Exhibit 10.6
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RBC
Centura
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AMENDED AND
RESTATED
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LOAN AND SECURITY
AGREEMENT
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(SD-L&S)
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This AMENDED AND RESTATED LOAN AND
SECURITY AGREEMENT (“Agreement”) is entered into as of
the 2 nd day of January, 2007, by and between
RBC CENTURA BANK (“Bank”) and COMPUTER SOFTWARE
INNOVATIONS, INC. (“Borrower”).
RECITALS
This Agreement restates and amends
the following agreements previously executed by and between
Borrower and Bank: (1) a Loan Agreement dated March 14,
2005; (2) a Pledge & Security Agreement effective
March 14, 2005; (3) a Commercial Security Agreement dated
February 10, 2006; and (4) a Business Loan Agreement
dated April 24, 2006. No novation of these agreements is
intended.
Borrower wishes to obtain additional
credit from time to time from Bank, and Bank desires to extend such
credit to Borrower for use by Borrower in its business. This
Agreement sets forth the terms and conditions on which Bank will
advance credit to Borrower.
AGREEMENT
The parties agree as
follows:
1. DEFINITIONS AND
INTERPRETATION .
1.1 Definitions . Capitalized
terms used herein and not defined in the specific section in which
they are used shall have the meanings assigned to such terms in
Exhibit A. Terms not defined in a specific section or in Exhibit
A which are defined in the Code shall have the meanings
assigned to such terms in the Code.
1.2 Accounting Terms . All
accounting terms not specifically defined in Exhibit A shall be
construed in accordance with GAAP and all calculations shall be
made in accordance with GAAP. The term “financial
statements” shall include the accompanying notes and
schedules.
1.3 Use and Application of
Terms . To the end of achieving the full realization by Bank of
its rights and remedies under this Agreement, including payment in
full of the Obligations, in using and applying the various terms,
provisions and conditions in this Agreement, the following shall
apply: (i) the terms “hereby”,
“hereof”, “herein”, “hereunder”
and any similar words refer to this Agreement; (ii) words in
the masculine gender mean and include correlative words of the
feminine and neuter genders and words importing the singular
numbered meaning include the plural number, and vice versa;
(iii) words importing persons include firms, companies,
associations, general partnerships, limited partnerships, limited
liability partnerships, limited liability limited partnerships,
limited liability companies, trusts, business trusts, corporations
and other registered or legal organizations, including public and
quasi-public bodies, as well as individuals; (iv) the use of
the terms “including” or “included in”, or
the use of examples generally, are not intended to be limiting, but
shall mean, without limitation, the examples provided and others
that are not listed, whether similar or dissimilar; (v) the
phrase “costs and expenses”, or variations thereof,
shall include, without limitation, the reasonable fees of the
following persons: attorneys, legal assistants, accountants,
engineers, surveyors, appraisers and other professionals and
service providers; (vi) as the context requires, the word
“and” may have a joint meaning or a several meaning and
the word “or” may have an inclusive meaning or an
exclusive meaning; (vii) this Agreement shall not be applied,
interpreted and construed more strictly against a person because
that person or that person’s attorney drafted this
Agreement;
(viii) wherever possible each provision of this
Agreement and the other Loan Documents shall be interpreted and
applied in such manner as to be effective and valid under
applicable Requirements of Law, but if any provision of this
Agreement or any of the other Loan Documents shall be prohibited or
invalid under such law, or the application thereof shall be
prohibited or invalid under such law, such provision shall be
ineffective to the extent of such prohibition or invalidity without
invalidating the remainder of such provision or the remaining
provisions, or the application thereof shall be in a manner and to
an extent permissible under applicable Requirements of Law; and
(ix) the Loan Documents shall be subject to the terms and
conditions of this Agreement, and in the event of a conflict
between the terms and conditions of this Agreement and the terms
and conditions of the Loan Documents, the terms and conditions of
this Agreement shall prevail.
2. CREDIT EXTENSIONS
.
2.1 Credit Extensions .
Subject to and upon the terms and conditions of this Agreement and
provided that no Event of Default has occurred and is continuing,
Bank shall make available to Borrower the following Credit
Facilities and Credit Extensions thereunder: Revolving Facility,
Equipment Facility, Real Estate Facility. The Credit Facilities and
related Credit Extensions which are to be made available to
Borrower are more fully described below in this Section 2.1
and unless otherwise provided in this Agreement, the Credit
Facilities and related Credit Extensions shall be evidenced by one
or more Promissory Notes from Borrower to Bank and the Credit
Extensions shall bear interest, and the Credit Extensions, the
interest and the fees, charges, premiums and costs and expenses
associated therewith, shall be repayable in accordance with the
terms of such Promissory Notes and this Agreement.
(a) Revolving Facility
.
(i) General . From the date
hereof through the Revolving Maturity Date, Bank agrees to make
advances (“Advance” or “Advances”) from the
Revolving Facility to Borrower for use in its business – and
not for any other purpose. Unless otherwise agreed, Bank will make
Advances on a daily basis, provided that the aggregate amount of
outstanding Advances shall not exceed at any time (i) the
lesser of (A) the amount available under the Revolving
Facility or (B) the Borrowing Base. If no Event of Default has
occurred and is continuing, amounts borrowed under the Revolving
Facility may be repaid and reborrowed at any time prior to the
Maturity Date of the Revolving Facility.
(ii) Making Advances .
Advances, as well as directions for payment from Borrower’s
accounts, may be requested orally or in writing by authorized
persons. Bank may, but need not, require that all oral requests be
confirmed in writing. Each Advance shall be conclusively deemed to
have been made at the request of and for the benefit of Borrower
(A) when credited to any deposit account of Borrower
maintained with Bank; or (B) when advanced in accordance with
the instructions of an authorized person. Bank, at its option, may
set a cutoff time, after which all requests for Advances will be
treated as having been requested on the next succeeding Business
Day. Not later than 2:00 p.m. (Eastern time) on the date on which
Borrower’s request for an Advance is deemed to have been
made, Bank shall make the Advance available to Borrower in
immediately available funds by crediting the amount thereof to
Borrower’s account with Bank.
(iii) Loan Account . Bank
shall maintain on its books a record of account in which Bank shall
make entries for each Advance and such other debits and credits as
shall be appropriate in connection with the Revolving Facility.
Bank shall provide Borrower with periodic statements of
Borrower’s account, which statements shall be considered to
be correct and conclusively binding on Borrower unless Borrower
notifies Bank to the contrary within thirty (30) days after
Borrower’s receipt of any such statement which Borrower deems
to be incorrect.
(b) Equipment Facility . Bank
shall increase the amount of the current term loan, evidenced by
that certain Promissory Note dated February 10, 2006, to Eight
Hundred Thousand and No/100 Dollars ($800,000.00), the proceeds of
which extension will be used to reimburse Borrower for Capital
Expenditures of Borrower incurred during 2006. Bank shall advance a
principal amount to Borrower under this Equipment Facility of the
difference between Eight Hundred Thousand and No/100 Dollars
($800,000.00) and the outstanding principal balance owing under the
Promissory Note dated February 10, 2006 as of January 2,
2007.
(c) Real Estate Facility .
Bank shall extend to Borrower financing in the amount of the lesser
of (A) ninety percent (90%) of the appraised value of
improved real estate, situate at 3213 Executive Park Circle,
Mobile, Alabama or (B) Five Hundred Thousand and No/100
Dollars ($500,000.00), the proceeds of which extension will be used
for the satisfaction of indebtedness incurred by Borrower in the
acquisition of said real estate.
2.2 [Intentionally
Omitted]
2.3 Overadvances . If, at any
time, the aggregate amount of the outstanding principal under any
Credit Extension exceeds the maximum amount that is permitted to be
outstanding at any one time, as provided in this Section 2,
the Borrower shall immediately pay to Bank, in cash, the amount of
such excess upon written or oral notice from Bank.
2.4 Charging of Payments .
Upon the occurrence and during the continuation of an Event of
Default hereunder, Bank may, at its option, set-off and apply to
the Obligations and otherwise exercise its rights of recoupment as
to any and all (i) balances and deposits of Borrower held by
Bank; and (ii) indebtedness and other obligations at any time
owing to or for the credit or the account of Borrower by Bank and
by any of Bank’s Affiliates. Bank may, at its option, upon
the occurrence and during the continuation of an Event of Default,
also charge all payments required to be made on any of the
Obligations against the Revolving Facility. If Bank charges the
aforementioned payments against the Revolving Facility, the same
shall be deemed an Advance thereunder and the amount of the Advance
shall thereafter accrue interest at the interest rate applicable
from time to time to Advances; and if Bank charges payments as
aforesaid, Bank may, in its discretion, limit, declare a moratorium
on and terminate Borrower’s right under this Agreement to
receive additional Advances, all without prior notice to Borrower,
unless notice is otherwise specifically required under this
Agreement – and Bank’s decision to do one of the
foregoing does not prevent it from later doing any one or more of
the others.
2.5 Fees . In addition to the
other fees, charges, costs and expenses required to be paid by
Borrower under this Agreement and the other Loan Documents,
Borrower shall pay to Bank the fees, charges, costs and expenses
set forth in this Section 2.5.
(a) Commitment Fee . On the
Closing Date, Borrower shall pay to Bank a non-refundable
Commitment Fee of Ten Thousand and 00/100 Dollars
($10,000.00).
(b) Bank Expenses . On the
Closing Date, Borrower shall pay to Bank all Bank Expenses incurred
through the Closing Date and shall pay, as and when demand is so
made by Bank to Borrower, all Bank Expenses incurred relating to
completion, after the Closing Date, of matters related to closing
of this Agreement. Borrower shall be responsible for its own fees
and expenses, including its legal fees.
2.6 Documentary and Intangible
Taxes; Additional Costs. To the extent not prohibited by law
and notwithstanding who is liable for payment of the taxes and
fees, Borrower shall pay, on Bank’s demand, all intangible
personal property taxes, documentary stamp taxes, excise taxes and
other similar taxes assessed, charged and required to be paid in
connection with the Credit Extensions and any extension, renewal
and modification thereof, or assessed, charged and required to be
paid in connection with this Agreement, any of the other Loan
Documents and any extension, renewal and modification of any of the
foregoing. If, with respect to this Agreement or the transactions
hereunder, any Requirement of Law (i) subjects Bank to any tax
(except federal, state and local income taxes on the overall net
income of Bank); (ii) imposes, modifies and deems applicable
any deposit insurance, reserve, special deposit or similar
requirement against assets held by, or deposits in, or loans by
Bank; or (iii) imposes upon Bank any other condition, and the
result of any of the foregoing is to impose any additional Bank
Expenses upon Bank with respect to the Obligations; then Borrower
agrees to pay to Bank the amount of such additional Bank Expenses
within thirty (30) days following presentation by Bank of a
statement of the amount and setting forth Bank’s calculation
thereof, all in reasonable detail, which statement shall be deemed
true and correct absent manifest error.
2.7 Term of Agreement . This
Agreement shall become effective on the Closing Date and shall
continue in full force and effect until the last to occur of
(i) payment in full of all of the Obligations; or
(ii) termination of Bank’s obligation to make Credit
Extensions under this Agreement. Notwithstanding the
foregoing,
Bank shall have the right to limit, declare a
moratorium on and terminate its obligation to make Credit
Extensions under this Agreement immediately and without notice upon
the occurrence and during the continuance of an Event of Default;
and such action by Bank shall not constitute a termination of this
Agreement, shall not constitute a termination of Borrower’s
obligations under this Agreement and the other Loan Documents and
shall not adversely affect or impair Bank’s security
interests in the Collateral. Bank’s decision to do any one of
the foregoing (i.e., limit, declare a moratorium and terminate its
obligations to make Credit Extensions) shall not prevent it from
exercising any one or more of the other options available to it at
any other time.
3. CONDITIONS OF CREDIT
EXTENSIONS .
3.1 Conditions Precedent to
Initial Credit Extension . The obligation of Bank to make the
initial Credit Extension on each Credit Facility is subject to the
condition precedent that all of the conditions and requirements set
forth in this Section 3.1 and Section 3.2 have been
satisfied and completed, or the satisfaction and completion thereof
waived by Bank. If all of the conditions are not met to
Bank’s satisfaction, or the completion thereof waived by
Bank, Bank may, at its option, (i) withhold disbursement until
the same are met; (ii) close and require that any unsatisfied
conditions be satisfied as a condition subsequent to closing within
such period of time as may be designated by the Bank; or
(iii) terminate its obligation to make any Credit Extension
and recover from Borrower all Bank Expenses incurred by Bank in
connection with its preparations for making the Credit Extensions.
A waiver by Bank of a condition must be in writing to be effective
and a waiver as to one or more conditions shall not constitute a
waiver as to other conditions and shall not establish a
“course of dealing or practice” that would require a
waiver of the same or a similar condition at some later
time.
(a) Loan Documents, etc .
Bank shall have received an original of this Agreement, duly
executed by Borrower and any other persons who are parties hereto,
and all of the information, certifications, certificates,
authorizations, consents, approvals, title and other insurance
policies and commitments, financial statements, financing
statements, agreements, documents and records listed on the Closing
Memorandum and Checklist as items to be received, reviewed,
completed, executed, recorded, filed and satisfied prior to Bank
making the initial Credit Extension, and such other information,
agreements, documents and records as Bank and its counsel may deem
reasonably necessary or appropriate.
(b) Payment of Fees . Bank
shall have received payment of the fees and Bank Expenses then due,
as specified in Section 2.
(c) No Event of Default . No
Event of Default shall have occurred and be continuing as of the
Closing Date, or after giving effect to the initial Credit
Extension to be made at or immediately after closing.
(d) Additional Matters . All
other legal and non-legal matters as Bank or its counsel deem
reasonably necessary or appropriate to be satisfied, completed and
received prior to the initial Credit Extension shall be satisfied,
completed and received in form and substance satisfactory to the
Bank and its counsel; and Bank’s counsel shall have received
duly executed counterpart originals, or certified or other such
copies of all records as such counsel may reasonably
request.
3.2 Conditions Precedent to All
Credit Extensions . The obligation of Bank to make each Credit
Extension, including the initial Credit Extension, is further
subject to all of the conditions and requirements set forth in this
Section 3.2 being satisfied and completed, or the satisfaction
and completion thereof waived by Bank.
(a) Loan Payment/Advance Request
Form . In the case of any Advances under the Revolving
Facility, Bank shall have received, as and when required, a
completed Loan Payment/Advance Request Form in form presented by
and acceptable to Bank.
(b) Representations and
Warranties; No Event of Default . The representations and
warranties referenced in Section 5 and in the other Loan
Documents shall be true and correct on and as of the date of each
Credit Extension as though made at and as of each such date
(provided, however, that those representations and
warranties expressly referring to another date
shall be true, correct and complete as of such date) and no Event
of Default shall have occurred and be continuing, or would exist
after giving effect to such Credit Extension. The making of each
Credit Extension shall be deemed to be a representation and
warranty by Borrower on the date of such Credit Extension as to the
accuracy of the facts referred to in this subsection.
4. CREATION OF SECURITY
INTEREST .
4.1 Grant of Security
Interest . Borrower grants and pledges to Bank a continuing
security interest in all presently existing and hereafter acquired
or arising Collateral to secure the prompt repayment of any and all
Obligations and to secure the prompt performance by Borrower of
each of its covenants, duties and obligations under the Loan
Documents. Except as to Permitted Liens or as Bank may have
otherwise consented hereunder or in the other Loan Documents, such
security interest constitutes a valid, first priority security
interest in the presently existing Collateral, and will constitute
a valid, first priority security interest in Collateral acquired or
arising after the date hereof. Notwithstanding any limitation of,
moratorium on or termination of Bank’s obligation to make
Credit Extensions under this Agreement, Bank’s security
interest on the Collateral shall remain in full force and effect
for so long as any Obligations are outstanding.
4.2 Delivery of Additional
Documentation Required . Borrower shall from time to time
execute and deliver to Bank, at the request of Bank, all Negotiable
Collateral, all Financing Statements and other documents and
records that Bank may request, in form and substance satisfactory
to Bank and its counsel, to perfect and continue perfected
Bank’s security interests in the Collateral and in order to
fully consummate all of the transactions contemplated under the
Loan Documents. Borrower hereby consents to the filing by Bank of
Financing Statements and such other instruments and documents in
any jurisdictions or locations deemed advisable or necessary in
Bank’s discretion to preserve, protect and perfect
Bank’s security interest and rights in the Collateral.
Borrower further consents to and ratifies the filing of such
Financing Statements and other instruments and documents prior to
the Closing Date. If Borrower has executed and delivered to Bank a
separate security agreement or agreements in connection with any or
all of the Obligations, that security agreement or those security
agreements and the security interests created therein shall be in
addition to and not in substitution of this Agreement and the
security interests created hereby, and this Agreement shall be in
addition to and not in substitution of the other security agreement
or agreements and the security interests created thereby (except to
the extent any such prior agreements are amended and restated by
this Agreement). In all cases this Agreement and the aforesaid
security agreement or agreements, as well as all other evidences or
records of any and all of the Obligations and agreements of
Borrower, Bank and other persons who may be obligated on any of the
Obligations, shall be applied and enforced in harmony with and in
conjunction with each other to the end that Bank realizes fully
upon its rights and remedies in each and the Liens created by each;
and, to the extent conflicts exist between this Agreement and the
other security agreements and records, the terms and conditions of
this Agreement shall prevail.
4.3 Power of Attorney .
Borrower does hereby irrevocably constitute and appoint Bank its
true and lawful attorney with full power of substitution, for it
and in its name, place and stead, to execute, deliver and file such
agreements, documents, notices, statements and records, to include,
without limitation, Financing Statements, and to do or undertake
such other acts as Bank, in its sole discretion, deems necessary or
advisable to effect the terms and conditions of this Agreement, the
other Loan Documents and to otherwise preserve, protect and perfect
the security of the security interest in the Collateral. The
foregoing appointment is and the same shall be coupled with an
interest in favor of Bank.
4.4 Right to Inspect and
Audit . Bank (through any of its officers, employees, agents or
other persons designated by Bank) shall have the right, upon
reasonable prior notice, from time to time during Borrower’s
usual business hours, to inspect Borrower’s Books and to make
copies thereof and to inspect, check, test, audit and appraise the
Collateral and Borrower’s business affairs in order to verify
Borrower’s financial condition or the amount, condition of,
or any other matter relating to the Collateral and Borrower’s
compliance with the terms and conditions of this Agreement and the
other Loan Documents. Upon reasonable prior notice to Borrower,
Borrower shall permit representatives of Bank to discuss the
business, operations, properties and financial and other conditions
of Borrower with its officers, board members, executives, managers,
members, partners, employees, agents, independent certified public
accountants and others, as applicable. Notwithstanding the
foregoing provisions of this Section 4.4, Bank shall not be
required to give prior notice or limit its inspections to normal
business hours if it deems an emergency or other extraordinary
situation to exist with respect to the Collateral, Borrower’s
Books and its other rights hereunder.
4.5 Collection of Accounts .
In addition to its other rights and remedies in this Agreement,
Bank shall have the rights and remedies set forth in this
Section 4.5, all of which may be exercised by Bank upon the
occurrence and during the continuation of an Event of
Default.
(a) Bank is authorized and empowered
at any time in its sole discretion (i) to require Borrower to
notify, or itself to notify, either in its own name or in the name
of Borrower, all or any of the Borrower’s account debtors,
and any other person obligated to Borrower, that Borrower’s
Accounts have been assigned to Bank and to request in its name, in
the name of Borrower or in the name of a third person, confirmation
from any such account debtor or other person of the amount payable
and any other matter stated therein or relating thereto;
(ii) to demand, collect, settle, compromise for, recover
payment of, to hold as additional security for the Obligations, and
to apply against the Obligations, any and all sums which are now
owing and which may hereafter arise and become due and owing upon
any of said Accounts and upon any other obligation to Borrower (to
include making, settling, adjusting, collecting and recovering
payment of all claims under and decisions with respect to
Borrower’s policies of insurance); (iii) to enforce
payment of any Account and any other obligation of any person to
Borrower either in its own name or in the name of Borrower;
(iv) to endorse in the name of Borrower and to collect any
instrument or other medium of payment, whether tangible or
electronic, tendered or received in payment of the Accounts that
constitute Collateral and any other obligation owed to Borrower;
(v) to sign Borrower’s name on any invoice or bill of
lading relating to any Account, drafts against account debtors,
schedules and assignments of Accounts, verifications of Accounts
and notices to account debtors; and (vi) to dispose of any
Collateral constituting Accounts and to convert any Collateral
constituting Accounts into other forms of Collateral. However,
under no circumstances shall Bank be under any duty to act in
regard to any of the foregoing matters. Without limiting the
provisions of Section 4.3 hereof, but in addition thereto,
Borrower hereby appoints Bank and any employee or representative of
Bank as Bank may from time to time designate, as attorneys-in-fact
for Borrower, to sign and endorse in the name of Borrower, to give
notices in the name of Borrower and to perform all other actions
necessary or desirable in the reasonable discretion of Bank to
effect these provisions and carry out the intent hereof. Borrower
hereby ratifies and approves all acts of such attorneys-in-fact and
neither Bank nor any other such attorneys-in-fact will be liable
for any acts of commission or omission nor for any error of
judgment or mistake of fact or law. The foregoing power, being
coupled with an interest, is irrevocable so long as an Event of
Default is continuing, any Account pledged and assigned to Bank
remains unpaid, and this Agreement or any other Loan Document is in
force. The costs and expenses of such collection and enforcement
shall be borne solely by Borrower whether the same are incurred by
Bank or on behalf of Bank or Borrower and, if paid or incurred by
Bank, the same shall be an Obligation owing by Borrower to Bank,
payable on demand with interest at the Default Rate, and secured by
this Agreement and the other Loan Documents. Borrower hereby
irrevocably authorizes and consents to all account debtors and
other persons communicating with Bank, or its agent, with respect
to Borrower’s property, business and affairs and to all of
the foregoing persons acting upon and in accordance with
Bank’s, or its representative’s, instructions,
directions and demands, including, without limitation, Bank’s
request and demand to pay money and deliver other property to Bank
or Bank’s representatives, all without liability to Borrower
for so doing.
(b) At Bank’s request,
Borrower will forthwith upon receipt of all checks, drafts, cash
and other tangible and electronic remittances in payment or on
account of Borrower’s Accounts, deposit the same in a special
bank account maintained with Bank or its representative, over which
Bank and its representative (as applicable) have the sole power of
withdrawal and will designate with each such deposit the particular
Account upon which the remittance was made. The funds in said
account shall be held by Bank as security for the Obligations. Said
proceeds shall be deposited in precisely the form received except
for the endorsement of Borrower where necessary to permit
collection of items, which endorsement Borrower agrees to make, and
which endorsement Bank and its representative (as applicable) are
also hereby authorized to make on Borrower’s behalf. Pending
such deposit, Borrower agrees that it will not commingle any such
checks, drafts, cash and other remittances with any of
Borrower’s funds or property, but will hold them separate and
apart therefrom and upon an express trust for Bank until deposit
thereof is made in the special account. Bank may at any time and
from time to time, in its sole discretion, apply any part of the
credit balance in the special account to the payment of all or any
of the Obligations, whether or not the same be due, and to payment
of any other obligation owing to Bank under or on account of this
Agreement or any of the other Loan Documents. In the event the
balance of the Obligations outstanding is ZERO at
any time prior to the Revolving Maturity Date,
and provided no Event of Default has occurred or is continuing,
Bank will pay over to the Borrower any excess good and collected
funds received by Bank from Borrower as aforesaid. On the Revolving
Maturity Date and upon the full and final payment of all of the
Obligations and the other obligations as aforesaid, together with a
termination of Bank’s obligation to make additional Advances,
Bank will pay over to Borrower any excess good and collected funds
received by Bank from Borrower, whether received as a deposit in
the special account or received as a direct payment on any of the
Obligations.
(c) Bank shall have the absolute and
unconditional right to apply for and to obtain the appointment of a
receiver, custodian or similar official for all or a portion of the
Collateral, including, without limitation, the Accounts, to, among
other things, manage and sell the same, or any part thereof, and to
collect and apply the proceeds therefrom to payment of the
Obligations as provided in this Agreement and the other Loan
Documents. In the event of such application, Borrower consents to
the appointment of such receiver, custodian or similar official and
agrees that such receiver, custodian or similar official may be
appointed without notice to Borrower, without regard to the
adequacy of any security for the Obligations secured hereby and
without regard to the solvency of Borrower or any other person who
or which may be liable for the payment of the Obligations or any
other obligations of Borrower hereunder. All costs and expenses
related to the appointment of a receiver, custodian or other
similar official hereunder shall be the responsibility of Borrower,
but if paid by Bank, Borrower hereby agrees to pay to Bank, on
demand, all such costs and expenses, together with interest thereon
from the date of payment at the Default Rate. All sums so paid by
Bank, and the interest thereon, shall be an Obligation owing by
Borrower to Bank, and secured by this Agreement and the other Loan
Documents. Notwithstanding the appointment of any receiver,
custodian or other similar official, Bank shall be entitled as
pledgee to the possession and control of any cash, deposits,
accounts, account receivables, documents, chattel paper, documents
of title or instruments at the present or any future time held by,
or payable or deliverable under the terms of the Loan Documents to
Bank.
5. REPRESENTATIONS AND
WARRANTIES .
Borrower represents and warrants to
Bank that the certifications, representations and warranties set
forth in the Certificate of Borrower which has been executed and
delivered by Borrower to Bank contemporaneously with the execution
and delivery of this Agreement by Borrower to Bank are true,
correct and accurate as of the date of this Agreement or such other
date as may be specifically set forth in a particular
certification, representation or warranty; and Borrower agrees that
such certifications, representations and warranties shall be
continuing certifications, representations and warranties of
Borrower to Bank.
6. AFFIRMATIVE COVENANTS
.
Borrower covenants and agrees that
until the termination of Bank’s obligation under this
Agreement to make Credit Extensions and the payment in full of the
Obligations, Borrower shall do each and all of the matters set
forth in this Section 6; and Borrower acknowledges to Bank
that the breach or default by Borrower of any of the covenants and
agreements set forth below in this Section 6 is and the same
shall be material.
6.1 Good Standing and Government
Compliance . Borrower shall maintain in good standing its and
each of its Subsidiaries’ organizational existence in their
respective jurisdictions of organization and maintain qualification
in each jurisdiction in which the conduct of their respective
businesses or their respective ownership of property requires that
they be so qualified, except for those jurisdictions where the
failure to be so qualified would not be reasonably expected to have
a Material Adverse Effect. Borrower shall comply, and shall cause
each Subsidiary to comply, with all Requirements of Law to which
they are subject, and without limiting the foregoing with respect
to compliance with all Requirements of Law, Borrower shall remain
in material compliance with, and each of its Subsidiaries shall
remain in material compliance with (i) the Trading with the
Enemy Act, as amended, and each of the foreign assets control
regulations of the United States Treasury Department (31 CFR,
Subtitle B, Chapter V, as amended) and any other enabling
legislation or executive order relating thereto; and (ii) the
Uniting And Strengthening America By Providing Appropriate Tools
Required To Intercept And Obstruct Terrorism (USA Patriot Act of
2001). Borrower shall maintain, and shall cause each of its
Subsidiaries to maintain, in force all licenses, approvals and
agreements, the loss of which or failure to comply with which could
have a Material Adverse Effect, or an adverse effect in a material
manner on the Collateral or the priority of Bank’s security
interest in the Collateral.
6.2 Payment/Performance .
Borrower shall pay when due all amounts owing to Bank under this
Agreement and the other Loan Documents and promptly perform all
other obligations of Borrower thereunder and hereunder.
6.3 Use of Loan Funds .
Borrower shall use all loan proceeds disbursed to Borrower only for
the purposes stated in this Agreement and the other Loan
Documents.
6.4 Financial Statements;
Reports; Certificates .
(a) Borrower shall deliver to Bank
each and all of the financial statements, reports, certificates and
other records referenced under this subsection (a) and such
other statements, reports, certificates and records as Bank may
reasonably request from time to time.
(i) As soon as available, but in any
event within twenty-five (25) days after the end of each
calendar month, Borrower shall deliver to Bank an unaudited
consolidated balance sheet and a statement of income, cash flow and
retained earnings prepared in accordance with GAAP, consistently
applied, covering Borrower’s consolidated operations during
such period, in a form acceptable to Bank.
(ii) Beginning with the fiscal year
ending December 31, 2006, as soon as available, but in any
event within one hundred twenty (120) days after the end of
Borrower’s fiscal year, Borrower shall deliver to Bank
audited consolidated financial statements of Borrower prepared by
an approved CPA.
(b) Within twenty-five
(25) days after the last day of each month so long as any
amounts remain outstanding under the Revolving Facility, and within
ten (10) days prior to any borrowing under the Revolving
Facility, Borrower shall deliver to Bank a Borrowing Base
Certificate dated and signed by a Responsible Officer, together
with an Accounts Receivable aging report, each in form acceptable
to Bank.
(c) Within thirty (30) days
after the beginning of each fiscal year of Borrower, Borrower shall
deliver to Bank a detailed annual budget, and Borrower shall notify
Bank of each material change to or deviation from such budget
within five (5) Business Days after Borrower’s board of
directors has approved such change or deviation.
(d) Borrower shall provide such
additional statements and information as Bank may from time to time
request, in form reasonably acceptable to Bank.
6.5 Taxes . Borrower shall
make, and shall cause each Subsidiary to make, due and timely
payment of, or deposit or withholding of, all federal, state and
local taxes, assessments or contributions required of it by all
Requirements of Law, and will execute and deliver to Bank, on
demand, appropriate certificates attesting to the payment, deposit
or withholding thereof; provided that Borrower or a Subsidiary need
not make any payment if the amount or validity of such payment is
contested in good faith by appropriate proceedings and is reserved
against (to the extent required by GAAP) by Borrower.
6.6 Insurance .
(a) Borrower, at its expense, shall
keep the Collateral insured against loss or damage by fire, theft,
explosion, sprinklers and all other hazards and risks required by
Bank. Unless otherwise directed by Bank, the insurance shall be all
risk replacement cost insurance with agreed amount endorsement,
standard noncontributing mortgagee clauses and standard waiver of
subrogation clauses. Borrower shall also maintain general
liability, workmen’s compensation and other insurance in
amounts and of a type that are customary to businesses similar to
Borrower’s, unless Bank directs otherwise, in which event
Borrower shall maintain such insurance in amounts and types as Bank
directs.
(b) All policies of insurance shall
be in such form and with such companies as may be reasonably
satisfactory to Bank. All policies of property insurance shall
contain a lender’s loss payable endorsement, in a form
reasonably satisfactory to Bank, showing Bank as an additional loss
payee, and all liability
insurance policies shall show Bank as an
additional insured. All policies shall specify that the insurer
must give at least twenty (20) days’ notice to Bank
before canceling its policy for any reason. Upon Bank’s
request, Borrower shall deliver to Bank certified copies of the
policies of insurance and evidence of all premium payments. All
proceeds payable under any such policy or policies shall, at
Bank’s option, be payable to Bank to be applied on account of
the Obligations. A
6.7 Primary Depository .
Borrower shall maintain its primary operating, depository and
lockbox accounts (if any) with Bank.
6.8 Financial Covenants .
Borrower shall maintain, as of the last day of each calendar year
unless stated otherwise, and Borrower shall fully and timely comply
with, each and every one of the financial maintenance covenants set
forth in this Section 6.8 and others that may be contained in
this Agreement and the other Loan Documents.
(a) Debt Service Coverage
Ratio . As measured on December 31, 2006 and annually
thereafter, a Debt Service Coverage Ratio of not less than 1.20 to
1.0.
(b) Funded Debt to EBITDA .
As measured on December 31, 2006, and annually thereafter, a
ratio of Funded Debt to EBITDA of not greater than 2.50 to 1.0;
provided that Bank will not unreasonably withhold a waiver of this
covenant in the event that Borrower consummates the acquisition of
another business which has been approved in advance by
Bank.
6.9 Maintenance of Property .
Borrower shall keep and maintain the Collateral in good working
order and condition and make all needed and proper repairs,
replacements, additions, or improvements thereto as are necessary,
reasonable wear and tear excepted.
6.10 Maintain Security
Interest . Borrower shall maintain, protect and preserve the
security interest of Bank in the Collateral and the lien position
of Bank in the Collateral, including, without limitation,
(i) the filing of “claims” under insurance
policies; and (ii) protecting, defending and maintain the
validity and enforceability of the Trademarks, Patents and
Copyrights.
6.11 Further Assurances . At
any time and from time to time, Borrower shall execute and deliver
such further instruments, agreements, documents and other records
and take such further action as may be reasonably requested by Bank
to effect the purposes of this Agreement, including, without
limitation, the perfection and continuation of perfection of
Bank’s security interests in the Collateral.
7. NEGATIVE COVENANTS
.
Borrower covenants and agrees that
until the termination of Bank’s obligation under this
Agreement to make Credit Extensions and the payment in full of the
Obligations, Borrower shall not do or permit to be done any of the
matters set forth in this Section 7; and Borrower acknowledges
to Bank that the breach or default by Borrower of any of the
covenants and agreements set forth below in this Section 7 is
and the same shall be material.
7.1 Dispositions . Borrower
shall not convey, sell, lease, transfer and otherwise dispose of,
and Borrower shall not permit any of its Subsidiaries to convey,
sell, lease, transfer and otherwise dispose of (with respect to
both Borrower and Borrower’s Subsidiaries, by operation of
law or otherwise), any of the Collateral, other than Permitted
Transfers.
7.2 Change in Business; Change in
Control or Executive Office . Borrower shall not engage in any
business, or permit any of its Subsidiaries to engage in any
business, other than as reasonably related or incidental to the
businesses currently engaged in by Borrower, without the prior
written consent of Bank, which consent shall not be unreasonably
withheld. Borrower shall not have a Change in Control and will not,
without thirty (30) days’ prior written notification to
Bank, relocate its chief executive office, change its state of
organization or change any other matter that will or could result
in Bank’s security interests in the Collateral becoming
unperfected. For purposes hereof, “Change in Control”
shall mean a majority of Nancy K. Hedrick, Thomas P. Clinton,
William J. Buchanan, and Beverly N. Hawkins no longer being
employed by Borrower as executive officers of Borrower.
7.3 Mergers or Acquisitions; New
Subsidiary . Borrower shall not merge or consolidate, or permit
any of its Subsidiaries to merge or consolidate, with or into any
other business organization, or acquire, or permit any of its
Subsidiaries to acquire, all or substantially all of the capital
stock or property of another person; excepting, however,
Borrower’s acquisition of substantially all of the assets of
McAleer Computer Associates, Inc. Borrower shall not create or
cause to be created or to come into existence any new subsidiary
after the Closing Date, without the prior written consent of
Bank.
7.4 Indebtedness . Borrower
shall not create, incur, assume or be or remain liable with respect
to any Indebtedness, or permit any Subsidiary so to do, other than
Permitted Indebtedness. With respect to Indebtedness described in
clause (iii) of the definition of Permitted Indebtedness in
Exhibit A , to the extent not specifically prohibited by the
terms of such Indebtedness, Bank shall have a subordinate lien in
and to all equipment and property financed or acquired with such
Indebtedness.
7.5 Encumbrances . Borrower
shall not create, incur, assume or allow any Lien with respect to
the Collateral, or assign or otherwise convey any right to receive
income, including the sale of any Accounts, or permit any of its
Subsidiaries so to do, except for Permitted Liens, or covenant to
any other person that Borrower in the future will refrain from
creating, incurring, assuming or allowing any Lien with respect to
any of Borrower’s property.
7.6 Judgments . Borrower
shall not permit a judgment for the payment of money to be entered
against it which judgment Borrower permits to remain unsatisfied or
unstayed for a period of thirty (30) days after the same is
entered against Borrower.
7.7 Distributions . Except in
the absence of an Event of Default and as would not result in an
Event of Default hereunder, or as consented to in writing by Bank,
Borrower shall not pay any dividends or make any other distribution
or payment on account of or in redemption, retirement or purchase
of any capital stock, or permit any of its Subsidiaries to do
so.
7.8 Investments . Borrower
shall not directly or indirectly acquire or own, or make any
Investment in or to any person, or permit any of its Subsidiaries
so to do, other than Permitted Investments.
7.9 Loans . Borrower shall
not make or commit to make any advance, loan, extension of credit
or capital contribution to, or purchase of any stock, bonds, notes,
debentures or other securities of any person.
7.10 Loans to Officers .
Borrower shall not make any loan or advance directly or indirectly
for the benefit of any past, present, or future stockholder,
director, officer, executive, manager, member, partner or employee
of Borrower, other than employee relocation loans, employee bridge
loans and other incidental loans to employees, all in the ordinary
course of business.
7.11 Compensation . Borrower
shall not pay any compensation to any past, present and future
shareholder, director, officer, executive, member, manager, partner
and employee, whether through salary, bonus or otherwise, in excess
of Borrower’s historical practices.
7.12 Transactions with
Affiliates . Borrower shall not directly or indirectly enter
into or permit to exist any material transaction with any Affiliate
of Borrower except for transactions that are in the ordinary course
of Borrower’s business, upon fair and reasonable terms that
are no less favorable to Borrower than would be obtained in an
arm’s length transaction with a non-affiliated
person.
7.13 Subordinated Debt .
Except for scheduled payments of interest and/or principal on any
Subordinated Debt to the stockholders of Borrower, Borrower shall
not make any payment in respect of any Subordinated Debt, or permit
any of its Subsidiaries to make any such payment, except in
compliance with the terms of such Subordinated Debt, or amend any
provision contained in any documentation relating to the
Subordinated Debt without Bank’s prior written
consent.
7.14 Inventory and Equipment
. Borrower shall not store its Inventory and shall not store its
Equipment with a bailee, warehouseman or similar person unless Bank
has received a pledge of the warehouse receipt covering such
Inventory and Equipment. Except for Inventory sold in the ordinary
course of business and except for such other locations as Bank may
approve in writing, Borrower shall not move or relocate its
Inventory and shall not move or relocate its Equipment from the
location or locations identified in the Certificate of Borrower and
such other locations of which Borrower gives Bank prior written
notice and as to which Borrower signs and files a
Financing