REVOLVING LINE OF CREDIT AGREEMENT by and between ZIONS FIRST NATIONAL BANK, a national banking association, as Lender, and FRANKLIN COVEY CO., a Utah corporation, as Borrower Dated as of March 14, 2007
Exhibit
10.6
REVOLVING
LINE OF CREDIT AGREEMENT
by
and
between
ZIONS
FIRST NATIONAL BANK,
a
national banking association,
as
Lender,
and
XXXXXXXX
XXXXX CO.,
a
Utah
corporation,
as
Borrower
Dated
as
of March 14, 2007
REVOLVING
LINE OF CREDIT AGREEMENT
THIS
REVOLVING
LINE OF CREDIT AGREEMENT
is made
as of March 14, 2007, by and between XXXXXXXX
XXXXX CO.,
a Utah
corporation (“Borrower”),
whose
address is 0000 Xxxx Xxxxxxx Xxxx., Xxxx Xxxx Xxxx, Xxxx 00000, and ZIONS
FIRST NATIONAL BANK,
a
national banking association (“Lender”),
whose
mailing address is 00 Xxxx Xxxxx Xxxxxx, Xxxxx 000, Xxxx Xxxx Xxxx, Xxxx
00000.
RECITALS:
A. Borrower
has applied to Lender for a revolving line of credit loan to finance Borrower’s
general corporate purposes, including Borrower’s working capital needs, the
redemption of Borrower’s common or preferred stock, or other Borrower purposes,
and for other uses approved by Lender, upon the terms and subject to the
conditions set forth herein.
B. Based
on
the foregoing and upon the terms and subject to the conditions set forth
herein,
Lender is willing to extend the requested revolving line of credit loan to
Borrower.
NOW,
THEREFORE, in consideration of the covenants and conditions herein contained,
the parties agree as follows:
ARTICLE
1
DEFINITIONS
1.1 Definitions.
As used
herein, the following terms shall have the meanings set forth
below:
“Account
Control Agreement”
means
that certain Account Control Agreement of even date herewith by and among
Borrower, Guarantor, Collateral Agent and Chase.
“Advance”
means
a
disbursement of Loan proceeds.
“Affiliate”
of
any
Person means any other Person directly or indirectly controlling or controlled
by or under direct or indirect common control with such Person. For the purposes
of this definition, “control,” when used with respect to any Person, means the
power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract
or
otherwise; and the terms “controlling” and “controlled” have meanings
correlative to the foregoing. The term “Affiliate” does not include the
officers, directors, or employees of a Person, if the Person is a corporation,
and does not include the employees or managers of a Person, if the Person
is a
limited liability company or limited partnership.
“Agreement”
means
this Revolving Line of Credit Agreement, as the same may be amended and
supplemented from time to time.
“Authorized
Representative”
means,
for any Person, the person or persons designated by that Person to take any
and
all actions on the part of that Person under any of the Loan Documents or
in
connection with the Loan.
“Average
Quarterly Outstanding Balance”
means
the aggregate sum of the outstanding and unpaid balance of the Loan for each
day
during a calendar quarter (or portion thereof) with respect to which the
Unused
Commitment Fee is being computed, divided by the number of days in that calendar
quarter (or portion thereof).
“Borrower”
has
the
meaning set forth in the introductory paragraph of this Agreement, together
with
its successors and permitted assigns.
“Borrower
Operating Documents”
means
the Articles of Incorporation of Borrower, as filed with the predecessor
filing
office to the Utah Department of Commerce, Division of Corporations and
Commercial Code on December 2, 1983, and the Amended and Restated Bylaws
of
Borrower, dated effective as of January 11, 2002, and all modifications and
amendments to those documents, pursuant to which Borrower has been formed
and
exists.
“Business
Day”
means
a
day other than a Saturday, Sunday or any other day on which Lender’s branch
located at 00 Xxxx Xxxxxxxx, Xxxx Xxxx Xxxx, Xxxx is authorized or obligated
to
close.
“Capital
Expenditures”
means
expenditures for fixed or capital assets as determined in accordance with
GAAP.
“Change
of Control”
(a)
means the closing of a sale or other disposition of all or substantially
all of
Borrower’s or Guarantor’s assets; (b) shall be deemed to have occurred at such
time as a “person” or “group” (within the meaning of Sections 13(d) and 14(d)(2)
of the Securities Exchange Act of 1934, as amended) becomes the “beneficial
owner” (as defined in Rule 13d3 under the Securities Exchange Act of 1934, as
amended), directly or indirectly, of more than fifty percent (50%) of the
total
voting power of all classes of stock then outstanding of Borrower entitled
to
vote in the election of directors; or (c) Borrower’s or Guarantor’s merger into
or consolidation with any other entity, or any other reorganization or transfer,
directly or indirectly, of the ownership interests in Borrower or Guarantor,
in
which the holders of the outstanding ownership interests in Borrower or
Guarantor immediately prior to such transaction receive or retain, in connection
with such transaction on account of their ownership interests, ownership
interests representing less than fifty percent (50%) of the voting power
of the
entity surviving such transaction; provided,
however,
that a
Change of Control shall not include a merger effected exclusively for the
purpose of changing the domicile of Borrower or Guarantor or a merger of
a
Guarantor into Borrower or another Guarantor.
“Chase”
means
JPMorgan Chase Bank, N.A.
“Chase
Loan”
means
that certain revolving line of credit in the maximum principal amount of
up to
EIGHTEEN MILLION AND NO/100 DOLLARS ($18,000,000.00).
“Chase
Loan Documents”
means
any agreements, documents, instruments or guaranties, now or hereafter
governing, evidencing, guarantying or securing the obligations of Borrower
with
respect to the Chase Loan, as such agreements, documents, instruments and
guaranties may be amended, modified, extended, renewed, or supplemented from
time to time.
“Closing
Date”
means
the date upon which Borrower, Guarantor and Lender have executed and delivered
each of the Loan Documents and each of the conditions precedent and other
requirements in Article 4
have
been satisfied or waived, as determined by Lender in its sole and absolute
discretion.
“Code”
means
the Internal Revenue Code of 1986, as amended, and any successor statute
promulgated in replacement thereof, together with all temporary, final and
other
Treasury Regulations promulgated under the Code.
“Collateral”
means
all of Borrower’s and Guarantor’s assets and proceeds thereof, including,
without limitation, the personal property subject to the Security Agreement,
including proceeds, products, interest on and investments thereof from time
to
time, and all other property, interests in property, and rights to property
securing any or all of Borrower’s and Guarantor’s payment and other obligations
under the Loan Documents from time to time.
“Collateral
Agent”
means
JPMORGAN
CHASE BANK, N.A.,
a
national banking association, not in its individual capacity, but solely
as
collateral agent for Lender and Chase.
“Consolidated
Entities”
means
Borrower and any Subsidiaries thereof, including, without limitation,
Guarantor.
“Covenant
Compliance Certificate”
means
a
Covenant Compliance Certificate in form and substance satisfactory to Lender,
which shall be in substantially the form attached hereto as Exhibit
A
from
Borrower to Lender certifying compliance with the financial covenants set
forth
in Section
6.8
of this
Agreement, together with such other supporting documents and information
as
Lender may require from time to time in accordance herewith.
“Default
Interest Rate”
means
a
rate of interest equal to the lesser of (a) the aggregate of THREE PERCENT
(3%)
per annum plus the Interest Rate, or (b) the highest rate legally permissible
under applicable Requirements of Law. The Default Interest Rate shall change
from time to time as and when the Interest Rate changes.
“Early
Termination Fee”
means,
as of the date of any early termination of the Loan by Borrower pursuant
to
Section
2.6(c),
an
amount equal to the sum of (a) the Unused Commitment Fee for the portion
of the
calendar quarter that has passed as of such date and (b) using a discount
rate
of seven percent (7%), the net present value of the aggregate amount of future
Unused Commitment Fees which would have been due (assuming an Average Quarterly
Outstanding Balance of $0.00) for each calendar quarter (or portion thereof)
remaining in the term of the Loan after the date Borrower terminates the
Loan.
“EBITDAR”
shall
have the meaning given in Section
6.8(a).
“ERISA”
means
the Employee Retirement Income Security Act of 1974, as amended, and any
successor statute of similar import, together with the regulations thereunder,
in each case as in effect from time to time. References to sections of ERISA
shall be construed to also refer to any successor sections.
“ERISA
Affiliate”
means
any corporation, partnership, or other trade or business (whether or not
incorporated) that is, along with Borrower or Guarantor, a member of a
controlled group of corporations or a controlled group of trades or businesses,
as described in sections 414(b) and 414(c), respectively, of the Code or
section
4001 of ERISA, or a member of the same affiliated service group within the
meaning of section 414(m) of the Code.
“Event
of Default”
means
the occurrence of any of the events listed in Section
7.1
and the
expiration of any applicable notice and cure period provided in said
section.
“Financing
Statement”
means
one or more UCC financing statements and/or addenda thereto, to be prepared
by
Collateral Agent, naming Borrower and/or Guarantor, as applicable, as debtor,
in
favor of Collateral Agent, as secured party, and perfecting Collateral Agent’s
security interest in the Collateral now owned or hereafter acquired by Borrower
and Guarantor, in form and substance satisfactory to Collateral Agent, to
be
filed with the Utah Department of Commerce, Division of Corporations and
Commercial Code and in such other offices for recording or filing such
statements in such jurisdictions as Collateral Agent shall desire to perfect
Collateral Agent’s liens and security interest or reflect such interest in
appropriate public records.
“Xxxxxxxx
Xxxxx Mexico”
means
XXXXXXXX XXXXX MEXICO, INC.,
a Utah
corporation.
“GAAP” shall
have the meaning given in Section
1.3.
“Governmental
Authority”
means
the government of the United States of America, any other nation or any
political subdivision thereof, whether state or local, and any agency,
authority, instrumentality, regulatory body, court, central bank or other
entity
exercising executive, legislative, judicial, taxing, regulatory or
administrative powers or functions of or pertaining to government.
“Guarantor”
means,
individually and collectively, as the context requires, and jointly and
severally, all present and future domestic Subsidiaries of Borrower, including,
without limitation, XXXXXXXX
XXXXX PRINTING, INC.,
a Utah
corporation (“Printing”),
FRANKLIN
DEVELOPMENT CORPORATION,
a Utah
corporation (“Development”),
XXXXXXXX
XXXXX TRAVEL, INC.,
a Utah
corporation (“Travel”),
XXXXXXXX
XXXXX CATALOG SALES, INC.,
a Utah
corporation (“Catalog”),
XXXXXXXX
XXXXX CLIENT SALES, INC.,
a Utah
corporation (“Client”),
XXXXXXXX
XXXXX PRODUCT SALES,
a Utah
corporation (“Product”),
XXXXXXXX
XXXXX SERVICES, L.L.C.,
a Utah
limited liability company (“Services”),
and
XXXXXXXX
XXXXX MARKETING, LTD.,
a Utah
limited partnership (“Marketing”).
“Guarantor
Loan Documents”
means
the Guaranty and any other guaranties, agreements, documents, or instruments
now
or hereafter executed by Guarantor evidencing, guarantying, securing or
otherwise related to the obligations of Guarantor or the Loan, as the Guaranty
and such other guaranties, agreements, documents, and instruments may be
amended, modified, extended, renewed, or supplemented from time to
time.
“Guarantor
Operating Documents”
means
the articles of incorporation, articles of organization, certificate of
partnership, bylaws, operating agreements and limited partnership agreements
of
Guarantor, as applicable, and all modifications and amendments to those
documents, pursuant to which Guarantor has been formed and exists.
“Guaranty”
means
that certain Repayment Guaranty executed by Guarantor, as the same may be
amended, modified, supplemented and restated from time to time.
“Indebtedness”
means,
as to any Person (a) indebtedness created, issued, incurred or assumed by
such
Person for borrowed money or evidenced by bonds, debentures, notes or similar
instruments; (b) all obligations of such Person to pay the deferred purchase
price of property or services; (c) all indebtedness secured by a lien on
any
asset of such Person whether or not such indebtedness is assumed by such
Person;
(d) all obligations, contingent or otherwise, of such Person directly or
indirectly guaranteeing any indebtedness or other obligation of any other
Person
or in any manner providing for the payment of any indebtedness or other
obligation of any other Person or otherwise protecting the holder of such
indebtedness against loss (excluding endorsements for collection or deposit
in
the ordinary course of business); (e) the amount of all reimbursement
obligations and other obligations of such Person (whether due or to become
due,
contingent or otherwise) in respect of letters of credit, bankers’ acceptances,
surety or other bonds (but excluding surety or other bonds in favor of
Governmental Authorities) and similar instruments; (f) all obligations under
leases capitalized in accordance with GAAP; and (g) all other obligations
that
would be included as liabilities on a balance sheet prepared in accordance
with
GAAP.
“Intercreditor
Agreement”
means
that certain Intercreditor Agreement of approximately even date herewith
by and
among Collateral Agent, Lender and Chase, as the same may be amended, modified,
supplemented or restated from time to time.
“Interest
Period”
means
each period commencing on the first day of a calendar month and ending on
the
first day of the next succeeding calendar month; provided,
however,
that
(i) the first Interest Period shall commence on the Closing Date; and (ii)
any
Interest Period that would otherwise extend past the Maturity Date shall
end on
the Maturity Date.
“Interest
Rate”
means
a
variable rate equal to the LIBO Rate in effect from time to time plus One
and
One-Tenth Percent (1.10%) per annum.
“Lender”
means
ZIONS
FIRST NATIONAL BANK,
a
national banking association whose address is as set forth in the introductory
paragraph of this Agreement, its successors and assigns.
“Letter
of Credit”
means
a
written agreement by Lender to honor drafts or other demands for payment
in
compliance with the conditions specified in a letter of credit extended by
Lender pursuant to this Agreement, on such form(s) of letter of credit as
customarily issued by Lender and on such terms as Lender shall require in
its
reasonable discretion.
“Letter
of Credit Limit”
means
the aggregate issued and committed amount of SEVEN MILLION AND NO/100 DOLLARS
($7,000,000.00).
“LIBO
Rate”
means,
with respect to any Interest Period, the rate per annum quoted by Lender
as
Lender’s LIBOR rate based upon quotes from the London Interbank Offered Rate
from the British Bankers Associates Interest Settlement Rates, as quoted
for
U.S. Dollars by Bloomberg or other comparable pricing services selected by
Lender. This definition of Lender’s LIBOR rate is to be strictly interpreted and
is not intended to serve any purpose other than providing an index to determine
the Interest Rate. Lender’s LIBOR rate may not necessarily be the same as the
quoted offer side in the Eurodollar time deposit market by any particular
institution or service applicable to any interest period. It is not the lowest
rate at which Lender may make loans to any of its customers, either now or
in
the future.
“Lien
or Encumbrance”
and
“Liens
and Encumbrances”
means
any assignment as security, conditional sale for security purposes, grant
in
trust, lien, mortgage, pledge, security interest, title retention arrangement,
other encumbrance, or other interest or right securing the payment of money
or
the performance of any other liability or obligation, whether voluntarily
or
involuntarily created and whether arising by agreement, document, or instrument,
under any law, ordinance, regulation, or rule (federal, state, or local),
or
otherwise.
“Loan”
means
the revolving line of credit loan from Lender to Borrower described in this
Agreement.
“Loan
Amount”
means
the amount of up to SEVEN MILLION AND NO/100 DOLLARS ($7,000,000.00), plus
any
sum in addition thereto advanced by Lender in its sole and absolute discretion
in accordance with the Loan Documents, to be disbursed pursuant to the terms
and
conditions of this Agreement.
“Loan
Documents”
means
the documents described in Section
4.1(i),
any
International Swap and Derivatives Association Master Agreement (and any
confirmation related thereto and any other Swap Agreement), and any other
guaranties, agreements, documents, or instruments now or hereafter evidencing,
guarantying or securing the Obligations of Borrower hereunder, as this
Agreement, the other documents described in Section
4.1,
and
such other agreements, documents, and instruments may be amended, modified,
extended, renewed, or supplemented from time to time.
“Loan
Party”
means
Borrower, Guarantor and each other Person that from time to time is or becomes
obligated to Lender or Collateral Agent under any Loan Document or grants
any
Lien or Encumbrance to Lender or Collateral Agent with respect to any
Collateral.
“Material
Adverse Change”
means
any change in the assets, liabilities, financial condition, or results of
operations of Borrower or Borrower and Guarantor on an aggregate basis, or
any
other event or condition with respect to Borrower or Borrower and Guarantor
together, that materially and adversely affects any of the following: (i)
the
likelihood of performance by Borrower or Borrower and Guarantor together
of any
Obligations or the ability of Borrower or Borrower and Guarantor together
to
perform such Obligations, (ii) the legality, validity or binding nature of
any of the Obligations of Borrower or Guarantor, (iii) any Lien or Encumbrance
securing any of such Obligations, or (iv) the priority of any Lien or
Encumbrance securing any of such Obligations.
“Maturity
Date”
means
the date which is exactly thirty-six (36) months from the date of the
Note.
“Multiemployer
Plan”
means
a
“multiemployer plan” as defined in Section 4001(a)(3) of ERISA which is
maintained for employees of Borrower or Guarantor.
“Note”
means
the Secured Promissory Note of approximately even date herewith executed
by
Borrower and payable to Lender, as such note may be amended, modified, extended,
renewed, supplemented or restated from time to time.
“Obligations”
means,
as the context requires, the duties and obligations of Borrower and/or Guarantor
under the Loan Documents from time to time, including without limitation,
any
and
all obligations, contingent or otherwise, whether now existing or hereafter
arising, of Borrower to Lender arising under or in connection with Swap
Agreements.
“Occupational
Safety and Health Law”
means
the Occupational Safety and Health Act of 1970, as amended, and any other
federal, state or local statute, law, ordinance, code, rule, regulation,
order
or decree regulating, relating to or imposing liability or standards of conduct
concerning employee health and/or safety.
“Other
Loans”
means
any loan, financing arrangement or extension of credit to Borrower or its
Subsidiaries, including, without limitation, Guarantor, from Lender, any
Affiliate of Lender, or from Chase or X.X. Xxxxxx Xxxxx & Co. or any of
their Affiliates.
“Payment
Date”
means
the first (1st)
day of
each calendar month after the Closing Date.
“PBGC”
means
the Pension Benefit Guaranty Corporation and any entity succeeding to any
or all
of its functions under ERISA.
“Permitted
Exceptions”
means
the following: (a) the sale, transfer, or other disposition of any Collateral
that is (i) consumed or worn out in ordinary usage and that is promptly replaced
with similar items of equal or greater value or (ii) sold in the ordinary
course
of business; (b) the Loan Documents; (c) purchase money liens on items of
the
Collateral; (d) Liens or Encumbrances granted to Chase or Collateral Agent
pursuant to the Chase Loan Documents in respect of which Lender or Collateral
Agent shares or is otherwise granted a first priority security interest with
Chase on a pari
passu
basis
pursuant to and as set forth in the Intercreditor Agreement; (e) Liens and
Encumbrances against Borrower or Guarantor set forth on Schedule
5.6
in
effect on the Closing Date; (f) covenants, restrictions, rights,
rights-of-way, easements and minor irregularities and encumbrances in title
which do not materially interfere with the business or operations of Borrower
or
Guarantor as presently conducted; (g) Liens and Encumbrances arising by statute
in connection with worker’s compensation and unemployment insurance (other than
Liens and Encumbrances arising under ERISA), good faith cash deposits in
connection with tenders, contracts or leases to which Borrower or Guarantor
is a
party or other cash deposits required to be made in the ordinary course of
business (provided in each case that the obligation is not for borrowed money
and that the obligation secured is not overdue or, if overdue, is being
contested in good faith); (h) mechanics’, workmen’s, materialmen’s,
landlords’, carriers’ or other similar Liens and Encumbrances arising in the
ordinary course of Borrower’s or Guarantor’s business with respect to
obligations which are not due or which are being contested in good faith;
(i)
the pledge of assets for the purpose of securing an appeal, stay or discharge
in
the course of any legal proceeding, provided that the aggregate amount of
liabilities of Borrower and Guarantor secured by a pledge of Collateral,
including interest and penalties thereon, if any, shall not be in excess
of
$2,000,000 at any one time outstanding; and (j) any interest or title of a
lessor under any operating lease to Borrower or Guarantor.
“Person”
means
any natural person, any unincorporated association, any corporation, any
partnership, any joint venture, any limited liability company, any trust,
any
other legal entity, or any Governmental Authority.
“Pledged
Securities”
means
all of the shares of the common stock of Guarantor (other than Services and
Marketing) owned and pledged by Borrower, together with all dividends therefrom
(whether in cash or in equity securities), all stock splits or reissuances
thereof, all distributions thereon or in respect thereof, all rights with
respect thereto, including voting and appraisement rights, all investments
thereof, interest thereon and proceeds thereof, all securities, cash or other
assets in replacement thereof.
“Quarterly
Payment Date”
means
the last day of each of March, June, September and December of each calendar
year until the Maturity Date, unless any such day is not a Business Day,
in
which case the Quarterly Payment Date shall be the next succeeding Business
Day.
“Reimbursement
Obligations” shall
have the meaning given in Section
3.2(a).
“Reportable
Event”
has
the
meaning given to such term in ERISA, but shall not include any event for
which
the thirty (30) day reporting requirement has been waived by the
PBGC.
“Request
for Advance”
means
a
completed, written Request for Advance and Pledge in form and substance
satisfactory to Lender, which shall be in substantially the form attached
hereto
as Exhibit
B
from
Borrower to Lender requesting an Advance from Lender, together with such
other
documents and information as Lender may require from time to time in accordance
herewith.
“Requirements
of Law” means
(a)
the organizational documents of an entity and (b) any law, regulation,
ordinance, code, decree, treaty, ruling or determination of an arbitrator,
court
or other Governmental Authority, or any Executive Order issued by the President
of the United States, in each case applicable to or binding upon such Person
or
to which such Person, any of its property or the conduct of its business
is
subject.
“Security
Agreement”
means
that certain Security Agreement of even date herewith by and between Borrower
and Guarantor, as debtor, and Collateral Agent, as secured party, with respect
to all of the assets of Borrower and Guarantor.
“Stock
Pledge Agreement”
means
that certain Pledge and Security Agreement of even date herewith by and between
Borrower, as pledgor, and Collateral Agent, pledging all of the shares of
each
Guarantor other than Services and Marketing.
“Subsidiary”
means,
with respect to any Person (the “parent”)
at any
date, any corporation, limited liability company, partnership, association
or
other entity (a) of which securities or other ownership interests representing
more than 50% of the equity or more than 50% of the ordinary voting power
or, in
the case of a partnership, more than 50% of the general partnership interests
are, as of such date, owned, controlled or held, or (b) that is, as of such
date, otherwise controlled, directly or indirectly, by the parent or one
or more
subsidiaries of the parent. As used in this definition, “control”
means
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of a Person, whether through the
ability
to exercise voting power, by contract or otherwise.
“Swap
Agreement”
means
any
interest rate swap, cap, collar, foreign exchange, or similar hedging agreement
between Lender or its Affiliate and Borrower.
“Transfer”
means
(a) the granting of any Lien or Encumbrance on the Collateral or any part
thereof to any Person, except the security interests in favor of Lender or
Collateral Agent, the Permitted Exceptions and other matters which have been
approved in writing by Lender; (b) any sale, transfer, conveyance, lease
or
vesting of the Collateral or any part thereof or interest therein to or in
any
Person, whether voluntary, involuntary, by operation of law, or otherwise,
except the Permitted Exceptions, which would result in a Material Adverse
Change
(without taking into consideration subsections (iii) and (iv) of the definition
of Material Adverse Change); (c) any Change of Control; or (d) the execution of
any agreements to do any of the foregoing, except the Permitted
Exceptions.
“Unused
Commitment Fee”
means,
with respect to each calendar quarter (or portion thereof) during the term
of
the Loan, an amount equal to (i) the Loan Amount minus
(ii) the
Average Quarterly Outstanding Balance for such calendar quarter (or portion
thereof) with respect to which the Unused Commitment is being computed, with
the
resulting number being multiplied
by
ONE
QUARTER OF ONE PERCENT (0.25%) per annum (i.e., 0.0625% per quarter). If
the
Unused Commitment Fee is being computed for less than a full calendar quarter,
the percentage used in the preceding sentence will be computed on a daily
basis
for the number of days for which the fee is being computed.
“Zions
Account”
means
an account established by Borrower with Lender into which Lender and Chase
shall
advance proceeds of the Loan and the Chase Loan, respectively.
1.2 Interpretation.
Unless
the context of this Agreement otherwise clearly requires, the following rules
of
construction shall apply to this Agreement and each of the other Loan
Documents:
(a) Number;
Inclusion.
References to the plural include the singular, the plural, the part and the
whole; “or” has the inclusive meaning represented by the phrase “and/or”; and
“including” has the meaning represented by the phrase “including without
limitation”.
(b) Documents
Taken as a Whole.
The
words “hereof,” “herein,” “hereunder,” “hereto” and similar terms in this
Agreement or any other Loan Document refer to this Agreement or such other
Loan
Document as a whole and not to any particular provision of this Agreement
or
such other Loan Document.
(c) Headings.
The
section and other headings contained in this Agreement or the other Loan
Documents and the Table of Contents (if any) preceding this Agreement or
the
other Loan Documents are for reference purposes only and shall not control
or
affect the construction of this Agreement or the other Loan Documents or
the
interpretation thereof in any respect.
(d) Implied
References to This Agreement.
Article, section, subsection, clause, schedule and exhibit references are
to
this Agreement unless otherwise specified.
(e) Persons.
Reference to any Person includes such Person’s successors and assigns but, if
applicable, only if such successors and assigns are permitted by this Agreement
or the other Loan Documents, as the case may be.
(f) Modifications
to Documents.
Reference to any agreement (including this Agreement and any other Loan Document
together with the schedules and exhibits hereto or thereto), document or
instrument means such agreement, document or instrument as amended, modified,
replaced, substituted for, superseded or restated.
1.3 Accounting
Terms.
For
purposes of this Agreement, all accounting terms not otherwise defined herein
or
in the Recitals shall have the meanings assigned to them in conformity with
generally accepted accounting practices and principles (“GAAP”),
consistently applied. In the event that GAAP changes during the term of this
Agreement such that the covenants contained in Section
6.8
would
then be calculated in a different manner or with different components, (a)
Borrower and Lender agree to amend this Agreement in such respects as are
necessary to conform those covenants as criteria for evaluating the Consolidated
Entities’ financial condition to substantially the same criteria as were
effective prior to such change in GAAP and (b) the Consolidated
Entities shall be deemed to be in compliance with the covenants contained
in Section
6.8
following any such change in GAAP if and to the extent that the Consolidated
Entities would have been (and would continue to be) in compliance therewith
under GAAP as in effect immediately prior to such change.
1.4 Actions
by Lender.
Unless
otherwise expressly provided in this Agreement, all determinations, consents,
approvals, disapprovals, calculations, requirements, requests, acts, actions,
elections, selections, opinions, judgments, options, exercise of rights,
remedies or indemnities, satisfaction of conditions or other decisions of
or to
be made by Lender under this Agreement or any of the other Loan Documents
shall
be made in the reasonable discretion of Lender. Any reference to Lender’s “sole
and absolute discretion” or similar phrases has the meaning represented by the
phrase “sole and absolute discretion, acting in good faith”.
1.5 Knowledge
of Borrower.
As used
herein and in any other Loan Document, the phrase “to the knowledge of
Borrower,” “to the knowledge of Guarantor” or such similar phrases shall mean to
the actual, conscious knowledge of Borrower’s Chief Executive Officer, Chief
Financial Officer or Treasurer.
ARTICLE
2
THE
LOAN
2.1 Agreement
to Lend and Borrow.
(a) Agreement
to Lend and Borrow.
Subject
to the terms and conditions of this Agreement and the other Loan Documents,
Lender agrees to lend to Borrower, and Borrower agrees to borrow from Lender
from time to time prior to the Maturity Date, Advances of the proceeds of
the
Loan up to the Loan Amount. Lender’s commitment to make Advances shall be
decreased at the same time and in the same amount as the aggregate stated
amount
of any outstanding Letters of Credit.
(b) Revolving
Nature of Loan.
Prior
to the Maturity Date, the Loan Amount may be drawn, repaid, and drawn again,
on
a revolving basis, in unlimited repetition so long as (i) the aggregate of
all
outstanding Advances does not exceed, at any time, the Loan Amount, and (ii)
no
Event of Default has occurred and is continuing. Although the outstanding
principal balance of the Note may be zero from time to time, the Loan Documents
will remain in full force and effect until the Maturity Date or all obligations
of Borrower or Guarantor relating to the Loan are indefeasibly paid and
performed in full, whichever is later. Borrower shall have the right to
terminate the Loan upon Borrower’s specific written direction and attendant
payment in full to Lender of all Obligations with respect to the Loan,
including, without limitation, the Early Termination Fee. Upon the occurrence
and during the continuance of any Event of Default, Lender may suspend or
terminate its commitment to make Advances of the proceeds of the Loan without
notice to Borrower or further act on the part of Lender.
(c) Use
of
Proceeds.
The
proceeds of the Loan may be used by Borrower for its general working capital
purposes or other Borrower purposes and to repurchase shares of Borrower’s
preferred and common stock.
2.2 Procedures
for Advances.
(a) Requests
for Advances.
Each
request for an Advance shall be in writing and in the form of a Request for
Advance. Lender, 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. In addition to complying with the other requirements of this
Agreement, each Request for Advance shall specify the date (which shall be
a
Business Day) and the amount of the requested Advance.
(b) Timing
of Disbursement of Advances.
Provided the conditions for the making of Advances contained herein are
satisfied, Lender shall disburse each Advance no later than the first Business
Day following the date of the receipt by Lender of a valid Request for Advance.
Upon acceptance of a Request for Advance made hereunder, Lender will make
the
amount of each Advance available to Borrower by depositing immediately available
funds into the Zions Account designated by Borrower in the Request for
Advance.
(c) Authorized
Persons.
The
persons initially authorized to request Advances are all Authorized
Representatives of Borrower. At Lender’s request, Borrower shall provide Lender
with documentation satisfactory to Lender indicating the names of those
employees of Borrower authorized by Borrower to sign a Request for Advance
and
other documents, and Lender shall be entitled to rely upon such documentation
until notified in writing by Borrower of any change(s) in the names of the
employees so authorized.
2.3 Conditions
Precedent to Advances.
The
obligation of Lender to make Advances is subject to the fulfillment, to the
satisfaction of Lender in its sole and absolute discretion, of each of the
following conditions; provided,
however,
that
Lender, in its sole and absolute discretion, may waive any of the following
conditions:
(a) Lender
shall have received a Request for Advance pursuant to Section
2.2;
(b) No
Event
of Default shall exist and be continuing or shall result from such
Advance;
(c) The
amount of the requested Advance, together with the amount of all prior Advances
then outstanding and the aggregate stated amount of all Letters of Credit
then
outstanding, shall not exceed the Loan Amount;
(d) The
representations and warranties made by Borrower contained herein and in the
other Loan Documents shall be true and correct in all material respects on
and
as of the date of such Advance with the same effect as if made on and as
of the
date of such Advance (except to the extent such representations and warranties
expressly refer to an earlier date, in which case they shall be true and
correct
in all material respects as of such earlier date); and
(e) Borrower
shall have provided such additional information and documents as Lender may
reasonably request.
Each
Request for Advance submitted by Borrower hereunder shall constitute a
representation and warranty by Borrower hereunder, as of the date of each
such
request and as of the date of each Advance, that the conditions in this
Section
2.3
are
satisfied.
2.4 Evidence
of Indebtedness.
The
Loan shall be evidenced by the Note. Disbursements of the Loan shall be charged
and funded under the Note. If there is any inconsistency between the Note
and
this Agreement, the provisions of this Agreement shall prevail.
2.5 Interest.
(a) Rate.
The
advanced and unpaid balance of the Loan shall bear interest at the Interest
Rate
in effect from time to time. Each change in the Interest Rate will become
effective for each Interest Period, without notice, on the date set forth
in the
definition of the term LIBO Rate set forth herein.
(b) Default
Interest Rate.
Upon the
occurrence and during the continuance of an Event of Default hereunder or
under
any of the Loan Documents, at the option of Lender, the outstanding and unpaid
principal balance of the Loan shall bear interest, payable on demand, at
a rate
per annum equal to the Default Interest Rate. Lender may also, at its option,
from time to time, add any unpaid accrued interest to principal and such
sum
will bear interest therefrom until paid at the rate provided in this Agreement
(including at the Default Interest Rate, as and when applicable). The
application of the Default Interest Rate shall not be interpreted or deemed
to
extend any cure period set forth in this Agreement, or otherwise to limit
any of
Lender’s remedies under this Agreement or any of the other Loan
Documents.
(c) Effective
Rate.
Borrower agrees to pay an effective rate of interest that is the sum of (i)
the
interest rate provided in this Agreement and (ii) any additional rate of
interest resulting from any other charges or fees paid or to be paid in
connection herewith that are determined to be interest or in the nature of
interest. Any other provision of this Agreement or any of the other Loan
Documents to the contrary notwithstanding, Lender and Borrower agree that
none
of the terms and provisions contained herein or in any of the Loan Documents
shall be construed to create a contract for the use, forbearance or detention
of
money requiring payment of interest at a rate in excess of the maximum interest
rate permitted to be charged by the Requirements of Laws of the State of
Utah.
In such event, if any holder of the Note shall collect monies which are deemed
to constitute interest which would otherwise increase the effective interest
rate on the Note to a rate in excess of the maximum rate permitted to be
charged
by applicable Requirements of Law, all such sums deemed to constitute interest
in excess of such maximum rate shall, at the option of the holder, be credited
to the payment of other amounts payable under the Loan Documents or returned
to
Borrower.
(d) Computation
of Interest.
Interest shall be computed by applying the ratio of the annual Interest Rate
over a year of three hundred sixty (360) days, multiplied by the outstanding
principal balance, multiplied by the actual number of days the principal
balance
is outstanding.
2.6 Payment
of Principal and Interest; Application of Payments.
(a) Payments
of Interest.
Commencing on the Payment Date occurring in May, 2007, and continuing on
each
monthly Payment Date thereafter, installments of all accrued and outstanding
interest shall be due and payable by Borrower to Lender.
(b) Payment
at Maturity.
The
outstanding principal balance of the Loan, together with all unpaid accrued
interest thereon, and all other amounts payable by Borrower with respect
to the
Note or pursuant to the terms of any other Loan Documents, shall be due and
payable on the Maturity Date in lawful money of the United States of
America.
(c) Early
Termination.
Borrower shall have the right to terminate the Loan at any time prior to
the
Maturity Date by (i) giving written notice of its intent to do so to Lender;
(ii) paying the outstanding principal balance of the Loan, together with
all
unpaid accrued interest thereon, and all other amounts payable by Borrower
with
respect to the Note or pursuant to the terms of any other Loan Documents;
and
(iii) paying the Early Termination Fee.
(d) Application
of Payments.
Unless
otherwise agreed to in writing or otherwise required by applicable Requirements
of Law, payments will be applied first to accrued, unpaid interest, then
to any
unpaid collection costs, late charges and other charges, and any remaining
amount to principal; provided,
however,
upon
the occurrence and during the continuance of an Event of Default, Lender
reserves the right to apply payments among principal, interest, late charges,
collection costs and other charges at its sole and absolute
discretion.
(e) No
Deductions.
All
payments of principal or interest hereunder or under the Note shall be made
(i)
without deduction of any present and future taxes, levies, imposts, deductions,
charges or withholdings, which amounts shall be paid by Borrower, and (ii)
without any other set off. Borrower will pay the amounts necessary such that
the
gross amount of the principal and interest received by Lender is not less
than
that required hereby and by the Note.
(f) Late
Charges.
If any
payment of interest or principal required pursuant to any provision of this
Agreement is not received by Lender within ten (10) days after its due date,
then, in addition to the other rights and remedies of Lender pursuant to
this
Agreement and the other Loan Documents, Borrower will be charged five percent
(5.0%) of the regularly scheduled payment or Twenty-Five and No/100 Dollars
($25.00), whichever is greater, up to the maximum amount of One Thousand
Five
Hundred and No/100 Dollars ($1,500.00) per late charge. Such late charge
will be
immediately due and payable and is in addition to any other costs, fees,
and
expenses that Borrower may owe as a result of such late payment.
2.7 Manner
and Time of Payment.
All
amounts payable by Borrower on or with respect to the Loan, or pursuant to
the
terms of any other Loan Documents, shall be paid without condition or
reservation of right, in lawful money of the United States of America at
00 Xxxx
Xxxxxxxx, Xxxxx 000, Xxxx Xxxx Xxxx, Xxxx 00000, or at such other place as
Lender may from time to time designate in writing, not later than 1:00 p.m.
(Utah time), in same day funds, on the date due, and to such account of Lender
as Lender may designate; funds received by Lender after that time shall be
deemed to have been paid on the next succeeding Business Day. If any payment
would otherwise be due on a day which is not a Business Day, the payment
instead
shall be due on the next succeeding Business Day and such extension of time
shall be included in computing the interest due in respect of said
payment.
2.8 Guaranty.
Payment
of the Note and performance of Borrower’s obligations hereunder shall be
unconditionally guaranteed by Guarantor pursuant to the Guaranty and secured
by,
among other things, the Security Agreement, which shall be a first priority
security interest in and to all of the personal property assets of Borrower
and
Guarantor, as more fully described in the Security Agreement, subject to
Permitted Exceptions.
2.9 Security.
Payment
of the Note shall be secured by and/or guaranteed by, among other things,
the
following:
(a) the
Guaranty;
(b) the
Security Agreement, which shall secure the Obligations and the Guaranty and
be a
first priority security interest in and to all of the personal property assets
of Borrower and Guarantor, as more fully described in the Security Agreement,
subject to Permitted Exceptions;
(c) the
Stock
Pledge Agreement, which shall secure the Obligations and be a first priority
security interest in and to the Pledged Securities, subject to Permitted
Exceptions; and
(d) the
Account Control Agreement, which shall secure the Obligations and the Guaranty
and perfect the security interest given to Collateral Agent in and to all
of
Borrower’s and Guarantor’s deposit accounts maintained with Zions.
2.10 Fees
and Expenses.
(a) Unused
Commitment Fee.
During
the term hereof, Borrower shall pay to Lender the applicable Unused Commitment
Fee on each Quarterly Payment Date. The Unused Commitment Fee shall be
calculated on a quarterly basis and payable quarterly in arrears for the
calendar quarter or portion thereof throughout the term of the Loan and on
the
Maturity Date.
(b) Early
Termination Fee.
As set
forth in Section 2.6(c) above, Borrower shall pay to Lender the Early
Termination Fee in the event Borrower elects to terminate the Loan prior
to the
Maturity Date.
(c) Additional
Provisions Regarding Fees.
The
fees described in this Section
2.10
shall be
payable in addition to, and not in lieu of, interest, expense reimbursements,
indemnification and other Obligations. Borrower acknowledges that all fees
and
other amounts described in this Section 2.10
have
been fully earned by Lender at the time of payment and are non-refundable
to
Borrower in the event this Agreement is terminated or expires as provided
herein. All fees specified or referred to in this Agreement shall bear interest,
if not paid when due, at the Default Interest Rate. Borrower hereby authorizes
Lender, at its sole option and direction, without prior notice to Borrower,
to
advance any of the fees provided for in this Section
2.10 if
not
paid within ten (10) days of when due.
ARTICLE
3
LETTERS
OF CREDIT
3.1 Issuance
of Letters of Credit.
Subject
to the terms and conditions of this Agreement and the policies, procedures,
and
requirements of Lender for issuance of Letters of Credit in effect from time
to
time, and pursuant to one or more letter of credit agreements between Lender
and
Borrower, Lender agrees to issue, from time to time on or before the Maturity
Date, Letters of Credit upon request by and for the account of Borrower.
Letters
of Credit
(i)
may
expire after the Maturity Date if they are secured by cash collateral received
by Lender no later than the Maturity Date;
and
(ii)
will not
exceed, in the aggregate stated amount outstanding at any time, the lesser
of
(A) Letter of Credit Limit or (B) the difference between the Loan Amount
and the
then outstanding principal balance of the Loan. Each reference in this Agreement
to “issue” or “issuance” or other forms of such words in relation to Letters of
Credit will also include any extension or renewal of a Letter of Credit.
Requests for the issuance of a Letter of Credit will be processed by Lender
in
accordance with its policies, procedures, and requirements then in effect.
Upon
the occurrence and during the continuance of an Event of Default, Lender
may
suspend or terminate its agreement to issue Letters of Credit
hereunder.
3.2 Assumption
of Risk and Liability.
Borrower hereby assumes all risk of the acts or omissions of any holder of
a
Letter of Credit, and any beneficiary or transferee of a Letter of Credit
with
respect to its use of a Letter of Credit. Neither Lender nor any of its
employees, officers, directors, agents or representatives shall be liable
or
responsible for:
(a) the
use
which may be made of a Letter of Credit or for any acts or omissions of Lender
in connection therewith;
(b) the
validity, sufficiency or genuineness of documents, or of any endorsements
thereon, whether submitted in connection with a drawing under a Letter of
Credit, or otherwise, even if such documents or endorsements should in fact
prove to be in any or all respects invalid, insufficient, fraudulent, forged,
inaccurate or untrue;
(c) payment
by Lender against presentation of documents which do not strictly comply
with
the terms of a Letter of Credit, including failure of any such documents
to bear
reference or adequate reference to a Letter of Credit or the failure of any
holder or beneficiary of a Letter of Credit to comply fully with conditions
required in order to obtain honor of a drawing under a Letter of
Credit;
(d) the
validity or sufficiency of any instrument transferring or assigning or
purporting to transfer or assign a Letter of Credit or the rights or benefits
thereunder or proceeds thereof, in whole or in part, which may prove to be
invalid or ineffective for any reason;
(e) omissions,
interruptions, losses or delays in transmission or delivery of any messages
by
mail, cable, telegraph, telex, telephone, facsimile transmission or
otherwise;
(f) any
loss
or delay in the transmission of any document or draft required in order to
make
a drawing under a Letter of Credit; or
(g) any
other
circumstances whatsoever in making or failing to make payment under a Letter
of
Credit.
ARTICLE
4
LOAN
CLOSING; INITIAL ADVANCE
4.1 Conditions
Precedent.
Lender’s obligation to close the Loan and to disburse the initial Advance and to
perform the remainder of its obligations under this Agreement are expressly
conditioned upon the receipt and approval by Lender, in its sole and absolute
discretion, of each of the following items and the satisfaction by Borrower
of
the following conditions on or before the Closing Date unless otherwise waived
by Lender in its sole and absolute discretion:
(a) Borrower’s
payment of all fees and costs payable under this Agreement;
(b) Receipt,
review and approval by Lender of copies of the Borrower Operating Documents
and
the Guarantor Operating Documents;
(c) The
representations and warranties of Borrower and/or Guarantor in Article
5
and
elsewhere in the Loan Documents shall be true and correct in all material
respects;
(d) No
Event
of Default shall exist and be continuing;
(e) Receipt,
review and approval by Lender, in its sole discretion, of such financial
statements and tax returns for Borrower and/or Guarantor as Lender may
require;
(f) A
determination by Lender that the Collateral provides an adequate loan-to-value
coverage ratio for the Loan and all Other Loans which are secured by the
Collateral;
(g) The
original certificates representing the Pledged Securities, together with
blank
transfer powers in form and substance acceptable to Lender shall have been
delivered to Lender;
(h) Receipt,
review and approval by Lender of the policies of insurance required under
Article
6
hereof;
(i) Borrower’s
delivery to Lender of the following documents, in form and content satisfactory
to Lender, duly executed (and acknowledged where necessary) by the appropriate
parties thereto:
(i)
This Agreement;
(ii)
The Note;
(iii)
The Guaranty;
(iv)
The Security Agreement;
(v)
The Stock Pledge Agreement;
(vi)
The original certificates representing the Pledged Securities;
(vii)
Blank stock transfer powers executed by the holders of all Pledged Securities
in
favor of Collateral Agent;
(viii)
An acknowledgement and consent to the pledge of the Pledged Securities pursuant
to the Stock Pledge Agreement from each issuer of the Pledged
Securities;
(ix)
The Account Control Agreement;
(x)
The Financing Statements, which shall be duly filed with the Utah Department
of
Commerce, Division of Corporations and Commercial Code;
(xi)
A closing certificate from Borrower and each Guarantor;
(xii)
Resolutions of the directors, members, managers, or partners of Borrower
and
Guarantor, as applicable, approving the Loan Documents and the Guarantor
Loan
Documents;
(xiii)
An opinion of legal counsel to Borrower and Guarantor;
(xiv)
True and correct copies of the Chase Loan Documents;
(xv)
The Intercreditor Agreement; and
(xvi)
Such other documents that Lender may require in its sole and absolute
discretion.
ARTICLE
5
REPRESENTATIONS
AND WARRANTIES
5.1 Consideration.
As an
inducement to Lender to execute this Agreement and to disburse the proceeds
of
the Loan, Borrower represents and warrants to Lender that the following
statements set forth in this Article
5 are
true,
correct and complete as of the date hereof and will be true, correct and
complete as of the Closing Date.
5.2 Organization,
Powers, Good Standing and Subsidiaries.
(a) Organization
and Powers.
Each of
Borrower and Guarantor is either a corporation, a limited liability company,
or
a limited partnership duly organized and validly existing under the laws
of the
State of Utah. Borrower and Guarantor have all requisite power and authority,
rights and franchises to own and operate their properties, to carry on their
businesses as now conducted and as proposed to be conducted, and to enter
into
and perform this Agreement and the other Loan Documents. The address of
Borrower’s chief executive office and principal place of business is 0000 Xxxx
Xxxxxxx Xxxx., Xxxx Xxxx Xxxx, Xxxx 00000.
(b) Good
Standing.
Borrower and Guarantor have made all filings and each is in good standing
in the
State of Utah, and in each other jurisdiction in which the character of the
property it owns or the nature of the business it transacts makes such filings
necessary or where failure to make such filings would result in a Material
Adverse Change.
(c) Organizational
Identification Number.
The
organizational identification number of Borrower and each Guarantor, as defined
and contemplated by the Utah Uniform Commercial Code, is as set forth in
the
Financing Statement.
(d) Subsidiaries.
Schedule
5.2(d)
attached
hereto sets forth a complete list of Borrower and each of its Subsidiaries,
including the percentage of voting stock in each Subsidiary owned, directly
or
indirectly, by Borrower.
5.3 Authorization
of Loan Documents.
(a) Authorization.
The
execution, delivery and performance of the Loan Documents (to which Borrower
or
Guarantor, respectively, is a party) by (i) Borrower are within Borrower’s
corporate powers and have been duly authorized by all necessary action by
Borrower and its directors and shareholders; and (ii) Guarantor are within
Guarantor’s corporate, limited liability company or partnership powers and have
been duly authorized by all necessary action by Guarantor and its directors,
shareholders, members, managers and partners, as applicable.
(b) No
Conflict.
The
execution, delivery and performance of the Loan Documents by Borrower will
not
violate (i) the Borrower Operating Documents; (ii) any legal requirement
affecting Borrower or any of its properties except where a violation of such
requirement would not result in a Material Adverse Change; or (iii) any
agreement to which Borrower is bound or to which it is a party, except where
a
violation of any such agreement would not result in a Material Adverse Change,
and will not result in or require the creation (except as provided in or
contemplated by this Agreement) of any Lien or Encumbrance upon any of such
properties. The execution, delivery and performance of the Guarantor Loan
Documents by Guarantor will not violate (1) any provision of the Guarantor
Operating Documents; (2) any legal requirement affecting Guarantor or any
of
Guarantor’s respective properties except where a violation of such requirement
would not result in a Material Adverse Change; or (3) any agreement to which
Guarantor is bound or to which Guarantor is a party, except where a violation
of
any such agreement would not result in a Material Adverse Change, and will
not
result in or require the creation (except as provided in or contemplated
by this
Agreement) of any Lien or Encumbrance upon any of such properties.
(c) Governmental
and Private Approvals.
All
governmental or regulatory orders, consents, permits, authorizations and
approvals required for the present use and operation of the Borrower’s business
and the Collateral have been obtained and are in full force and effect, except
where failure to obtain such orders, consents, permits, authorizations or
approvals would not result in a Material Adverse Change. To the knowledge
of
Borrower, no additional governmental or regulatory actions, filings or
registrations with respect to the Borrower’s business and the Collateral, and no
approvals, authorizations or consents of any trustee or holder of any
Indebtedness or obligation of Borrower or Guarantor are required for the
due
execution, delivery and performance by Borrower or Guarantor of their respective
duties and obligations under the Loan Documents or the Guarantor Loan
Documents.
(d) Binding
Obligations.
This
Agreement and the other Loan Documents have been duly executed by Borrower,
and
are legally valid and binding obligations of Borrower, enforceable against
Borrower in accordance with their terms, except as enforceability may be
limited
by bankruptcy, insolvency, reorganization, moratorium or similar Requirements
of
Laws affecting creditors’ rights generally and by general principles of equity.
The Guarantor Loan Documents have been duly executed by Guarantor, and are
the
legally valid and binding obligations of Guarantor, enforceable against
Guarantor in accordance with their terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar
Requirements of Laws affecting creditors’ rights generally and by general
principles of equity.
5.4 No
Material Defaults.
There
exists no material violation of or material default by Borrower and, to the
knowledge of Borrower, no event has occurred which, upon the giving of notice
or
the passage of time, or both, would constitute a material default, which
in each
case, would result in a Material Adverse Change, with respect to the terms
of
(a) any instrument evidencing or securing any Indebtedness of Borrower or
Guarantor, (b) any instrument evidencing or securing any Indebtedness secured
by
the Collateral, (c) any agreement affecting the Collateral, (d)
any
license, permit, statute, ordinance, Requirements of Law, judgment, order,
writ,
injunction, decree, rule, or regulation of any Governmental Authority, or
any
determination or award of any arbitrator, to which Borrower, Guarantor or
the
Collateral is a party or may be bound, or (e) any document, instrument, or
agreement by which Borrower, or any of its properties, is bound and, with
respect to this clause (e),
(i)
which
involves any Loan Document,
(ii)
which
involves the Collateral and is not adequately covered by insurance,
(iii)
which
might materially and adversely affect the ability of Borrower or Guarantor
to
perform its respective obligations under any of the Loan Documents or any
other
material document, instrument, or agreement to which it is a party,
or
(iv)
which,
subject to the Permitted Exceptions, might adversely affect the first priority
of the liens created by this Agreement, the Security Agreement or any of
the
other Loan Documents.
5.5 Litigation;
Adverse Facts.
Except
as disclosed on Schedule
5.5
attached
hereto, there is no action, suit, investigation, proceeding, or arbitration
(whether or not purportedly on behalf of Borrower or Guarantor) at law or
in
equity or before or by any foreign or domestic court or other governmental
entity (a “Legal
Action”),
pending or, to the knowledge of Borrower, threatened in writing against or
affecting the Collateral, Borrower or Guarantor, individually or in the
aggregate in excess of $500,000, which would result in any Material Adverse
Change. Neither Borrower nor Guarantor is (a) in violation of any applicable
Requirements of Law which violation would result in a Material Adverse Change,
(b) subject to, or in default with respect to, any other legal requirement
that
would result in a Material Adverse Change, or (c) in default with respect
to any
agreement to which Borrower or Guarantor is a party or to which either is
bound
where such default would result in a Material Adverse Change. There is no
Legal
Action pending or, to the knowledge of Borrower or Guarantor, threatened
in
writing against or affecting Borrower or Guarantor questioning the validity
or
the enforceability of this Agreement or any of the other Loan
Documents.
5.6 Title
to Properties; Liens.
Each of
Borrower and Guarantor has good, sufficient, and legal title to the Collateral
and all other properties and assets reflected in its most recent balance
sheet
delivered to Lender, except (a) for assets disposed of in the ordinary course
of
business since the date of such balance sheet, (b) for Permitted Exceptions
and
(c) where failure to have such title would not result in a Material Adverse
Change. Borrower and/or Guarantor, as applicable, is the sole owner of the
Collateral, and the Collateral is free from any adverse Lien or Encumbrance,
security interest, or encumbrance of any kind whatsoever, excepting only
Liens
or Encumbrances and security interests in favor of Lender or Collateral Agent,
Permitted Exceptions and other matters which have been approved in writing
by
Lender in its sole and absolute discretion. All Liens and Encumbrances against
Borrower or Guarantor in effect on the Closing Date (and which are included
as
Permitted Exceptions under clause (e) of the definition of Permitted Exceptions)
are set forth on Schedule
5.6
attached
hereto.
5.7 Disclosure.
To the
knowledge of Borrower, there is no fact that would result in a Material Adverse
Change which has not been disclosed in this Agreement or in other documents,
certificates, and written statements furnished to Lender in connection
herewith.
5.8 Payment
of Taxes.
All tax
returns and reports of Borrower and Guarantor which are required to be filed
by
Borrower or Guarantor have been timely filed, and all taxes, assessments,
fees,
and other governmental charges upon Borrower or Guarantor, and upon their
respective properties, assets, income, and franchises which are due and payable
have been paid when due and payable, except, in each case, where failure
to do
so would not result in a Material Adverse Change. Borrower knows of no proposed
tax assessment against it that would result in a Material Adverse Change,
and
neither Borrower nor Guarantor has contracted with any government entity
in
connection with such taxes. To the knowledge of Borrower, all tax returns
and
reports of Guarantor required to be filed have been timely filed, and all
taxes,
assessments, fees, and other governmental charges upon Guarantor and upon
its
properties, assets, income, and franchises which are due and payable have
been
paid when due and payable, except, in each case, where failure to do so would
not result in a Material Adverse Change.
5.9 Securities
Activities.
Neither
Borrower nor Guarantor is engaged principally, or as one of its important
activities, in the business of extending credit for the purpose of purchasing
or
carrying any margin stock (as defined within Regulations G, T, and U of the
Board of Governors of the Federal Reserve System), and not more than twenty-five
percent (25.0%) of the value of Borrower’s and/or Guarantor’s assets consists of
such margin stock. No part of the Loan will be used to purchase or carry
any
margin stock or to extend credit to others for that purpose or for any other
purpose that violates the provisions of Regulations U or X of said Board
of
Governors.
5.10 Government
Regulations.
Neither
Borrower nor Guarantor is subject to regulation under the Investment Company
Act
of 1940, the Federal Power Act, the Public Utility Holding Company Act of
1935,
or any other federal or state statute or regulation limiting its ability
in
incur Indebtedness for money borrowed.
5.11 Rights
to Property Agreements, Permits, and Licenses.
Borrower and/or Guarantor is the true owner of all rights in and to all existing
agreements, permits, and licenses relating to the Collateral, and will be
the
true owner of all rights in and to all future agreements, permits, and licenses
relating to the Collateral, except, in each case, where failure to be such
an
owner would not result in a Material Adverse Change. Borrower’s and/or
Guarantor’s interest in all such agreements, permits, and licenses is not
subject to any present claim (other than the Permitted Exceptions, under
the
Loan Documents or as otherwise approved by Lender in its sole and absolute
discretion), set-off, or deduction, other than in the ordinary course of
business, which would result in a Material Adverse Change.
5.12 Compliance
with Laws.
Borrower’s and Guarantor’s business does, and shall at all times, comply fully
with all applicable Requirements of Law, except, in each case, where failure
to
comply would not result in a Material Adverse Change. The Collateral, and
the
uses to which the Collateral are and will be put, shall at all times comply
fully with all applicable Requirements of Laws, except, in each case, where
failure to comply would not result in a Material Adverse Change.
5.13 Financial
Condition.
The
financial statements and all financial data previously delivered to Lender
in
connection with the Loan or relating to Borrower or Guarantor are true, correct,
and complete in all material respects. Such financial statements comply with
the
requirements of this Agreement and fairly present the financial position
of the
parties who are the subject thereof as of the date thereof. No Material Adverse
Change has occurred and, except for this Loan and the Permitted Exceptions,
no
borrowings have been made by Borrower or Guarantor since the date thereof
which
are secured by, or might give rise to, a Lien or Encumbrance, security interest,
or claim against the Collateral or the proceeds of the Loan or the Other
Loans.
5.14 Personal
Property.
Borrower and/or Guarantor is now, and shall continue to be, the sole owner
of
all personal property which constitutes a portion of the Collateral free
from
any adverse lien, security interest, or adverse claim of any kind whatsoever,
except
(a)
Permitted Exceptions,
(b)
liens
and security interests in favor of Lender or Collateral Agent, and
(c)
other
matters which have been approved in writing by Lender in its sole and absolute
discretion.
5.15 Other
Loan Documents.
Each of
the representations and warranties of Borrower or Guarantor contained in
any of
the other Loan Documents, the Guarantor Loan Documents or the agreements,
guaranties, documents, or instruments now or hereafter evidencing, guarantying
or securing the Indebtedness of Borrower or Guarantor under the Other Loans,
as
such agreements, guaranties, documents, and instruments may be amended,
modified, extended, renewed, or supplemented from time to time, is true and
correct in all material respects. All of such representations and warranties
are
incorporated herein for the benefit of Lender.
5.16 Contracts;
Labor Matters.
Except
as disclosed to Lender in writing (a) neither Borrower nor Guarantor is subject
to any charge, corporate restriction, judgment, decree or order, which would
result in a Material Adverse Change; (b) no labor contract to which Borrower
or
Guarantor is a party or is otherwise subject is scheduled to expire prior
to the
Maturity Date except to the extent that such expiration would not result
in a
Material Adverse Change; (c) neither Borrower nor Guarantor has, within the
two-year period preceding the date of this Agreement, taken any action which
would have constituted or resulted in a “plant closing” or “mass layoff” within
the meaning of the Federal Worker Adjustment and Retraining Notification
Act of
1988 or any similar applicable federal, state or local Requirements of Law,
and
on the date hereof Borrower and Guarantor have no reasonable expectation
that
any such action is or will be required at any time prior to the initial Maturity
Date; and (d) on the date of this Agreement (i) neither Borrower nor Guarantor
is a party to any material labor dispute and (ii) there are no strikes or
walkouts relating to any labor contracts to which Borrower or Guarantor is
a
party or is otherwise subject.
5.17 ERISA.
Each of
Borrower and Guarantor is in compliance with ERISA in all material respects.
No
Reportable Event or Prohibited Transaction (as defined in ERISA) or termination
of any Pension Plan has occurred and no written notice of termination has
been
filed with respect to any Pension Plan published or maintained by Borrower
or
Guarantor that is subject to ERISA. Neither Borrower nor Guarantor has incurred
any material funding deficiency within the meaning of ERISA or any material
liability to the PBGC in connection with any such plan established or maintained
by Borrower or Guarantor. Neither Borrower nor Guarantor is a party to any
Multiemployer Plan.
5.18 Pension
and Welfare Plans.
Each
Pension Plan of Borrower or Guarantor complies in all material respects with
all
applicable statutes and governmental rules and regulations; no Reportable
Event
has occurred and is continuing with respect to any Pension Plan; neither
Borrower nor Guarantor nor any ERISA Affiliate has withdrawn from any
Multiemployer Plan in a “complete withdrawal” or a “partial withdrawal” as
defined in Sections 4203 or 4205 of ERISA, respectively; no steps have been
instituted by Borrower or Guarantor to terminate any Pension Plan; no
contribution failure has occurred with respect to any Pension Plan sufficient
to
give rise to a Lien or Encumbrance under Section 302(f) of ERISA; no condition
exists or event or transaction has occurred in connection with any Pension
Plan
or Multiemployer Plan which could reasonably be expected to result in the
incurrence by Borrower or Guarantor or any ERISA Affiliate of any material
liability, fine or penalty; and neither Borrower nor Guarantor nor any ERISA
Affiliate is a “contributing sponsor” as defined in Section 4001(a)(13) of ERISA
of a “single-employer plan” as defined in Section 4001(a)(15) of ERISA which has
two or more contributing sponsors at least two of whom are not under common
control. Neither Borrower nor Guarantor has any contingent liability with
respect to any Welfare Plan which covers retired or terminated employees
and
their beneficiaries.
5.19 Occupational
Safety and Health Matters.
Except
as disclosed to Lender in writing, Borrower and each property, operation
and
facility that Borrower may own, operate or control (a) complies in all respects
with all applicable Occupational Safety and Health Laws, except to the extent
the noncompliance would not result in a Material Adverse Change; (b) is not
subject to any judicial or administrative proceeding alleging the violation
of
any Occupational Safety and Health Law; (c) has not received any written
notice
(i) that it may be in violation of any Occupational Safety and Health Law,
(ii)
threatening the commencement of any proceeding relating to allegedly unlawful,
unsafe or unhealthy conditions, or (iii) alleging that it is or may be
responsible for any response, cleanup, or corrective action, including but
not
limited to any remedial investigation/feasibility studies, under any
Occupational Safety and Health Law; (d) to Borrower’s knowledge, is not the
subject of federal or state investigation evaluating whether any investigation,
remedial action or other response is needed to respond to any allegedly unsafe
or unhealthful condition; (e) has not filed any notice under or relating
to any
Occupational Safety and Health Law indicating or reporting any potentially
unsafe or unhealthful condition, and there exists no basis for such notice
irrespective of whether or not such notice was actually filed; and (f) has
no
contingent liability in connection with any unsafe or unhealthful
condition.
5.20 Management
Common Stock Loan Program.
Schedule
5.20
attached
hereto sets forth a description of Borrower’s management common stock loan
program.
ARTICLE
6
COVENANTS
OF BORROWER
6.1 Consideration.
As an
inducement to Lender to execute this Agreement and to disburse the Loan Amount,
Borrower hereby covenants as set forth in this Article
6,
which
covenants shall remain in effect so long as the Note shall remain unpaid,
unless
otherwise waived by Lender in its sole and absolute discretion.
6.2 No
Encumbrances.
Neither
Borrower nor Guarantor will permit any Lien or Encumbrance to be made or
filed
against the Collateral, or any portion thereof, except for Permitted Exceptions,
or permit any receiver, trustee, or assignee for the benefit of creditors
to be
appointed to take possession of the Collateral or any portion
thereof.
6.3 Compliance
with Laws.
Borrower will comply and, to the extent Borrower is able, will cause Guarantor
to comply with all Requirements of Laws and requirements of all Governmental
Authorities having jurisdiction over Borrower, Guarantor or the Collateral,
except to the extent that noncompliance would not result in a Material Adverse
Change.
6.4 Lender
Inspections.
Upon
reasonable prior notice, throughout the term of the Loan and during normal
business hours, Borrower shall permit Lender or Collateral Agent and Lender’s or
Collateral Agent’s representatives, inspectors, and consultants to enter upon
the premises where any Collateral may be located and inspect the Collateral,
to
audit, examine, and copy all contracts, records (including, but not limited
to,
financial and accounting records pertaining to the Loan or the Collateral)
which
are kept at such premises or at Borrower’s offices, and to discuss the affairs,
finances, and accounts of Borrower with representatives of Borrower and,
to the
extent Borrower is able, will cause others to provide access to Lender or
Collateral Agent and Lender’s or Collateral Agent’s representatives, inspectors,
and consultants to audit, examine, and copy all contracts, books, documents
and
records.
6.5 Intentionally
Omitted.
6.6 Ownership
of Collateral.
Borrower and/or Guarantor is and will be the sole owner of the Collateral
(except as described in Section
5.6),
whether acquired before or after the Closing Date, free from any adverse
Lien or
Encumbrance, security interest, or adverse claim of any kind whatsoever,
except
for Permitted Exceptions, security interests and Liens or Encumbrances in
favor
of the interest of a lessor pursuant to a lease of personal property approved
by
Lender and the Liens or Encumbrances and security interests approved by Lender
pursuant to the Loan Documents.
6.7 Information
and Statements.
Borrower shall deliver to Lender the following:
(a) Annual
Financial Statements.
Within
one hundred twenty (120) days of the end of its fiscal year, the complete
consolidated financial statements of the Consolidated Entities, which shall
consist of a balance sheet, statements of income, cash flow and retained
earnings, and a schedule of contingent liabilities as of the end of such
annual
period, such financial statements to be audited by an independent certified
public accountant of recognized standing acceptable to Lender in its reasonable
discretion. Lender consents to the engagement of KPMG.
(b) Quarterly
Financial Statements.
Within
sixty (60) days of the end of each fiscal quarter (other than the final quarter
of a fiscal year), the complete consolidated financial statements of the
Consolidated Entities which shall consist of a balance sheet, statements
of
income, cash flow and retained earnings, and a schedule of contingent
liabilities as of the end of each such quarterly period, such financial
statements to be certified as true and correct by the president or chief
financial officer of Borrower.
(c) Other
Information.
As soon
as reasonably practicable, but in any event within thirty (30) days after
a
request therefor, such information concerning Borrower, Guarantor, any
Subsidiaries thereof and the assets, business, financial condition, operations,
property, prospects, and results of operations of Borrower, Guarantor and
any
other Subsidiaries thereof as Lender reasonably requests from time to
time.
(d) Covenant
Compliance Information.
Notwithstanding anything in this Agreement to the contrary, Borrower will
be
required to timely deliver, as soon as reasonably practicable, but in any
event
within fifteen (15) days after a request therefor from Lender, such financial
information as may be necessary to promptly and accurately calculate any
financial ratio or covenant required under this Agreement, even if such
information is not specifically enumerated herein. Any review of any
Borrower-prepared financial statements used to test any financial ratio or
covenant will not waive Lender’s rights to require further review or audit of
such information or any rights if such further review or audit indicates
financial information contrary to Borrower-prepared financial statements.
Borrower agrees to deliver to Lender a Covenant Compliance Certificate at
the
same time as the delivery of the financial statements required pursuant to
Sections
6.7(a)
and
(b).
6.8 Financial
Covenants.
The
Consolidated Entities shall not:
(a) Funded
Debt to EBITDAR Ratio.
Permit
its ratio of (A) total liabilities, plus the net present value of payments
under
operating leases at a discount rate of seven percent (7%), but excluding
(1)
accounts arising from the purchase of goods and services in the ordinary
course
of business, (2) accrued expenses or losses, and (3) deferred revenues or
gains,
to (B) net income, plus amortization expense, depreciation expense, interest
expense, income tax expense, and rents and operating lease payments, less
extraordinary gains and losses (collectively, “EBITDAR”),
for
the twelve (12) month period then ending, to be greater than (x) 3.25 to
1.00 as
of the end of the fiscal quarter of Borrower ending on March 3, 2007, (y)
3.00
to 1.00 as of the end of the fiscal quarter of Borrower ending on June 2,
2007,
and (z) 2.75 to 1.00 as of the end of the fiscal quarter of Borrower ending
on
August 31, 2007 and each fiscal quarter thereafter.
(b) Fixed
Charge Coverage Ratio.
Permit
its ratio of (A) net income before income tax expense, plus amortization
expense, depreciation expense, interest expense, rent and operating lease
payments, minus any distributions or dividends, for the twelve (12) month
period
then ending, to (B) prior period current maturities of long term debt and
capital leases, interest expense, cash taxes paid, rent and operating lease
payments, for the same such period, to be less than (x) 1.30 to 1.00 as of
the
end of the fiscal quarter of Borrower ending on March 3, 2007, (y) 1.35 to
1.00
as of the end of the fiscal quarter of Borrower ending on June 2, 2007, and
(z)
1.50 to 1.00 as of the end of the fiscal quarter of Borrower ending on August
31, 2007 and each fiscal quarter thereafter.
(c) Capital
Expenditures.
Make
Capital Expenditures, exclusive of curriculum development costs, in excess
of
(i) $11,000,000.00 for Borrower’s fiscal year ending on August 31, 2007 and (ii)
$8,000,000.00 for each fiscal year of Borrower thereafter.
(d) Minimum
Net Worth.
Permit
its Net Worth to be less than ONE HUNDRED THIRTY-THREE MILLION AND NO/100
DOLLARS ($133,000,000.00); provided,
however,
the
Consolidated Entities’ Net Worth may be less than such amount if Lender
determines that the Consolidated Entities’ Net Worth has decreased to an amount
less than $133,000,000.00 as a result of Borrower’s purchase of its outstanding
common or preferred stock. As used in this Section
6.8(d),
the
term “Net
Worth”
means
the Consolidated Entities’ total assets less
total
liabilities, in each case as determined in accordance with GAAP.
Such
covenant or any computations required to determine or test compliance with
such
covenant may be made by Lender at any time or times and in its sole and absolute
discretion based on information available to Lender.
6.9 Representations
and Warranties.
Until
repayment of the Note and all other obligations secured by the Security
Agreement, the representations and warranties of Article
5
shall
remain true and complete in all material respects.
6.10 Trade
Names.
Borrower and Guarantor shall promptly notify Lender in writing of any change
in
the legal, trade, or fictitious business names used by Borrower or Guarantor,
or
a change in the state of formation of Borrower or Guarantor, and shall, upon
Lender’s request, authorize the preparation and filing of any additional
financing statements and/or execute or cause to be executed any other
certificates or documents necessary to reflect the change in legal, trade,
or
fictitious business names, or a change in state of formation.
6.11 Intentionally
Omitted.
6.12 Notice
of Litigation, Material Adverse Change or Event of Default.
Borrower will give, or cause to be given, prompt written notice to Lender
of (a)
any action or proceeding which is instituted by or against Borrower or Guarantor
in any federal or state court, or before any commission or other regulatory
body, federal, state or local, foreign or domestic, or any such proceedings
which are threatened in writing against Borrower or Guarantor which, if
adversely determined, would result in a Material Adverse Change, (b) any
other action, event, or condition of any nature which would result in a Material
Adverse Change, and (c) any actions, proceedings, or written notices
adversely affecting the Collateral, or Lender’s or Collateral Agent’s interest
therein, except to the extent any such action, proceeding or notice would
not
result in a Material Adverse Change, and (d) the occurrence of an Event of
Default.
6.13 Intentionally
Omitted.
6.14 Maintenance
of Business.
Borrower and Guarantor shall maintain and preserve all rights and franchises
material to their respective businesses.
6.15 Material
Agreements.
Unless
such actions would not result in a Material Adverse Change, Borrower shall
not
make, consent to, or permit any alteration, amendment, modification, release,
waiver or termination of any material agreement to which it is a party without
the prior written consent of Lender, which consent will not be unreasonably
withheld or delayed.
6.16 Right
of Entry.
Lender
or Collateral Agent shall have the right, upon reasonable prior notice, to
enter
upon any portion of the premises where any Collateral may be located to verify
compliance with the Loan Documents.
6.17 Transfer
of Assets.
Unless
such action would result in a Material Adverse Change (without taking into
consideration subsections (iii) and (iv) of the definition of Material Adverse
Change), Borrower and Guarantor may sell, convey, transfer, assign or dispose
of
any properties or assets, or any right, title or interest therein, or any
part
thereof, or enter into any lease covering all or any portion thereof or an
undivided interest therein, either voluntarily, involuntarily, or otherwise;
provided,
however,
that
neither Borrower nor Guarantor shall sell, transfer, lease, or otherwise
dispose
of all or any substantial part of the assets, business, operations, or property
of Borrower or Guarantor, other than such a sale, transfer, lease or disposition
to Borrower or another Guarantor.
6.18 Dividends
and Other Distributions.
The
Consolidated Entities may directly or indirectly declare or pay dividends
to its
shareholders, members, partners or others on or on account of any shares,
membership interests, partnership interests or other securities of any of
the
Consolidated Entities, so long as no Event of Default has occurred and is
continuing or would occur as a result of such declaration or
payment.
6.19 Change
of Control.
Without
the prior written consent of Lender, which consent will not be unreasonably
withheld or delayed, Borrower and Guarantor shall not cause, permit or suffer
any Change of Control to occur.
6.20 Loans,
Investments, Guaranties, Subordinations.
From
and after the date hereof, unless an Event of Default has occurred and is
continuing or would occur as a result of such action, and provided that at
any
time the amounts involved do not exceed $1,000,000 in any individual case
or
$5,000,000 in the aggregate, the Consolidated Entities may, directly or
indirectly (a) make loans or advances to other Persons, (b) purchase or
otherwise acquire capital stock or other securities of other Persons, limited
liability company interests or partnership interests in other Persons, or
warrants or other options or rights to acquire capital stock or securities
of
other Persons or limited liability company interests or partnership interests
in
other Persons, (c) make capital contributions to other Persons, (d) otherwise
invest in or acquire interests in other Persons, (e) guaranty or otherwise
become obligated in respect of Indebtedness of other Persons, (f) subordinate
claims against, or obligations of other Persons to, the Consolidated Entities
to
any other indebtedness of such Person, or (g) incur Indebtedness;
provided,
however,
that,
for the avoidance of doubt, (1) if an Event of Default has occurred and is
continuing or would occur as a result of the taking of any of the foregoing
actions, or if the amounts involved exceed the caps specified in this Section,
the Consolidated Entities may not do or take any of the actions listed in
this
Section without the prior written consent of Lender and (2) (A) the line
of
credit in the maximum principal amount of £100,000.00 incurred by Xxxxxxxx Xxxxx
Europe, Ltd., (B) the line of credit in the maximum principal amount of
CAN$500,000.00 incurred by Xxxxxxxx Xxxxx Canada, Ltd., and (C) the mortgage
loan in the maximum principal amount of CAN$895,253.00 incurred by Xxxxxxxx
Xxxxx Canada, Ltd., in each case incurred prior to and outstanding as of
the
Closing Date (and any refinance thereof up to the amounts stated in the
foregoing clauses (A), (B) and (C)) shall not be subject to the caps specified
in this Section. Notwithstanding the foregoing, the prior written consent
of
Lender shall not be required for (y) intercompany transactions between or
among
the Consolidated Entities or (z) unsecured trade payables incurred by the
Consolidated Entities in the ordinary course of business.
6.21 Acquisition
of All or Substantially All Assets.
Unless
an Event of Default has occurred and is continuing or would occur as a result
of
such action, and provided that the amounts involved do not exceed $1,000,000
in
any individual case or $5,000,000 in the aggregate, Borrower and Guarantor
may,
directly or indirectly, acquire by purchase, lease, or otherwise all or
substantially all of the assets of any other Person; provided,
however,
that,
for the avoidance of doubt, (1) if an Event of Default has occurred and is
continuing or would occur as a result of the taking of any of the foregoing
actions, or if the amounts involved exceed the caps specified in this Section,
Borrower or Guarantor may not do or take any of the actions listed in this
Section without the prior written consent of Lender and (2) the amounts of
any
transactions entered into by any of the Consolidated Entities within sixty
(60)
days prior to the Closing Date shall be subject to the caps specified in
this
Section.
6.22 Government
Regulation.
Borrower shall not (a) be or become subject at any time to any law, regulation,
or list of any government agency (including, without limitation, the U.S.
Office
of Foreign Asset Control list) that prohibits or limits Lender from making
any
advance or extension of credit to Borrower or from otherwise conducting business
with Borrower, or (b) fail to provide documentary and other evidence of
Borrower’s identity as may be requested by Lender at any time to enable Lender
to verify Borrower’s identity or to comply with any applicable law or
regulation, including, without limitation, Section 326 of the USA Patriot
Act of
2001, 31 U.S.C. Section 5318.
6.23 Intentionally
Omitted.
6.24 Disposition
of Xxxxxxxx Xxxxx Mexico.
The
sale of Xxxxxxxx Xxxxx Mexico (whether by asset sale, merger, or otherwise)
shall have closed no later than the date which is nine (9) months after the
Closing Date. Borrower agrees that if the foregoing has not occurred by such
date, Borrower shall cause Xxxxxxxx Xxxxx Mexico to guaranty the Loan and
to
pledge all of its assets to Lender as security for such guaranty, and to
deliver
to Lender the equivalent of such agreements, documents, instruments,
certificates and information as have been required to be delivered by each
Guarantor as of the date hereof under any of the Loan Documents.
6.25 Additional
Guarantors.
Upon
the formation of any domestic Subsidiary of Borrower, Borrower shall cause
such
Subsidiary to be added as a Guarantor under the Guaranty.
ARTICLE
7
EVENTS
OF DEFAULT AND REMEDIES
7.1 Events
of Default.
The
occurrence of any one or more of the following shall constitute an Event
of
Default under this Agreement:
(a) Failure
by Borrower or Guarantor to pay any monetary amount within ten (10) days
of the
date when due under any Loan Document.
(b) Failure
by Borrower or Guarantor to perform or comply with the provisions of
Sections
6.2,
6.6,
6.7,
6.8,
6.10,
6.17,
6.18,
6.19,
6.20,
6.21,
or
6.24.
(c) Except
as
otherwise provided in this Section
7.1,
any
failure by Borrower or Guarantor to perform any obligation not involving
the
payment of money, or to comply with any other term or condition applicable
to
Borrower or Guarantor under any Loan Document and the expiration of thirty
(30)
days after written notice of such failure by Lender to Borrower or
Guarantor.
(d) The
occurrence of a Material Adverse Change.
(e) Any
representation or warranty by Borrower or Guarantor in any Loan Document
is
materially false, incorrect, or misleading as of the date made.
(f) Borrower
or Guarantor (i) is unable or admits in writing Borrower’s or Guarantor’s
inability to pay Borrower’s or Guarantor’s monetary obligations as they become
due, (ii) fails to pay when due any monetary obligation, whether such obligation
be direct or contingent, to any person in excess of $1,000,000, unless such
obligation is being contested in good faith by Borrower or Guarantor, as
determined by Lender in its reasonable discretion, (iii) makes a general
assignment for the benefit of creditors, or (iv) applies for, consents to,
or
acquiesces in, the appointment of a trustee, receiver, or other custodian
for
Borrower or Guarantor or the property of Borrower or Guarantor or any part
thereof, or in the absence of such application, consent, or acquiescence,
a
trustee, receiver, or other custodian is appointed for Borrower or Guarantor
or
the property of Borrower or Guarantor or any part thereof, and such appointment
is not discharged within sixty (60) days.
(g) Commencement
of any case under the Bankruptcy Code, Title 11 of the United State Code,
or
commencement of any other bankruptcy arrangement, reorganization, receivership,
custodianship, or similar proceeding under any federal, state, or foreign
Requirements of Law by or against Borrower or Guarantor and with respect
to any
such case or proceeding that is involuntary, and such case or proceeding
is not
dismissed with prejudice within sixty (60) days of the filing
thereof.
(h) A
final
judgment or decree for monetary damages or a monetary fine or penalty (not
subject to appeal or as to which the time for appeal has expired) is entered
against Borrower or Guarantor by any Government Authority, which together
with
the aggregate amount of all other such judgments or decrees against Borrower
or
Guarantor that remain unpaid or that have not been discharged or stayed,
exceeds
$250,000, and such judgment or decree is not paid and discharged or stayed
or
appealed within thirty (30) days after the entry thereof.
(i) The
dissolution of Borrower or Guarantor or the commencement of any action or
proceeding which seeks as one of its remedies the dissolution of Borrower
or
Guarantor.
(j) All
or
any material part of the Collateral of Borrower or Guarantor is attached,
levied
upon, or otherwise seized by legal process, and such attachment, levy, or
seizure is not quashed, stayed, or released within twenty (20) days of the
date
thereof.
(k) The
occurrence of any Transfer, unless Lender delivers to Borrower its prior
written
consent to such Transfer.
(l) Guarantor
shall take any action to repudiate its Guaranty, or the Guaranty shall otherwise
cease to be in full force and effect.
(m) The
occurrence of any default and the failure to cure such default during applicable
cure periods, if any, or an Event of Default, as such term is defined in
any
other Loan Document.
(n) Any
failure, breach or default under the Other Loans, it being the intention
and
agreement of Lender and Borrower to cross-default the Loan and the Other
Loans.
(o) The
occurrence or existence of any default, event of default or other similar
condition or event (however described) with respect to a Swap
Agreement.
7.2 Remedies.
(a) Notwithstanding
any provision to the contrary herein or in any of the other Loan Documents,
upon
the happening, and during the continuance, of any Event of Default under
this
Agreement, Lender’s obligation to make Advances or to issue Letters of Credit
shall xxxxx and Lender shall, at its option, have the remedies provided herein
and in any other Loan Document, including, without limitation, the option
to
declare all outstanding indebtedness to be immediately due and payable without
presentment, demand, protest or notice of any kind, and the following remedies:
(i) Lender may, at its option, apply any of Borrower’s or Guarantor’s funds in
its possession to the outstanding indebtedness under the Note whether or
not
such indebtedness is then due; (ii) Lender or Collateral Agent may exercise
all
rights and remedies available to them under any or all of the Loan Documents;
and (iii) Lender shall have the right to perform Borrower’s obligations under
this Agreement. All sums expended by Lender or Collateral Agent for such
purposes shall be deemed to have been disbursed to and borrowed by Borrower
and
evidenced by the Note and secured by the Security Agreement.
(b) Borrower
hereby constitutes and appoints Lender, or an independent contractor selected
by
Lender, during the continuance of an Event of Default, as its true and lawful
attorney-in-fact with full power of substitution for the purposes of performance
of Borrower’s obligations under this Agreement in the name of Borrower. It is
understood and agreed that the foregoing power of attorney shall be deemed
to be
a power coupled with an interest which cannot be revoked until repayment
of the
Loan.
(c) In
addition to any other rights and remedies of Lender, if an Event of Default
exists and is continuing, Lender is authorized at any time and from time
to time
during the continuance of the Event of Default, without prior notice to Borrower
(any such notice being waived by Borrower to the fullest extent permitted
by
law) to set-off and apply any and all deposits or deposit accounts (general
or
special, time or demand, provisional or final) at any time held by Lender
to or
for the credit or the account of Borrower against any and all obligations
of
Borrower under the Loan Documents, now or hereafter existing, irrespective
of
whether or not Lender shall have made demand under this Agreement or any
other
Loan Document and although such amounts owed may be contingent or unmatured.
If
Lender exercises such setoff right, Lender exercising such right agrees promptly
to notify Borrower after any such setoff and application made by Lender;
provided,
however,
that
the failure to give such notice shall not affect the validity of such setoff
and
application.
ARTICLE
8
MISCELLANEOUS
8.1 Assignment.
Borrower shall not assign any of its rights under this Agreement.
8.2 Notices.
All
notices, requests, demands and consents to be made hereunder to the parties
hereto shall be in writing and shall be delivered by hand or sent by registered
mail or certified mail, postage prepaid, return receipt requested (except
for
any notice address which is a post office box, in which case notice may be
given
by first class mail), through the United States Postal Service to the addresses
shown below, or such other address which the parties may provide to one another
in accordance herewith. Such notices, requests, demands and consents, if
sent by
mail, shall be deemed given two (2) Business Days after deposit in the United
States mail, and if delivered by hand, shall be deemed given when
delivered.
To
Lender:
Zions
First National Bank
00
Xxxx
Xxxxx Xxxxxx, Xxxxx 000
Xxxx
Xxxx
Xxxx, Xxxx 00000
Attn:
Xxxxxx Xxxxx
with
a
copy to: Xxxxxxxxx
Xxxxxxx & XxXxxxxxxx
00
Xxxx
Xxxxx Xxxxxx, Xxxxx 000
Xxxx
Xxxx
Xxxx, Xxxx 00000
Attn:
Xxxxxxx X. Xxxxxx, Esq.
To
Borrower: Xxxxxxxx
Xxxxx Co.
0000
Xxxx
Xxxxxxx Xxxx.
Xxxx
Xxxx
Xxxx, Xxxx 00000
Attn:
Xxxxxxx Xxxxxx
with
a
copy to: Xxxxxx
& Xxxxxxx LLP
000
Xxxxx
Xxxx Xxxxxx, Xxxxx 000
Xxxx
Xxxx
Xxxx, Xxxx 00000
Attn:
Xxxxx X. Xxxxxx, Esq.
8.3 Intentionally
Omitted.
8.4 Inconsistencies
with the Loan Documents.
In the
event of any inconsistencies between the terms of this Agreement and any
terms
of any of the Loan Documents, the terms of this Agreement shall govern and
prevail.
8.5 No
Waiver.
No
waiver by Lender of any Event of Default or conditions or covenants contained
herein (including, without limitation, with respect to the making of Advances)
shall extend to any subsequent or other Event of Default or conditions or
covenants contained herein or impair any consequence of such subsequent Event
of
Default or conditions or covenants contained herein.
8.6 Lender
Approval of Instruments and Parties.
All
proceedings taken in accordance with transactions provided for herein, and
all
surveys, appraisals, and documents required or contemplated by this Agreement
and the persons responsible for the execution and preparation thereof shall
be
satisfactory to and subject to approval by Lender. Lender’s counsel shall be
provided with copies of all documents which they may reasonably request in
connection with the Agreement.
8.7 Lender
Determination of Facts.
Lender
shall at all times be free to establish independently, to its satisfaction,
the
existence or nonexistence of any fact or facts, the existence or nonexistence
of
which is a condition of this Agreement.
8.8 Incorporation
of Preamble, Recitals and Exhibits.
The
preamble, recitals, and exhibits hereto are hereby incorporated into this
Agreement.
8.9 Payment
of Expenses.
Borrower
shall pay or cause to be paid all taxes and assessments and all expenses,
charges, costs, and fees provided for in this Agreement or relating to the
Loan
or the Collateral, including, without limitation, any fees incurred for
recording or filing any of the Loan Documents, fees of any consultants,
reasonable fees and expenses of Lender’s or Collateral Agent’s counsel in
negotiating, documenting, administering and enforcing the Loan, whether prior
to
or after the Closing Date, documentation and processing fees, printing,
photostating and duplicating expenses, air freight charges, escrow fees,
costs
of inspections of the Collateral, and premiums of hazard insurance policies
and
surety bonds. Borrower hereby authorizes Lender to disburse the proceeds
of the
Loan to pay such expenses, charges, costs, and fees notwithstanding that
Borrower may not have requested a disbursement of such amount. Lender may
make
such disbursements notwithstanding the fact that the Loan is not “in balance” or
that Borrower is in default under the terms of this Agreement or any other
Loan
Document. Such disbursement shall be added to the outstanding principal balance
of the Note. The authorization hereby granted shall be irrevocable, and no
further direction or authorization from Borrower shall be necessary for Lender
to make such disbursements. However, the provision of this Section
8.9
shall
not prevent Borrower from paying such expense, charges, costs, and fees from
its
own funds. All such expenses, charges, costs, and fees shall be Borrower’s
obligation regardless of whether or not Borrower has requested and met the
conditions for an Advance. The obligations on the part of Borrower under
this
Section 8.9
shall
survive the closing of the Loan and the repayment thereof. Borrower hereby
authorizes Lender, in its sole and absolute discretion, to pay such expenses,
charges, costs, and fees at any time by a disbursement of the Loan.
8.10 Disclaimer
by Lender.
Lender
shall not be liable to any contractor, subcontractor, supplier, laborer,
architect, engineer, or any other party for services performed or materials
supplied in connection with the Collateral. Neither Lender nor Collateral
Agent
shall be liable for any debts or claims accruing in favor of any such parties
against Borrower or others or against the Collateral. Borrower is not and
shall
not be an agent of Lender or Collateral Agent for any purpose. Neither Lender
nor Collateral Agent is a joint venture partner with Borrower in any manner
whatsoever. Prior to default by Borrower under this Agreement and the exercise
of remedies granted herein, neither Lender nor Collateral Agent shall be
deemed
to be in privity of contract with any contractor or provider of services
to the
Collateral, nor shall any payment of funds directly to a contractor,
subcontractor, or provider of services be deemed to create any third party
beneficiary status or recognition of same by Lender or Collateral Agent.
Approvals granted by Lender or Collateral Agent for any matters covered under
this Agreement shall be narrowly construed to cover only the parties and
facts
identified in any written approval or, if not in writing, such approvals
shall
be solely for the benefit of Borrower.
8.11 Indemnification.
TO THE
FULLEST EXTENT PERMITTED BY LAW, BORROWER AGREES TO PROTECT, INDEMNIFY, DEFEND
AND SAVE HARMLESS LENDER OR COLLATERAL AGENT, THEIR DIRECTORS, OFFICERS,
AGENTS,
ATTORNEYS, AND EMPLOYEES FOR, FROM, AND AGAINST ANY AND ALL LIABILITY, EXPENSE,
OR DAMAGE OF ANY KIND OR NATURE AND FOR, FROM, AND AGAINST ANY SUITS, CLAIMS,
OR
DEMANDS, INCLUDING REASONABLE ATTORNEY’S FEES AND EXPENSES ON ACCOUNT OF ANY
MATTER OR THING OR ACTION, WHETHER IN SUIT OR NOT, ARISING OUT OF THIS
AGREEMENT, OR IN CONNECTION HEREWITH, EXCLUDING HOWEVER, ANY MATTERS ARISING
OUT
OF AN INDEMNIFIED PARTY’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OR ANY MATTERS
ARISING AFTER EITHER OF LENDER OR COLLATERAL AGENT HAS TAKEN TITLE TO OR
POSSESSION OF THE COLLATERAL. Upon receiving knowledge of any suit, claim,
or
demand asserted by a third party that Lender or Collateral Agent believes
is
covered by this indemnity, Lender or Collateral Agent, as the case may be,
shall
give Borrower notice of the matter and an opportunity to defend it, at
Borrower’s sole cost and expense, with legal counsel satisfactory to Lender or
Collateral Agent, as the case may be. Lender or Collateral Agent, as the
case
may be, may also require Borrower to so defend the matter. The obligations
on
the part of Borrower under this Section
8.11
shall
survive the closing of the Loan and the repayment thereof.
8.12 Titles
and Headings.
The
headings at the beginning of each section of this Agreement are solely for
convenience and are not part of this Agreement. Unless otherwise indicated,
each
reference in this Agreement to a section or an exhibit is a reference to
the
respective section herein or exhibit hereto.
8.13 Number
and Gender.
In this
Agreement the singular shall include the plural and the masculine shall include
the feminine and neuter gender and vice versa, if the context so
requires.
8.14 Brokers.
Borrower and Lender represent to each other that neither of them knows of
any
brokerage commissions or finders’ fee due or claimed with respect to the
transaction contemplated hereby. Borrower and Lender shall indemnify and
hold
harmless the other party for, from and against any and all loss, damage,
liability, or expense, including costs and reasonable attorney fees, which
such
other party may incur or sustain by reason of or in connection with any
misrepresentation by the indemnifying party with respect to the
foregoing.
8.15 Change,
Discharge, Termination, or Waiver.
No
provision of this Agreement may be changed, discharged, terminated, or waived
except in writing signed by the party against whom enforcement of the change,
discharge, termination, or waiver is sought. No failure on the part of Lender
to
exercise, and no delay by Lender in exercising, any right or remedy under
the
Loan Documents or under the law shall operate as a waiver thereof.
8.16 Choice
of Law.
THIS
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREUNDER SHALL BE GOVERNED BY
AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF UTAH WITHOUT GIVING
EFFECT
TO CONFLICT OF LAWS PRINCIPLES. THE PARTIES AGREE THAT ALL ACTIONS OR
PROCEEDINGS ARISING IN CONNECTION WITH THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS MAY BE TRIED AND LITIGATED IN THE STATE AND FEDERAL COURTS LOCATED
IN
THE COUNTY OF SALT LAKE, STATE OF UTAH OR, IN ANY OTHER COURT IN WHICH A
PARTY
SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT MATTER
JURISDICTION OVER THE MATTER IN CONTROVERSY. EACH OF BORROWER AND LENDER
WAIVES,
TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO
ASSERT
THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT
ANY
PROCEEDING IS BROUGHT IN ANY STATE OR FEDERAL COURT LOCATED IN THE COUNTY
OF
SALT LAKE, STATE OF UTAH.
8.17 Disbursements
in Excess of Loan Amount.
In the
event the total disbursements by Lender exceed the amount of the Loan, to
the
extent permitted by the laws of the State of Utah, the total of all
disbursements shall be secured by the Collateral. All other sums expended
by
Lender pursuant to this Agreement or any other Loan Documents shall be deemed
to
have been paid to Borrower and shall be secured by, among other things, the
Collateral.
8.18 Participations;
Assignments.
Lender
shall have the right at any time to sell, assign, transfer, negotiate, or
grant
participations in all or any part of the Loan or the Note to one or more
participants. Borrower hereby acknowledges and agrees that any such disposition
will give rise to a direct obligation of Borrower to each such participant.
Lender may at any time, without the consent of Borrower, assign all or any
portion of its rights under this Agreement and the Note to a Federal Reserve
Bank. Borrower shall have the right, without any obligation to pay the Early
Termination Fee, to terminate the Loan prior to the Maturity Date within
ninety
(90) days after receiving written notice from Lender that it intends to assign
or grant participations in the Loan, provided that Borrower otherwise complies
with the requirements of Section
2.6(c)
hereof.
8.19 Counterparts.
This
Agreement may be executed in any number of counterparts each of which shall
be
deemed an original, but all such counterparts together shall constitute but
one
agreement. Borrower and Lender agree and acknowledge that facsimile signature
pages will be acceptable and shall be conclusive evidence of execution of
any
Loan Document, resolution or other agreement relating to the Loan.
8.20 Time
is of the Essence.
Time is
of the essence of this Agreement.
8.21 Attorneys’
Fees.
Borrower agrees to pay all costs of administration, enforcement and collection
and preparation for any Event of Default or any action taken by Lender or
Collateral Agent (including, without limitation, reasonable attorney’s fees),
whether or not any action or proceeding is brought (including, without
limitation, all such costs incurred in connection with any bankruptcy,
receivership, or other court proceedings (whether at the trial or appellate
level)), together with interest thereon from the date of demand at the Default
Interest Rate.
8.22 Jury
Waiver.
EACH
PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW,
ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY
OR
INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY).
EACH
PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY
WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND
(B)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION.
8.23 Waiver
of Special Damages. TO
THE
EXTENT PERMITTED BY APPLICABLE LAW, BORROWER SHALL NOT ASSERT, AND HEREBY
WAIVES, ANY CLAIM AGAINST LENDER, ON ANY THEORY OF LIABILITY, FOR SPECIAL,
INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES (AS OPPOSED TO DIRECT OR ACTUAL
DAMAGES) ARISING OUT OF, IN CONNECTION WITH, OR AS A RESULT OF, THIS AGREEMENT
OR ANY AGREEMENT OR INSTRUMENT CONTEMPLATED HEREBY, THE TRANSACTIONS, THE
LOAN
OR THE USE OF THE PROCEEDS THEREOF.
8.24 MISCELLANEOUS
WAIVERS.
TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, BORROWER HEREBY WAIVES ANY AND
ALL
RIGHTS TO REQUIRE MARSHALLING OF ASSETS BY LENDER. WITH RESPECT TO ANY SUIT,
ACTION OR PROCEEDINGS RELATING TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS
(EACH, A “PROCEEDING”),
BORROWER IRREVOCABLY (A) SUBMITS TO THE JURISDICTION OF THE STATE AND FEDERAL
COURTS HAVING JURISDICTION IN THE CITY OF SALT LAKE, COUNTY OF SALT LAKE
AND
STATE OF UTAH, AND (B) WAIVES ANY OBJECTION WHICH IT MAY HAVE AT ANY TIME
TO THE
LAYING OF VENUE OF ANY PROCEEDING BROUGHT IN ANY SUCH COURT, WAIVES ANY CLAIM
THAT ANY PROCEEDING HAS BEEN BROUGHT IN AN INCONVENIENT FORUM AND FURTHER
WAIVES
THE RIGHT TO OBJECT, WITH RESPECT TO SUCH PROCEEDING, THAT SUCH COURT DOES
NOT
HAVE JURISDICTION OVER SUCH PARTY. NOTHING IN THIS AGREEMENT SHALL PRECLUDE
LENDER FROM BRINGING A PROCEEDING IN ANY OTHER JURISDICTION NOR WILL THE
BRINGING OF A PROCEEDING IN ANY ONE OR MORE JURISDICTIONS PRECLUDE THE BRINGING
OF A PROCEEDING IN ANY OTHER JURISDICTION. BORROWER FURTHER AGREES AND CONSENTS
THAT, IN ADDITION TO ANY METHODS OF SERVICE OF PROCESS PROVIDED FOR UNDER
APPLICABLE LAW, ALL SERVICE OF PROCESS IN ANY PROCEEDING IN ANY UTAH STATE
OR
UNITED STATES COURT SITTING IN THE CITY OF SALT LAKE AND COUNTY OF SALT LAKE
MAY
BE MADE BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, DIRECTED
TO
BORROWER AT THE ADDRESS INDICATED BELOW, AND SERVICE SO MADE SHALL BE COMPLETE
UPON RECEIPT; EXCEPT
THAT IF
BORROWER SHALL REFUSE TO ACCEPT DELIVERY, SERVICE SHALL BE DEEMED COMPLETE
FIVE
(5) DAYS AFTER THE SAME SHALL HAVE BEEN SO MAILED.
8.25 Integration.
The
Loan Documents contain the complete understanding and agreement of Borrower
and
Lender and supersede all prior representations, warranties, agreements,
arrangements, understandings, and negotiations. PURSUANT
TO UTAH
CODE ANNOTATED
SECTION 25-5-4, BORROWER IS NOTIFIED THAT THE
WRITTEN LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES
AND MAY
NOT BE CONTRADICTED BY EVIDENCE OF ANY ALLEGED PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
8.26 Binding
Effect.
The
Loan Documents will be binding upon, and inure to the benefit of, Borrower
and
Lender and their respective successors and assigns. Borrower may not delegate
its obligations under the Loan Documents.
8.27 Survival.
The
representations, warranties, and covenants of Borrower and the Loan Documents
shall survive the execution and delivery of the Loan Documents and the making
of
the Loan.
8.28 Exchange
of Information.
Borrower
agrees that Lender may exchange financial information about Borrower and
Guarantor with its affiliates and other related entities, its participants
and
prospective participants, and purchasers or potential purchasers of the Loan.
Borrower agrees that Lender may at any time sell, assign, or transfer one
or
more interests or participations in all or any part of its rights or obligations
in and to this Agreement and the other Loan Documents to one or more purchasers
whether or not related to or affiliated with Lender. Borrower hereby authorizes
Lender, at its sole discretion and without notice to or consent of Borrower
or
Guarantor, to disclose to Chase or Collateral Agent on a confidential basis
any
information, financial or otherwise, which it may possess concerning Borrower
or
Guarantor.
8.29 Regulation
FD.
Lender
acknowledges that it is aware, and Lender will advise its directors, officers,
employees, agents and advisors (collectively, “Representatives”)
who
are informed as to the matters which are the subject of this Agreement, that
the
United States securities laws prohibit any Person who has received from an
issuer material, non-public information concerning such issuer from purchasing
or selling securities of such issuer or from communicating such information
to
any other Person under circumstances in which it is reasonably foreseeable
that
such Person is likely to purchase or sell securities. Lender further agrees
that
it will keep, and it will advise its Representatives of its obligations to
keep,
confidential any material non-public information disclosed to Lender by Borrower
or any Person acting on Borrower’s behalf. This Section
8.29
is a
confidentiality agreement for purposes of Regulation FD promulgated under
the
Securities Exchange Act of 1934.
8.30 USA
PATRIOT ACT NOTIFICATION.
Required Notice:
USA
PATRIOT ACT.
The
Lender hereby notifies Borrower that pursuant to the requirements of the
USA
Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001))
(the “Act”),
it is
required to obtain, verify and record information that identifies Borrower,
which information includes the name and address of Borrower and other
information that will allow Lender to identify Borrower in accordance with
the
Act.
8.31 Exhibits
and Schedules.
The following exhibits and schedules to this Agreement are fully incorporated
herein as if set forth at length:
Exhibit
A
- Form of Covenant Compliance Certificate
Exhibit
B
- Form of Request for Advance
Schedule
5.2(d) - Subsidiaries
Schedule
5.5 - Litigation
Schedule
5.6 - Existing Liens and Encumbrances
Schedule
5.20 - Management Loan Program
ARTICLE
9
COLLATERAL
RELEASES
9.1 Full
Release.
Unless
either of Lender or Collateral Agent otherwise consents in writing, the
Collateral or any part thereof shall not be released from the Lien and
Encumbrance of the Security Agreement until all Indebtedness and Obligations
of
Borrower and Guarantor under the Loan Documents have been indefeasibly paid
and
performed in full.
[Remainder
of Page Intentionally Left Blank]
IN
WITNESS WHEREOF, Lender and Borrower have caused this Agreement to be duly
executed and delivered as of the date first above written.
| XXXXXXXX XXXXX CO. | ||
| |
|
a
Utah
corporation |
| By: | /s/ XXXXXXX XXXXXX | |
|
Name: Xxxxxxx Xxxxxx |
||
|
Title:
Treasurer and Vice President of Investor Relations
"Borrower"
|
||
| ZIONS FIRST NATIONAL BANK | ||
| |
|
a national
banking association |
| By: | /s/ XXXXXX XXXXX | |
|
Name: Xxxxxx Xxxxx |
||
|
Title:
Vice Presient
"Lender"
|
||
EXHIBIT
A
FORM
OF COVENANT COMPLIANCE CERTIFICATE
COVENANT
COMPLIANCE CERTIFICATE
To: Zions
First National Bank
00
Xxxx
Xxxxx Xxxxxx, Xxxxx 000
Xxxx
Xxxx
Xxxx, Xxxx 00000
For
the
[Quarter/Fiscal
Year]
Ending:
_______________, 20___ (the “Reporting
Period”).
XXXXXXXX
XXXXX CO.,
a Utah
corporation (“Borrower”),
makes
this certification to ZIONS
FIRST NATIONAL BANK,
a
national banking association (“Lender”),
under
that certain Revolving Line of Credit Agreement dated March 14, 2007 (the
“Loan
Agreement”)
by and
between Borrower and Lender. Capitalized terms used herein without definition
shall have the meanings given to such terms in the Loan Agreement.
The
undersigned hereby certifies to Lender that as reported on the most recent
financial statements described below and submitted herewith to Lender, Borrower
is in full and compliance with each and every financial covenant set forth
in
the Loan Agreement and each other covenant set forth in the Loan Agreement.
The
financial covenant requirements compared to the actual results are determined
to
be as follows, which results are further described on the Line of Credit
Covenant Calculations set forth on Schedule
1
attached
hereto, each of which Borrower certifies to be true and correct:
Funded
Debt to EBITDAR Ratio Covenant.
The
Consolidated Entities shall not permit its ratio of (A) total liabilities,
plus
the net present value of operating leases at a discount rate of seven percent
(7%), but excluding (1) accounts arising from the purchase of goods and services
in the ordinary course of business, (2) accrued expenses or losses, and (3)
deferred revenues or gains, to (B) net income, plus amortization expense,
depreciation expense, interest expense, income tax expense, and rents and
operating lease payments, less extraordinary gains and losses (collectively,
“EBITDAR”),
for
the twelve (12) month period then ending, to be greater than (x) 3.25 to
1.00 as
of the end of the fiscal quarter of Borrower ending on March 3, 2007, (y)
3.00
to 1.00 as of the end of the fiscal quarter of Borrower ending on June 2,
2007,
and (z) 2.75 to 1.00 as of the end of the fiscal quarter of Borrower ending
on
August 31, 2007 and each fiscal quarter thereafter.
| Maximum Ratio for Reporting Period: | |||
| Actual Ratio for Reporting Period: | |||
| In Compliance: Yes ¨ No ¨ | |||
Fixed
Charge Coverage Ratio Covenant.
The
Consolidated Entities shall not permit its ratio of (A) net income before
income
tax expense, plus amortization expense, depreciation expense, interest expense,
rent and operating lease payments, minus any distributions or dividends,
for the
twelve (12) month period then ending, to (B) prior period current maturities
of
long term debt and capital leases, interest expense, cash taxes paid, rent
and
operating lease payments, for the same such period, to be less than (x) 1.30
to
1.00 as of the end of the fiscal quarter of Borrower ending on March 3, 2007,
(y) 1.35 to 1.00 as of the end of the fiscal quarter of Borrower ending on
June
2, 2007, and (z) 1.50 to 1.00 as of the end of the fiscal quarter of Borrower
ending on August 31, 2007 and each fiscal quarter thereafter.
| Maximum Ratio for Reporting Period = | |||
| Actual Ratio for Reporting Period = | |||
| In Compliance: Yes ¨ No ¨ | |||
Capital
Expenditures Covenant.
The
Consolidated Entities shall not make Capital Expenditures, exclusive of
curriculum development costs, in excess of (i) $11,000,000.00 for Borrower’s
fiscal year ending on August 31, 2007 and (ii) $8,000,000.00 for each fiscal
year of Borrower thereafter.
| Maximum Capital Expenditures for Reporting Period: | $ | ||
| Actual Capital Expenditures for Reporting Period: | $ | ||
| In Compliance: Yes ¨ No ¨ | |||
Minimum
Net Worth Covenant.
The
Consolidated Entities shall not permit its Net Worth to be less than ONE
HUNDRED
THIRTY-THREE MILLION AND NO/100 DOLLARS ($133,000,000.00); provided,
however,
the
Consolidated Entities’ Net Worth may be less than such amount if Lender
determines that the Consolidated Entities’ Net Worth has decreased to an amount
less than $133,000,000.00 as a result of Borrower’s purchase of its outstanding
common or preferred stock. As used in Section
6.8(d) of
the
Loan Agreement, the term “Net
Worth”
means
the Consolidated Entities’ total assets less
total
liabilities, in each case as determined in accordance with GAAP.
| Minimum Net Worth as of End of Reporting Period: | $ | ||
| Actual Net Worth as of End of Reporting Period: | $ | ||
| In Compliance: Yes ¨ No ¨ | |||
In
addition, the undersigned certifies to Lender that, during the period covered
by
the financial statements and through the date of this
Certification:
A. No
Event
of Default has occurred and is continuing.
B. Borrower
has not pledged any of its assets except as permitted in the Loan
Agreement.
C. There
has
been no change in GAAP or in the application thereof to the Consolidated
Entities’ financial statements since the date of the audited financial
statements referred to in Section
6.7
of the
Loan Agreement which were last delivered to Lender.
Dated
as
of _______________, 20___.
Very
truly yours,
| XXXXXXXX XXXXX CO. | |||
| |
|
a
Utah
corporation |
|
| By: | |||
|
Name:
|
|||
|
Title:
|
|
||
SCHEDULE
1
TO
COVENANT COMPLIANCE CERTIFICATE
LINE
OF CREDIT COVENANT CALCULATIONS
EXHIBIT
B
FORM
OF REQUEST FOR ADVANCE
[insert
date]
Zions
First National Bank
00
Xxxx
Xxxxx Xxxxxx, Xxxxx 000
Xxxx
Xxxx
Xxxx, Xxxx 00000
Request
for Advance No.:_____________________
Ladies/Gentlemen:
Reference
is made to the Revolving Line of Credit Agreement dated as of March 14, 2007
(the “Loan
Agreement”)
between XXXXXXXX
XXXXX CO.,
a Utah
corporation (“Borrower”),
and
ZIONS
FIRST NATIONAL BANK,
a
national banking association (“Lender”).
Capitalized terms used but not otherwise defined herein shall have the meaning
given them in the Loan Agreement.
In
accordance with Section
2.2(a)
of the
Loan Agreement, the undersigned Borrower hereby requests that Lender make
an
Advance to us in the amount of $____________________. Borrower hereby certifies,
as of the date hereof and as of the date the Advance requested hereby is
made,
that:
(a) no
Event
of Default has occurred and is continuing nor will an Event of Default occur
after giving effect to such Advance as a result of such Advance;
(b) each
of
the representations and warranties made by Borrower in or pursuant to the
Loan
Documents is true and correct in all material respects on and as of such
date as
if made on and as of the date hereof (or, if any such representation or warranty
is expressly stated to have been made as of a specific date, as of such specific
date); and
(c) Borrower
has satisfied all conditions precedent and all other requirements for the
Advance of the funds requested herein as provided in the Loan Agreement and
other Loan Documents.
|
Very
truly yours,
|
||
| XXXXXXXX XXXXX CO. | ||
| |
|
a
Utah
corporation |
| By: | ||
|
Name: |
||
|
Title:
|
||
SCHEDULE
5.2(d)
SUBSIDIARIES
SCHEDULE
5.5
LITIGATION
epicRealm
Licensing, LLC v. Xxxxxxxx Xxxxx Co., et al.,
Case
No. 2:05-CV-00356-DF-CMC in the United States District Court for the Eastern
District of Texas, Marshall Division (has been consolidated with Case No.
2:05-CV-00163-DF-CMC). In August 2005, epicRealm Licensing, LLC (epicRealm)
filed an action against Borrower for patent infringement. The action alleges
that Borrower infringed upon two of epicRealm’s patents that cover systems and
methods for managing dynamic Web page generation requests from clients to
a Web
server that in turn uses a page server to generate a dynamic Web page using
content retrieved from a data source. Borrower denies the patent infringement
and believes that the epicRealm claims are invalid. This litigation is currently
in the discovery phase and Borrower intends to vigorously defend the
matter.
SCHEDULE
5.6
EXISTING
LIENS AND ENCUMBRANCES
|
Debtor
|
Secured
Party
|
Collateral
|
Jurisdiction
|
Filing
Date
|
Filing
No.
|
|
Xxxxxxxx
Xxxxx Corporation
|
Lease
Operations
|
Equipment
|
Utah
|
04/10/2002
|
184734200241
|
|
Xxxxxxxx
Xxxxx Company
|
Inter-tel
Leasing,
Inc.
|
Equipment
|
Utah
|
06/27/2002
|
191497200239
|
|
Xxxxxxxx
Xxxxx Printing, Inc.
|
Heidelberg
USA, Inc.
|
Equipment
|
Utah
|
10/30/2006
|
306412200696
|
|
Xxxxxxxx
Xxxxx Company, Inc.
|
IOS
Capital, LLC
|
Leased
Equipment
|
Utah
|
10/31/2002
|
201520200221
|
|
Xxxxxxxx
Xxxxx Printing, Inc.
|
Komori
America Corporation
|
Equipment
|
Utah
|
01/10/2007
|
311178200706
|
|
Xxxxxxxx
Xxxxx Co.
|
Zions
First National Bank
|
Account
#0000000 with Zions First National Bank
|
Utah
|
01/24/2007
|
312076200702
|
SCHEDULE
5.20
MANAGEMENT
COMMON STOCK LOAN PROGRAM
In
May
2004, our Board of Directors approved modifications to the terms of the
management stock loans. While these changes had significant implications
for
most management stock loan program participants, the Company did not formally
amend or modify the stock loan program notes. Rather, the Company chose to
forego certain of its rights under the terms of the loans and granted
participants the modifications described below in order to potentially improve
their ability to pay, and the Company’s ability to collect, the outstanding
balances of the loans. These modifications to the management stock loan terms
applied to all current and former employees whose loans do not fall under
the
provisions of the Xxxxxxxx-Xxxxx Act of 2002. Loans to the Company’s officers
and directors (as defined by the Xxxxxxxx-Xxxxx Act of 2002) were not affected
by the approved modifications. During fiscal 2005 the Company collected $0.8
million, which represented payment in full, from an officer and members of
the
Board of Directors that were required to repay their loans on the original
due
date of March 30, 2005.
The
May
2004 modifications to the management stock loan terms included the
following:
|
|
|
Waiver
of Right to Collect
- The
Company will waive its right to collect the outstanding balance
of the
loans prior to the earlier of (a) March 30, 2008, or (b) the date
after
March 30, 2005 on which the closing price of the Company’s stock
multiplied by the number of shares purchased equals the outstanding
principal and accrued interest on the management stock loans (the
Breakeven Date).
|
|
|
|
|
|
|
|
Lower
Interest Rate
- Effective
May 7, 2004, the Company prospectively waived collection of all
interest
on the loans in excess of 3.16 percent per annum, which was the
“Mid-Term
Applicable Federal Rate” for May 2004.
|
|
|
|
|
|
|
|
Use
of the Company’s Common Stock to Pay Loan
Balances
- The
Company may consider receiving shares of our common stock as payment
on
the loans, which were previously only payable in cash.
|
|
|
|
|
|
|
|
Elimination
of the Prepayment Penalty
- The
Company will waive its right to charge or collect any prepayment
penalty
on the management common stock
loans.
|
These
modifications, including the reduction of the loan program interest rate,
were
not applied retroactively and participants remain obligated to pay interest
previously accrued using the original interest rate. Also during fiscal 2005,
our Board of Directors approved loan modifications for a former executive
officer and a former director substantially similar to loan modifications
previously granted to other loan participants in the management stock loan
program as described above.
Prior
to
the May 2004 modifications, the Company accounted for the loans and the
corresponding shares using a loan-based accounting model that included guidance
found in SAB 102, Selected
Loan Loss Allowance Methodology and Documentation Issues;
SFAS
No. 114, Accounting
by Creditors for Impairment of A Loan - an Amendment of FASB Statements No.
5
and 15;
and
SFAS No. 5, Accounting
for Contingencies.
However, due to the nature of the May 2004 modifications, the Company
reevaluated its accounting for the management stock loan program. Based upon
guidance found in EITF Issue 00-23, Issues
Related to the Accounting for Stock Compensation under APB Opinion No. 25
and
FASB Interpretation No. 44,
and
EITF Issue 95-16, Accounting
for Stock Compensation Agreements with Employer Loan Features under APB Opinion
No. 25,
we
determined that the management common stock loans should be accounted for
as
non-recourse stock compensation instruments. While this accounting treatment
does not alter the legal rights associated with the loans to the employees
as
described above, the modifications to the terms of the loans were deemed
significant enough to adopt the non-recourse accounting model as described
in
EITF 00-23. As a result of this accounting treatment, the remaining carrying
value of the notes and interest receivable related to financing common stock
purchases by related parties, which totaled $7.6 million prior to the loan
term
modifications, was reduced to zero with a corresponding reduction in additional
paid-in capital. Since the Company was unable to control the underlying
management common stock loan shares, the loan program shares continued to
be
included in Basic earnings per share (EPS) following the May 2004
modifications.
We
currently account for the management common stock loans as equity-classified
stock option arrangements. Under the provisions of SFAS No. 123R, which we
adopted on September 1, 2005, additional compensation expense will be recognized
only if the Company takes action that constitutes a modification which increases
the fair value of the arrangements. This accounting treatment also precludes
us
from reversing the amounts expensed as additions to the loan loss reserve,
totaling $29.7 million, which were recognized in prior periods.
During
fiscal 2006, the Company offered participants in the management common stock
loan program the opportunity to formally modify the terms of their loans
in
exchange for placing their shares of common stock purchased through the loan
program in an escrow account that allows the Company to have a security interest
in the loan program shares. The key modifications to the management common
stock
loans for the participants accepting the fiscal 2006 offer are as
follows:
|
|
|
Modification
of Promissory Note
-
The management stock loan due date was changed to be the earlier
of (a)
March 30, 2013, or (b) the Breakeven Date as defined by the May
2004
modifications. The interest rate on the loans will increase from
3.16
percent compounded annually to 4.72 percent compounded
annually.
|
|
|
|
|
|
|
|
Redemption
of Management Loan Program Shares
-
The Company will have the right to redeem the shares on the due
date in
satisfaction of the promissory notes as
follows:
|
|
|
·
|
On
the Breakeven Date, the Company has the right to purchase and redeem
from
the loan participants the number of loan program shares necessary
to
satisfy the participant’s obligation under the promissory note. The
redemption price for each such loan program share will be equal
to the
closing price of the Company’s common stock on the Breakeven
Date.
|
|
|
|
|
|
|
·
|
If
the Company’s stock has not closed at or above the breakeven price on or
before March 30, 2013, the Company has the right to purchase and
redeem
from the participants all of their loan program shares at the closing
price on that date as partial payment on the participant’s
obligation.
|
The
fiscal 2006 modifications were intended to give the Company a measure of
control
of the outstanding loan program shares and to facilitate payment of the loans
should the market value of the Company’s stock equal the principal and accrued
interest on the management stock loans. If a loan participant declines the
offer
to modify their management stock loan, their loan will continue to have the
same
terms and conditions that were previously approved in May 2004 by the Company’s
Board of Directors and their loans will be due at the earlier of March 30,
2008
or the Breakeven Date. Consistent with the May 2004 modifications, stock
loan
participants will be unable to realize a gain on the loan program shares
unless
they pay cash to satisfy the promissory note obligation prior to the due
date.
As of the closing date of the extension offer, which was substantially completed
in June 2006, management stock loan participants holding approximately 3,508,000
shares, or 94 percent of the remaining loan shares, elected to accept the
extension offer and placed their management stock loan shares into the escrow
account.
As
a
result of this modification, the Company reevaluated its accounting treatment
regarding the loan shares and their inclusion in Basic EPS. Since the management
stock loan shares held in the escrow account continue to have the same income
participation rights as other common shareholders, the Company has determined
that the escrowed loan shares are participating securities as defined by
EITF
03-06, Participating
Securities and the Two-Class Method under FASB Statement No.
128.
As a
result, the management loan shares will be included in the calculation of
Basic
EPS in periods of net income and excluded from Basic EPS in periods of net
loss
beginning in the fourth quarter of fiscal 2006, which was the completion
of the
escrow agreement modification.
As
a
result of these loan program modifications, the Company hopes to increase
the
total value received from loan participants; however, the inability of the
Company to collect all, or a portion, of these receivables could have an
adverse
impact upon our financial position and future cash flows compared to full
collection of the loans.
