAK
INTERACTIVE LIMITED
AND
SUNTRUST
BANK
December
16, 2005
LOAN
AGREEMENT
THIS
AGREEMENT, made, entered into and effective as of
December 16, 2005, by and between SOUTHPEAK INTERACTIVE,
L.L.C., a Virginia limited liability company
(“SouthPeak”), SOUTHPEAK INTERACTIVE LIMITED, a
United Kingdom limited company (“SouthPeak-UK”),
jointly and severally (SouthPeak and SouthPeak-UK shall be
referred to herein collectively or individually, whether one
or more in number, as the “Borrower”), and
SUNTRUST BANK (the “Lender”), recites and provides
as follows:
WITNESSETH:
WHEREAS,
Borrower has applied to Lender for financing more particularly
described hereinbelow; and
WHEREAS,
Lender is willing to extend financing to Borrower in
accordance with the terms hereof upon the execution of this
Agreement by Borrower, compliance by Borrower with all of the
terms and provisions of this Agreement and fulfillment of all
conditions precedent to Lender’s obligations herein
contained;
NOW,
THEREFORE, to induce Lender to extend the financing provided
for herein, and for other good and valuable consideration, the
sufficiency and receipt of all of which are acknowledged by
Borrower, Lender and Borrower agree as follows:
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1.
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DEFINITIONS,
TERMS AND REFERENCES
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1.1
Certain
Definitions . In
addition to such other terms as elsewhere defined herein, as
used in this Agreement, in any Exhibits and in any
Supplements, the following terms shall have the following
meanings:
“
Account
Debtor ”
means any Person who is or may become obligated to the
Borrower under or on an account as defined in the
UCC.
“
Advance
”
shall mean an advance of borrowed funds made by Lender to or
on behalf of Borrower under the Revolving Note.
“
Affiliate
”
shall mean, with respect to any Person, any Person
Controlling, Controlled by or under common Control with such
Person or any director, officer, member, manager or employee
of such Person. For purposes hereof, each Guarantor, Manager
and Subsidiary shall at all times be considered an
“Affiliate” of Borrower.
“
Agreement
”
shall mean this Loan Agreement, as it may be amended or
supplemented from time to time.
“
Applicable
Rate ”
shall mean the Prime Rate plus one-half percent (½%)
per annum.
“
Bankruptcy
Code ”
shall mean Title 11 of the United States Code, as it may be
amended from time to time.
“
Borrower
”
shall have the meaning given to such term in the preamble to
this Agreement.
“
Borrowings
”
shall mean advances of borrowed funds made hereunder to or on
behalf of Borrower.
“
Business
Day ”
shall mean a day on which Lender is open for the conduct of
banking business at its office in the City of Richmond,
Virginia.
“
Capital
Expenditures ”
shall mean all expenditures made in respect of the cost of any
fixed asset or improvement, or replacement, substitution, or
addition thereto, having a useful life of more than one (1)
year, including, without limitation, those arising in
connection with the direct or indirect acquisition of such
assets by way of increased product or service charges or
offset items or in connection with Capital
Leases.
“
Capital
Lease ”
shall mean any lease of property that, in accordance with
GAAP, should be reflected as a liability on the balance sheet
of a Person.
“
Cash
Collateral Account ”
means that certain deposit account number ____________________
held by Lender in the name of SouthPeak into which all
proceeds of SouthPeak’s Accounts
(as defined in the Security Agreements) are
deposited in accordance with Section 4.8.1.
hereof.
“
Closing
Date ”
shall mean the date indicated on the first page.
“
Collateral
”
shall
mean the property described in the Security
Agreements.
“
Consolidated
Subsidiaries ”
shall mean: (i) those Subsidiaries of Borrower (if any)
existing from time to time which, for purposes of GAAP, are
required to be consolidated with the Borrower for financial
reporting purposes; and (ii) those Subsidiaries of Borrower
(if any) organized under the laws of any foreign jurisdiction
and existing from time to time which, if such Subsidiary were
a U.S. entity, would be required to be consolidated with the
Borrower for financial reporting purposes under
GAAP.
“
Control
”,
“ Controlled
”
or “ Controlling
”
shall mean, with respect to any Person, the power to direct
the management and policies of such Person, directly,
indirectly, whether through the ownership of voting rights or
otherwise; provided, however, that, with respect to a business
entity, any Person which owns directly or indirectly ten
percent (10%) or more of the voting rights of such entity or
of the rights to elect the management of such entity shall be
deemed to “Control” such business entity for
purposes of this Agreement.
“
Debt
”
shall mean all liabilities, obligations and indebtedness of a
Person, of any kind or nature, whether now or hereafter owing,
arising, due or payable, howsoever evidenced, created,
incurred, acquired or owing, and whether primary, secondary,
direct, contingent, fixed or otherwise, including, without in
any way limiting the generality of the foregoing: (i) all
obligations, liabilities and indebtedness secured by any Lien
on a Person’s property, even though such Person shall
not have assumed or become liable for the payment thereof;
(ii) all obligations or liabilities created or arising under
any Capital Lease, conditional sale or other title retention
agreement; (iii) all accrued pension fund and other employee
benefit plan obligations and liabilities; (iv) all guaranteed
obligations; (v) any liabilities under, or associated with,
interest rate protection agreements; and (vi) all deferred
taxes.
“
Default
Condition ”
shall mean the occurrence of any event which, after
satisfaction of any requirement for the giving of notice or
the lapse of time, or both, would become an Event of
Default.
“
Default
Rate ”
shall mean that interest rate that is the lesser of (i) the
Applicable Rate plus 4.00% per annum or (ii) the maximum rate
allowed by law.
“
Eligible Receivables
”
shall mean such Accounts (as defined in the Security
Agreements) of SouthPeak to the extent that they conform and
continue to conform to the following criteria to the
satisfaction of Lender:
(i)
the
Account arose from a bona fide outright sale of goods or
provision of services by SouthPeak, and such goods or services
have been delivered to the appropriate account debtor or its
respective designees, SouthPeak has in its possession shipping
and delivery receipts evidencing such shipment and delivery,
no return, rejection or repossession has occurred and such
goods or services have been finally accepted by the account
debtor;
(ii)
the
Account is based upon an enforceable written order or contract
for goods delivered or services rendered and the same were
shipped, held, or performed in accordance with such order or
contract;
(iii)
the
title of SouthPeak to the Account and, except as to the
account debtor and any creditor which finances the account
debtor’s purchase of such goods, to any goods is
absolute and is not subject to any prior assignment, claim or
Lien, and SouthPeak otherwise has the full and unqualified
right and power to assign and grant a security interest in it
to Lender;
(iv)
the
amount shown on the books of SouthPeak and on any invoice,
certificate, schedule or statement delivered to Lender is
owing to SouthPeak and no partial payment has been received
unless reflected on such invoice, certificate, schedule or
statement;
(v)
the
Account is not subject to any claim of reduction,
counterclaim, set-off, recoupment, or other defense in law or
equity, or any claim for credits, allowances, or adjustments
by the account debtor because of returned, inferior, or
damaged goods, unsatisfactory services or for any other
reason;
(vi)
the
account debtor has not returned or refused to retain, or
otherwise notified SouthPeak of any dispute concerning, or
claimed nonconformity of, any of the goods or services from
the sale of which the Account arose;
(vii)
the
Account is not outstanding more than ninety (90) days from the
date of the invoice therefor;
(viii)
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 by SouthPeak to Lender of the
Account arising with respect thereto;
(ix)
SouthPeak
has not received any note, trade acceptance draft or other
instrument with respect to, or in payment of, the Account,
unless, if any such instrument has been received, SouthPeak
immediately notified Lender and, at the latter’s
request, endorsed or assigned and delivered the same to
Lender;
(x)
SouthPeak
has not received any written notice of dissolution,
termination of existence, insolvency, business failure,
appointment of a receiver for any part of the property of,
assignment for the benefit of creditors by, or the filing of a
petition in bankruptcy or the commencement of any proceeding
under any bankruptcy or insolvency laws by or against, the
account debtor;
(xi)
the
account debtor is not an Affiliate, Subsidiary, employee,
officer director or shareholder of SouthPeak;
(xii)
the
account debtor is not incorporated in or primarily conducting
business in any jurisdiction located outside of the United
States of America, unless consented to in advance by Lender,
and has its principal place of business located in either the
United States of America or Canada;
(xiii)
SouthPeak
is not indebted in any manner to the account debtor, with the
exception of customary credits, adjustments and/or discounts
given to an account debtor by SouthPeak in the ordinary course
of its business, and the account is not otherwise subject to
risk of set-off;
(xiv)
the
Accounts of any single account debtor of SouthPeak (together
with the Accounts of all Affiliates of such account debtor)
shall be eligible only to the extent that they do not exceed
thirty-five percent (35%) of the total Accounts of
SouthPeak;
(xv)
no
Accounts of an account debtor shall be eligible if more than
thirty-five percent (35%) of such account debtor’s
Accounts are outstanding
more than ninety (90) days from the date of the invoice
therefor;
(xvi)
the
account debtor is not a supplier of SouthPeak;
and
(xvii)
the
Account is not a contra account.
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 Lender in the exercise of its
reasonable discretion shall control. Lender may determine, on
a daily basis, whether any Account constitutes an Eligible
Receivable, and if an Eligible Receivable subsequently becomes
ineligible its ineligibility shall be immediate.
“
Employee
Benefit Plan ”
shall mean any employee welfare benefit plan as that term is
defined in Section 3(1) of ERISA, any employee pension benefit
plan, as that term is defined in Section 3(2) of ERISA or any
other plan which is subject to the provisions of Title IV of
ERISA or which is for the benefit of any employees of Borrower
and any employees of any Subsidiary or any other entity which
is a member of a controlled group or under common control with
Borrower, as such terms are defined in Section 4001(a)(14) of
ERISA.
“
Environmental
Laws ”
shall mean all federal, state, local and foreign laws, rules,
regulations, ordinances, programs, permits, guidances, orders
and consent decrees relating to health, safety and
environmental matters, whether now or hereafter existing,
including, but not limited to state and federal superlien and
environmental cleanup laws and U.S. Department of
Transportation regulations and any other state or local law or
regulation relating to pollution, reclamation, or protection
of the environment, including laws relating to emissions,
discharges, releases or threatened releases of pollutants,
contaminants, or hazardous or toxic materials or wastes into
air, water, or land, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants or
hazardous or toxic materials or wastes.
“
ERISA
”
shall mean the Employee Retirement Income Security Act of
1974, as may be amended from time to time.
“
Event
of Default ”
shall mean any of the events or conditions described in
Section 7, provided that any requirement for the giving of
notice or the lapse of time, or both, has been
satisfied.
“
Executive
Office ”
shall mean the address of SouthPeak designated as such
on Exhibit
“A” .
“
Financial
Contract ”
shall mean (a) an agreement (including terms and conditions
incorporated by reference therein) which is a rate swap
agreement, basis swap, forward rate agreement, commodity swap,
commodity option, equity or equity index swap, bond option,
interest rate option, foreign exchange agreement, rate cap
agreement, rate floor agreement, rate collar agreement,
currency swap agreement, cross-currency rate swap agreement,
currency option, any other similar agreement (including any
option to enter into any of the foregoing; (b) any combination
of the foregoing; or (c) a master agreement for any of the
foregoing together with all supplements.
“
Fiscal
Year ”,
in respect of a Person, shall mean the fiscal year of such
Person employed by such Person as of the Closing Date, and
designated as such on Exhibit
“A” as to
Borrower. The term “ Fiscal
Quarter ”
shall correspond accordingly thereto.
“
GAAP
”
shall mean generally accepted accounting principles
consistently applied for the period or periods in
question.
“
Guarantees
”
shall mean the Guaranty Agreements dated of even date herewith
executed in connection with the Loan by the Guarantors,
together with any amendments, modifications, extensions,
renewals or substitutions thereof.
“
Guarantors
”
shall mean, collectively: (i) Terry M. Phillips and
Cathy S. Phillips; (ii) Gregory R. Phillips and
Susan M. Phillips; (iii) Terry Phillips Sales, Inc., a
Virginia corporation; (iv) Phillips Land, L.C., a Virginia
limited liability company; and (v) Capitol Distributing, LLC,
a Virginia limited liability company.
“
Lender
”
shall mean SunTrust Bank, its subsidiaries, affiliates,
successors and assigns.
“
Lien
”
shall mean any deed to secure debt, deed of trust, mortgage or
similar instrument, and any lien, security interest,
preferential arrangement which has the practical effect of
constituting a security interest, security title, pledge,
charge, encumbrance or servitude of any kind, whether by
consensual agreement or by operation of statute or other law,
and whether voluntary or involuntary, including, without
limitation, any conditional sale or other title retention
agreement or lease in the nature thereof.
“
Loan
”
shall mean the Revolving Loan.
“
Loan
Administration Fee ”
shall have the meaning set forth in Section
2.2.2.
“
Loan
Documents ”
shall mean this Agreement, the Revolving Note, the Security
Agreements, the Guarantees and the Security Agreements of even
date herewith executed by each of the Guarantors, any
Financial Contract, and any and all other documents,
instruments, certificates, commitment letters, deeds of trust,
security agreements, guaranty agreements, landlords’
lien waivers, and any and all other agreements executed and/or
delivered by Borrower or any Guarantor in connection herewith,
or any one, more, or all of the foregoing, as the context
shall require, together with all amendments, modifications,
replacements, substitutions and extensions
thereof.
“
Manager(s)
”
shall mean the Person(s) designated as such on
Exhibit
“A” attached
hereto.
“
Material
Adverse Effect ”
shall mean with respect to any event, act, condition or
occurrence of whatever nature (including any adverse
determination in any litigation, arbitration or governmental
investigation or proceeding), whether singly or in conjunction
with any other event or events, act or acts, condition or
conditions, occurrence or occurrences, whether or not related,
a material adverse change in, or a material adverse effect
upon any of (a) the financial condition, operations, business,
properties or prospects of the Borrower and its Consolidated
Subsidiaries taken as a whole, (b) the rights and remedies of
the Lender under any of the Loan Documents or any documents,
instruments or agreements executed and/or delivered by any
Person other than Borrower in conjunction with the Loan
Documents, or the ability of the Borrower to perform its
obligations under any of the Loan Documents or (c) the
legality, validity or enforceability of any of the Loan
Documents or any documents, instruments or agreements executed
and/or delivered by any Person other than Borrower in
conjunction with the Loan Documents.
“
Member(s)
”
shall mean the Person(s) designated as such on
Exhibit
“A” attached
hereto.
“
Note
”
shall mean the Revolving Note.
“
Obligations
”
shall mean any and all Debt of Borrower to Lender, including
without limiting the generality of the foregoing, any
indebtedness, liability or obligation, now existing or
hereafter arising, due or to become due, absolute or
contingent, of Borrower to Lender under any Loan Document or
under any Financial Contract, and any and all extensions or
renewals thereof in whole or in part; any Debt of Borrower to
Lender arising hereunder or as a result hereof, whether
evidenced by the Revolving Note, or otherwise, and any and all
extensions or renewals thereof in whole or in part; any Debt
of Borrower to Lender under any later or future advances or
loans made by Lender to Borrower, and any and all extensions
or renewals thereof in whole or in part; and any and all
future or additional Debt of Borrower to Lender whatsoever and
in any event, whether existing as of the date hereof or
hereafter arising, whether arising under a loan, lease, credit
card arrangement, line of credit, letter of credit or other
type of financing, and whether direct, indirect, absolute or
contingent, as maker, endorser, guarantor, surety or
otherwise, and whether evidenced by, arising out of, or
relating to, a promissory note, bill of exchange, check,
draft, bond, letter of credit, guaranty agreement,
bankers’ acceptance, foreign exchange contract, interest
rate protection agreement, commitment fee, service charge or
otherwise.
“
Payment(s)
”
shall mean any check, note, draft, bill of exchange,
acceptance, money order, legal tender or other form of payment
or evidence of indebtedness in total or partial payment of the
amount due on any Account or other Collateral.
“
Permitted
Encumbrances ”
shall mean: (i) Liens for taxes not yet due and payable or
being actively contested as permitted by this Agreement, only
if such Liens do not adversely affect Lender’s rights or
the priority of Lender’s security interest in the
Collateral; (ii) carriers’, warehousemen’s
mechanics, materialmen’s, repairmen’s or other
like Liens arising in the ordinary course of business, payment
for which is not yet due or which are being actively contested
in good faith and by appropriate, lawful proceedings, but only
if such Liens are and remain junior to Liens granted in favor
of Lender; (iii) pledges or deposits in connection with
worker’s compensation, unemployment insurance and other
social security legislation; (iv) deposits to secure the
performance of utilities, leases, statutory obligations and
surety and appeal bonds and other obligations of a like nature
arising by statute or under customary terms regarding
depository relationships on deposits held by financial
institutions with whom Borrower has a banker-customer
relationship; (v) typical restrictions imposed by licenses and
leases of software (including location and transfer
restrictions); (vi) Liens set forth on Exhibit
“A” and
approved by the Lender in its sole discretion; (vii) statutory
Liens against the Collateral in favor of any landlords of
Borrower, which liens have been satisfactorily subordinated to
the Lender; and (viii) Liens in favor of the
Lender.
“
Person
”
shall mean any individual, partnership, corporation, limited
liability company, joint venture, joint stock company, trust,
governmental unit or other entity.
“
Prime
Rate ”
shall mean that interest rate so denominated and set by Lender
from time to time as an interest rate basis for borrowings.
The Prime Rate is but one of several interest rate bases used
by Lender. Lender extends credit at interest rates above and
below the Prime Rate.
“
Related
Loan Agreements ”
shall mean: (i) that certain
Loan Agreement dated September 13, 2004, by and among
Lender and Terry M. Phillips and Cathy S. Phillips; (ii)
that certain Loan Agreement dated September 13, 2004, by and
among Lender and Gregory R. Phillips and Susan M.
Phillips; and (iii) that
certain
Loan Agreement dated September 13, 2004, by and between Lender
and Terry Phillips Sales, Inc.
“
Revolving
Loan ”
shall mean that certain extension of credit from Lender to
Borrower for general corporate and working capital purposes,
in the maximum principal amount of Five Million and No/100
Dollars ($5,000,000.00), evidenced by the Revolving Note, all
as more particularly described in the Loan
Documents.
“
Revolving
Note ”
shall mean the promissory note, dated of even date herewith,
as amended or supplemented from time to time, in the original
principal amount of Five Million and No/100 Dollars
($5,000,000.00), evidencing the Borrower’s obligation to
repay to the Lender the Revolving Loan, together with interest
together with any renewals, modifications or extensions
thereof, in whole or in part.
“
Security
Agreements ”
means (i) the one or more Security Agreements by the Borrower
encumbering the assets of the Borrower as therein provided and
the proceeds thereof as security for the Obligations; and (ii)
any subsequent Security Agreement executed in favor of Lender
pursuant to Section 4.17.
“
Subordinated
Debt ”
shall mean any Debt of the Borrower, any Guarantor or any
Subsidiary to any Person which, by written agreement in form
and substance satisfactory to Lender, has been subordinated in
right of payment and claim, to the rights and claims of Lender
in respect of the Obligations, on terms and conditions
satisfactory to Lender.
“
Subsidiary
”
shall mean any corporation, partnership, business association
or other entity (including any Subsidiary of any of the
foregoing) of which Borrower owns, directly or indirectly,
fifty percent (50%) or more of the capital stock or equity
interest having ordinary power for the election of directors,
managers or others performing similar functions.
“
Termination
Date ”
shall mean, with respect to the Revolving Loan, the earliest
to occur of the following dates: (i) that date on which,
pursuant to Section 7, Lender terminates the Revolving Loan
(or the Revolving Loan is deemed automatically terminated)
subsequent to the occurrence of an Event of Default; or (ii)
November 30, 2006, or such later date as to which Lender may
agree in writing from time to time hereafter.
“
UCC
”
shall mean the Uniform Commercial Code of Virginia, as amended
or modified from time to time.
1.2
Use
of Defined Terms . All
terms defined in this Agreement and the Exhibits shall have
the same defined meanings when used in any other Loan
Documents, unless the context shall require
otherwise.
1.3
Accounting
Terms . All
accounting terms not specifically defined herein shall have
the meanings generally attributed to such terms under
GAAP.
1.4
UCC
Terms . The
terms “accounts”, “chattel paper”,
“deposit account”, “instruments”,
“general intangibles”, “inventory”,
“equipment” and “fixtures”, as and
when used in the Loan Documents, shall have the same meanings
given such terms under the UCC unless the context shall
require otherwise.
1.5
Terminology
. All
personal pronouns used in this Agreement, whether used in the
masculine, feminine or neuter gender, shall include all other
genders; the singular shall include the plural, and the plural
shall include the singular. Titles of Articles and Sections in
this Agreement are for convenience only, and neither limit nor
amplify the provisions of this Agreement, and all references
in this Agreement to Articles, Sections, Subsections,
paragraphs, clauses, subclauses, Exhibits or Supplements shall
refer to the corresponding Article, Section, Subsection,
paragraph, clause, subclause of, or Exhibit or Supplement
attached to, this Agreement, unless specific reference is made
to the articles, sections or other subdivisions of, or Exhibit
or Supplement to, another document or instrument. Wherever in
this Agreement reference is made to any instrument, agreement
or other document, including, without limitation, any of the
Loan Documents, such reference shall be understood to mean and
include any and all amendments thereto or modifications,
restatements, renewals or extensions thereof. Wherever in this
Agreement reference is made to any statute, such reference
shall be understood to mean and include any and all amendments
thereof and all regulations promulgated pursuant thereto.
Whenever any matter set forth herein or in any Loan Document
is to be consented to or satisfactory to Lender, or is to be
determined, calculated or approved by Lender, then, unless
otherwise expressly set forth herein or in any such Loan
Document, such consent, satisfaction, determination,
calculation or approval shall be in Lender’s sole
discretion, and shall be conclusive absent manifest
error.
1.6
Exhibits
. All
Exhibits attached hereto are by reference made a part
hereof.
2.
THE
FINANCING .
2.1
Revolving
Loan . On
the Closing Date, subject to fulfillment of all conditions
precedent set forth in Section 10 and any other conditions
contained in the Loan Documents, Lender agrees to extend the
Revolving Loan to Borrower so that, during the period from the
Closing Date to, but not including, the Termination Date, so
long as there is not in existence any Default Condition or
Event of Default and the borrowing will not cause a Default
Condition or Event of Default to exist, Borrower may borrow
and repay and reborrow Advances up to a maximum aggregate
principal amount outstanding at any one time equal to the
original principal amount of the Revolving Note. All proceeds
so obtained under the Revolving Loan may be used by Borrower
for general corporate and working capital purposes, in such
manner as Borrower may elect in the ordinary course of its
business operations. The Debts arising from Advances made to
or on behalf of Borrower under the Revolving Loan shall be
evidenced by the Revolving Note, which shall be executed by
Borrower and delivered to Lender on the Closing Date. The
outstanding principal amount of the Revolving Note may
fluctuate from time to time, but shall be due and payable in
full on the Termination Date, and each Advance thereunder
shall bear interest from the date of such Advance until paid
in full at the Applicable Rate.
2.1.1
Advances
. After
the Closing Date, Advances under the Revolving Loan shall be
made on the following terms and conditions:
(a)
SouthPeak
shall make each request for a Revolving Loan (“Advance
Request”) to Lender (or to Lender’s agent) before
11:00 a.m. on the Business Day prior
to the
date of the requested Advance; provided
,
however, that SouthPeak shall not be permitted to make more
than one (1) Advance Request per week. Advance Requests must
be made in writing, specifying the date of the requested
Advance and the amount thereof. Each request shall be signed
by (i) the manager of SouthPeak or (ii) any person designated
as SouthPeak’s agent by the manager of SouthPeak in a
writing delivered to Lender or (iii) any person whom Lender
reasonably believes to be the manager of SouthPeak or such a
designated agent, and shall be accompanied by a current
Borrowing Base Certificate (hereinafter defined).
(b)
On a
daily basis, Lender shall debit the Cash Collateral Account
and apply the amount of collected funds in the Cash Collateral
Account to the reduction of the aggregate principal amount
outstanding under the Revolving Loan. All principal and
accrued interest and fees shall be due and payable on the
Termination Date and to the extent that the collected funds in
the Cash Collateral Account (or the Lockbox in accordance with
Section 4.8.1) are insufficient to make such payments,
SouthPeak shall be obligated to make such
payments.
(c)
The
Borrower’s obligation to pay the principal of, and
interest on, the Revolving Loan shall be evidenced by the
records of Lender and by the Revolving Note. The entries made
in such records and/or on the schedule annexed to the
Revolving Note shall be prima
facie evidence
of the existence and amounts of the obligations of the
Borrower therein recorded;
provided
, that
the failure or delay of Lender in maintaining or making
entries into any such record or on such schedule or any error
therein shall not in any manner affect the obligation of the
Borrower to repay the Revolving Loan in accordance with the
terms of this Agreement.
(d)
Lender
shall send Borrower a monthly statement of Borrower’s
loan account showing all debits and credits and which shall
also reflect the interest accrued on the Revolving Loan, the
Loan Administration Fee for the immediately preceding month
and any other fees due hereunder. The interest and fees shall
be added by Lender to Borrower’s loan account on the
last Business Day of each calendar month and shall be deemed
to be first paid from Payments subsequently credited to the
Cash Collateral Account. The statement of the loan account
shall be deemed correct and accepted by and conclusively
binding upon Borrower unless Borrower notifies Lender in
writing specifically as to a particular discrepancy within
forty-five (45) days from the mailing of such
statement.
2.1.2
Limitations
on Revolving Loan .
Notwithstanding anything contained in this Agreement to the
contrary, including, without limitation, the provisions of the
foregoing Section 2.1.1, the
aggregate outstanding principal balance of Advances under the
Revolving Loan (the “Total Outstandings”) at any
one time shall not exceed the lesser of (a) the original
principal amount of the Revolving Note, or (b) the Borrowing
Base (hereinafter defined). In the event that the Total
Outstandings at any time exceeds the Borrowing Base, Borrower
shall pay to Lender the amount of such excess within three (3)
business days of receipt by Borrower of written notice of such
excess from Lender. For purposes of this Agreement, the term
“Borrowing Base” shall mean (i) from the date
hereof until and including December 31, 2005, seventy-five
percent (75%) of the net amount of Eligible Receivables, plus
$2,000,000.00; (ii) from and including January 1, 2006 until
and including March 31, 2006, seventy-five percent (75%) of
the net amount of Eligible Receivables, plus $1,500,000.00;
(iii) from and including April 1, 2006 until and including
April 30, 2006, seventy-five percent (75%) of the net amount
of Eligible Receivables, plus $750,000.00; and (iv) from and
including May 1, 2006 until and including the Termination
Date, seventy-five percent (75%) of the net amount of Eligible
Receivables.
2.2
Interest
and Other Charges .
2.2.1
Interest
at Applicable Rate . The
Revolving Loan shall bear interest on the outstanding
principal amount thereof at a rate per annum equal to the
Applicable Rate.
(a)
Payment
of Interest .
Accrued interest on each Borrowing at the Applicable Rate
shall be due and payable monthly in arrears, on the first day
of each calendar month, for the preceding calendar month (or
portion thereof), commencing on the first day of the first
calendar month following the Closing Date.
(b)
Calculation
of Interest and Fees .
Interest on each Borrowing at the Applicable Rate shall be
calculated on the basis of a 360-day year and actual days
elapsed.
(c)
Charging
Interest and Fees .
Accrued and unpaid interest on any Borrowings (and any
outstanding fees described in Section 2.2.2) may, when due and
payable, be paid, at Lender’s option (without any
obligation to do so), either (i) by Lender’s charging
the Revolving Note for an Advance in the amount thereof; or
(ii) by Lender’s debiting any deposit account of
Borrower for the amount thereof.
(d)
Rate
on Other Obligations . To
the extent that, at any time, there are other Obligations
besides Advances which are outstanding and unpaid, such
Obligations shall, unless any Note evidencing such Obligations
provides otherwise, bear interest at the Applicable
Rate.
2.2.2
Loan
Fees . In
addition to the payment of interest at the Applicable Rate,
Borrower shall also be obligated to pay Lender: (i) a fee
equal to the monthly average principal balance outstanding
under all of the Note for such month, multiplied by 0.125%,
due on a monthly basis in arrears and payable with each
regularly scheduled monthly interest payment under the Note
(the “Loan Administration Fee”), but in no event
shall the Loan Administration Fee be less than $1,500.00 per
month; and (ii) a one-time loan fee equal to $40,000.00, which
sum shall be due, payable and deemed earned on the Closing
Date.
2.2.3
Capital
Adequacy . If,
after the Closing Date, the adoption of any applicable law,
rule or regulation regarding capital adequacy, or any change
therein, or any change in the interpretation or administration
thereof by any governmental authority, central bank or
comparable agency charged with the administration thereof, or
compliance by Lender with any request or directive regarding
capital adequacy (whether or not having the force of law) of
any such authority, central bank or comparable agency, affects
or might affect the amount of capital required or expected to
be maintained by Lender or any corporation in control of
Lender and Lender determines that the amount of such capital
is increased by or based upon Lender’s obligations
hereunder, then from time to time, within thirty (30) days
after demand by Lender, Borrower shall pay to Lender such
additional amount or amounts as will compensate Lender in
light of such circumstances, to the extent that Lender
reasonably determines such increase in capital is allocable to
Lender’s obligations hereunder, and such payment, as and
when received, shall be applied by Lender in reimbursement of
Lender’s increased costs in regard to such
obligations.
2.2.4
Usury
Savings Provisions .
Lender and Borrower hereby further agree that the only charge
imposed by Lender upon Borrower for the use of money in
connection herewith is and shall be the interest expressed in
the Revolving Note at the rate set forth in the Revolving
Note, and that all other charges imposed by Lender upon
Borrower in connection herewith, are and shall be deemed to be
charges made to compensate Lender for underwriting and
administrative services and costs, and other services and
costs performed and incurred, and to be performed and
incurred, by Lender in connection with the Borrowings, and
shall under no circumstances be deemed to be charges for the
use of money. In no contingency or event whatsoever shall the
aggregate of all amounts deemed interest hereunder or under
the Revolving Note and charged or collected pursuant to the
terms of this Agreement or pursuant to the Revolving Note
exceed the highest rate permissible under any law which a
court of competent jurisdiction shall, in a final
determination, deem applicable hereto. In the event that such
a court determines that Lender has charged or received
interest hereunder in excess of the highest applicable rate,
the rate in effect hereunder shall automatically be reduced to
the maximum rate permitted by applicable law and Lender shall
promptly refund to Borrower any interest received by Lender in
excess of the maximum lawful rate or, if so requested by
Borrower, shall apply such excess to the principal balance of
the Obligations. It is the intent hereof that Borrower not pay
or contract to pay, and that Lender not receive or contract to
receive, directly or indirectly in any manner whatsoever,
interest in excess of that which may be paid by Borrower under
applicable law.
2.3
General
Provisions as to Payments .
2.3.1
Method
of Payment .
Unless paid in accordance with Section 2.2.1(c), all payments
of interest, fees and principal pursuant to this Agreement
must be received by Lender no later than 2:00 p.m. (Richmond,
Virginia time) on the date when due, in Federal or other funds
immediately available to Lender in Richmond,
Virginia.
2.3.2
Application
of Payment . All
payments received by Lender hereunder shall be applied, in
accordance with the then current billing statement applicable
to the Borrowing, first to accrued interest, then to fees,
then to
principal due
and then to
late charges .
Any
remaining funds shall be applied to the further reduction of
principal. In the event more than one Borrowing shall be
outstanding hereunder, Lender in its sole discretion may determine
which Borrowing(s) each payment shall be applied to.
Notwithstanding the foregoing, upon the occurrence of a Default
Condition or Event of Default, payments shall be applied as
determined by Lender in its sole discretion or as expressly
provided herein.
2.3.3
Late Charges
. If any portion of a payment is at least ten (10) days past due,
the Borrower agrees to pay a late charge of 5% of the amount which
is past due.
3.
GENERAL
REPRESENTATIONS AND WARRANTIES . In
order to induce Lender to enter into this Agreement, Borrower
hereby represents and warrants to Lender (which
representations and warranties, together with any other
representations and warranties of Borrower contained elsewhere
in this Agreement, shall be deemed to be renewed as of the
date of each Advance under the Revolving Note) as set forth
below:
3.1
Existence
and Qualification .
SouthPeak is a limited liability company duly organized,
validly existing and in good standing under the laws of the
Commonwealth of Virginia, with its principal place of
business, chief executive office and office where it keeps all
of its books and records being located at its Executive
Office. SouthPeak-UK is a limited company duly organized,
validly existing and in good standing under the laws of the
United Kingdom. Within thirty (30) calendar days from the date
hereof, Borrower shall be duly qualified as a foreign limited
liability company in good standing in each other state in
which a Collateral location is situated or wherein the conduct
of its business or the ownership of its property requires such
qualification. Each Borrower has as its company name, as
registered with the secretary of state of the state of its
organization or similar authority, the words first inscribed
hereinabove as its name, and, except as may be described
on Exhibit
“A” , has
not done business under any other name for at least the past
seven (7) years.
3.2
Authority;
Validity and Binding Effect .
Borrower has the power to make, deliver and perform under the
Loan Documents, and to borrow hereunder, and has taken all
necessary and appropriate action to authorize the execution,
delivery and performance of the Loan Documents. This Agreement
and the remainder of the Loan Documents constitute, the valid
obligations of Borrower, legally binding upon it and
enforceable against it in accordance with their respective
terms. The Borrower acknowledges that the Lender’s liens
and security interests in the Collateral have been duly
perfected as required by applicable law. No novation is
intended or to be implied. The Collateral shall secure the
Revolving Note and the other Obligations.
3.3
Incumbency
and Authority of Signing Parties . The
undersigned Manager(s) of Borrower hold the office(s)
specified hereinbelow and, in such capacity, are duly
authorized and empowered to execute, attest and deliver this
Agreement and the remainder of the Loan Documents for and on
behalf of Borrower, and to bind Borrower accordingly
thereby.
3.4
No
Material Litigation .
Except as may be set forth on Exhibit
“A” , there
are no legal proceedings pending (or, so far as Borrower or
its Manager(s) know, threatened), before any court or
administrative agency which, if adversely determined, could
reasonably be expected to materially and adversely affect the
financial condition or operations of Borrower.
3.5
Taxes
.
Borrower has filed or caused to be filed all tax returns
required to be filed by it and has paid all taxes shown to be
due and payable by it on said returns or on any assessments
made against it.
3.6
Collateral
Locations . Prior
to July 1, 2001, no portion of SouthPeak’s Collateral
has been located at any location other than
2900
Polo Parkway, Suite 200, Midlothian, Virginia 23113.
Thereafter, no portion of SouthPeak’s Collateral has
been located at any location other than those identified as
“Business Locations” on Exhibit
“A” attached
hereto.
3.7
Organization
. The
articles of organization of and operating agreement, or
similar charter or organizational documents, of Borrower are
in full force and effect under the law of the state or other
jurisdiction of its organization and all amendments to said
articles of organization, operating agreement and other
documents have been duly and properly made under and in
accordance with all applicable laws.
3.8
Insolvency
. After
giving effect to the execution and delivery of the Loan
Documents and the making of any disbursements under the
Revolving Note, Borrower will not be “insolvent”,
within the meaning of such term as used in Virginia Code
Section 8.1A-201(23) or as defined in Sec. 101(32) of the
Bankruptcy Code; or be unable to pay its debts generally as
such debts become due; or have an unreasonably small
capital.
3.9
Title
.
Borrower has good and marketable title to all of its
properties subject to no material Lien of any kind except as
otherwise disclosed in writing to Lender and as to the
Collateral, except for the Permitted
Encumbrances.
3.10
Margin
Stock .
Borrower is not engaged principally, or as one of its
important activities, in the business of purchasing or
carrying any “margin stock”, as that term is
defined in Section 221.2(h) of Regulation U of the Board of
Governors of the Federal Reserve System, and no part of the
proceeds of any borrowing made pursuant hereto will be used to
purchase or carry any such margin stock or to extend credit to
others for the purpose of purchasing or carrying any such
margin stock, or be used for any purpose which violates, or
which is inconsistent with, the provisions of Regulation X of
said Board of Governors. In connection herewith, if requested
by Lender, Borrower will furnish to Lender a statement in
conformity with the requirements of Federal Reserve Form U-1
referred to in said Regulation U to the foregoing
effect.
3.11
No
Violations . The
execution, delivery and performance by Borrower of this
Agreement and the Revolving Note have been duly authorized by
all necessary action and do not and will not require any
consent or approval of the members of Borrower, violate any
provision of any law, rule, regulation (including, without
limitation, Regulation X of the Board of Governors of the
Federal Reserve System), order, writ, judgment, injunction,
decree, determination or award presently in effect having
applicability to Borrower or of the charter, operating
agreement or similar organizational documents of Borrower, or
result in a breach of or constitute a default under any
indenture or loan or credit agreement or any other agreement,
lease or instrument to which Borrower is a party or by which
it or its properties may be bound or affected; and Borrower is
not in default under any such law, rule, regulation, order,
writ, judgment, injunction, decree, determination or award or
any such indenture, agreement, lease or
instrument.
3.12
Financial
Statements . The
financial statements of Borrower, the Guarantors and
Borrower’s Consolidated Subsidiaries (if any) for its
most recent Fiscal Year together with the financial statements
of Borrower, the Guarantors and Borrower’s Consolidated
Subsidiaries (if any) for that portion ended with its most
recent Fiscal Quarter of its current Fiscal Year, for which
statements have been prepared, copies of which heretofore have
been furnished to Lender, are complete and accurately and
fairly represent the financial condition of Borrower, the
Guarantors and Borrower’s Consolidated Subsidiaries (if
any), the results of its operations and the transactions in
its equity accounts as of the dates and for the periods
referred to therein, and have been prepared in accordance with
GAAP. There are no material liabilities, direct or indirect,
fixed or contingent, of Borrower, any Guarantor or any such
Consolidated Subsidiaries as of the date of such financial
statements which are not reflected therein or in the notes
thereto. No Material Adverse Effect has occurred since the
date of the balance sheet contained in financial statements
described hereinabove.
3.13
Purchase
of Collateral .
Except as disclosed on Exhibit
“A” ,
within the twelve (12) months period preceding the Closing
Date, neither Borrower nor any Subsidiary has purchased any of
the Collateral in a bulk transfer or in a transaction which
was outside the ordinary course of the business of
Borrower’s seller.
3.14
Pollution
and Environmental Control .
Borrower and each Subsidiary have obtained all permits,
licenses and other authorizations which are required under,
and is in material compliance with, all Environmental
Laws.
3.15
Possession
of Permits .
Borrower and each Subsidiary possess all franchises,
certificates, licenses, permits and other authorizations from
governmental political subdivisions or regulatory authorities,
and all patents, trademarks, service marks, trade names,
copyrights, licenses and other rights, free from burdensome
restrictions, that are necessary for the ownership,
maintenance and operation of any of its properties, assets and
Collateral, and Borrower is not in violation of any
thereof.
3.16
Subsidiaries
. As of
the Closing Date, Borrower has no Subsidiaries except as
described on Exhibit
“A” .
3.17
Federal
Taxpayer Identification Number .
SouthPeak’s federal taxpayer identification number is as
indicated on Exhibit
“A” .
3.18
Employee
Benefit Plans . As of
the Closing Date, Borrower has no Employee Benefit Plans
except as described on Exhibit
“A” .
4.
AFFIRMATIVE
COVENANTS .
Borrower
covenants to Lender that from and after the date hereof, and
so long as any amount remains unpaid on account of any of the
Obligations or this Agreement remains effective (whichever is
the last to occur), Borrower will comply (and cause each
Subsidiary to comply) with the affirmative covenants set forth
below:
4.1
Records
Respecting Collateral . All
records of SouthPeak with respect to the Collateral will be
kept at its Executive Office and will not be removed from such
address without the prior written
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