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AMENDED AND RESTATED
REVOLVING LINE OF CREDIT LOAN AGREEMENT
AND SECURITY AGREEMENT
THIS AMENDED AND RESTATED REVOLVING LINE OF CREDIT LOAN
AGREEMENT AND SECURITY AGREEMENT ("Agreement") is made as of
February 22, 2008, by and among Varsity Group Inc., a Delaware
corporation, Campus Outfitters Group, LLC, a Delaware limited
liability company, VarsityBooks.com, LLC, a Delaware limited
liability company and CollegeImpact.com, Inc., a Delaware
corporation, all having an address at 2677 Prosperity Avenue,
Fairfax, Virginia 20031 (collectively, the "Borrower"); and VGI
FINANCIAL CORP., a Delaware corporation (as assignee of Bank of
America, N.A., a national banking corporation), having an address
at 2233 West Street, River Grove, Illinois 60171-1895.
RECITALS
A. The Borrower and Bank of America, N.A. (the "Initial
Lender"), entered into that certain Revolving Line of Credit Loan
Agreement and Security Agreement dated as of March 8, 2007 (as
amended prior to the date hereof, the "Existing Loan
Agreement").
B. Effective as of the Effective Date, the Initial Lender has
sold and assigned to the Lender, and the Lender has purchased and
assumed from the Initial Lender, all of the Initial Lender's
interest in and to the Initial Lender's rights and obligations
under the Existing Loan Agreement, and as a condition thereto, the
Lender requires that the Borrower amend and restate the Existing
Loan Agreement on the terms and conditions hereinafter set
forth.
C. The Borrower is, and has been, in default under the terms and
conditions of the Loan Documents, the declaration and notice of
which by the Initial Lender is hereby acknowledged by the Borrower,
as a result of the Borrower's failure to maintain the Minimum
Tangible Net Worth required under Section 6.14 of the Existing Loan
Agreement and this Agreement (the "Existing Event of Default"). As
a result of such Existing Event of Default, the Lender has the
right to declare all principal, interest and other amounts owing
under the Loan Documents to be immediately due and payable. Except
as expressly provided in Section 2.1(b) of this Agreement, Lender
has not and is not presently waiving any rights or remedies in
enforcing any or all of Borrower's obligations under any of the
Loan Documents and any or all applicable provisions thereunder.
D. Except as expressly provided in Section 2.1(b) of this
Agreement, the Borrower expressly acknowledges and agrees that, as
of the date hereof, the Lender has not waived, modified or
released, directly or indirectly, expressly or impliedly any or all
of its rights or remedies to enforce the terms of the Loan
Documents or to otherwise seek collection of all principal,
interest and other amounts owing under the Loan Documents, with all
such rights being expressly reserved. Except as expressly provided
in Section 2.1(b) of this Agreement, nothing contained in this
Agreement shall be deemed or construed to be a waiver,
modification, release or forbearance of any kind or nature
whatsoever with respect to amounts due under the Loan Documents or
the rights and remedies available to the Lender, and all such
rights in favor of the Lender are expressly preserved and shall be
deemed unaffected, valid and subsisting rights notwithstanding the
execution and delivery of this Agreement.
INITIAL ACKNOWLEDGMENTS AND AGREEMENTS
To further induce the Lender to enter into this Agreement, the
Borrower covenants, represents and warrants to the Lender with the
intent and understanding that the Lender is expressly relying
thereon as a material inducement to enter into this Agreement, as
follows:
-
-
- The Borrower consents and agrees to the actions requested of
the Lender herein and acknowledges that the Loan is in default and
is immediately due and payable in full without further demand;
- The terms of the Loan Documents, as amended herein, including,
but not limited to, Borrower's obligations and liabilities under
the Loan Documents and the validity and priority of the liens and
security interests created thereby and hereunder, are hereby
affirmed and ratified by the Borrower, and it is acknowledged and
agreed that the same are in full force and effect and are
unconditionally binding and enforceable against the Borrower, and
all of them, as the case may be, in accordance with their
respective terms;
- The Borrower does not possess any claims, defenses, offsets,
recoupments or counterclaims of any kind or nature against the
enforcement or validity of this Agreement, the Existing Loan
Agreement, the Loan Documents, or any of the obligations set forth
therein (collectively, the "Claims"), nor does the Borrower now
have knowledge of any facts that would give rise to any Claims
affecting, modifying or limiting the enforceability of same. In the
event there now exists facts that would give rise to any Claims
against or with respect to the enforcement of this Agreement, the
Loan Documents or the Loans, the Borrower does hereby
unconditionally, irrevocably and unequivocally waive and fully
release any and all such Claims to the same extent as if such
Claims were the subject of a lawsuit, adjudicated to a conclusion
in favor of the Lender and dismissed therein with prejudice;
- To the best of the knowledge or information of the Borrower,
the Lender has a first priority and superior security interest,
which is validly perfected against all of the Lender's
Collateral;
- The Borrower is unconditionally liable for all obligations,
whether for principal, interest, costs, expenses or otherwise,
under the applicable Loan Documents and does hereby ratify and
affirm all of such obligations;
- Through and including February 22, 2008, there was due and
owing under the Loan Agreement, in addition to interest which
continues to accrue on a daily basis at the rates and in the manner
set forth in the Revolving Note and this Agreement, and any and all
other costs and expenses, incurred or to be incurred by the Lender
in connection with this Agreement, the Loans and/or the Loan
Documents, the following principal amount:
$1,775,269.24.
- The Borrower fully and unequivocally consents and agrees that
there is no obligation of the Lender to extend or renew any of the
Loan Documents or this Agreement or to provide any further or
additional financial accommodations of any kind or nature
whatsoever, other than the Committed Advances, on the terms and
subject to the conditions set forth herein;
- The Borrower, for itself, its heirs, legal representatives,
beneficiaries, officers, directors, shareholders, employees,
affiliates, predecessors, subsidiaries, members, managers,
attorneys, agents, representatives, successors and assigns, and
each of them, as the case may be, ("Releasors"), does hereby
unconditionally, unequivocally and irrevocably remise, release and
forever discharge the Lender, and its officers, directors,
shareholders, employees, attorneys, agents, representatives,
affiliates, parents, predecessors, successors and assigns
(collectively, "Released Parties"), from and against all manners of
action, causes of action, suits, debts, accounts, promises,
warranties, damages and consequential damages, demands, agreements,
bonds, bills, specialties, covenants, controversies, variances,
trespasses, judgments, executions, costs, expenses or claims
whatsoever, in law or in equity, whether presently known to
Releasors or whether not known (collectively, the "Released
Claims") including, but not limited to, all Released Claims arising
out of, under, or relating to the Indebtedness, Loan Documents or
the Lender's Collateral, which the Borrower now has or ever had, or
can, shall or may have against Released Parties, upon or by reason
of any manner, cause or thing whatsoever on or at any time prior to
the date of these presents, it being the intention of the Borrower
to reserve nothing whatsoever hereunder with respect to Released
Parties and to assure Released Parties their peace and freedom from
all Released Claims;
- The failure of the Lender to insist upon strict compliance with
any of the terms, covenants, or conditions hereof or of one or more
of the Loan Documents shall not be deemed a waiver of such term,
covenant, or condition, nor shall any waiver or relinquishment of
any right or power hereunder at any one time or more times be
deemed a waiver or relinquishment of such right or power at any
time or times; and
- The invalidity or unenforceability of any provision in this
Agreement or in one or more of the Loan Documents shall in no way
affect the validity or enforceability of any other provision.
AGREEMENTS
NOW, THEREFORE, in consideration of the premises, the mutual
agreements herein contained, and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the Borrower and the Lender hereby further agree as
follows:
- DEFINITIONS.
-
- Defined Terms . Certain capitalized terms not otherwise
defined herein are used in this Agreement with the following
meanings, unless the context otherwise requires:
-
- " Account " means a right to payment of a monetary
obligation, whether or not earned by performance, (i) for property
that has been or is to be sold, leased, licensed, assigned, or
otherwise disposed of, (ii) for services rendered or to be
rendered, (iii) for a policy of insurance issued or to be issued,
(iv) for a secondary obligation incurred or to be incurred, (v) for
energy provided or to be provided, (iv) for use or hire of a vessel
under a charter or other contract, (v) arising out of the use of a
credit or charge card or information contained on or for use with
the card.
- " Adjusted Collateral Value " means, for each type of
BOA Investments in the BOA Collateral Accounts, the Investment
Collateral Value for each type of BOA Investments in the BOA
Collateral Accounts.
- " Advance " means an advance of funds under the Line of
Credit, including the Outstanding Advance, Committed Advances and
advances made on an uncommitted basis.
- " Affiliate " means, with respect to any specified
Person, any other Person which, directly or indirectly, through one
or more intermediaries, controls or is controlled by, or is under
common control with, such specified Person. The term "control"
means the possession, directly or indirectly, of the power to
direct or cause the direction of management and policies of a
Person, whether through ownership of common stock, by contract, or
otherwise.
- " Aggregate Adjusted Collateral Value " means the
aggregate of the Adjusted Collateral Values for the BOA Investments
in the BOA Collateral Accounts.
- " Agreement " means this Amended and Restated Revolving
Line of Credit Loan Agreement and Security Agreement, as the same
may be amended, modified or supplemented from time to time.
- " Apparel Inventory " means that part of the Borrower's
Inventory which is clothing for sale to the general public and
which is not New Textbook Inventory, Used Textbook Inventory or On
Campus Inventory.
- " Assignment " means a direct assignment of Payments
under Government Contracts, pursuant to and in compliance with the
Assignment of Claims Act.
- " Assignment of Claims Act " means Title 31, United
States Code 3727, and Title 41, United States Code 15, as revised
or amended, and any rules or regulations issued pursuant thereto,
and also shall be deemed to include any other laws, rules or
regulations governing the assignment of payments under Government
Contracts or claims against a Government.
- " BOA Collateral Accounts " means one or more restricted
deposit or investment accounts owned and established by Borrower
with Bank of America, N.A. or Bank of America Securities, LLC,
subject to control agreements in favor of and satisfactory to the
Lender, in which shall be deposited and held the BOA
Investments.
- " BOA Investments " means the cash, instruments,
securities and other Investment Property now owned or hereafter
acquired by Borrower from time to time and to be held in the BOA
Collateral Accounts.
- " Borrower " means Varsity Group Inc., a Delaware
corporation, Campus Outfitters Group, LLC, a Delaware limited
liability company, VarsityBooks.com, LLC, a Delaware limited
liability company, and CollegeImpact.com, Inc., a Delaware
corporation and to each such Person or to all of them, as the
context may require, and the representations and obligations
hereunder of the Persons comprised by the term "Borrower" shall be
joint and several. For purposes of testing compliance with the
financial covenants hereinafter, the negative covenants
hereinafter, and the unused fee provided hereinafter, financial
information concerning the Borrower shall mean financial
information for Varsity Group Inc., Campus Outfitters Group, LLC,
VarsityBooks.com, LLC and CollegeImpact.com, Inc. stated on a
consolidated basis.
- " Borrowing Base " means:
-
- Aggregate Adjusted Collateral Value; plus
- Seventy-five percent (75%) of Borrower's Eligible New Textbook
Inventory; plus
- Fifty percent (50%) of Borrower's Eligible Used Textbook
Inventory; plus
- Fifty percent (50%) of Borrower's Eligible On Campus Inventory;
plus
- Fifty percent (50%) of Borrower's Eligible Apparel Inventory;
plus
- Eighty percent (80%) of Borrower's Eligible Commercial
Accounts.
After calculating the portion of the Borrowing Base comprised of
(a) the Aggregate Adjusted Collateral Value of the BOA Investments,
(b) Eligible New Textbook Inventory, (c) Eligible Used Textbook
Inventory, (d) Eligible On Campus Inventory, (e) Eligible Apparel
Inventory and (f) Eligible Commercial Accounts, Lender shall deduct
from such portion of the Borrowing Base such reserves as Lender may
establish from time to time in its reasonable credit judgment,
including without limitation, reserves for dilution, rent at leased
locations subject to statutory or contractual landlord's liens,
Inventory shrinkage, customs charges, warehousemen's or bailees'
charges, and the amount of estimated maximum exposure, as
determined by Lender from time to time, under any interest rate
contracts which Borrower enters into with Lender (including
interest rate swaps, caps, floors, options thereon, combinations
thereof, or similar contracts).
In addition, Lender may require modifications to the percentage
rates of advance set forth above, based on the results of any field
examination or audit of Borrower, as determined in Lender's sole
and absolute discretion. In the absence of manifest error, Lender's
determination of the amount of the Borrowing Base shall be
conclusive.
- " Borrowing Base Certificate " means a certificate
substantially in the form of Schedule 1.1(A) attached hereto and
made a part hereof (or such subsequent form as the Lender shall
require).
- " Borrowing Date " means the date on which an Advance is
made.
- " Business Day " means any day that is not a Saturday,
Sunday or banking holiday in the State of Illinois.
- " Capital Lease " means any lease which has been or
should be capitalized on the books of the lessee in accordance with
GAAP.
- " Cash Collateral Account " means an account to be
established by Lender in Borrower's name, with Bank of America,
N.A., at Lender's sole discretion, for the purpose of receiving
Payments, which shall constitute part of the Collateral unless and
until disbursed to the Borrower or applied for the Borrower's
account in accordance with this Agreement.
- " Code " means the Internal Revenue Code of the United
States, as amended.
- " Collateral " means all of the following kinds of
property now owned or hereafter acquired by the Borrower:
-
- Accounts;
- Chattel paper;
- Deposit accounts;.
- Documents;
- Equipment;
- Fixtures;
- General intangibles (including payment intangibles and
software);
- Instruments;
- Inventory;
- Investment Property;
- Intellectual property;
- Money;
- Supporting obligations (including letter of credit
rights);
- All books and records and computer hardware, software and
systems;
- All policies of insurance and the proceeds thereof;
- All additions and accessions to and replacements of the
collateral described above; and
- All products and proceeds of all of the collateral described
above;
provided , however , that notwithstanding any of
the other provisions set forth in this definition or in Article 4
hereof, this Agreement shall not constitute a grant of a security
interest in (i) any property to the extent that such grant of a
security interest is prohibited by any requirements of law of a
Government, (ii) more than 65% of the total outstanding voting
capital stock of any foreign subsidiary of the Borrower, and (iii)
cash held by the Borrower or any of its subsidiaries in connection
with its role as a tuition payment and/or collection agent, to the
extent that Borrower has no existing or future ownership interest
in or entitlement to ownership in all or any part of such cash, and
is holding such cash only as an agent for another Person. It is
hereby understood and agreed that any property described in the
preceding provision shall be excluded from the definition of
"Collateral" and shall be referred to as the "Excluded
Collateral".
- " Commercial Accounts " means all Accounts of Borrower
due from Customers other than the Government.
- " Committed Advance Ending Date " means April 30,
2008.
- " Compliance Certificate " means a certificate
substantially in the form of Schedule 1.1(B) attached hereto and
made a part hereof.
- " Consolidated Debt " means with respect to Borrower and
its subsidiaries on a consolidated basis, without duplication, all
of the following, whether or not included as indebtedness or
liabilities in accordance with GAAP:
-
- all indebtedness of Borrower and its subsidiaries for borrowed
money, whether current or long-term (including all amounts owing
with respect to the Loan) and all obligations of Borrower and its
subsidiaries evidenced by bonds, debentures, notes, loan agreements
or other similar instruments;
- all purchase money indebtedness of Borrower and its
subsidiaries;
- the principal portion of all indebtedness under conditional
sale or other title retention agreements relating to property
purchased by Borrower and its subsidiaries (other than customary
reservations or retentions of title under agreements with suppliers
entered into in the ordinary course of business);
- all obligations of Borrower and its subsidiaries arising under
letters of credit (including standby and commercial), bankers'
acceptances, bank guaranties, surety bonds and similar
instruments;
- all indebtedness of Borrower and its subsidiaries in respect of
the deferred purchase price of property or services, other than
trade accounts payable in the ordinary course of business and, in
each case, not past due for more than 120 days after the date on
which such trade account payable was created, and;
- any indebtedness of Borrower and its subsidiaries under Capital
Leases, sale and leaseback transactions, synthetic leases and
securitization transactions;
- all obligations of Borrower and its subsidiaries to purchase,
redeem, retire, defease or otherwise make any payment prior to the
Ending Date in respect of any equity or ownership interests in such
Person or any other Person, valued, in the case of a redeemable
preferred interest, at the greater of its voluntary or involuntary
liquidation value plus accrued and unpaid dividends;
- all Consolidated Debt of others secured by (or for which the
holder of such Consolidated Debt has an existing right, contingent
or otherwise, to be secured by) any Encumbrance on, or payable out
of the proceeds of production from, property owned or acquired by
such Person, whether or not the obligations secured thereby have
been assumed;
- all guarantees with respect to Consolidated Debt of the types
specified in clauses (1) through (8) above of another Person (other
than Borrower and its subsidiaries); and
For purposes hereof, the amount of any obligation arising under
letters of credit (including standby and commercial), bankers'
acceptances, bank guaranties, surety bonds and similar instruments
shall be the maximum amount available to be drawn thereunder.
- " Contra Account " means an Account due from an account
debtor to which the Borrower owes money.
- " Customer " means any governmental entity (federal,
state, county, municipal or otherwise) or business entity
(corporation, association, partnership, limited liability company
or partnership, sole proprietorship or otherwise) or individual to
which Borrower provides goods or services for compensation.
- " Dividend " with respect to any Person means that such
Person has declared or paid a dividend or returned any equity
capital to its holders of its Equity Interests or authorized or
made any other distribution, payment or delivery of property (other
than common stock of such Person) or cash to holders of its Equity
Interests as such, or redeemed, retired, purchased or otherwise
acquired, directly or indirectly, for consideration any shares of
any class of its Equity Interests outstanding on or after the date
hereof (or any options or warrants issued by such Person with
respect to its Equity Interests), or set aside any funds for any of
the foregoing purposes, or shall have permitted any of its
Subsidiaries to purchase or otherwise acquire for a consideration
any shares of any class of the Equity Interests of such Person
outstanding on or after the date hereof (or any options or warrants
issued by such Person with respect to its Equity Interests) or, in
any such case, entered into any transaction having a substantially
similar effect. Without limiting the foregoing, "Dividends" with
respect to any Person shall also include all payments made or
required to be made by such Person with respect to any stock
appreciation rights plans, equity incentive or achievement plans or
any similar plans or setting aside of any funds for the foregoing
purposes.
- " Eligible ," when used to describe an Account, means
that the Account conforms to the following criteria:
-
- the Account has been Billed;
- in the case of a Commercial Account or Government Account, less
than ninety-one (91) days have passed from the original billing
date;
- at the Lender's option, in the case of a Government Account,
the Borrower has made an Assignment of all Payments due or to
become due under the Government Contract giving rise to the
Account;
- the Account arose from a bona fide sale of goods or services to
a Customer; the goods or services have been delivered or provided
to the Customer; the Borrower possesses receipts from the Customer
acknowledging delivery of the goods or performance of the services;
and Customer has not returned or rejected the goods or
services;
- the Account is based upon an enforceable written order or
contract for goods or services;
- the Borrower's title to the Account is absolute and is not
subject to any prior assignment, claim, escrow agreement or
amendment; lien or security interest, and the Borrower otherwise
has the full and unqualified right and power to assign and grant a
security interest in the Account to the Lender;
- the amount shown on the books of the Borrower and on any
invoice, certificate, schedule or statement delivered to the Lender
regarding the amount due on the Account is due and owing to the
Borrower;
- 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
Customer because of returned, inferior or damaged goods,
unsatisfactory services or for any other reason, or any claim by a
Customer against a warranty provided by Borrower for an Account
arising from the sale of goods or services to a Customer;
- the Customer has not notified the Borrower of any dispute
concerning any of the goods or services giving rise to the Account,
nor made claim that the goods or services fail to conform to the
requirements of the Customer's order or contract, nor notified the
Borrower to cure any default under the Customer's order or
contract;
- the Account does not arise out of a Customer's contract or
order that by its terms forbids or makes void or unenforceable the
Borrower's assignment of the Account to the Lender;
- the Borrower has not received any note, trade acceptance draft
or other instrument tendered in payment of the Account;
- the Borrower has not received any notice of the death of the
Customer or any partner in a Customer that is a partnership (where
the death of such partner would result in dissolution or
termination of such Customer); nor has Borrower received any 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 Customer;
- the Customer is not incorporated in any jurisdiction outside
the United States and is not conducting its business primarily
outside the United States;
- Borrower is not indebted in any manner to the Customer;
- no bond has been issued or is contemplated with respect to the
goods or services furnished by the Borrower or with respect to the
project or contract for which those goods or services were
furnished, unless otherwise agreed to in advance, in writing by
Lender, as determined by Lender in its sole and absolute
discretion; and
- the Account is not an Ineligible Account; and
when used to describe Inventory, shall mean the cost of the
Borrower's Inventory, less such part of the Inventory that the
Lender determines to be ineligible, and less a reserve for
obsolescence to be determined by the Lender. Ineligible Inventory
shall include, but shall not be limited to, work-in-process,
Inventory on consignment and any other Inventory that the Lender
believes should not be considered eligible, either because of
doubtful value or because the Lender believes there would be
practical difficulties in realizing on the Inventory.
In the event of any dispute, under the foregoing criteria, as to
whether an Account or Inventory is, or has ceased to be, an
Eligible Account or Eligible Inventory, the Lender's decision shall
control.
- " Encumbrance " means any mortgage, pledge, deed of
trust, collateral assignment, security interest, hypothecation,
lien or charge of any kind (including any conditional sale or other
title retention agreement, any Capital Lease having substantially
the same economic effect as any of the foregoing, and the filing
of, or agreement or authorization to give or file, any financing
statement under the Uniform Commercial Code or comparable law of
any jurisdiction). It is understood and agreed by the parties
hereto that the Borrower and its subsidiaries may, as part of their
businesses, grant licenses to Persons to use Intellectual Property
owned or developed by, or licensed to, the Borrower or its
subsidiaries. For purposes of this Agreement, such licensing
activity shall not constitute an "Encumbrance" under this Agreement
against such Intellectual Property.
- " Effective Date " means February 25, 2008.
- " Ending Date " means May 30, 2008.
- " Environmental Laws " mean all laws relating to
Hazardous Wastes, Toxic Substances or materials that might be
emitted, released or discharged into the environment or other laws
or regulations protecting the environment.
- " Equity Interests " means (i) in the case of a
corporation, corporate stock, (ii) in the case of a limited
liability company, association or business entity, any and all
shares, interests, participations, ownership or voting rights or
other equivalents (however designated) of corporate stock, (iii) in
the case of a partnership, partnership interests (whether general
or limited) and (iv) any other interest or participation that
confers on a Person the right to receive a share of the profits and
losses of, or distributions of assets of, the issuing Person, in
each case regardless of class or designation, and all warrants,
options, purchase rights, conversion or exchange rights, voting
rights, calls or claims of any character with respect thereto.
- " ERISA " means the Employee Retirement Income Security
Act of 1974, as amended, and any successor statute thereto, as
interpreted by the rules and regulations thereunder, all as the
same may be in effect from time to time. References to sections of
ERISA shall be construed also to refer to any successor
sections.
- " ERISA Affiliate " means an entity, whether or not
incorporated, which is under common control with the Borrower or
any of its subsidiaries within the meaning of Section 4001(a)(14)
of ERISA, or is a member of a group which includes the Borrower or
any of its subsidiaries and which is treated as a single employer
under Sections 414(b), (c), (m), or (o) of the Code.
- " Event of Default " means any one of the events
specified as an "Event of Default" under this Agreement.
- " GAAP " means generally accepted accounting principles
in the United States of America, consistently applied.
- " GAAS " means generally accepted auditing standards in
the United States of America.
- " Governance Documents " means the Borrower's Articles
or Certificate of Incorporation and Bylaws or other documents or
agreements affecting the Borrower's corporate governance if
Borrower is a corporation, or the Borrower's Articles of
Organization and Operating Agreement or other documents or
agreements affecting the Borrower's limited liability company
governance if Borrower is a limited liability company.
- " Government " means the government of the United States
of America or the departments or agencies of the United States, but
does not include the government of any state or the District of
Columbia or any departments or agencies of any state or of the
District of Columbia.
- " Government Accounts " means all Accounts of Borrower
arising out of any Government Contract.
- " Government Contracts " means all contracts of Borrower
with a Government, including all renewals, extensions,
modifications, change orders and amendments thereof and
thereto.
- " Hazardous Wastes " mean all waste materials subject to
regulation under the Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. 9601 et seq., the
Resource Conservation and Recovery Act, 42 U.S.C. 6901 et seq., or
applicable state law and any other applicable federal, state or
local laws and their regulations now in force or hereafter enacted
relating to hazardous wastes.
- " Ineligible Accounts " shall include the following
Accounts:
-
- Accounts that do not conform with the criteria set forth for
Eligible Accounts;
- An Account owing by any account debtor for which the Lender has
deemed fifty percent (50%) or more of the account debtor's other
Accounts to be non-Eligible; however, for purposes of this category
of Ineligible Accounts, each Government Contract shall be treated
as an individual Customer;
- Government Accounts arising under Government Contracts which
contain an express prohibition against assignment of the Borrower's
rights to Payment;
- The last payment due on a Government Account, unless such
Government Account arises from a Government Contract which is a
"fixed price contract" (as defined in the Federal Acquisition
Regulations) which does not include any provision for progress
payments, incentive arrangements or price redetermination;
- Contra Accounts;
- Any Accounts owing by Customers purchasing goods or services
from the Borrower for such Customer's personal, family or household
use, or otherwise constituting an Account arising from the sale of
Consumer Goods (as such term is defined in the UCC); or Accounts
constituting credit card purchases or which otherwise arise from
obligations of individuals to pay for such goods or services;
- Accounts receivable from Affiliates or subsidiaries of the
Borrower;
- Unbilled Accounts, including, but not limited to, progress
payments, retainages, milestones and final payments; or
- Any Account deemed by the Lender, in the exercise of its sole
and absolute discretion, to be an Ineligible Account because of
uncertainty as to the creditworthiness of the Customer or because
the Lender otherwise considers the collateral value thereof to the
Lender to be impaired or its ability to realize such value to be
insecure.
- " Initial Cash Flow Projections " means the Cash Flow
Projections for the Borrower attached hereto as Schedule 1.1(C) and
made a part hereof.
- " Initial TNW Amount " means the Tangible Net Worth of
Borrower as of December 31, 2006, as set forth in the PWC Audit,
less Five Hundred Thousand and 00/100 Dollars ($500,000.00).
- " Intellectual Property " shall mean all patents,
licenses, trade names, trademarks, copyrights, inventions, service
marks, trademark registrations, service mark registrations and
copyright registrations, whether domestic or foreign and
applications for any of the foregoing, and all proprietary
technology, know-how, trade secrets or other intellectual property
rights owned or used by the Borrower or any subsidiary in the
operation of their respective businesses.
- " Inventory " means the New Textbook Inventory, Used
Textbook Inventory, On Campus Inventory, Apparel Inventory and all
other inventory of Borrower, as such term is defined in the
UCC.
- " Investment Collateral Value " means the value for each
type of BOA Investments in the BOA Collateral Accounts which shall
be determined at any given time as follows:
-
- If checking, savings, money market or other deposit accounts,
the Investment Collateral Value shall be the daily balance on
deposit with respect to each of such accounts as stated in a
statement or certificate issued by Bank of America, N.A. for the
day on which such valuation is requested.
- If government or agency obligations or bonds, the Investment
Collateral Value shall be determined from the most recent closing
bid price for such bonds obtained from the Wall Street Journal. If
such closing bid price is not available in the Wall Street Journal,
the Investment Collateral Value shall be the value quoted to Lender
by a reputable brokerage firm selected by Lender. If no such quote
is available, the value will be determined by Lender in its sole
discretion.
The Investment Collateral Value of stock, mutual funds (other
than money market funds accounts referenced in item 1 above) and
corporate bonds shall conclusively be deemed to be $0 for purposes
of this Agreement. The foregoing reduction in Investment Collateral
Value shall not affect the Lender's continuing lien and security
interest in such Collateral established by the Loan Documents.
In addition, notwithstanding the foregoing, the Investment
Property and any checking, savings, money market or other deposit
accounts shall be deemed to not have any Investment Collateral
Value hereunder unless it is subject to a perfected first priority
security interest in favor of Lender.
Furthermore, to the extent that Borrower has not (i) delivered
any Collateral consisting of certificated securities or instruments
into the possession of Lender, (ii) obtained the written agreement
of any bailee or securities intermediary in form and substance
satisfactory to Lender with respect to any Collateral, or (iii)
taken any other action required by Lender with respect to the
Collateral, Lender, in its sole discretion, may exclude from the
calculations of this Agreement, the Investment Collateral Value of
any such Collateral until Borrower has complied with such
requirement to the sole satisfaction of Lender.
- " Investment Property " means a security, whether
certificated or uncertificated, security entitlement, securities
account, commodity contract, or commodity account, and as such term
is further defined under the UCC.
- " Item " means any "item" as defined in Section 4-104 of
the Uniform Commercial Code, to include, without exclusion or
limitation, checks, drafts, money orders or other media by which
Payment may be made.
- " Lender " means VGI Financial Corp., a Delaware
corporation, and its successors and assigns.
- " Line of Credit " has the meaning provided in Section
2.1.
- " Line of Credit Amount " has the meaning provided in
Section 2.1.
- " Loan " means the Advances made under the Line of
Credit.
- " Loan Documents " mean this Agreement, the Revolving
Note or any other document executed by the Borrower or any other
Person evidencing, securing, guaranteeing or relating to the Loan
or other Obligations, as such documents or instruments may be
amended, modified or extended from time to time.
- " Material Adverse Effect " has the meaning provided in
the Merger Agreement.
- " Merger " has the meaning provided in the Merger
Agreement.
- " Merger Agreement " means that certain Plan and
Agreement of Merger dated February 22, 2008 by and among Varsity
Group Inc., a Delaware corporation, VGI Holdings Corp., a Delaware
corporation and VGI Acquisition Corp., a Delaware corporation.
- " Multiemployer Plan " means a Plan which is a
multiemployer plan as defined in Sections 3(37) or 4001(a)(3) of
ERISA.
- " Multiple Employer Plan " means a Plan which the
Borrower or any of its subsidiaries or any ERISA Affiliate and at
least one employer other than the Borrower or any of its
subsidiaries or any ERISA Affiliate are contributing sponsors.
- " New Textbook Inventory " means that part of the
Borrower's Inventory which is textbooks available for sale to the
general public that is comprised of new textbooks and is not Used
Textbook Inventory, On Campus Inventory or Apparel Inventory, which
for avoidance of doubt, the Borrower must hold legal title to.
- " Obligations " means (i) all debts, obligations or
liabilities owing by the Borrower to the Lender, now or hereafter
existing or incurred whether absolute or contingent, of every kind
and description, whether or not evidenced by notes or other
instruments, and whether or not such debts, obligations or
liabilities are direct or indirect, fixed or contingent, liquidated
or unliquidated including, without limitation, those arising under
the Existing Loan Agreement, that certain Revolving Note dated
March 8, 2007 payable to the Initial Lender and assigned to the
Lender, this Agreement, the Revolving Note, and all other
instruments, documents and agreements of every kind and nature now
or hereafter executed in connection with the Existing Loan
Agreement, that certain Revolving Note dated March 8, 2007 payable
to the Initial Lender and assigned to the Lender, this Agreement or
the Revolving Note (including all renewals, increases, extensions,
restatements and replacements thereof and amendments and
modifications of any of the foregoing), (ii) all costs, attorneys'
fees and expenses incurred by Lender in connection with the
collection or enforcement of any of the above. For the avoidance of
doubt, the Warrant issued to Lender in connection herewith is not
an "Obligation."
- " Offer " has the meaning provided in the Merger
Agreement.
- " On Campus Inventory " means that part of the
Borrower's Inventory which is for sale to the student population at
colleges and universities in the United States of America which is
not New Textbook Inventory, Used Textbook Inventory or Apparel
Inventory.
- " Operating Account " means a demand deposit account
established by the Borrower with Bank of America, N.A. that is
subject to an account control agreement in favor of and
satisfactory to the Lender, for the Borrower's use in connection
with its business operations and with the Line of Credit.
- " Outstanding Advances " means the Advances outstanding
on the Effective Date that were made to Borrower by Initial Lender,
being $1,775,269.24 in principal amount, with $5,825.68 of accrued
interest thereon through February 22, 2008, with a per diem of
$268.39 through the Effective Date, if later.
- " Payment " or "Payments" means any check, draft, cash
or any other remittance or credit in payment or on account of any
or all of the Accounts of Borrower.
- " PBGC " means the Pension Benefit Guaranty Corporation
established pursuant to Subtitle A of Title IV of ERISA and any
successor thereto.
- " Person " means any individual, partnership,
association, trust, corporation, limited liability company or
partnership, or other entity.
- " Plan " means any employee benefit plan (as defined in
Section 3(3) of ERISA) which is covered by ERISA and with respect
to which the Borrower or any of its subsidiaries or any ERISA
Affiliate is (or, if such plan were terminated at such time, would
under Section 4069 of ERISA be deemed to be) an "employer" within
the meaning of Section 3(5) of ERISA.
- " Prime Rate " means the annual rate of interest
identified as the "prime rate" in the "Money Rates" column
published in the Wall Street Journal. If the published prime rate
is expressed on the applicable date as a range, the prime rate for
purposes of this Agreement shall be the average between the high
and low of that range. If the Wall Street Journal ceases to publish
a prime rate, Lender may substitute another publication publishing
the "Prime Rate", as the source of the "Prime Rate" for purposes of
this Agreement. In the event that "Prime Rates" are no longer
generally published, then the final published Prime Rate shall
remain the "Prime Rate" hereunder for the balance of the term of
this Agreement. Any change in the Prime Rate shall become
effective, without prior notice to the Borrower, automatically as
of the date of such change in the Prime Rate..
- " PWC Audit " means that certain financial audit of the
consolidated financial statements of Varsity Group Inc. and its
subsidiaries for the year ending December 31, 2006, performed by
PricewaterhouseCoopers LLP and reflecting the consolidated
financial condition of Varsity Group Inc. and its subsidiaries, in
accordance with GAAP, such audit to have been performed in
accordance with GAAS.
- " Request for Advance " means a certificate
substantially in the form of Schedule 1.1(D) attached hereto and
made a part hereof.
- " Reportable Event " means a "reportable event" as
defined in Section 4043 of ERISA with respect to which the notice
requirements to the PBGC have not been waived.
- " Revolving Note " means the Borrower's amended and
restated promissory note, of even date, in the amount of Five
Million and 00/100 Dollars ($5,000,000.00), payable to the order of
the Lender, and evidencing Borrower's obligation to repay the
Advances.
- " Single Employer Plan " means any Plan which is covered
by Title IV of ERISA, but which is not a Multiemployer Plan.
- " Tangible Net Worth " means the value of Borrower's
total assets (including leaseholds and leasehold improvements and
reserves against assets, but excluding goodwill, patents,
trademarks, trade names, organization expense, unamortized debt
discount and expense, capitalized or deferred research and
development costs, deferred marketing expenses, and other like
intangibles, and monies due from Affiliates, officers, directors,
employees, shareholders, members and managers of Borrower) less
total liabilities, including but not limited to accrued and
deferred income taxes.
- " Termination Event " means (i) with respect to any
Plan, the occurrence of a Reportable Event or the substantial
cessation of operations (within the meaning of Section 4062(e) of
ERISA); (ii) the withdrawal of the Borrower or any of its
subsidiaries or any ERISA Affiliate from a Multiple Employer Plan
during a plan year in which it was a substantial employer (as such
term is defined in Section 4001(a)(2) of ERISA), or the termination
of a Multiple Employer Plan; (iii) the distribution of a notice of
intent to terminate or the actual termination of a Plan pursuant to
Section 4041(a)(2) or 4041A of ERISA; (iv) the institution of
proceedings to terminate or the actual termination of a Plan by the
PBGC under Section 4042 of ERISA; (v) any event or condition which
might constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any
Plan; (vi) the complete or partial withdrawal of the Borrower or
any of its subsidiaries or any ERISA Affiliate from a Multiemployer
Plan.
- " Toxic Substances " mean any materials which have been
shown to have significant adverse effects on human health or which
are subject to regulation under the Toxic Substances Control Act,
15 U.S.C. 2601 et seq., applicable state law, or any other
applicable federal, state or local laws now in force or hereafter
enacted relating to toxic substances. "Toxic Substances" includes,
but is not limited to, asbestos, polychlorinated biphenyls (PCBs),
petroleum products, and lead-based paints.
- " UCC " means the Uniform Commercial Code in the
state(s) as set forth in Section 1.4 of this Agreement.
- " Used Textbook Inventory " means that part of the
Borrower's Inventory which is textbooks, which is available for
sale to the general public in the ordinary course of Borrower's
business, and that is not New Textbook Inventory, On Campus
Inventory or Apparel Inventory.
- Accounting Terms . Accounting terms used in this
Agreement but not defined in this Agreement shall have the meanings
given to them in accordance with GAAP in effect as of the date of
this Agreement and as modified from time to time. Except as
otherwise provided in this Agreement, all financial computations
made pursuant to this Agreement and all financial reports provided
to the Lender shall be made in accordance with GAAP, consistently
applied. Except as otherwise provided in this Agreement, whenever
this Agreement refers to a balance sheet, financial statement or
the information contained in a balance sheet or other financial
statement, the Agreement shall be construed to refer to the most
recent consolidated balance sheet or other financial statement that
Borrower has provided to the Lender.
- Use of Defined Terms . All terms defined in this
Agreement shall have the same defined meanings when used in any
certificate, report or other document made or delivered in
connection with this Agreement, unless otherwise set forth
therein.
- UCC Terms . Terms that incorporate definitions provided
in the Uniform Commercial Code shall have such meanings as are
mandated by the Uniform Commercial Code of the state or states
applicable for the determination of such meanings. Terms not
otherwise defined herein and not incorporating a definition under
the Uniform Commercial Code of any particular state, but which are
defined in the Uniform Commercial Code as adopted by the State of
Illinois, shall have the meanings ascribed to them under the
Uniform Commercial Code as adopted by the State of Illinois.
- LOAN.
-
- Revolving Line of Credit .
-
- Line of Credit The Lender hereby establishes a line of
credit (the "Line of Credit") in favor of the Borrower pursuant to
which the Lender may, in its sole and absolute discretion, and
subject to the other terms and conditions of this Agreement, make
Advances to the Borrower from time to time to and including the
Ending Date, unless the Lender, in its sole and absolute
discretion, sooner notifies the Borrower of the termination of the
Line of Credit. The aggregate principal amount of all Advances at
any one time outstanding shall not exceed the least of (i)
$5,000,000, (ii) the Borrowing Base and (iii) such reduced amount
as may be fixed by the Lender by written notice to the Borrower of
not less than $4,000,000 (the "Line of Credit Amount"). Subject to
the foregoing and to the other terms and conditions of this
Agreement, the Borrower may borrow, repay and reborrow from the
Lender the Advances.
- Committed Advances; Forbearance .
-
- Notwithstanding the foregoing, subject to the terms and
conditions of this Agreement, the Lender hereby agrees to make
Advances (the "Committed Advances") to Borrower under the Line of
Credit from time to time to and including the Committed Advance
Ending Date in an aggregate principal amount at any one time
outstanding not to exceed $2,000,000; provided, however, that (i)
for the period beginning on the Effective Date and ending on
February 21, 2008, Lender shall only be obligated to make Advances
in an amount up to the limit for such period set forth in Schedule
2.1, (ii) for each bi-monthly period thereafter, Lender shall only
be obligated to make Advances in an amount up to the limits set
forth for such period in Schedule 2.1 (clauses (i) and (ii)
constituting the "Committed Amount") and (iii) at no time shall
Lender be obligated to make an Advance if the aggregate of all
outstanding Advances would exceed the Borrowing Base. It is
understood that (A) such amount shall be in addition to the amount
of the Outstanding Advances, (B) all Advances made on or after the
Effective Date shall constitute Committed Advances in satisfaction
of Lender's commitment under this Section 2.1(b) and (C) Lender may
satisfy its obligation to make Committed Advances by releasing cash
from the BOA Collateral Account in the amount of the required
Advance, such release constituting an Advance hereunder.
- Lender hereby agrees that, during the period beginning on the
date hereof and ending on May 30, 2008 (the " Forbearance
Period "), Lender shall not exercise or enforce any of its
rights or remedies under the Agreement, or under any of the other
Loan Documents, in connection with the Existing Event of Default,
other than with respect to releases or other disbursements to
Borrower from the BOA Collateral Account, which Lender may do at
any time. Without limiting the generality of the foregoing, the
Lender agrees that during the Forbearance Period it will forbear
from exercising any legal or equitable rights or remedies they may
have against any of the Collateral (other than the BOA Collateral
Account), including, but not limited to, any rights of set off with
respect to any funds in their possession. Notwithstanding the
foregoing, the Forbearance Period shall terminate and the Lender
shall immediately be entitled to exercise its legal and equitable
rights and remedies under this Agreement and the other Loan
Documents upon the occurrence of any Event of Default other than
the Existing Event of Default.
- EXCEPT FOR THE COMMITTED ADVANCES, THIS AGREEMENT IS NOT,
NOR SHALL IT BE DEEMED TO CONSTITUTE, A COMMITMENT ON THE PART OF
LENDER TO MAKE ANY EXTENSION OF CREDIT TO OR FOR ACCOUNT OF
BORROWER AND MAY NOT BE RELIED UPON BY IT FOR FINANCING.
- Mandatory Prepayments . If the principal of all
outstanding Advances at any time exceeds the Line of Credit Amount,
then Borrower shall make an immediate payment in an amount
sufficient that the principal of all outstanding Advances will no
longer exceed the Line of Credit Amount.
- Records and Notes Evidencing Advances . The Lender will
record all Advances made pursuant to this Agreement and all
payments of principal and interest in its records, which records
will be conclusive absent manifest error. Any failure so to record
or any error in doing so shall not, however, limit or otherwise
affect the obligation of the Borrower hereunder to pay any amount
owing with respect to the Advances. Instead of or in addition to
such records, the Advances may be evidenced by the Revolving Note,
which will be payable on the Ending Date or such earlier date as
the Lender may require.
- Advances . The Advance shall be denominated in U.S.
Dollars. Each Committed Advance and each other Advance made by the
Lender in its sole and absolute discretion will be made in
immediately available funds.
- Election to Make Advances . The Borrower agrees that its
compliance with and its performance of the provisions of this
Agreement do not obligate the Lender to make any Advances and that
the Lender may make any Advance in its sole and absolute
discretion, except as provided in Section 2.1(b).
- Procedure for Advances .
-
- Each Advance shall be made upon the Borrower's irrevocable
written notice delivered to the Lender in the form of a Request for
Advance attached hereto as Schedule 1.1(D) which notice must be
received by the Lender prior to 11 a.m. (Chicago time) three (3)
Business Days prior to the requested borrowing date, specifying:
(A) the amount of the borrowing, which, unless otherwise agreed by
Lender, shall be in an aggregate minimum amount of $25,000 or any
multiple of $10,000 in excess thereof and (B) the requested
borrowing date, which shall be a Business Day.
- The Lender may honor telephone instructions for Advances or
payments given, or purported to be given, by any one of the
individuals authorized to sign loan agreements on behalf of the
Borrower, or any other individual designated by any one of such
authorized signers.
- Advances will be deposited in the Borrower's Operating Account
or the Cash Collateral Account, at the sole Lender's
discretion.
- At the request of the Lender, the Borrower will promptly
provide written confirmation to the Lender of any telephone
instructions. If there is a discrepancy and the Lender has already
acted on the telephone instructions, the telephone instructions
will prevail over the written confirmation.
- The Borrower indemnifies and shall defend and hold the Lender
(including its officers, employees, and agents) harmless from all
liability, loss, and costs in connection with or resulting from
telephone instructions it reasonably believes are made by any
individual authorized by the Borrower to give such instructions.
This indemnity and defense obligation will survive this
Agreement.
- Repayment Terms .
-
- Interest . Unless otherwise specified herein, the
Borrower shall pay interest on the unpaid principal amount of each
Advance from the date of the Advance until paid in full on the
Ending Date or such earlier date as may be required under this
Agreement at a rate per annum equal to the Prime Rate plus 3%. All
interest will be computed on the basis of a 360-day year, based on
the actual number of days elapsed. Notwithstanding the foregoing,
prior to the effective date the interest shall have accrued at the
rates provided in the Existing Loan Agreement and the revolving
note issued thereunder.
- Principal . Unless otherwise required or permitted to be
paid sooner pursuant to the provisions hereof, the Borrower will
repay in full all principal and any unpaid interest or other
charges outstanding under this Agreement no later than the Ending
Date.
- Default Rate . After demand, while an Event of Default
is continuing, or in the event any amounts are unpaid after the
Ending Date, the unpaid principal balance of the Advances will bear
interest at a rate per annum which is 2% percent higher than the
rate of interest otherwise provided under this Agreement (the
"Default Rate"). The Borrower acknowledges that the Default Rate
shall be in effect immediately as a result of the Existing Event of
Default.
- Place of Payment . Each payment by the Borrower will be
made without set-off or counterclaim in U.S. Dollars in immediately
available funds no later than 12:00 noon, Chicago time, on the
dates called for under this Agreement per wire instructions set
forth on Schedule 2.8. Funds received on any day after such time
will be deemed to have been received on the next Business Day.
Whenever any payment to be made under this Agreement is stated to
be due on a day which is not a Business Day, such payment will be
made on the next succeeding Business Day and such extension of time
will be included in the computation of any interest
- Use of Proceeds . The proceeds of any Advance shall be
used for working capital, and for no other purposes. Without
limiting the foregoing, the proceeds of any Advance shall be used
to make payments in accordance with the Initial Cash Flow
Projections, and for such other purposes as the Lender
consents.
- Line of Credit Fee . In consideration of the Lender
entering into this Agreement, Borrower promises to pay Lender a
loan administration and collateral monitoring fee in the amount of
$5,000 per month. This fee is in addition to interest payable on
the Advances on the Ending Date or such earlier date as may be
required under this Agreement.
- CONDITIONS PRECEDENT TO LOAN.
-
- Conditions Precedent to Initial Advance . Prior to
Lender's purchase of the Existing Loan, and as a condition to
Lender's obligation to make the initial Committed Advance, the
Borrower shall satisfy all of the following conditions, in the
Lender's sole judgment,:
-
- Representations and Warranties; Compliance . All
representations and warranties made by Borrower in or in connection
with this Agreement or any of the other Loan Documents or otherwise
made in writing in connection with this Agreement shall be true and
correct in all material respects on the Effective Date, and the
Borrower shall have performed all of the promises or undertakings
under this Agreement and satisfied all of the conditions of this
Agreement that the Borrower was required to perform or to satisfy
as of the Effective Date.
- Documents Concerning the Borrower . If Borrower is a
corporation, Borrower shall deliver to the Lender copies of all
documents requested by the Lender, including a complete, correct
and current copy of the Borrower's Articles of Incorporation,
certified by the Secretary of State of the Borrower's state of
incorporation; a complete, correct and current copy of its Bylaws,
certified by Borrower's corporate secretary; a complete, correct
and current copy of all resolutions of Borrower's Board of
Directors authorizing the execution, delivery and performance of
this Agreement and of the other Loan Documents, certified by
Borrower's corporate secretary; and appropriate certificates of
incumbency for those officers of Borrower executing this Agreement
or any of the other Loan Documents, certified by Borrower's
corporate secretary and president. If Borrower is a limited
liability company, Borrower shall deliver to the Lender copies of
all documents requested by the Lender, including a complete,
correct and current copy of the Borrower's Articles of
Organization, certified by the Secretary of State of the Borrower's
state of formation/organization; a complete, correct and current
copy of its Operating Agreement, certified by Borrower's manager or
managing member; a complete, correct and current copy of all
resolutions of Borrower's members and managers authorizing the
execution, delivery and performance of this Agreement and of the
other Loan Documents, certified by Borrower's manager or managing
member. In addition, the following documents and materials shall
have been delivered to the Lender, and must be satisfactory to the
Lender in form and substance:
-
- all supporting documentation with regard to the Borrower and
the Loan as the Lender may require;
- Borrower's Initial Cash Flow Projections;
- such additional information, opinions, certificates, reports
and documents relating to the Borrower or the Collateral as the
Lender may deem necessary; and
- such lien releases, termination statements or assignments as
Lender may deem necessary to remove, or assign to Lender, any
Encumbrances on the Collateral.
- Executed Notes and Loan Documents . Borrower shall
deliver to the Lender, fully executed: this Agreement, the
Revolving Note, UCC-3 Financing Statement Amendments and such other
documents, instruments and certificates as the Lender may
reasonably require, in form and substance satisfactory to the
Lender. All taxes, fees and charges with respect to the
preparation, filing and recording of the Loan Documents shall have
been paid by Borrower.
- Landlord and Mortgagee Waivers . Borrower shall have
used its best efforts to obtain and deliver to Lender as soon as
possible, such landlord and mortgagee waivers as Lender shall
request with respect to any of the Borrower's landlords or
mortgagees which could claim an interest in any Collateral as a
remedy for a default under any lease, mortgage or deed of trust;
provided however, that in any event, each such landlord and
mortgagee for which a waiver has been required by Lender (the
required waivers being from landlords of the real property leased
by Borrower and having the following addresses: (1) 8284 Center Run
Drive, Suite B, Indianapolis, Indiana, and (2) 5107-A, 5107-D and
5127 Berwyn Road, College Park, Maryland), shall have executed and
delivered to Lender waivers in form and substance satisfactory to
Lender prior to the Effective Date.
- Warehouseman and Bailee Waivers . Borrower shall use its
best efforts to obtain and deliver to Lender as soon as possible,
such warehouseman and bailee waivers as Lender shall request, in
form and substance satisfactory to Lender, with respect to any
bailees, warehouse operators or other Persons which could claim an
interest in any Collateral as a remedy for a default under any
lease, fulfillment arrangement or storage agreement or other
agreement, or as a result of maintaining possession of any property
of Borrower; provided however, that in any event, each such bailee,
warehouse operator or other Person for which a waiver has been
required by Lender (the required waivers being from the
warehousemen holding Borrower's property at 1160 Trademark Drive,
Reno, Nevada), shall have executed and delivered to Lender waivers
in form and substance satisfactory to Lender with 60 days of the
Effective Date.
- Financing Statements and Control Agreements . All
financing statements and control agreements deemed necessary by the
Lender to perfect its security interest in the Collateral or any
other collateral or property securing the Loan.
- Operating Account . The Borrower shall have established
and maintain at all times its primary Operating Account with Bank
of America, N.A., and the Borrower shall have delivered to Lender a
Control Agreement, signed by the Borrower and Bank of America,
N.A., under which Bank of America, N.A. shall agree to comply with
all notifications originated by the Lender that Bank of America,
N.A. receives directing disposition of the funds in the Operating
Account without further consent by the Borrower and under which
Bank of America, N.A. subordinates to the Lender any security
interest, lien or right of setoff that Bank of America, N.A. may
now or hereafter have against the Operating Account or property in
the account (except Bank of America, N.A.'s lien for normal
fees).
- Compliance with Covenants . Borrower shall establish to
Lender's satisfaction that, immediately after giving effect to the
proposed Advance, Borrower would be in compliance with Borrower's
financial covenants in section 6.14 of this Agreement (other than
with respect to the Existing Event of Default).
- Borrowing Base Certificate . Borrower shall deliver to
the Lender a Borrowing Base Certificate stating the Borrowing Base
as of January 31, 2008 with supporting schedules attached thereto,
including without limitation, current accounts receivable and
accounts payable reports.
- Future Advances . Prior to requesting any Advance
subsequent to the Effective Date, and as a condition to the
Lender's obligation to make any additional Committed Advance,
Borrower shall satisfy each of the following conditions:
-
- Conditions of First Advance Remain Satisfied . The
Lender shall have determined, in its sole judgment, that the
conditions precedent to the first Advance are satisfied as of the
Borrowing Date for the subsequent Advance; the Loan Documents shall
remain in full force and effect; and neither the Borrower nor any
Person providing Collateral or a guaranty shall have purported to
terminate any of the Loan Documents or notified Lender of an
intention not to perform under any applicable Loan Document;
- Borrowing Base Certificates . Until February 25, 2008,
Lender shall rely on the Borrowing Base Certificate to be provided
by Borrower which shall provide Borrowing Base and other financial
information for Borrower as of January 31, 2008, along with the
supporting schedules thereto. Commencing with the Borrowing Base
Certificate due under this Agreement on or before February 25, 2008
stating the Borrowing Base as of February 22, 2008, and continuing
with each Borrowing Base due thereafter, prior to an Advance, the
Lender shall have timely received such Borrowing Base Certificate,
executed by a duly authorized officer of the Borrower with
supporting updated schedules attached thereto.
- Bank Statement . The Lender shall have timely received a
bank statement for all Deposit Accounts as requested from Lender,
including but not limited to a statement as of the date of any
Request for Advance.
- Cash Flow Projections .
-
- For all periods prior to such date, Borrower's operations shall
have generated cash flow from operations equal to or in excess of
the levels set forth in the Initial Cash Flow Projections.
- The Lender shall have timely received all Cash Flow Projections
and variance reports required under section 6.11(f).
- Representations and Warranties . All representations and
warranties contained herein shall be true and correct in all
material respects at the date of such disbursement;
- No Material Adverse Change . The Lender shall have
determined, in its sole discretion, that no Material Adverse Effect
has occurred; and
- No Default . No Event of Default has occurred and
remains uncured, and no default or event has occurred or
circumstance exists which, with the passage of time or the giving
of notice, or both, would constitute an Event of Default.
- Lender's Right To Rely On Communications . The Borrower
authorizes the Lender to accept, rely upon, act upon and comply
with, any verbal or written instructions, requests, confirmations
and orders of any employee or agent of the Borrower. The Borrower
acknowledges that the transmission between the Borrower and the
Lender of any such instructions, requests, confirmations and orders
involves the possibility of errors, omissions, mistakes and
discrepancies. The Borrower hereby assumes all risk of loss arising
out of: (i) the Lender's acceptance, reliance on, compliance with
or observation of any such instructions, requests, confirmations or
orders that Lender, in good faith, believes are genuine; and (ii)
any such errors, omissions, mistakes and discrepancies, except
those caused by the Lender's gross negligence or willful
misconduct. Borrower agrees to indemnify Lender and to hold Lender
harmless for and from all claims, demands, suits, actions,
judgments, decrees, losses or damages, including attorneys fees and
expenses, that Lender may incur as a result of the foregoing events
or occurrences for which the Borrower has assumed the risk of
loss.
- SECURITY.
-
- Grant of Security Interest . As security for (i) the
payment of the Loan, and any other extensions of credit, loans,
interest, costs or other financial accommodations made under the
Existing Loan Agreement or now or hereafter made by the Lender for
the benefit of the Borrower, and (ii) any other Obligations, the
Borrower hereby grants to the Lender a security interest in the
Collateral. In addition, except as provided by law, Borrower grants
to Lender a security interest in all deposit accounts and
investment accounts of Borrower with any of Lender's Affiliates.
The Borrower further agrees that the Lender shall have in respect
of the Collateral all of the rights and remedies of a secured party
under the Uniform Commercial Code, other applicable law and this
Agreement. The Borrower covenants and agrees to execute and
deliver, and hereby authorizes Lender to prepare and file with the
financing statement records for such jurisdictions as Lender deems
appropriate, such financing statements and other instruments and
filings or perform any and all acts as are necessary in the opinion
of the Lender to perfect, maintain and protect the security
interest hereby granted. The Borrower shall not dispose of the
Collateral, or any part thereof, other than in the ordinary course
of its business or as otherwise may be permitted by this
Agreement.
- Covenants Regarding Inventory and Equipment . With
regard to Collateral that constitutes Inventory or equipment, the
Borrower further covenants as follows:
-
- The Lender's security interest shall extend and attach to
Inventory which is presently in existence and is owned by the
Borrower or in which the Borrower purchases or acquires an interest
at any time and from time to time in the future, whether such
Inventory is in transit or in the Borrower's constructive, actual
or exclusive occupancy or possession or not, and wherever the same
may be located, including, without limitation, all Inventory which
may be located at the premises of the Borrower or upon the premises
of any carriers, forwarding agents, truckers, warehousemen,
vendors, selling agents, finishers, convertors or other third
parties who may have possession of the Inventory.
- Upon sale, exchange, lease or disposition of the Inventory or
equipment, the security interest of the Lender shall without break
in continuity and without further formality or act continue in and
attach to all cash and non-cash proceeds of such sale, exchange,
lease or disposition, including Inventory returned or rejected by
customers or repossessed by either the Borrower or the Lender. As
to any such sale, exchange, lease or disposition, the Lender shall
have all of the rights of an unpaid seller, including stoppage in
transit, replevin, detinue and reclamation.
- Covenants Regarding BOA Investments . The following
supplemental covenants and agreements are in addition to the
covenants and agreements otherwise set forth in this Agreement with
respect to Investment Property:
-
- Voting rights . So long as no Event of Default shall
have occurred and be continuing, Borrower shall be entitled to
exercise all voting rights and other consensual rights pertaining
to the BOA Investments; provided ,
however , that Borrower will not cast any vote, give
any consent, waiver or ratification, or take or fail to take any
action, in any manner, that would, or could reasonably be expected
to, violate or be inconsistent with any of the terms of this
Agreement, or any of the other Loan Documents or have the effect of
impairing the positions or interests of Lender.
- Dividends and Distributions . All interest, income,
dividends, distributions and other amounts payable in cash in
respect of the BOA Investments shall, at all times be paid to
Lender and retained by it as a part of the Collateral (except to
the extent applied upon receipt to the repayment of the amounts
owing under the Revolving Note, this Agreement and/or the other
Loan Documents). Lender shall also be entitled at all times to
receive directly, and to retain as part of the Collateral, (i) all
interest, income, dividends, distributions or other amounts paid or
payable in cash or other property in respect of any of the BOA
Investments in connection with the dissolution, liquidation,
recapitalization or reclassification of the capital of the
applicable issuer to the extent representing an extraordinary
liquidating or other distribution in return of capital, (ii) all
additional BOA Investments or other securities or property (other
than cash) paid or payable or distributed or distributable in
respect of any of the BOA Investments in connection with any
noncash dividend, distribution, return of capital, spin-off, stock
split, split-up, reclassification, combination of shares or
interests or similar rearrangement, and (iii) without affecting any
restrictions against such actions contained elsewhere in this
Agreement or in any of the other Loan Documents, all additional BOA
Investments or other securities or property (including cash) paid
or payable or distributed or distributable in respect of any of the
BOA Investments in connection with any consolidation, merger,
exchange of securities, liquidation or other reorganization. All
interest, income, dividends, distributions or other amounts that
are received by Borrower in violation of the provisions of this
Section shall be received in trust for the benefit of Lender, shall
be segregated from other property or funds of Borrower, and shall
be forthwith delivered to Lender as Collateral in the same form as
so received (with any necessary endorsements).
- Delivery of Certificates and Filings . To perfect the
Lender's lien on and security interest in the BOA Investments and
other Investment Property which is part of the Collateral, Borrower
shall immediately deliver to Lender the original of all
certificates or other instruments evidencing all or any part of the
Collateral, which shall be retained by Lender until this Agreement
is terminated. Borrower's failure to so deliver such certificates
or instruments shall constitute an Event of Default under this
Agreement. In addition to the delivery of such certificates and
instruments, Borrower agrees that Lender may file and record UCC
financing statements in order to perfect Lender's lien on and
security interest in the BOA Investments and other Investment
Property of Borrower. Borrower shall also execute such documents as
Lender may request in order to perfect or maintain the perfection
of Lender's lien on and security interest in the BOA Investments
and other Investment Property of Borrower. Borrower hereby agrees
to pay the cost of filing all financing statements authorized or
required hereunder in all public offices wherever the Lender deems
filing to be necessary or desirable. Borrower hereby authorizes
Lender to prepare and file with the financing records for such
jurisdictions as Lender deems appropriate, such financing
statements, amendments thereto and continuations thereof and other
documents pursuant to the UCC and otherwise, and to take such other
action and perform such other acts, as are necessary, in the sole
and absolute opinion of the Lender, to perfect and maintain the
perfection and first lien priority and security interests granted
hereunder.
- Securities Account Control Agreements . With respect to
securities held in the BOA Collateral Accounts, if any, Borrower
shall deliver to Lender a Control Agreement, signed by the Borrower
and Bank of America Securities, LLC, at which the BOA Collateral
Accounts is to be established, under which Bank of America
Securities, LLC shall agree to comply with all notifications
originated by the Lender that Bank of America Securities, LLC
receives directing it to transfer or redeem any property in the BOA
Collateral Accounts without further consent by the Borrower and
under which Bank of America Securities, LLC subordinates to the
Lender any security interest, lien or right of setoff that Bank of
America Securities, LLC may now or hereafter have against the BOA
Collateral Accounts or property in the account (except Bank of
America Securities, LLC's lien for normal commissions and
fees).
- Further Assurances; Power of Attorney . (i) Borrower
hereby agrees to do such further acts and things and to execute and
deliver to Lender such additional conveyances, assignments,
agreements and instruments as Lender may require or deem advisable
to perfect, establish, confirm and maintain the security interest
and first priority lien provided for herein, to carry out the
purposes of this Agreement or to further assure and confirm unto
Lender its rights, powers and remedies hereunder, in each case at
Borrower's own expense. Borrower hereby ratifies and approves all
financing statements naming Lender as secured party and Borrower as
debtor with respect to the Collateral (and any amendments and
continuations with respect to such financing statements) filed by
or on behalf of Lender prior to the date hereof and ratifies and
confirms the authorization of Lender to file such financing
statements (and amendments and continuations, if any). Borrower
hereby authorizes Lender to adopt on behalf of the Borrower any
symbol required for authenticating any electronic filing. In no
event shall Borrower at any time file, or permit or cause to be
filed, any termination statement with respect to any financing
statement (or amendment or continuation with respect thereto)
naming Lender as secured party and Borrower as debtor, without
express prior written authorization of Lender.
-
(ii) Borrower hereby irrevocably appoints Lender as its lawful
attorney-in-fact, with full authority in the place and stead of
Borrower and in the name of Borrower, Lender or otherwise, and with
full power of substitution in the premises (which power of
attorney, being coupled with an interest, is irrevocable for so
long as this Agreement shall be in effect), exercisable from time
to time in Lender's discretion (which may be taken by Lender
without regard to whether an Event of Default has occurred) to
allow Lender to take any action and to execute any instruments that
Lender may reasonably deem necessary or advisable to accomplish the
purpose of this Agreement, including, without limitation:
-
- to ask, demand, collect, sue for, recover, compound, received
and give acquittance and receipts for moneys due and to become due
under or in respect of any of the BOA Investments;
- to receive, endorse and collect any checks, drafts,
instruments, chattel paper and other orders for the payment of
money made payable to Borrower representing any interest, income,
dividend, distribution or other amount payable in respect of any of
the BOA Investments and to give full discharge for the same;
- to file any claims or take any action or institute any
proceedings that Lender may deem necessary or advisable for the
collection of any of the BOA Investments or otherwise to enforce
the rights of Lender with respect to any of the BOA Inve
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