K:\XXXXXX\XXXXXX\RESPONSEUSA\LOAN A & R-3.WPD
MELLON BANK, N.A.
WITH
RESPONSE USA, INC.
UNITED SECURITY SYSTEMS, INC.
RESPONSE ABILITY SYSTEMS, INC.
EMERGENCY RESPONSE SYSTEMS, INC.
XXXXXXX SECURITY, INC.
RELIABLE-HAWK, INC.
AND
MSG SECURITY SYSTEMS, INC.
___________________________________________________
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
___________________________________________________
TABLE OF CONTENTS
PAGE
SECTION 1. DEFINITIONS AND INTERPRETATION 1
1.1 Terms Defined 1
1.2 Accounting Principles 12
SECTION 2. THE LOAN 12
2.1 Revolving Line of Credit - Description 12
2.2 Revolving Credit - Termination by Borrowers 13
2.3 Interest 14
2.4 Loan Disbursements 14
2.5 Fees 15
2.6 Payments 16
2.7 Use of Proceeds 16
2.8 Capital Adequacy 16
2.9 Mandatory Repayment 16
SECTION 3. COLLATERAL 17
3.1 Description 17
3.2 Lien Documents 18
3.3 Other Actions 18
3.4 Collateral Pledge 19
3.5 Searches 19
3.6 Landlord's and Mortgagee's Waivers 20
3.7 Filing Security Agreement 20
3.8 Power of Attorney 20
SECTION 4. CLOSING AND CONDITIONS PRECEDENT TO ADVANCES 20
4.1 Resolutions, Opinions, and Other Documents 21
4.2 Absence of Certain Events 22
4.3 Warranties and Representations at Closing 23
4.4 Compliance with this Agreement 23
4.5 Chief Executive Officer's Certificate 23
4.6 Verifications 23
4.7 Additional Equity 23
4.8 Closing 23
4.9 Effectiveness of Increase in Maximum Revolving
Credit Amount 23
4.10 Non-Waiver of Rights 24
4.11 Future Advances 24
4.12 Warranties and Representations upon Future Advances 25
SECTION 5. REPRESENTATIONS AND WARRANTIES 25
5.1 Corporate Organization and Validity 25
5.2 Insurance 26
5.3 Litigation 26
5.4 Title to Properties 26
5.5 Patents and Trademarks 27
5.6 Governmental Consent 27
5.7 Taxes 27
5.8 Financial Statements 28
5.9 Full Disclosure 28
5.10 Subsidiaries and Affiliates 28
5.11 Guarantees, Contracts, etc 28
5.12 Government Regulations and Compliance 29
5.13 Business Interruptions 31
5.14 Names and Addresses 31
5.15 Other Associations 31
5.16 Environmental Matters 31
5.17 Regulation O 32
5.18 Capital Stock 32
5.19 Solvency 33
5.20 Monthly MRR 33
5.21 Qualified Accounts 33
SECTION 6. AFFIRMATIVE COVENANTS 33
6.1 Payment of Taxes and Claims 33
6.2 Maintenance of Properties, Collateral and Corporate
Existence 34
6.3 Places of Business 35
6.4 Business Conducted 36
6.5 Litigation 36
6.6 Certain Taxes 36
6.7 Bank Accounts 36
6.8 Employee Benefit Plans 36
6.9 Submission of Collateral Documents 37
6.10 Other Governmental Contracts 37
6.11 Financial Covenants 37
6.12 Financial and Business Information 38
6.13 Officers' Certificates 40
6.14 Inspection and Verification 40
6.15 Tax Returns and Reports 41
6.16 Information to Participant 41
6.17 Material Adverse Developments 41
6.18 Lockbox Agreements 41
6.19 Executive Management 42
6.20 Interest Rate Cap Agreement 42
6.21 Notice of Certain Events 42
6.22 Board Nominee 43
6.23 Board Observation 43
6.24 Additional Equity 43
6.25 Monitoring Agreements 43
SECTION 7. NEGATIVE COVENANTS 44
7.1 Sales, Merger, Consolidation, Dissolution or
Liquidation 45
7.2 Acquisitions 45
7.3 Liens and Encumbrances 45
7.4 Transactions With Affiliates or Subsidiaries 46
7.5 Indebtedness or Guarantees 46
7.6 Distributions, Redemptions and Other Indebtedness 46
7.7 Loans and Investments 47
7.8 Use of Lender's Name 47
7.9 Change in Capital Stock 47
7.10 Method of Business 47
7.11 Officer/Shareholder Compensation 47
7.12 Capital Expenditures 48
7.13 MRR Sales 48
7.14 Purchases of MRR 48
7.15 Prohibited Transactions 48
7.16 Consulting Agreements 49
7.17 Delinquencies 49
7.18 Additional MRR Test 49
7.19 Modification of Financial Covenants 49
7.20 Miscellaneous Covenants 49
SECTION 8. DEFAULT 50
8.1 Events of Default 50
8.2 Rights and Remedies 53
8.3 Continuation of Event of Default 54
8.4 Nature of Remedies 54
8.5 Set-Off 54
8.6 Confession of Judgment 54
SECTION 9. MISCELLANEOUS 55
9.1 Governing Law 55
9.2 Integrated Agreement 55
9.3 Waivers, Releases and Indemnification 56
9.4 Time 57
9.5 Expenses of Lender 57
9.6 Brokerage 58
9.7 Notices 58
9.8 Headings 59
9.9 Survival 59
9.10 Successors and Assigns 60
9.11 Duplicate Originals 60
9.12 Modification 60
9.13 Signatories 60
9.14 Third Parties 60
9.15 Discharge of Taxes, Borrowers' Obligations, Etc. 60
9.16 Withholding and Other Tax Liabilities 61
9.17 Consent to Jurisdiction 62
9.18 Waiver of Jury Trial 62
9.19 Future Commitments 63
AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
This Amended and Restated Loan and Security Agreement
("Agreement") is dated as of February ___, 1998 among RESPONSE
USA, INC., a Delaware corporation ("RUSA"), UNITED SECURITY
SYSTEMS, INC., a New Jersey corporation ("USS"), RESPONSE
ABILITY SYSTEMS, INC., a New Jersey corporation ("RAS"),
EMERGENCY RESPONSE SYSTEMS, INC., a Delaware corporation ("ERS"),
XXXXXXX SECURITY, INC., a New Jersey corporation ("SSI"),
RELIABLE-HAWK, INC., a New Jersey corporation ("RHI") and MSG
SECURITY SYSTEMS, INC., a Pennsylvania corporation ("MSG") (each
a "Borrower" and collectively "Borrowers") and MELLON BANK, N.A.
("Lender").
BACKGROUND
X. Xxxxxxxxx (except RHI) have established certain
financing arrangements with and borrow funds and obtain other
credit accommodations from Lender pursuant to the terms of that
certain Loan and Security Agreement dated as of June 30, 1996
among Borrowers and Lender, as amended from time to time
("Existing Loan Agreement"). The Existing Loan Agreement,
together with all instruments, documents and agreements executed
in connection therewith are hereinafter referred to as the
"Existing Financing Agreements."
B. RUSA recently acquired 100% of the stock of RHI, who is
hereby becoming a Borrower and becoming jointly and severally
liable for the Obligations.
C. The parties desire to amend and restate the Existing
Loan Agreement on the terms and conditions set forth herein.
NOW, THEREFORE, the parties hereto, intending to be legally
bound hereby, agree as follows:
SECTION 1. DEFINITIONS AND INTERPRETATION
1.1 Terms Defined: As used in this Agreement, the
following terms shall have the following respective meanings:
Account - Any right to payment for goods sold or leased
or for services rendered which is not evidenced by an instrument
or chattel paper, whether or not it has been earned by
performance.
Account Debtor - Any Person obligated on any Account.
Acquisition - The purchase by RUSA of 100% of the
issued and outstanding capital stock of Jupiter from the
stockholders of Jupiter pursuant to a certain agreement to
acquire the capital stock of Jupiter dated September 30, 1997 and
the purchase by USS of certain of the assets of Triple A pursuant
to a certain Asset Purchase Agreement dated October 1, 1997.
Advances - Any monies advanced or credit extended to
Borrowers by Xxxxxx under the Revolving Credit.
Affiliate - Any entity (other than a Subsidiary) which
directly or indirectly through one or more intermediaries
controls, is controlled by, or is under common control with any
Borrower. Control may be by ownership, contract, or otherwise.
Applicable Rate - The Contract Rate or the Default
Rate, as applicable and in effect from time to time.
Authorized Officer - Any officer of a Borrower
authorized by specific resolution of a Borrower to request
Advances as set forth in the incumbency certificate referred to
in Section 4.1(d) of this Agreement (or any replacement thereof)
delivered to Lender.
Available Credit - The excess (if any) of the Maximum
Revolving Credit Amount over the aggregate Advances then
outstanding.
Bankruptcy Code - Title 11 of the United States Code,
11 U.S.C. 101 et seq. in effect as of the date hereof.
Business Day - Any day other than a Saturday, Sunday,
or legal holiday on which Lender is not open for business in
Philadelphia, Pennsylvania.
Business Operations - all business offerings and
services of Borrower, including, without limitation, Monitoring
Services, Rentals and Servicing.
Capital Expenditures - Any expenditure (whether in cash
or deferred obligation, and whether by purchase or through a
capital lease) that would be classified as a capital expenditure
on a statement of cash flow of Borrowers prepared in accordance
with GAAP, consistently applied.
Capital Leases - Leases which under GAAP are
capitalized and treated as debt of the lessee and are carried as
a liability on the lessee's balance sheet.
Capitalized Lease Obligations - All debts, liabilities
and obligations of a lessee under Capital Leases.
Cash Equivalents - All cash (excluding cash held for
customers or other Persons), cash equivalents (as reasonably
determined by Lender) and trade Accounts.
Cash Flow - Earnings of Borrowers before interest
expense (excluding non-cash original issue discount interest
expense), income taxes, depreciation, non-cash compensation
expense for options and warrants granted to employees and
amortization, as shown on a consolidated statement of income for
Borrowers prepared in accordance with GAAP; such earnings shall
be calculated for each Fiscal Quarter and then multiplied by four
(4).
Change in Control - means a transaction or transactions
in which (i) one or more Persons shall have acquired Voting
Control of RUSA or (ii) there shall have occurred a merger,
consolidation or similar combination as a result of which one or
more Persons shall have acquired Voting Control of RUSA or its
successor corporation.
Closing - As defined in Section 4.8.
Closing Date - As defined in Section 4.8.
Collateral - As defined in Section 3.1.
Commitment Fee - As defined in Section 2.5(b).
Contract Rate - Shall equal the Prime Rate plus one and
three-quarters percent (1.75%) per annum.
Controller's Certificate - A certificate signed by the
Chief Financial Officer or Controller of a Borrower in the form
of Exhibit "A" hereto.
Default Rate - Shall equal the Prime Rate plus three
and three-quarters percent (3.75%) per annum.
Delinquent Recurring Monthly Revenue - As defined in
Section 7.17 herein.
Distribution -
(1) Dividends or other distributions on capital stock
of Borrower; and
(2) The redemption, repurchase or acquisition of such
stock or of warrants, rights or other options to purchase such
stock.
ERISA - The Employee Retirement Income Security Act of
1974, as the same may be amended from time to time.
Event of Default - As defined in Section 8.1.
Expenses - As defined in Section 9.5.
Extended Warranty/Service - Providing extended warranty
and maintenance services under contract in connection with sales,
rentals or leases of alarm systems and personal emergency
response systems.
Extended Warranty/Service Agreements - Agreements
between a Borrower and its customers pursuant to which such
Borrower provides Extended Warranty/Service services.
Extended Warranty/Service Revenues - Borrower's
revenues from Extended Warranty/Services net of all residential
and commercial service time and materials costs.
Facility Fee - As defined in Section 2.5(a).
Financial Statements - Consolidated and consolidating
balance sheet, income statement, statement of cash flow and
statement of Shareholder's Equity of Borrowers, all prepared in
accordance with GAAP consistently applied and accompanied by a
Controller's Certificate. All Financial Statements shall set
forth both the current Fiscal Year and the comparative period of
the prior Fiscal Year; monthly and quarterly Financial Statements
shall also include year to date information and information for
the comparative period for the prior Fiscal Year.
Fiscal Quarter - A fiscal quarter of Borrowers
(currently the three month periods ending March 31, June 30,
September 30 and December 31 of each year).
Fiscal Year - A fiscal year of Borrowers (currently the
period beginning each July 1 and ending on June 30 of following
calendar year).
GAAP - Generally accepted accounting principles applied
in a manner consistent with the audited financial statements of
Xxxxxxxx provided to Lender on or prior to the date hereof.
Healthlink Interest - RUSA's fifty percent(50%)
ownership interest in Healthlink, Ltd., a Nevada limited
partnership.
Healthlink Pledge Agreement - Pledge Agreement from
RUSA dated as of June 30,1997, pledging to Lender RUSA's fifty
percent (50%) interest in Healthlink, Ltd.
Holdings - APT Holdings Corporation, a Delaware
corporation.
Indebtedness - As to any Person, at a particular time,
all items which would, in conformity with GAAP, be classified as
liabilities on a balance sheet of such Person as at such time,
and also including (a) indebtedness arising under acceptance
facilities and the face amount of all letters of credit issued
for the account of such Person, and, without duplication, all
drafts drawn thereunder, (b) all liabilities secured by any Lien
on any property owned by such Person even though it has not
assumed or otherwise become liable for the payment thereof, (c)
obligations under leases which have been, or under GAAP are
required to be, capitalized, (d) all liabilities for which such
Person is liable as a surety, guarantor, co-signer or
accommodation maker, and (e) all liabilities with respect to
redeemable preferred stock.
Inventory - In addition to the term as defined in the
UCC, any inventory now or hereafter owned or acquired by
Borrowers, wherever located, and, in any event, including all
inventory, merchandise, goods and other personal property which
are held by or on behalf of Borrowers for sale or lease or are
furnished or are to be furnished under a contract of service or
which constitute raw materials, work in progress, or materials
used or consumed or to be used or consumed in Borrowers'
business, or in the processing, packaging, advertising,
promotion, delivery or shipping of the same, and all finished
goods.
Investment Property - Has the meaning ascribed to such
term in the UCC.
Jupiter - The Jupiter Group, Inc.
Jupiter Pledge Agreement - A stock pledge agreement, in
form and substance satisfactory to Lender, to be executed by RUSA
contemporaneously with consummation of the Acquisition, whereby
RUSA shall pledge to Lender 100% of the issued and outstanding
capital stock of Jupiter.
Key Man Policies - The key man life insurance policies
issued by First Colony Insurance Company, Transamerica Occidental
Life Insurance Company and Banner Life Insurance Company, which
are owned by RUSA, insure the life of Xxxxxxx X. Xxxxxx and are
in the aggregate face amount of $3,000,000.
Lien - Any interest in Property securing an obligation
owed to, or a claim by, a Person other than the owner of the
Property, whether such interest is based on the common law,
statute or contract, and including, but not limited to, a
security interest, lien, mortgage, encumbrance, pledge,
conditional sale, other title retention agreement, trust receipt,
lease, consignment or bailment for security purposes or trust.
The term "Lien" shall include reservations, exceptions, encroach
ments, easements, rights-of-way, covenants, conditions, re
strictions, leases and other title exceptions and encumbrances
affecting Property other than those which would not materially
interfere with Borrowers' use of the Property or would not
materially detract from the value of the Property. For the
purposes of this Agreement, Borrowers shall be deemed to be the
owner of any Property which they have acquired or hold subject to
a conditional sale agreement or other arrangement pursuant to
which title to the Property has been retained by or vested in
some other person for security purposes.
Loan Documents - This Agreement, the Revolving Credit
Note, the Pledge Agreements, the Warrant Documents and each other
document, instrument or agreement required to be delivered
hereby, as each may be amended, supplemented or replaced from
time to time.
Material Adverse Effect - A material adverse effect on
the business, Property, financial condition, operations or
business prospects of a Borrower or the ability of a Borrower to
pay and perform its obligations under this Agreement.
Maturity Date - June 30, 2000.
Maximum Revolving Credit Amount - Eighteen Million
($18,000,000) Dollars, subject to reduction as provided in
Sections 2.9 and 6.2(b) herein, and subject to mandatory
reductions of $250,000 on each of March 31, June 30, September 30
and December 31 of each year, commencing March 31, 1999, until
all Obligations are paid in full and the Revolving Credit is
terminated.
Monitoring Agreements - Agreements between any Borrower
and its customers pursuant to which such Borrower provides
Monitoring Services.
Monitoring Business - The provision of Monitoring
Services to customers pursuant to Monitoring Agreements.
Monitoring Revenues - Borrowers' revenues from
performance of Monitoring Services.
Monitoring Services - The monitoring of signals
received from alarm systems and personal emergency response
systems installed at a specified location and the response to
such signals in accordance with the written instructions prepared
by the customer and delivered to a Borrower.
Monthly Recurring Revenue - (MRR) - The sum of
Borrowers' (i) Monitoring Revenues, (ii) Rental Revenues and
(iii) Extended Warranty/Services Revenues during the last month
of each Fiscal Quarter. MRR does not include any revenues from
the sale of alarm systems, personal emergency response systems or
other products.
Net Income (Loss) - The net income (or loss) of
Borrowers before taxes, as such would appear on a consolidated
statement of income of Borrowers prepared in accordance with
GAAP, consistently applied, except that such income or loss shall
be calculated without taking into account the original issue
discount amortization expense with respect to (i) the Warrant and
the Revolving Credit Note and (ii) RUSA's 1996 Series A
Convertible Preferred Stock.
Net Proceeds from the Secondary Offering - The proceeds
(after all discounts and allowances) of the secondary offering of
common stock of RUSA described in that certain prospectus dated
January 12, 1998, net of (i) all amounts required for the
complete redemption by RUSA of the 4712 currently outstanding
shares of RUSA's 1996 Series A Convertible Preferred Stock and
(ii) all expenses incurred or otherwise payable by RUSA arising
out of or related to such secondary offering.
Obligations - All liabilities and obligations of
Borrowers to Lender, including, without limitation, indebtedness
evidenced by the Revolving Credit Note issued pursuant hereto,
obligations under the other Loan Documents, all fees and charges
owing by Borrowers, and all other liabilities and obligations of
every kind or nature whatsoever of Borrowers to Lender, whether
hereunder or otherwise, whether incurred, created, acquired or
arising on the date thereof or hereafter incurred, created or
arising, joint or several, matured, unmatured or contingent,
direct or indirect, primary or secondary, related or unrelated,
due or to become due, including, but not limited to, any ex
tensions, modifications, substitutions, increases and renewals
thereof, and substitutions therefor; the payment of all amounts
advanced by Lender to preserve, protect, defend, and enforce its
rights hereunder and in the Collateral in accordance with the
terms of this Agreement; and the payment of all Expenses incurred
by Xxxxxx.
Operating Contracts - All Monitoring Agreements, Rental
Agreements and Service Agreements.
Permitted Liens - As defined in Section 7.3 herein.
Person - An individual, partnership, corporation,
trust, unincorporated association or organization, limited
liability company or partnership, joint venture or any other
entity.
Pledge Agreements - The Stock Pledge Agreement from
RUSA, dated June 30, 1996, the Healthlink Pledge Agreement, the
Jupiter Pledge Agreement and the Stock Pledge Agreement from RUSA
of even date herewith, collectively pledging the Pledged Stock to
Lender to secure the Obligations.
Pledged Stock - The capital stock of all of RUSA's
Subsidiaries.
Potential Default - any event or condition the
occurrence or existence of which, with the giving of notice or
passage of time or both, would become or constitute an Event of
Default.
Preferred Stock - The 7,500 shares of 1996 Series A
Preferred Stock issued by RUSA on or prior to the date hereof (of
which 4712 shares are outstanding on the date hereof) and the
3,069.58 shares of 1997 Series B Preferred Stock issued by RUSA
on or prior to the date hereof.
Prime Rate - That rate designated by Lender in its
discretion from time to time as Xxxxxx's "Prime Rate", which
shall not necessarily constitute Lender's lowest or best
available rate to any customer or group or class of customers.
Property - Any interest of any Person in any kind of
property or asset, whether real, personal or mixed, or tangible
or intangible.
Purchase Money Lien - A Lien upon equipment securing
purchase money indebtedness incurred to finance the purchase of
such equipment so long as (i) the Lien shall at all times be
confined to the purchased equipment, (ii) indebtedness secured by
such Xxxx does not exceed eighty percent (80%) of the purchase
price of the purchased equipment, and (iii) the removal or
deactivation of the purchased equipment would not have an adverse
effect on the operation or value of the Collateral or a
Borrower's Business Operations.
Qualified Account - An Account of a Borrower meeting
all the following specifications: (i) it is lawfully and solely
owned by a Borrower and subject to no Lien or assignment (other
than the Lien of Lender), and such Borrower has the right of
assignment thereof and the power to grant a security interest to
Lender therein; (ii) it is a valid and enforceable Account,
representing the undisputed indebtedness of an Account Debtor
outstanding not more than ninety (90) days past the payment date
specified in the invoice therefor; (iii) the Account is not
subject to any defense, set-off, counterclaim, deduction,
discount, credit, chargeback, freight claim, allowance or
adjustment of any kind; (iv) the Account is net of all amounts
representing goods the sale of which has given rise to the
Account which have been returned, rejected, lost or damaged;
(v) if it arises from the sale of goods by such Borrower, such
sale was an absolute sale and not on consignment or on approval
or on a sale-or-return basis nor subject to any other repurchase
or return agreement, and such goods have been shipped to the
Account Debtor or its designee; (vi) if it arises from the
performance of services, such services have actually been
performed; (vii) it arose in the ordinary course of such
Borrower's Business Operations; (viii) no notice of the
bankruptcy, receivership, reorganization or insolvency of the
Account Debtor has been received; (ix) the Account Debtor is not
a Subsidiary or Affiliate of Borrowers; (x) except for Voxcom,
Inc. it is not an Account of an Account Debtor having its princi
pal place of business or executive office outside the United
States, the payment of which Account is not guaranteed by an
irrevocable letter of credit in form and substance satisfactory
to Lender and assigned to Lender; (xi) it does not represent a
sale to the government of the United States of America or any
subdivision thereof unless such Borrower has complied, for the
benefit of Lender, with the Federal Assignment of Claims Act;
(xii) not more than fifty percent (50%) of the aggregate balance
of all Accounts owing from the Account Debtor obligated on the
Account are outstanding more than sixty (60) days past their
payment date; (xiii) it is not an Account of an Account Debtor
obligated to a Borrower under any instrument; and (xiv) the
payment date for such Account is not later than thirty (30) days
after its original invoice date. A Qualified Account does not
include that portion of an Account representing interest charges
for past due balances, credit memos, or sales tax.
Registration Agreement - The Registration Rights
Agreement dated June 30, 1996 between RUSA and Holdings.
Rental Agreements - Contracts with customers pursuant
to which a Borrower leases (as lessor) alarm systems or personal
emergency response systems.
Rental Revenues - Borrower's revenues from Rentals.
Rentals - The leasing (as lessor) of alarm systems and
personal emergency response systems.
Revolving Credit - As defined in Section 2.1(a).
Revolving Credit Note - That certain promissory note
described in Section 2.1(b), as it may be amended, supplemented
or replaced from time to time.
Secondary Offering - The offer and sale by RUSA of
shares of its common stock pursuant to a registration statement
on Form SB-2, as amended, filed by RUSA with the SEC on October
10, 1997, which became effective on February 4, 1998.
Senior Funded Debt - The average unpaid balance of
Advances outstanding under the Revolving Credit during a Fiscal
Quarter.
Service Agreements - Contracts with customers pursuant
to which a Borrower provides Servicing.
Subordinated Debt - Indebtedness subordinated to the
Obligations pursuant to a subordination agreement in form and
substance acceptable to Lender.
Subsidiary - Any corporation more than fifty (50%)
percent of whose voting stock is legally and beneficially owned
by a Borrower or owned by a corporation more than fifty (50%)
percent of whose voting stock is legally and beneficially owned
by a Borrower.
Triple A - Triple A Security Systems, Inc.
UCC - The Uniform Commercial Code as in effect on the
date hereof in the Commonwealth of Pennsylvania.
Voting Control - Shall mean the power directly or
indirectly, individually, or as a member of a "control group" (as
such term is defined in Section 13 of the Securities Exchange Act
of 1934, as amended, and the rules and regulations promulgated
thereunder), to cast votes, or to cause votes to be cast, either
through voting (individually, as a voting trustee or as an
officer, director or controlling shareholder of a corporate
shareholder, as a general partner of a shareholder which is a
partnership or as a trustee of a shareholder which is a trust) or
by agreement or proxy, for the election of a majority of the
members of the board of directors of RUSA (or any successor of
RUSA as a result of any merger, consolidation or otherwise).
Warrant - The Common Stock Purchase Warrant dated June
30, 1996 issued by RUSA to Holdings. On the date hereof, there
are no shares of RUSA's Common Stock issuable thereunder.
Warrant Agreement - The Warrant Agreement dated June
30, 1996 between RUSA and Holdings.
Warrant Documents - The Warrant, Warrant Agreement and
the Registration Agreement.
1.2 Accounting Principles: Where the character or amount
of any asset or liability or item of income or expense is
required to be determined or any consolidation or other account
ing computation is required to be made for the purposes of this
Agreement, this shall be done in accordance with GAAP, to the
extent applicable, except where such principles are inconsistent
with the requirements of this Agreement.
SECTION 2. THE LOAN
2.1 Revolving Line of Credit - Description:
(a) Subject to the terms and conditions of this
Agreement, Lender hereby establishes for the benefit of Borrowers
a revolving credit facility ("Revolving Credit") under which
Advances shall be extended to or for the benefit of Borrowers
from time to time hereunder. The aggregate principal amount of
all Advances outstanding shall not, at any time, exceed the
Maximum Revolving Credit Amount. Subject to such limitation, the
outstanding balance of unpaid Advances under the Revolving Credit
may fluctuate from time to time, to be reduced by repayments made
by Xxxxxxxxx, and to be increased by future Advances which may be
made by Xxxxxx to or for the benefit of Borrowers. For the
purposes of this Agreement, any determination as to whether there
is Available Credit for Advances shall be determined by Xxxxxx
and shall be final and binding upon Borrowers. Subject to the
existence of Available Credit and up to the amount thereof, the
fulfillment of any and all other conditions to borrowing
contained in this Agreement and the absence of an Event of
Default or Potential Default, Borrowers may borrow, repay and
reborrow under the Revolving Credit from time to time prior to
the Maturity Date. If the aggregate principal amount of all
Advances at any time exceeds the Maximum Revolving Credit Amount,
Borrowers will, upon Xxxxxx's request, and without impairing any
other rights of Lender, immediately repay such excess in full.
(b) At Closing, Borrowers shall execute and deliver a
replacement promissory note to Lender in the principal sum of the
Maximum Credit Amount, in form and substance acceptable to
Lender, (the "Revolving Credit Note") to evidence its
unconditional obligation to repay Lender for all Advances made
from time to time under the Revolving Credit, with interest as
herein and therein provided. Each Advance made from time to time
under the Revolving Credit shall be deemed evidenced by the
Revolving Credit Note, which is deemed incorporated herein by
reference and made part hereof. The Revolving Credit Note shall
amend, restate and supersede (but not extinguish the indebtedness
evidenced by or cause a novation of) that certain Revolving
Credit Note dated January 14, 1998 from Borrowers to Lender, in
the principal amount of $15,500,000.
(c) The term of the Revolving Credit and Xxxxxx's
obligation to make Advances hereunder shall expire on the
Maturity Date. On such date, all of the outstanding Obligations
under the Revolving Credit, unless having been sooner demanded by
Xxxxxx pursuant to the terms hereof or of the Revolving Credit
Note, shall be due and payable in full and as of and after such
due date no further Advances shall be available from Lender.
(d) Borrowers each hereby confirm and acknowledge
that, as of the date hereof, the outstanding principal balance of
all advances and extensions of credit made by Lender to Borrowers
under the Existing Financing Agreements is $15,310,000, such
amount is unconditionally owing by Borrowers to Lender without
defense, setoff, counterclaim, discount, recoupment or charge of
any kind by any Borrower and shall be considered to be
outstanding Advances under the Revolving Credit for all purposes
hereunder as though such advances and extensions of credit had
been originally made under this Agreement.
2.2 Revolving Credit - Termination by Borrowers: Borrowers
may at any time prior to the Maturity Date and on not less than
thirty (30) days prior written notice to Xxxxxx, terminate the
Revolving Credit; provided, however, that on the termination date
Borrowers shall pay in full all of the outstanding Obligations.
2.3 Interest:
(a) Rate: Interest on outstanding Advances shall
accrue at a per annum rate equal to Contract Rate, subject to the
provisions of subparagraph (b) below.
(b) Default Rate: After the occurrence and during the
continuance of an Event of Default hereunder, interest on the
outstanding Advances shall accrue at a per annum rate equal to
the Default Rate.
(c) Calculation and Payment of Interest: Interest on
all Advances shall be computed daily for the actual number of
days elapsed, but calculated on the basis of a year of 360 days.
The interest rate charged on each such obligation shall change on
the same day as Xxxxxx's Prime Rate may change from time to time.
Interest on the outstanding Advances shall be payable monthly, in
arrears, on the first day of each calendar month.
(d) Continuation of Interest Charges: Interest shall
continue to accrue on all outstanding Advances and be paid at the
Applicable Rate even after default, maturity, acceleration,
judgment, bankruptcy, insolvency proceedings of any kind, or the
happening of any other event or occurrence.
(e) Applicable Interest Limitations: In no
contingency or event whatsoever shall the aggregate of all
amounts deemed interest hereunder and charged or collected
pursuant to the terms of this Agreement exceed the highest rate
permissible under any law which a court of competent jurisdiction
shall, in a final determination, deem applicable hereto. In the
event that any court determines Lender has charged or received
interest hereunder in excess of the highest applicable rate, such
rate shall automatically be reduced to the maximum rate permitted
by such law and the amount of any excess previously received by
Lender determined to be refundable shall be offset and applied
against other Obligations due or to become due as Lender may
determine.
2.4 Loan Disbursements:
(a) Advances made by Lender under the Revolving Credit
shall be made available to Borrowers by crediting such proceeds
to the operating account(s) of Borrowers with Xxxxxx. Advances
will be made available to Borrowers on any Business Day after a
telephonic request by Borrowers to Lender (made before 11:00 A.M.
Philadelphia time) on such Business Day. Each such request shall
be confirmed by Borrowers in writing on the same day as the
Advance is requested (confirmation by facsimile transmission
being acceptable), which confirmation shall be accompanied by a
Borrowing Base Certificate. Lender may rely upon any and all
telephonic and written requests and confirmations purported to be
made by Borrowers through any of their Authorized Officers. All
Advances requested by Xxxxxxxxx shall be in a minimum amount of
Fifty Thousand Dollars ($50,000) and in equal increments of Ten
Thousand Dollars ($10,000) thereafter.
(b) Lender may, in its sole discretion, without any
obligation to do so, charge the operating account(s) of Borrowers
with Lender for the Obligations as they become due from time to
time under this Agreement including, without limitation,
interest, principal, fees and reimbursement of Expenses.
2.5 Fees:
(a) Borrowers have paid to Lender Thirty Thousand
($30,000) Dollars (the "Facility Fee") to which Lender is
entitled for increasing the amount available to Borrowers under
the Revolving Credit.
(b) So long as the Revolving Credit has not been
terminated pursuant to the terms hereof and the Obligations have
not been satisfied in full, Borrowers shall unconditionally pay
to Lender a fee ("Commitment Fee") equal to one-half of one
percent (0.5%) per annum of the average daily Available Credit,
which fee shall be computed on a monthly basis in arrears and
shall be due and payable on the first day of each month
commencing on the first day of the first full month after Closing
and on the Maturity Date.
(c) Within thirty (30) days of the date hereof, RUSA
shall issue to APT Holdings Corporation ("APT") 40,000 shares of
its common stock (post 3 for 1 reverse split and public offering)
or the applicable number of shares of RUSA's 1997 Series B
Convertible Preferred Stock calculated utilizing the conversion
ratio specified in the terms of such Preferred Stock.
2.6 Payments: Except to the extent otherwise set forth in
this Agreement, or as may be otherwise designated by Lender in
writing, all payments of principal and of interest on Advances
under the Revolving Credit, the Facility Fee, the Commitment Fee,
all other charges and any other Obligations of Borrower
hereunder, shall be made to Lender at Mellon Independence Center,
000 Xxxxxx Xxxxxx, 0X Xxxxx, Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000,
Attn: Loan Administration, in United States dollars, in
immediately available funds. All payments shall be applied in
the manner designated by Borrower if not so designated or if an
Event of Default is outstanding, may be applied by Lender against
the Obligations in such order as Lender may determine in its
discretion.
2.7 Use of Proceeds: The proceeds of Advances shall be
used to refinance Borrowers' existing borrowed indebtedness, for
the redemption of the 1996 Series A Preferred Stock issued by
RUSA, and the balance shall be used for acquisitions and for the
working capital needs of Borrowers.
2.8 Capital Adequacy: If any present or future law,
governmental rule, regulation, policy, guideline, directive or
similar requirement (whether or not having the force of law)
imposes, modifies, or deems applicable any capital adequacy,
capital maintenance or similar requirement which affects the
manner in which Lender allocates capital resources to its
commitments (including any commitments hereunder), and as a
result thereof, in the opinion of Lender, the rate of return on
Lender's capital with regard to the Advances is reduced to a
level below that which Xxxxxx could have achieved but for such
circumstances, then in such case and upon notice from Lender to
Borrowers, from time to time, Borrowers shall pay Lender such
additional amount or amounts as shall compensate Lender for such
reduction in Lender's rate of return. Such notice shall contain
the statement of Lender with regard to any such amount or amounts
which shall, in the absence of manifest error, be binding upon
Borrowers. In determining such amount, Lender may use any method
of averaging and attribution that it deems applicable, in its
sole discretion.
2.9 Mandatory Repayment: Upon the death of Xxxxxxx X.
Xxxxxx (i) the proceeds of the Key Man Policies shall be applied
to repay outstanding Advances as follows: if at such time an
Event of Default or Potential Default has occurred and is
continuing, all of the proceeds of such Policies shall be so
applied; otherwise $1,500,000 of the proceeds shall be so applied
and (ii) the Maximum Credit Amount shall automatically be reduced
by an amount equal to the amount required to be repaid.
SECTION 3. COLLATERAL
3.1 Description: As security for the full and timely
payment of the Obligations, and satisfaction by the Borrowers of
all covenants and undertakings contained in this Agreement and
the other Loan Documents, Borrowers each hereby respectively
assign and grant to Lender a continuing lien on and security
interest in, upon and to the following Property (the "Collater
al"):
(a) Accounts, Contract Rights, Etc. - All of such
Borrowers' respective now owned and hereafter acquired, created
or arising Accounts, accounts receivable, notes receivable,
contract rights, chattel paper, documents (including documents of
title), instruments and letters of credit;
(b) Inventory - All of such Xxxxxxxx's respective now
owned or hereafter acquired Inventory of every nature and kind,
wherever located;
(c) General Intangibles - All of such Xxxxxxxx's now
owned and hereafter acquired, created or arising general
intangibles of every kind and description, including, without
limitation, all existing and future customer lists, choses in
action, claims, books, records, patents and patent applications,
copyrights, trademarks, tradenames, tradestyles, trademark
applications, blueprints, drawings, designs and plans, trade
secrets, contracts, licenses, license agreements, distribution
agreements, formulae, tax and any other types of refunds,
returned and unearned insurance premiums, rights and claims under
insurance policies including, without limitation, credit, life
and casualty insurance policies, and computer information,
software, records and data;
(d) Equipment - All of such Borrower's now owned and
hereafter acquired equipment, including, without limitation,
machinery, vehicles, furniture and fixtures, wherever located,
and all replacements, parts, accessions, substitutions and
additions thereto;
(e) Deposit Accounts - All of such Xxxxxxxx's now
existing and hereafter acquired or arising deposit accounts of
every nature, wherever located, and all documents and records
associated therewith;
(f) Property in Lender's Possession - All Property of
each Borrower now or hereafter in Xxxxxx's possession;
(g) Life Insurance - The Key Man Policies;
(h) Pledged Stock - The Pledged Stock, the Healthlink
Interest and all of each Borrower's other Investment Property;
and
(i) Proceeds - The proceeds (including, without
limitation, insurance proceeds), whether cash or non-cash, of all
of the foregoing.
3.2 Lien Documents: At Closing and thereafter as Lender
reasonably deems necessary, Borrowers shall execute and deliver
to Lender, or have executed and delivered (all in form and
substance satisfactory to Lender):
(a) Financing Statements - Financing statements
covering the Collateral pursuant to the UCC (the "Financing
Statements"), which Lender may file from time to time in any
jurisdiction where any Collateral is or may be located and in any
other jurisdiction that Lender deems appropriate; and
(b) Other Agreements - Any other agreements,
documents, assignments, instruments and writings required to
evidence, perfect or protect Xxxxxx's lien and security interest
in the Collateral required hereunder or as Lender may reasonably
request from time to time.
3.3 Other Actions: In addition to the foregoing, Borrowers
shall do anything further that may be lawfully and reasonably
required by Lender to secure Lender and effectuate the intentions
and objects of this Agreement, including, but not limited to,
obtaining the written consent of BKR, Inc. and Healthlink, Ltd.
to the pledge by RUSA of the Healthlink Interest, the execution
and delivery of continuation statements, amendments to financing
statements, security agreements, contracts and any other
documents required hereunder. At Lender's request, Borrowers
shall also immediately deliver to Lender all items for which
Xxxxxx must receive possession to obtain a perfected security
interest, including, without limitation, all notes, letters of
credit, certificates and documents of title, chattel paper
(including, but not limited to, all Rental Agreements), warehouse
receipts, instruments, and any other similar instruments
constituting Collateral.
3.4 Collateral Pledge: On the Closing Date, as further
security for payment of the Obligations and satisfaction by
Borrowers of all covenants and undertakings contained in this
Agreement and the other Loan Documents, Lender shall receive a
collateral pledge from RUSA of all of the capital stock of each
of the other Borrowers, to the extent not currently pledged to
Lender.
3.5 Searches:
(a) Lender shall, prior to or at Closing, and
thereafter as Lender may determine from time to time, all at
Borrowers' expense, obtain, or Borrowers shall obtain at Lender's
request, the following searches against each Borrower, under
their current and former names and the names of each Person from
whom any Borrower acquired assets outside of the ordinary course
of business within the past five years (the results of which are
to be consistent with the warranties and representations made by
Borrowers in this Agreement):
(i) UCC searches with the Secretary of
State/Commonwealth and local filing office of each state where
each Borrower maintains or has maintained its respective
executive office, a place of business, or assets and where any
Person acquired by a Borrower maintains or has maintained its
respective executive office, a place of business, or assets;
(ii) Judgment, federal tax lien and corporate tax
lien searches, in all applicable filing offices of each
state/commonwealth searched under subparagraph (a)(i) above.
(b) Borrowers shall, prior to or at Closing and at its
expense, obtain and deliver to Lender good standing certificates
showing each Borrower to be in good standing in its
state/commonwealth of incorporation and in each other state or
foreign country in which it is doing and presently intends to do
business for which qualification is required.
3.6 Landlord's and Xxxxxxxxx's Waivers: To the extent not
previously delivered to Lender, Borrowers will cause each owner
of any premises occupied by any Borrower or to be occupied by any
Borrower and each mortgagee of any premises owned or occupied by
any Borrower to execute and deliver to Lender an instrument, in
form and substance satisfactory to Lender, under which such
owner(s) or mortgagee(s) respectively, subordinates its/his/their
interests in and waives its/his/their right to distrain on or
foreclose against the Collateral and agrees to allow Lender to
remain on such premises to dispose of or deal with any Collateral
located thereon.
3.7 Filing Security Agreement: A carbon, photographic or
other reproduction or other copy of this Agreement or of a
financing statement is sufficient as and may be filed in lieu of
a financing statement.
3.8 Power of Attorney: Each of the officers of Xxxxxx is
hereby irrevocably made, constituted and appointed the true and
lawful attorney for each Borrower (without requiring any of them
to act as such and without liability of any kind for so acting)
with full power of substitution to do the following: (1) execute
in the name of such Borrower any financing statements,
amendments, schedules, assignments, instruments, documents and
statements that such Borrower is obligated to give Lender
hereunder or which are necessary or desirable to perfect Lender's
security interest or lien in the Collateral; (2) endorse the name
of such Borrower upon any and all checks, drafts, money orders
and other instruments for the payment of monies that are payable
to such Borrower and constitute collections on Accounts or other
Collateral; and (3) following the occurrence and during the
continuance of an Event of Default, do such other and further
acts and deeds in the name of such Borrower that Lender may deem
necessary or desirable to enforce or collect any Account or other
Collateral.
SECTION 4. CLOSING AND CONDITIONS PRECEDENT TO ADVANCES
Closing is subject to the following conditions precedent
(all documents to be in form and substance satisfactory to Lender
and Xxxxxx's counsel):
4.1 Resolutions, Opinions, and Other Documents: Borrowers
shall have delivered to Lender the following:
(a) this Agreement and the Revolving Credit Note
properly executed by Xxxxxxxxx;
(b) each Loan Document required to be executed by any
Borrower or by any other Person under any provision of this
Agreement or any related agreement;
(c) certified copies of (i) resolutions of each
Borrower's board of directors authorizing the execution and
performance of this Agreement, the Revolving Credit Note to be
issued hereunder and each other Loan Document to be delivered
from time to time in conjunction with this Agreement and (ii)
each Borrower's Articles and Certificate of Incorporation and
By-laws;
(d) an incumbency certificate for each Borrower
identifying all Authorized Officers, with specimen signatures;
(e) good standing certificates for each Borrower;
(f) a written opinion from and executed by independent
counsel for Xxxxxxxxx addressed to Xxxxxx;
(g) such financial statements, reports, certifications
and other operational information concerning Borrowers,
including, without limitation, Borrowers' June 30, 1997
consolidated audited financial statements and unqualified opinion
(without explanatory paragraphs) of its independent certified
public accountants and any other information required to be
delivered hereunder;
(h) certificate of each Borrower's chief executive
officer stating that there has not occurred as of the Closing any
material adverse change in the business, operations, condition
(financial or otherwise) or prospects of such Borrower since June
30, 1997 or December 31, 1997;
(i) payment by Borrowers of all fees and expenses
including, without limitation, the Facility Fee to be paid to
Lender as of the Closing and all Expenses associated with this
Agreement incurred to the Closing Date;
(j) all documents and agreements required with respect
to the Collateral, including without limitation, landlord's and
mortgagees' waivers properly executed and Financing Statements
properly executed by Xxxxxxxxx;
(k) evidence that acceptable liability, property,
casualty and business interruption insurance is in place for each
Borrower and that Lender is named as lender's loss payee and
additional insured with respect thereto;
(l) a written consent from BKR, Inc. and Healthlink,
Ltd. to the pledge by RUSA of the Healthlink Interest;
(m) all Rental Agreements and Monitoring Agreements in
effect;
(n) a stock pledge agreement from RUSA pledging 100%
of the capital stock of Reliable-Hawk, Inc. to Lender and
delivery to Lender of the original stock certificates pledged
thereby along with undated stock powers endorsed in blank;
(o) either (i) an amendment to the Registration
Agreement amending the definition of "Registrable Securities"
contained therein to include (A) all shares of common stock
issued upon conversion of RUSA's 1997 Series B Preferred Stock
and (B) all shares of common stock issued by RUSA to Holdings in
connection with this Agreement, or any prior agreements among
Borrowers and Lender, as the same have been or may hereafter be
amended, restated, modified or supplemented from time to time or
in connection with any waivers of any of the provisions thereof
or (ii) proof satisfactory to Lender of the effectiveness of the
registration statement on Form S-3 filed by RUSA with the SEC on
August 20, 1997 registering the shares of RUSA common stock
described in clauses (A) and (B) above; and
(p) such other documents, instruments and agreements
which Lender reasonably requests and which must be satisfactory
to Lender.
4.2 Absence of Certain Events: At the Closing Date, no
Potential Default or Event of Default hereunder shall have
occurred and be continuing, nor shall there have occurred, since
June 30, 1997 or December 31, 1997, any material adverse change
in the assets, operations, condition (financial or otherwise),
products or prospects of any Borrower.
4.3 Warranties and Representations at Closing: The
warranties and representations of Borrowers contained in Section
5 as well as any other section of this Agreement or any other
Loan Document shall be true and correct on the Closing Date with
the same effect as though made on and as of that date. No
Borrower shall have taken any action or permitted any condition
to exist which would have been prohibited in this Agreement or
any other Loan Document.
4.4 Compliance with this Agreement: Borrowers shall have
performed and complied with all agreements, covenants and
conditions contained herein or in any other Loan Document which
are required to be performed or complied with by them before or
at the Closing Date, including, without limitation, the
provisions of Sections 4 and 6 hereof.
4.5 Chief Executive Officer's Certificate: Each Borrower
shall provide Lender with an officer's certificate signed by its
chief executive officer certifying that all conditions to Closing
contained in this Agreement have been fulfilled.
4.6 Verifications: Lender shall have received
verifications of Borrowers' Monitoring Agreements and other
Operating Contracts satisfactory to it.
4.7 Additional Equity: RUSA shall have received Net
Proceeds from the Secondary Offering of not less than $7,000,000
without taking into account any proceeds of any over-allotment
shares.
4.8 Closing: Subject to the conditions of this section,
the initial additional Advances under this Agreement shall be
made available on such date (the "Closing Date") and at such time
as may be mutually agreeable to the parties contemporaneously
with the execution hereof (the "Closing") at such place as may be
requested by Xxxxxx.
4.9 Effectiveness of Increase in Maximum Revolving Credit
Amount: Notwithstanding anything herein to the contrary, the
Maximum Revolving Credit Amount available to Borrowers shall be
limited to $15,500,000 and shall not increase to $18,000,000
until, in addition to satisfaction of each of the other
conditions to closing, satisfaction of the following additional
conditions precedent (all documents to be in form and substance
satisfactory to Xxxxxx and Xxxxxx's counsel):
(a) consummation of the Acquisition on terms and
conditions satisfactory to Lender, and delivery of proof of such
consummation;
(b) the execution by RUSA and delivery to Lender of
the Jupiter Pledge Agreement along with the delivery to Lender of
the original stock certificates so pledged and undated stock
powers duly endorsed in blank; and
(c) joinder of Jupiter as a Borrower under this
Agreement and the other Loan Documents and the execution by
Jupiter and delivery to Lender of all documents, instruments and
agreements required by Lender in connection with such joinder
including, without limitation, amendments to the Loan Documents
and an allonge to the Revolving Credit Note.
4.10 Non-Waiver of Rights: By completing the Closing
hereunder, or by making Advances hereunder, Xxxxxx does not
thereby waive a breach of any warranty or representation made by
any Borrower hereunder or a breach under any agreement, document,
or instrument delivered to Lender or otherwise referred to
herein, and all of Xxxxxx's claims and rights resulting from any
breach or misrepresentation by any Borrower are specifically
reserved by Xxxxxx.
4.11 Future Advances: Xxxxxx shall have no obligation of
any kind to make any Advance after the Closing Date if a
Potential Default or an Event of Default is outstanding. If
Lender at any time or from time to time elects (in its sole and
absolute discretion) to make an Advance notwithstanding the
existence of a Potential Default or Event of Default, the making
of such Advance shall not constitute or create (a) any waiver of
such a Potential Default or Event of Default or (b) any duty or
obligation to make Advances thereafter.
4.12 Warranties and Representations upon Future Advances:
Each request by Borrowers for an Advance under the Revolving
Credit in any form following the Closing Date shall constitute an
automatic representation and warranty by Borrowers to Lender to
the effect that:
(a) No Event of Default or Potential Default then
exists;
(b) Each Advance is within and fully complies with the
terms and conditions of this Agreement (including, but not
limited to, the conditions for Advances); and
(c) Each representation and warranty set forth in
Section 5 of this Agreement is then true and correct in all
material respects, as though made on the funding date for such
Advance, except for such changes as are expressly permitted by a
covenant contained herein.
SECTION 5. REPRESENTATIONS AND WARRANTIES
Each Borrower jointly and severally warrants and represents to
Lender that:
5.1 Corporate Organization and Validity:
(a) Each Borrower is a corporation duly organized and
validly existing under the laws of the state identified as the
state of incorporation in Section 1 above and is duly qualified,
is in good standing and has lawful power and authority to engage
in business in each state where the nature and extent of its
business requires qualification except where the absence of good
standing would not have a Material Adverse Effect. A list of all
states and other jurisdictions where each Borrower is qualified
to do business is attached hereto as Schedule "5.1" and made a
part hereof.
(b) The making and performance of this Agreement and
each Loan Document will not breach or violate any law, statute,
government rule or regulation, any judgment, order, decree, writ,
injunction or award, or the charter, minutes or bylaws of each
Borrower or violate or result in a default (immediately or with
the passage of time or notice or both) under any contract,
indenture, agreement or instrument to which any Borrower is a
party, or by which any Borrower is bound. No Borrower is in
violation of any term of any material agreement or instrument to
which it is a party or by which it may be bound or of any
provision of its charter, minutes or bylaws.
(c) Each Borrower has all requisite corporate power
and authority to enter into and perform this Agreement and each
Loan Document to which it is a party and to incur the obligations
herein provided for, and has taken all proper and necessary
corporate action to authorize the execution, delivery and
performance of this Agreement, the Revolving Credit Note and the
other Loan Documents.
(d) This Agreement, the Revolving Credit Note, and all
other Loan Documents, when delivered, will be valid and binding
upon the respective Person(s) who are parties thereto and
enforceable in accordance with their respective terms.
5.2 Insurance: Schedule "5.2" sets forth all policies of
property, casualty, liability, business interruption and other
insurance maintained by Borrowers. All such policies are in full
force and effect and the amounts of coverage, deductibles, risks
insured against and other terms and provisions are customary in
Borrowers' industry and are adequate for Borrowers' business and
assets.
5.3 Litigation: Except as set forth on Schedule "5.3"
thereto, (i) there are no judgments or judicial, administrative,
regulatory or arbitration orders, decrees, rulings, or awards
outstanding, or (ii) proceedings or litigation pending or, to the
knowledge of any Borrower, threatened against or affecting any
Borrower in any court or before any governmental authority or
arbitration board or tribunal seeking either equitable relief or
damages of $25,000 or more. No Borrower is in default with
respect to any order, decree, ruling or award of any court,
governmental authority, regulatory agency or arbitration board or
tribunal. All lawsuits against any Borrower commenced during the
past five years and seeking damages of $50,000 or more are set
forth on Schedule "5.3" hereto.
5.4 Title to Properties: Each Borrower has exclusive title
to all of its Property in fee simple (or its equivalent under
applicable law) free from Liens and free from the claims of any
other Person, except for (i) those existing Liens set forth on
Schedule "5.4" attached hereto and made part hereof, (ii)
mechanics', carriers', workmen's, repairmen's or other like Liens
arising or incurred in the ordinary course of such Borrower's
business; and (iii) Liens, if any, for taxes, assessments and
other governmental charges which are not due and payable, but may
nevertheless exist by operation of law. No Borrower owns any
real property except as set forth on Schedule "5.4(b)" hereto.
5.5 Patents and Trademarks: Each Borrower owns or has the
exclusive unconditional right to use all the patents, patent
applications, trademarks, trademark applications, service marks,
trade names, and copyrights, that are material for the present
and planned future conduct of its business, without any known
conflict with the rights of others. A list of all such patents,
patent applications, trademarks, trademark applications,
licenses, and copyrights owned or otherwise used by any Borrower
(indicating the nature of such Borrower's interest) is attached
hereto as Schedule "5.5", and made a part hereof. No Borrower is
in default of any obligation or undertaking with respect to such
Property or rights. Except as set forth on Schedule "5.5"
hereto, no Borrower licenses or sublicenses any such rights or
property interests to any other Person.
5.6 Governmental Consent: Neither the nature of any
Borrower or of its business or Property, nor any relationship
between any Borrower and any other Person, nor any circumstance
affecting any Borrower in connection with the execution or
delivery of any Loan Document is such as to require a consent,
approval or authorization of, or filing (other than filing of
UCC-1 financing statements), registration or qualification with,
any governmental authority on the part of any Borrower in conjunc
tion with the execution, delivery and performance of this Agree
ment or the issuance or delivery of the Revolving Credit Note, or
other Loan Documents.
5.7 Taxes: All tax returns required to be filed by each
Borrower in any jurisdiction have in fact been filed, and all
taxes, assessments, fees and other governmental charges upon each
Borrower or upon any of its Property, income or franchises, which
are due and payable have been paid, except for those taxes being
contested in good faith with due diligence by appropriate proceed
ings for which appropriate reserves have been maintained under
GAAP. No Borrower is aware of any proposed additional tax assess
ment or tax to be assessed against or applicable to any Borrower.
5.8 Financial Statements: The Fiscal Year of each Borrower
ends on June 30 of each year. Borrowers' audited consolidated
and consolidating Financial Statements as at and for the year
ended June 30, 1997 fairly present the financial condition and
results of operations of Borrowers (and each of them) as of the
date(s) and for the period(s) set forth therein, and have been
prepared in accordance with GAAP. Xxxxxxxx's unaudited
consolidated and consolidating financial statements as at and for
the six months ended December 31, 1997 fairly present the
financial condition and results of operations of Borrowers (and
each of them) as of the date(s) and for the period(s) set froth
therein, and have been prepared in accordance with GAAP
consistently applied. There has been no material adverse change
in the financial condition or results of operations of Borrowers
(as set forth in the consolidating and consolidated audited year-
end Financial Statements) since either December 31, 1997 or June
30, 1997.
5.9 Full Disclosure: Neither the financial statements
referred to in Section 5.8, nor this Agreement or related
agreements and documents or any written statement furnished to
Lender in connection with the negotiation of the Revolving Credit
and contained in any financial statements or documents relating
to the Collateral contain any untrue statement of a material fact
or omit a material fact necessary to make the statements con
tained therein or herein not misleading. There is no fact
presently known to any officer of any Borrower which has not been
disclosed to Lender in writing, which is reasonably likely to
cause a Material Adverse Effect.
5.10 Subsidiaries and Affiliates: Except as set forth on
Schedule "5.10", RUSA has no direct or indirect Subsidiaries or
Affiliates other than the other Borrowers. The Subsidiaries
listed on Schedule 5.10 own no Property or assets of any nature
and shall be dissolved as promptly as practicable.
5.11 Guarantees, Contracts, etc:
(a) No Borrower owns or holds any equity or long term
debt investments in, has any outstanding advances to, has any
outstanding guarantees for the obligations of, or has any
outstanding borrowings from, any Person, except as described in
Schedule "5.11(a)" attached hereto and made part hereof.
(b) No Borrower is a party to any contract with any
vendor or customer for the purchase, sale or license of inventory
or the performance of services with respect to any Borrower's
business operations, except as described on Schedule "5.11(b)"
attached hereto and made part hereof. Each such contract or
agreement is in full force and effect, no notice of termination
has been given with respect thereto, and Borrower is not in
default thereof.
(c) No Borrower is a party to any contract or agree
ment, or subject to any charter or other corporate restriction,
which is reasonably likely to cause a Material Adverse Effect.
(d) Except as otherwise specifically provided in this
Agreement, no Borrower has agreed or consented to cause or permit
any of its Property, whether now owned or hereafter acquired, to
be subject in the future (upon the happening of a contingency or
otherwise) to a Lien not permitted by this Agreement.
(e) No Borrower is a party to any contract with any
consultant or other advisor for the receipt of consulting or
similar services with respect to such Borrower's business
operations, except as described in Schedule "5.11(e)" attached
hereto and made a part hereof.
(f) Monitoring Agreements are separate agreements from
Rental Agreements; no Monitoring Agreement is also a Rental
Agreement.
(g) No Borrower is a party to any lease for any
real or personal property except as set forth in Schedule
"5.11(g)" hereto. True and correct copies of all leases listed
on Schedule "5.11(g)" have been delivered to Lender and all such
leases remain in full force and effect and no party is in breach
or violation thereof.
5.12 Government Regulations and Compliance:
(a) The use of the proceeds of the Advances and each
Borrower's issuance of the Revolving Credit Note will not
directly or indirectly violate or result in a violation of the
Securities Act of 1933 or the Securities Exchange Act of 1934, as
amended, or any regulations issued pursuant thereto, including,
without limitation, Regulations U, T, G and X of the Board of
Governors of the Federal Reserve System, 12 C.F.R., Chapter II.
No Borrower owns or intends to carry or purchase any "margin
security" within the meaning of said Regulations.
(b) (i) Each Employee Benefit Plan, as defined in
Section 3(3) of ERISA, (other than a multi-employer plan
described in Section 3(37) of ERISA) maintained by any Borrower
or in which any Borrower is a participating employer has been
maintained in all material respects in accordance with its terms
and with applicable law, and (ii) each such Employee Benefit Plan
which is intended to be tax-qualified currently satisfies, and
for all years subsequent to the establishment of such Plan and
with respect to which any Borrower's income tax returns are open
to audit, has satisfied, the requirements of Section 401(a) or
403 of the Code, except that if any such requirement has not been
satisfied, the failure to satisfy such requirements has not had,
and in the future will not have, a Material Adverse Effect
(assuming the continued conduct of the any Borrower's business is
substantially consistent with past practice), (iii) no such
Employee Benefit Plan has engaged in or been involved in a
Prohibited Transaction (as defined in ERISA) under ERISA or the
Internal Revenue Code, and (iv) no such Employee Benefit Plan has
been terminated, which termination is reasonably likely to have a
Material Adverse Effect. No Borrower nor any member of a
Controlled Group (as defined in ERISA) has received notice of a
claim asserted against any Borrower or other members of the
Controlled Group for withdrawal liability (as defined in the
Multiemployer Pension Plan Amendments Act of 1980, as amended)
with respect to any multiemployer pension plan. All Borrowers
have timely made all contributions when due with respect to any
multiemployer pension plan in which any of them participate and,
no event has occurred triggering a claim against any Borrower or
any member of a Controlled Group including any Borrower for
withdrawal liability with respect to any multi-employer pension
plan. All Employee Benefit Plans and multi-employer plans
maintained by any Borrower are listed on Schedule "5.12" attached
hereto and made a part hereof.
(c) No Borrower is in violation of any applicable
statute, regulation or ordinance of the United States of America,
or of any state, city, town, municipality, county or of any other
jurisdiction, or of any agency thereof, (including without
limitation, environmental laws and regulations and regulations of
any Public Utility Commission) which violation by itself or in
the aggregate with any other such violations would have a
Material Adverse Effect on the Borrowers, and each Borrower
possesses all licenses, permits and governmental and quasi-
governmental approvals needed to operate its business, except
where the failure to do so would not, individually or in
aggregate, have a Material Adverse Effect on the Borrowers.
(d) Each Borrower is current with all reports and
documents required to be filed with any state or federal secu
rities commission or similar agency and is in full compliance in
all material respects with all applicable rules and regulations
of such commissions.
5.13 Business Interruptions: Within two (2) years prior to
the Closing Date, neither the business, Property nor operations
of any Borrower have been materially and adversely affected in
any way by any casualty, strike, lockout, combination of workers,
order of the United States of America, or any state or local
government, or any political subdivision or agency thereof,
directed against such Person. There are no pending or threatened
labor disputes, strikes, lockouts or similar occurrences or
grievances against the business being operated by any Borrower.
5.14 Names and Addresses: During the five (5) years prior
to the Closing Date, no Borrower has (i) except as set forth on
Schedule "5.14", conducted business under or used any other names
(whether corporate or assumed) except for its present corporate
name or, (ii) acquired any assets outside of the ordinary course
of business or (iii) conducted business at any addresses except
for the addresses listed in Schedule "5.14". Each Borrower is
the sole owner of its name and any and all business done and all
invoices using such Borrower's name or any names listed in
Schedule "5.14" represent sales and business of such Borrower and
are owned solely by such Borrower.
5.15 Other Associations: Except as shown on Schedule "5.15"
hereto, no Borrower is engaged in any joint venture or
partnership with any other Person.
5.16 Environmental Matters: Except as shown on Schedule
"5.16" attached hereto and made a part hereof, no Borrower has
knowledge:
(a) of the presence of any Hazardous Substances or
underground storage tanks on any of the real property on which
the Collateral is located, or
(b) of any on-site spills, releases, discharges,
disposal or storage of Hazardous Substances that have occurred or
are presently occurring on any of such real property, or
(c) of any spills, releases, discharges or disposal of
Hazardous Substances that have occurred, are presently occurring,
on or at any other real property as a result of the activities,
conduct, action or inaction of any Borrower, or
(d) of any notice, summons, citation or other
communication sent to any Borrower from any state or federal
agency concerning any intentional or unintentional action or
conduct, inaction or omission, past or present which is or may be
in violation of any state or federal environmental law, rule or
regulation.
As used herein, the term "Hazardous Substances" means any
substances defined or designated as hazardous or toxic waste,
hazardous or toxic material, hazardous or toxic substance or
similar term, by any environmental statute, rule or regulation of
any governmental entity presently in effect and applicable to
such real property.
5.17 Regulation O: No director, executive officer or
principal shareholder of any Borrower is a director, executive
officer or principal shareholder of Lender. For the purposes
hereof the terms "director" (when used with reference to Xxxxxx),
"executive officer" and "principal shareholder" have the
respective meanings assigned thereto in Regulation O issued by
the Board of Governors of the Federal Reserve System.
5.18 Capital Stock: The authorized and outstanding capital
stock of each Borrower is as set forth on Schedule "5.18"
attached hereto and made part hereof. All of the capital stock
of each Borrower has been duly and validly authorized and issued
and is fully paid and non-assessable and has been sold and
delivered to the holders thereof in compliance with, or under
valid exemption from, all federal and state laws and the rules
and regulations of all regulatory bodies thereof governing the
sale and delivery of securities. Except as provided in Schedule
"5.18", there are no subscriptions, warrants, options, calls,
commitments, rights or agreements by which any Borrower is bound
relating to the issuance, transfer, voting or redemption of
shares of any of their capital stock or any pre-emptive rights
held by any Person with respect to the pre-emptive rights held by
any party with respect to the shares of capital stock of any
Borrower. Except as provided in Schedule "5.18", no Borrower has
issued any securities convertible into or exchangeable for shares
of its capital stock or any options, warrants or other rights to
acquire such shares or securities convertible into or
exchangeable for such shares.
5.19 Solvency: Each Borrower is able to pay its debts as
they become due, has sufficient capital to carry on its business
operations, and presently owns property having a fair salable
value which is greater than the amount required to pay all of
such Borrower's debts as they become due.
5.20 Monthly MRR: Each Operating Contract entered into
before, from and after the date hereof, will be valid and
enforceable in accordance with its terms and will arise from the
performance in the ordinary course of business of services by a
Borrower. Additionally, all Operating Contracts between a
Borrower and its customers are and shall be set forth in a
written contract, which contract shall be in a form consistent
with standard industry practice and such Borrower's standard
forms.
5.21 Qualified Accounts: Except as set forth in Schedule
"5.21", all Accounts are Qualified Accounts.
SECTION 6. AFFIRMATIVE COVENANTS
Each Borrower covenants that until all of the Obligations to
Lender are paid and satisfied in full and the Revolving Credit
has been terminated:
6.1 Payment of Taxes and Claims: Each Borrower shall pay,
before they become delinquent,
(a) all taxes, assessments and governmental charges or
levies imposed upon Borrowers or upon the Collateral, including,
without limitation, excise taxes, and
(b) all claims or demands of materialmen, mechanics,
carriers, warehousemen, landlords and other like Persons entitled
to the benefit of statutory or common law Liens, which, if
unpaid, might result in the imposition of a Lien upon its
Property;
provided, however, that no Borrower shall be required to pay any
such tax, assessment, charge, levy or claim if the amount,
applicability or validity thereof shall at the time be contested
diligently and in good faith and by appropriate proceedings by
such Borrower, and if such Borrower shall have set aside on its
books adequate reserves in respect thereof, if so required in
accordance with GAAP; which deferment of payment is permissible
so long as such Borrower's title to, and its right to use, the
Collateral are not materially adversely affected thereby and
Lender's Lien and priority on the Collateral are not materially
and adversely affected, altered or impaired thereby.
6.2 Maintenance of Properties, Collateral and Corporate
Existence:
(a) Property - Each Borrower shall maintain its
Property in good condition and make all renewals, replacements,
additions, betterments and improvements thereto reasonably
required in the ordinary course of such Borrower's business, and
will pay and discharge when due the cost of repairs and
maintenance to its Property.
(b) Property Insurance - Each Borrower shall maintain
insurance on all insurable tangible Collateral against fire,
flood, casualty and such other hazards as may be acceptable to
Lender in such amounts, with such deductibles and with such
insurers as may be acceptable to Lender. The policies of all
such casualty insurance shall contain standard Lender's Loss
Payable clauses issued in favor of Lender under which all losses
thereunder shall be paid to Lender as Xxxxxx's interest may
appear. Such policies shall expressly provide that the requisite
insurance cannot be altered or canceled without thirty (30) days
prior written notice to Lender and shall insure Lender notwith
standing the act or neglect of the insured. At or prior to
Closing, Borrowers shall furnish Lender with duplicate original
policies of insurance or such other evidence of insurance as
Lender may require. In the event Borrowers fail to procure or
cause to be procured any such insurance or to timely pay or cause
to be paid the premium(s) on any such insurance, Lender may do so
for Borrowers but Borrowers shall continue to be liable for the
same. Each Borrower hereby appoints Lender as its attorney-in-
fact, exercisable at Lender's option, to endorse any check which
may be payable to such Borrower in order to collect the proceeds
of such insurance. Any and all amount or amounts received or
collected by Lender pursuant to the provisions of this paragraph
may be applied by Lender to any Obligations (in which case the
Maximum Credit Amount shall be reduced by the amount so applied)
or to repair, reconstruct or replace the loss of or damage to Col
lateral as Lender in its sole judgment may from time to time
determine.
(c) Public Liability and Business Interruption
Insurance - Each Borrower shall maintain, and shall deliver to
Lender upon Xxxxxx's request evidence of, public liability
insurance in such amounts as is customary for companies in the
same or similar businesses located in the same or similar area
including, without limitation, business interruption insurance.
(d) Financial Records - Each Borrower shall keep
current and accurate books of records and accounts in which full
and correct entries will be made of all of its business trans
actions, and will reflect in its financial statements adequate
accruals and appropriations to reserves, all in accordance with
GAAP.
(e) Corporate Existence and Rights - Each Borrower
shall do (or cause to be done) all things necessary to preserve
and keep in full force and effect its existence, good standing,
rights and franchises.
(f) Compliance with Law - Each Borrower shall comply
with all laws, ordinances, governmental rules and regulations to
which it is subject, and shall obtain and maintain any licenses,
permits, franchises or other governmental authorizations,
necessary to the ownership of its Property or to the conduct of
its business.
(g) Collection of Accounts - Each Borrower shall
continue to collect its Accounts in the ordinary course of its
business.
6.3 Places of Business: Borrowers shall give thirty (30)
days prior written notice to Lender of any change in the location
of any place of business of any Borrower, of the places where
records concerning its Accounts are kept, of the places where the
Collateral is kept, or of the establishment of any new, or the
discontinuance of any existing places of business.
6.4 Business Conducted: Each Borrower shall continue in
the business presently operated by it using its best efforts to
maintain its customers and goodwill. Based upon representations
made by Borrower to Lender to induce Lender to establish the
Revolving Credit for Borrower, no Borrower shall engage, directly
or indirectly, in any line of business substantially different
from the business conducted by it immediately prior to the
Closing Date, or engage in business or lines of business which
are not reasonably related thereto.
6.5 Litigation: Borrowers shall give prompt written notice
to Lender of any litigation pending, threatened or affecting any
Borrower which involves in any such case more than (i) $25,000 or
(ii) Recurring Monthly Revenue of $5,000 or more.
6.6 Certain Taxes: Borrowers shall pay all taxes (other
than taxes based upon or measured by Xxxxxx's income or revenues
or any personal property tax), if any, in connection with the
issuance of the Revolving Credit Note, and the recording of any
Lien documents. The obligations of Borrowers under this Section
6.6 shall survive the payment of the Obligations and the termi
nation of this Agreement.
6.7 Bank Accounts: As additional consideration for the
Loans and in order to more fully secure Borrowers' Obligations to
Lender, each Borrower shall maintain all of its principal
depository and disbursement account(s) with Lender except for
Borrowers' payroll account(s).
6.8 Employee Benefit Plans: Each Borrower will (a) fund
all its Employee Benefit Plans in a manner that will satisfy the
minimum funding standards of Section 302 of ERISA, or will
promptly satisfy any accumulated funding deficiency that arises
under Section 302 of ERISA, (b) furnish Lender, promptly after
the filing of the same, with copies of all reports or other
statements filed with the United States Department of Labor, the
Pension Benefit Guaranty Corporation ("PBGC") or the Internal
Revenue Service ("IRS") with respect to all Employee Benefit
Plans, or which any Borrower or any member of a Controlled Group,
may receive from the United States Department of Labor, the IRS
or the PBGC, with respect to all such Employee Benefit Plans, and
(c) promptly advise Lender of the occurrence of any Reportable
Event (as defined in Section 4043 of ERISA other than the type of
event with respect to which the PBGC has waived the 30-day notice
requirement of Section 4043 of ERISA) or Prohibited Transaction
(as defined by ERISA) with respect to any such Employee Benefit
Plan(s) and the action which such Borrower proposes to take with
respect thereto. Each Borrower will make all contributions when
due with respect to any multi-employer pension plan in which it
participates and will promptly advise Lender (i) upon its receipt
of notice of the assertion against such Borrower of a claim for
withdrawal liability, (ii) upon the occurrence of any event
which, to the best of such Borrower's knowledge, would trigger
the assertion of a claim for withdrawal liability against such
Borrower, and (iii) upon the occurrence of any event which, to
the best of such Xxxxxxxx's knowledge, would place such Borrower
in a Controlled Group (other than those Controlled Groups in
which any Borrower is a member as of the Closing Date) as a
result of which any member (including any other Borrower) thereof
is reasonably likely to be subject to a claim for withdrawal
liability, whether liquidated or contingent.
6.9 Submission of Collateral Documents: Borrowers shall
promptly notify Lender if an Account becomes evidenced or secured
by an instrument or chattel paper. Borrowers will promptly
deliver to Lender any instrument evidencing an Account and all
chattel paper including, but not limited to, all Rental
Agreements (and all amendments and extensions thereof).
6.10 Other Governmental Contracts: Following the occurrence
of an Event of Default and if requested by Xxxxxx, Borrowers will
execute any documents or agreements and take any steps required
by Lender so that all monies due and to become due under any
contract(s) with the United States or any department, agency or
instrumentality thereof are assigned to Lender and notice thereof
given to and acknowledged by the appropriate government agency or
authority under the Federal Assignment of Claims Act.
6.11 Financial Covenants: Borrowers shall maintain and
comply with the following financial covenants, all of which shall
be calculated on a consolidated basis:
(a) Ratio of Cash Flow to Interest Expense: Borrowers
shall have and maintain ratios of Cash Flow to Interest Expense
(excluding non-cash original issue discount interest expense) of
not less than the following ratios as of the last day of each
Fiscal Quarter for each of the following Fiscal Quarters then
ending:
Fiscal Quarter Ending Minimum Ratio
December 31, 1997 1.25 to 1.0
March 31, 1998 1.25 to 1.0
June 30, 1998 and thereafter 1.50 to 1.0
(b) Senior Funded Debt to Monthly Recurring Revenue:
Borrowers shall have and maintain ratios of Senior Funded Debt to
Monthly Recurring Revenue of not more than 20.0 to 1.00 as of the
last day of each Fiscal Quarter for the Fiscal Quarter then
ending.
(c) Ratio of Senior Funded Debt to Cash Flow:
Borrowers shall have and maintain ratios of Senior Funded Debt to
Cash Flow of not more than the following ratios as of the last
day of each Fiscal Quarter for the following Fiscal Quarters then
ending.
Fiscal Quarter Ending Maximum Ratio
December 31, 1997 7.28 to 1.0
March 31, 1998 7.28 to 1.0
June 30, 1998 5.25 to 1.0
September 30, 1998 and thereafter 5.00 to 1.0
(d) Net Income (Loss): Borrowers shall have Net
Income (Loss) of not worse than the following amounts during each
of the following Fiscal Quarters:
Fiscal Quarter Ending Net Income (Loss)
December 31, 1997 (1,230,000)
March 31, 1998 (1,230,000)
June 30, 1998 (1,230,000)
September 30, 1998 and thereafter (1,050,000)
6.12 Financial and Business Information: Borrowers shall
deliver to Lender the following:
(a) Financial Statements and Collateral Reports:
(i) detailed monthly accounts receivable and accounts payables
aging reports within thirty (30) days after the end of each
calendar month; (ii) internally prepared monthly Financial State
ments for Borrowers, accompanied by a Controller's Certificate,
within thirty (30) days after the end of each calendar month and
together with those monthly Financial Statements delivered as of
the end of each Fiscal Quarter, Borrowers shall deliver Financial
Statements reflecting Borrowers' results for the Fiscal Quarter
then ending; (iii) annual projections (budget) of profit and loss
statements, balance sheets and cash flow reports (prepared on a
monthly basis) for the current Fiscal Year within forty-five (45)
days after the start of each of Borrowers' Fiscal Years; (iv)
annual audited Financial Statements for each Fiscal Year,
accompanied by (1) the unqualified opinion (without explanatory
paragraphs) of Borrowers' independent certified public
accountants (which shall be a Big Four firm for all Fiscal Years)
selected by Borrowers and acceptable to Lender and (2) a
Controller's Certificate, within ninety (90) days after the end
of each of Borrower's Fiscal Years; (v) an annual management
letter and covenant compliance certificate prepared and executed
by Borrower's independent certified public accountants, within
ninety (90) days after the end of each of Borrower's Fiscal
Years; (vi) within thirty (30) days after the end of each month,
Borrowers shall submit to Lender (a) an aging of its MRR accounts
receivable and an MRR reconciliation report, and within thirty
(30) days after the end of each Fiscal Quarter, a detailed aging
of its MRR; (vii) copies of all reports sent to RUSA's
shareholders and copies of all reports and registration
statements filed under the Securities and Exchange Commission;
and (viii) such other data, reports, certificates and information
concerning Borrowers' financial or operating condition or status
as Lender may request from time to time. Annual Financial
Statements shall set forth in comparative form figures for the
corresponding periods in the prior Fiscal Year.
(b) Notice of Event of Default - Promptly upon
becoming aware of the existence of any condition or event which
constitutes a Potential Default or an Event of Default under this
Agreement, a written notice to Lender specifying the nature and
period of existence thereof and what actions Borrowers are taking
(and propose to take) with respect thereto;
(c) Accuracy of Projections - Each projection
delivered to Lender pursuant to paragraph 6.12(a)(iii) above will
be prepared in good faith and shall reflect each Borrower's
reasonable estimate based upon facts and conditions then known to
such Borrower. No fact known to any Borrower which will be
reasonably likely to cause any such projections to be inaccurate
or misleading will be withheld from Lender.
6.13 Officers' Certificates: Within thirty (30) days of the
end of each calendar quarter, each Borrower shall deliver to
Lender a certificate from such Borrower's chief financial
officer, in form and substance reasonably satisfactory to Lender,
setting forth:
(a) Covenant Compliance - the information (including
detailed calculations, including without limitation, calculations
showing Senior Funded Debt) required in order to establish
whether such Borrower is in compliance with the requirements of
Sections 6 and 7 as of the end of the period covered by the Xxxxx
cial Statements then being furnished and any exhibits appended to
such Financial Statements under Section 6.12; and
(b) Event of Default - That the signers have reviewed
the relevant terms of this Agreement, and have made (or caused to
be made under their supervision) a review of the transactions and
conditions of such Borrower from the beginning of the accounting
period covered by the Financial Statements being delivered there
with to the date of the certificate, and that such review has not
disclosed the existence during such period of any condition or
event which constitutes an Event of Default or which is then, or
with the passage of time or giving of notice, or both, would
become an Event of Default hereunder, and if any such condition
or event existed during such period or now exists, specifying the
nature and period of existence thereof and what action such
Borrower(s) have taken or proposes to take with respect thereto.
6.14 Inspection and Verification: So long as the Revolving
Credit has not been terminated and the Obligations paid in full,
each Borrower will permit any of Lender's officers, agents or
other representatives to visit and inspect, at any time
(provided, however, that Lender shall, prior to the occurrence of
an Event of Default, provide Borrower with prior reasonable
notice of such visits or inspections), any of the Collateral, to
examine all of such Borrower's books of account, records, reports
and other papers, to make copies and extracts therefrom and to
discuss its affairs, finances and accounts with its officers,
employees and independent public accountants. All reasonable
costs relating to any such visits and inspections shall be paid
by Borrowers.
6.15 Tax Returns and Reports: Borrowers shall promptly
furnish Lender with copies of the annual federal and state income
tax returns of Borrowers. Borrowers further agree that if
requested by Xxxxxx, they shall promptly furnish Lender with
copies of all reports filed by each Borrower with any federal,
state or local governmental authority or agency, board or
commission.
6.16 Information to Participant: Lender may divulge to any
participant or prospective participant it may obtain in the
Revolving Credit or any portion thereof, all information in its
possession concerning Borrowers, their Property and financial
condition, and furnish to such participant copies of reports,
financial statements, projections, certificates, and documents
obtained under any provision of this Agreement, or related
agreements and documents, as well as copies of the Loan
Documents.
6.17 Material Adverse Developments: Borrowers agree that
promptly upon becoming aware of any development or other
information outside the ordinary course of business (excluding
matters of a general economic, financial or political nature)
which would have a Material Adverse Effect, or of Lender's
failure to perform any of its obligations to Borrowers under this
Agreement it shall give to Lender telephonic or facsimile notice
specifying the nature of such development or information and such
anticipated effect. In addition, such verbal communication shall
be confirmed by written notice thereof to Lender on the same day
such verbal communication is made.
6.18 Lockbox Agreements: Each Borrower shall maintain
arrangements under which all of such Borrower's Accounts are paid
into a lockbox operated by Lender with collections transferred to
Borrowers' deposit account with Lender subject to such check
clearance procedures as Lender may establish. During the
continuance of an Event of Default, all lockbox collections may,
at Xxxxxx's discretion, be applied by Xxxxxx to the Obligations
as Lender may determine in accordance with applicable law.
6.19 Executive Management: At all times (i) Xxxxxxx X.
Xxxxxx ("Xxxxxx") shall be the Chairman, President and Chief
Executive Officer of RUSA, (ii) Xxxxxx X. Xxxxxxx ("Xxxxxxx")
shall be the Vice President of RUSA, and (iii) following the
consummation of the Acquisition, Xxxxxx Xxx shall be the
Executive Vice President of RUSA.
6.20 Interest Rate Cap Agreement: Borrowers shall, until
the second anniversary of the Closing, have in effect an interest
rate cap agreement with any financial institution reasonably
acceptable to Lender under which Borrowers eliminate their risk
with respect to $9,000,000 of the Revolving Credit from increases
in the Prime Rate above ten and one-half percent (10.5%) per
annum. Notwithstanding the foregoing, Borrowers shall have
thirty (30) days following the date of this Agreement to obtain
such interest rate cap protection with respect to the additional
$1,500,000 of protection being required hereby.
6.21 Notice of Certain Events: Give prompt written notice
to Lender of:
(a) any claim that, if decided adversely to a
Borrower, is reasonably likely to have a Material Adverse Effect,
or which is the subject of a proceeding between any Borrower and
any governmental regulatory body or law enforcement agency;
(b) any labor controversy resulting or likely to
result in a strike or work stoppage against any Borrower;
(c) any proposal made in writing to any Borrower or
any public action taken by any public authority to acquire the
assets or business of any Borrower by eminent domain and/or
condemnation;
(d) the location of any Collateral other than at a
Borrower's place of business disclosed in this Agreement other
than Collateral in transit in the ordinary course of a Borrower's
business;
(e) any actual change in (i) the name of any Borrower;
or (ii) corporate structure of any Borrower;
(f) any circumstance or event which becomes known to
any Borrower by virtue of which or in connection with which any
Borrower may have or may incur any liability, expense or
responsibility under any environmental law or regulation which is
reasonably likely to have a Material Adverse Effect;
(g) any information of which any Borrower has
knowledge received by any Borrower with respect to Accounts or
Recurring Monthly Revenue that is reasonably likely to materially
and adversely affect the aggregate value thereof or the rights
and remedies of Lender with respect thereto; and
(h) any Account ceasing to be a Qualified Account.
6.22 Board Nominee: At each election of members of RUSA's
Board of Directors, a person recommended by Xxxxxx and reasonably
acceptable to RUSA shall be nominated for election to RUSA's
Board of Directors.
6.23 Board Observation: Lender shall be entitled to send up
to two representatives to attend each meeting of (i) RUSA's Board
of Directors, (ii) RUSA's Executive Committee and (iii) RUSA's
shareholders. RUSA shall send written notice to Lender of all
such meetings in the same form and at the same time it sends
notice of such meetings to all other persons.
6.24 Additional Equity: RUSA shall not issue any shares of
capital stock other than (i) non-cumulative perpetual convertible
preferred stock, (ii) common stock or (iii) cumulative perpetual
convertible preferred stock provided the payment of dividends is
limited to payment by delivery of either shares of preferred
stock permitted hereby or common stock. RUSA shall at all times
maintain the ownership of one hundred percent (100%) of the
issued and outstanding capital stock of each other Borrower.
6.25 Monitoring Agreements: Within ten (10) days after the
end of each month, Borrowers will deliver to Lender (i) all
Monitoring Agreements entered into by Borrowers during such
month, and (ii) all extensions and amendments of existing
Monitoring Agreements executed during such month. Monitoring
Agreements will conform to the warranties and representations set
forth in this Agreement and to the following additional
warranties and representations:
(i) A Borrower's right to receive payment is
absolute and not contingent upon the fulfillment of any condition
whatsoever, except for (1) its continuing to provide services
under such contracts and (2) with respect to contracts arising in
the ordinary course of its Monitoring Business pursuant to which
customers prepay for services, such Borrower will render such
services in the future;
(ii) such Agreements do not arise from
transactions with an affiliate, parent, division or subsidiary of
RUSA or to a person controlled by an affiliate, subsidiary or
parent of RUSA;
(iii) such Agreements do not arise from the
exchange or barter of any goods or services;
(iv) such Agreements are not the obligation of a
customer located in a foreign country;
(v) such Agreements do not contain a prohibition
against assigning or granting a security interest therein;
(vi) such Agreements do not arise from a
transaction with a customer which is a creditor or an inventory
or trade supplier of any Borrower;
(vii) to the best knowledge of Borrowers, the
customers thereunder have not (1) made a general assignment for
the benefit of creditors or (2) filed or have had filed against
it any petition under any bankruptcy law or other law or laws for
the relief of debtors, or (3) suspended business; and
(viii) the customers thereunder have not denied or
contested their obligations to make payment or commenced
litigation against any Borrower.
SECTION 7. NEGATIVE COVENANTS
Each Borrower covenants that until all of the Obligations
are paid and satisfied in full and the Revolving Credit has been
terminated, that:
7.1 Sales, Merger, Consolidation, Dissolution or
Liquidation:
(a) No Borrower shall sell, lease, license, transfer
or otherwise dispose of any of its Property, other than (1)
inventory sold in the ordinary course of Borrower's business; and
(2) obsolete equipment sold or discarded in the ordinary course
of such Borrower's business the absence of which (or a
replacement item of similar value, quality or usefulness) would
not be reasonably likely to have a Material Adverse Effect.
(b) No Borrower shall merge or consolidate with any
other Person, or commence a dissolution or liquidation, other
than a merger of one or more Borrowers.
(c) No Borrower shall permit its name to be changed
without at least thirty (30) days prior written notice to Xxxxxx.
7.2 Acquisitions: Without Lender's express prior written
consent, no Borrower shall acquire all or a material portion of
the stock, securities or assets of any Person in any transaction
or in any series of related transactions (an "Acquisition")
unless (i) such Acquisition is of an existing Monitoring Business
and (ii) the purchase price payable by such Borrower for such
Acquisition exceeds neither $1,000,000 nor 31.5 times Monthly
Recurring Revenue of the Monitoring Business being acquired. No
Borrower shall enter into any sale and leaseback transaction.
7.3 Liens and Encumbrances: No Borrower shall cause or
permit or agree or consent to cause or permit in the future (upon
the happening of a contingency or otherwise), its Property
(including, without limitation, the Collateral), whether now
owned or hereafter acquired, to be subject to a Lien except for
the following ("Permitted Liens"):
(a) Liens securing taxes, assessments or governmental
charges or levies or the claims or demands of materialmen,
mechanics, carriers, warehousemen, landlords, and other like
persons, provided the payment thereof is not at the time required
by Section 6.1;
(b) Liens incurred or deposits made in the ordinary
course of business in connection with workers' compensation,
unemployment insurance, social security and other like laws and
in connection with leases or trade contracts;
(c) Existing and other Liens described in Section 5.4
and set forth on Exhibit "5.4" hereto which are not required to
be terminated on the date hereof; and
(d) Purchase Money Liens securing purchase money
indebtedness not exceeding, in the aggregate as to all Borrowers,
$100,000.00 in any rolling twelve month period (on a
non-cumulative basis) which amount shall include the principal
amount of all Capital Leases.
7.4 Transactions With Affiliates or Subsidiaries:
(a) No Borrower shall enter into any transaction
involving the purchase, sale, contribution or exchange of
Property, or the loaning or giving of funds to or with any
Subsidiary, any Affiliate, other than sales or acquisitions of
inventory and payments therefor in the ordinary course of such
Xxxxxxxx's business;
(b) No Borrower shall create or acquire any Subsidiary
without Lender's express prior written consent.
7.5 Indebtedness or Guarantees: Excepting (i) the
endorsement in the ordinary course of business of negotiable
instruments for deposit or collection, (ii) the Obligations,
(iii) Indebtedness under Purchase Money Liens permitted under
Section 7.3(d), (iv) Subordinated Indebtedness, (v) trade
payables and other accrued liabilities incurred in the ordinary
course of business,(vi) Indebtedness listed on Schedule "7.5"
hereto and (vii) $200,000 of Capitalized Lease Obligations
related to the Bethesda Memorial Hospital PERS program, no
Borrower shall at any time be liable for any Indebtedness or
subject to any liability, direct or indirect, primary or
secondary, matured or contingent, in any manner, whether as
borrower, obligor, principal, guarantor, surety, accommodation
maker, or otherwise, for existing or future indebtedness of any
kind, its own or of any other Person.
7.6 Distributions, Redemptions and Other Indebtedness:
No Borrower shall: (1) declare or pay or make any
forms of Distribution to its shareholders other than stock
dividends on the Preferred Stock and the redemption of the 1996
Series A Preferred Stock; (2) make any prepayments on any
existing or future indebtedness for borrowed money (including
capital leases) to any Person; (3) make any payments on any
existing or future indebtedness for borrowed money (including
Capital Leases) to any Person after the occurrence of an Event of
Default hereunder; or (4) hereafter borrow money or obtain credit
from or incur indebtedness to any Person other than Xxxxxx,
except (i) trade credit in the ordinary course of business for
the purchase of inventory to be sold in the ordinary course of
Xxxxxxxx's business, (ii) purchase money indebtedness as
permitted under Section 7.3(d) and (iii) other indebtedness
specifically permitted to be incurred thereafter under the terms
of this Agreement.
7.7 Loans and Investments: No Borrower shall make or have
outstanding loans, advances, or extensions of credit to, or
capital contributions or investments in, any Person, including,
without limitation, any officers, employees and directors of any
Borrower, except for (i) loans to or investments in another
Borrower and (ii) loans not exceeding $2,500.
7.8 Use of Xxxxxx's Name: No Borrower shall use Lender's
name (or the name of any of Lender's affiliates) in connection
with any of its business operations except in press releases
approved in writing in advance by Xxxxxx. Borrowers may
nevertheless disclose to third parties that they have a deposit
and borrowing relationship with Xxxxxx. Nothing herein contained
is intended to permit or authorize any Borrower to make any
contract or commitment on behalf of Xxxxxx.
7.9 Change in Capital Stock: There shall occur no change
in the ownership of the stock of Borrowers (other than RUSA).
7.10 Method of Business: No Borrower shall change the
nature or methods of operation of its Business Operations in any
material respect.
7.11 Officer/Shareholder Compensation: The salary and
bonuses of Xxxxxx, Xxxxxxx and May may not exceed $275,000,
$200,000, and $225,000, respectively, in any Fiscal Year. The
Borrowers may pay additional bonuses to Xxxxxx and Xxxxxxx in
1998 in an aggregate amount not to exceed $112,500.
7.12 Capital Expenditures: Borrowers shall not expend, on
an aggregate basis, for Capital Expenditures (calculated on a non-
cumulative basis) more than $250,000 in any rolling twelve month
period exclusive of expenditures in connection with the
Capitalized Lease Obligations described in clause 7.5(vii) above.
In addition, after consummation of the Acquisition, Borrowers
shall be permitted to expend, on an aggregate basis, up to an
additional $250,000 in any rolling twelve month period for
Capital Expenditures in connection with the business operations
acquired in the Acquisition.
7.13 MRR Sales: No Borrower shall sell or otherwise dispose
of Operating Contracts without Xxxxxx's prior written consent,
except that without such consent Borrowers may, during any
rolling twelve month period, sell or otherwise dispose of in the
aggregate up to two percent of their Operating Contracts.
7.14 Purchases of MRR: No Borrower shall purchase or
otherwise acquire any Operating Contract without Xxxxxx's prior
written consent except as expressly permitted in Section 7.2
herein.
7.15 Prohibited Transactions: No Borrower shall without
Lender's prior written approval, (A) subcontract any services
(other than arm's length subcontracting with unaffiliated third
parties for response, installation and service calls in a manner
acceptable to Lender) or otherwise not maintain full possession,
dominion and control over all of its MRR, (B) provide
subcontracting or so called "wholesale" services to other alarm
businesses other than in arm's length transactions for which a
Borrower can reasonably expect to earn a reasonable profit; or
(C) provide personnel and/or assets to any Affiliate for use in
the management or operation of its business on other than fair,
reasonable and arm's length cash compensation, payable not less
often than monthly. Except as set forth in Schedule "7.15",
under no circumstances may a Borrower subcontract to third
parties the monitoring of any of such Borrower's MRR except upon
the occurrence of any event which renders such Borrower's
monitoring facility inoperative, and then only for the period of
time during which such Borrower is required to repair or relocate
such monitoring facility.
7.16 Consulting Agreements: Other than the consulting
agreements set forth in Schedule "5.11(e)", Borrowers shall not
enter into any consulting or similar agreements requiring
payments by Borrowers thereunder exceeding $50,000 in the
aggregate in any Fiscal Year.
7.17 Delinquencies: Borrowers shall not allow Delinquent
Recurring Monthly Revenue to be more than six percent (6%) of MRR
at any time. As used herein "Delinquent Recurring Monthly
Revenue" means MRR under contracts with customers that are
overdue in payment as follows: residential and personal
accounts, more than ninety (90) days past due; commercial
accounts, more than one hundred twenty (120) days past due; and
municipal, hospital and school system accounts, more than one
hundred fifty (150) days past due.
7.18 Additional MRR Test: Notwithstanding Section 7.17
immediately above, Borrowers shall maintain at all times not less
than $1,000,000 of MRR which is not Delinquent Recurring Monthly
Revenue.
7.19 Modification of Financial Covenants: If Borrowers make
any sales or acquisitions of MRR permitted hereunder, Xxxxxxxxx
and Xxxxxx agree to negotiate in good faith to establish new
Financial Covenants to appropriately reflect the effect of such
permitted sales and/or acquisitions of MRR. If Borrowers and
Lender cannot so agree, then the Financial Covenants shall remain
as set forth herein.
7.20 Miscellaneous Covenants:
(a) No Borrower shall become or be a party to any
contract or agreement which would breach this Agreement, or
breach, in any material respect, any other instrument, agreement
or document to which any Borrower is a party or by which it is or
may be bound.
(b) No Borrower shall carry or purchase any "margin
security" within the meaning of Regulations U, G, T or X of the
Board of Governors of the Federal Reserve System, 12 C.F.R.,
Chapter II.
(c) Borrowers will not amend, terminate or modify any
Monitoring Agreement, Rental Agreement or Extended
Warranty/Service Agreement except in the ordinary course of
business consistent with past practices.
SECTION 8. DEFAULT
8.1 Events of Default: Each of the following events
(subject to the passage of any applicable notice, grace or cure
period set forth herein) shall constitute an event of default
("Event of Default") and Lender shall thereupon have the option
to declare, as to each Borrower, all Obligations to Lender
immediately due and payable all without demand, notice,
presentment or protest or further action of any kind (it also
being understood that the occurrence of any of the Events of
Default set forth in subparagraphs (j), (k) or (l) shall automati
cally cause an acceleration of the Obligations):
(a) Payments - if any Borrower fails to make any pay
ment of principal or interest hereunder when such payment is
otherwise due and payable; or
(b) Other Charges - if any Borrower fails to pay any
other charges, fees or other monetary obligations owing to Lender
arising out of or incurred in connection with this Agreement or
the other Loan Documents when such payment is due and payable; or
(c) Particular Covenant Defaults - if any Borrower
fails to perform or observe any covenant, condition or
undertaking contained in this Agreement, provided, however, that
Borrowers shall have a ten (10) day cure period (without notice)
with respect to the first three (3) covenant defaults of those
covenants set forth in Sections 6.1, 6.2, 6.5, 6.6, 6.9, 6.10,
6.13, 6.15 and 6.21 hereof (such defaults may regard the same or
different covenants set forth in such Sections), whether or not
such covenant defaults are declared by Lender; or
(d) Information - if any statement, report, financial
statement, or certificate made or delivered by any Borrower or
any of its officers, employees or agents, to Lender is not true
and correct, in all material respects, when made or deemed made;
or
(e) Uninsured Loss - if there shall occur any
uninsured or underinsured damage to or loss, theft, or
destruction of the Collateral in an amount in excess of $100,000;
or
(f) Warranties or Representations - if any warranty,
representation or other statement by or on behalf of any Borrower
contained in this Agreement, or in any other Loan Document, or in
reference to this Agreement, or in any other existing or future
agreement between any Borrower and Lender, is false, erroneous,
or misleading in any material respect when made or deemed made;
or
(g) Agreements with Others - if any Borrower shall
default beyond any grace or cure period under any agreement with
any creditor for borrowed money of such Borrower, (including
Capital Leases), and if as a result of such default, the holder
of such Borrower's obligations declares or is permitted to
declare any such obligation of such Borrower to become due prior
to its maturity date or prior to its regularly scheduled date of
payment; or
(h) Other Agreements with Lender - if any Borrower
breaches or violates any material term of, or if a Potential
Default or an Event of Default, occurs under, any Loan Document
or any other existing or future agreement (related or unrelated)
between such Borrower and Lender (subject to any applicable grace
or cure period which may be contained in any such other
agreement); or
(i) Judgments - if any final unappealable judgment for
the payment of money which is not fully covered by insurance
shall be rendered by any court of record against any Borrower,
and such outstanding judgment has not been dismissed, discharged
or satisfied within twenty (20) days after the entry thereof; or
(j) Assignment for Benefit of Creditors, etc. - if any
Borrower makes an assignment for the benefit of creditors
generally, offers a composition or extension to creditors, or
makes or sends notice of an intended bulk sale of any business or
assets now or hereafter conducted by such Borrower; or
(k) Bankruptcy, Dissolution, etc. - upon the
commencement of any action for the dissolution or liquidation of
any Borrower or the commencement of any case or proceeding for
reorganization or liquidation of any Borrower's debts under the
Bankruptcy Code or any other state or federal law, now or
hereafter enacted for the relief of debtors, whether instituted
by or against such Borrower, which in the case of any involuntary
case under the Bankruptcy Code is not dismissed within thirty
(30) days from the commencement thereof (Lender having no
obligation to make Advances and being entitled to seek adequate
protection or otherwise protect its rights during such thirty
(30) day period); or
(l) Receiver - upon the application for the
appointment of a receiver, liquidator, custodian, trustee or
similar official or fiduciary for any Borrower or for any
Borrower's Property; or
(m) Execution Process, etc. - the issuance of any
execution or distraint process against any Borrower or any of
Borrower's Property; or
(n) Termination of Business - if any Borrower ceases
any material portion of the Business Operations as presently
conducted or alters the Business Operations in a material manner
from the manner in which the Business Operations are currently
conducted; or
(o) Unlawful Activity - if any Borrower commits or is
indicted for committing any criminal activity, or any Borrower
engages in or is reasonably likely to have engaged in any type of
activity which, in Xxxxxx's discretion, might result in the
forfeiture of any material Property of such Borrower to any
governmental entity, federal, state or local; or
(p) Tax Liens - if a notice of a Lien, levy or
assessment is filed of record with respect to any or all of any
Borrower's Property by the United States government, or any
department, agency or instrumentality thereof, or by any state,
county, municipal or other government agency, or if any taxes or
debts owing at any time hereafter to any one or more of such
entities becomes a Lien, whether xxxxxx or otherwise, upon any or
all of any Borrower's Property; or
(q) Change of Control - RUSA shall suffer any Change
in Control.
8.2 Rights and Remedies:
(a) In addition to all other rights, options and
remedies granted to Lender under this Agreement, Lender may, upon
or at any time after the occurrence and during the continuance of
an Event of Default terminate the Revolving Credit, cease making
Advances thereunder, and exercise all other rights granted to it
hereunder and all rights under the UCC and any other applicable
law or in equity, and under all Loan Documents permitted to be
exercised after the occurrence of an Event of Default, including
the following rights and remedies (which list is given by way of
example and is not intended to be an exhaustive list of all such
rights and remedies):
(i) The right to take possession of, send notices
regarding, and collect directly the Collateral, with or without
judicial process (including, without limitation, the right to
notify the United States postal authorities to redirect mail
addressed to any Borrower to an address designated by Xxxxxx);
(ii) The right to, by its own means or with
judicial assistance, enter any Borrower(s)' premises and take
possession of the Collateral, or render it unusable, or dispose
or dismantle of the Collateral on such premises, without any
liability for rent, storage, utilities or other sums;
(iii) The right to require Borrowers at Borrowers'
expense to assemble all or any part of the Collateral and make it
available to Lender at any place designated by Lender; and
(iv) The right to reduce the Maximum Revolving
Credit Amount or to modify the terms and conditions upon which
Xxxxxx is willing to consider making Advances under the Revolving
Credit.
(b) Borrowers hereby agree that a notice received by
them at least seven (7) days before the time of any intended
public sale or of the time after which any private sale or other
disposition of the Collateral is to be made, shall be deemed to
be reasonable notice of such sale or other disposition. If
permitted by applicable law, any perishable inventory or
Collateral or Pledged Collateral which threatens to speedily
decline in value or which is sold on a recognized market may be
sold immediately by Lender without prior notice to Borrowers.
Borrowers covenant and agree not to interfere with or impose any
obstacle, resistance or disruption to Xxxxxx's exercise of its
rights and remedies with respect to the Collateral, after the
occurrence and during the continuance of an Event of Default
hereunder.
(c) In addition to all other rights, options and
remedies granted to Lender under this Agreement, Lender may, at
any time, in its sole discretion with or without cause,
relinquish or abandon any Collateral or any security interest
therein.
8.3 Continuation of Event of Default: Borrowers
acknowledge and agree that if an Event of Default occurs it shall
be deemed continuing unless Xxxxxx expressly agrees, in its sole
discretion, and without any duty or obligation of any kind to
agree or consider to agree, to waive or accept a cure of any such
Event of Default.
8.4 Nature of Remedies: Lender shall have the right to
proceed against all or any portion of the Collateral and Pledged
Collateral in any order and may apply such Collateral and Pledged
Collateral to the Obligations in any order. All rights and
remedies granted Xxxxxx xxxxxxxxx and under any agreement
referred to herein, or otherwise available at law or in equity,
shall be deemed concurrent and cumulative, and not alternative
remedies, and Lender may proceed with any number of remedies at
the same time until the Obligations are satisfied in full. The
exercise of any one right or remedy shall not be deemed a waiver
or release of any other right or remedy, and Lender, upon the
occurrence and during the continuance of an Event of Default, may
proceed against Borrowers (or any one or more them), and/or the
Collateral and Pledged Collateral, at any time, under any
agreement, with any available remedy and in any order.
8.5 Set-Off: If any bank account of any Borrower with
Lender or with any participant is attached or otherwise liened or
levied upon by any third party, Lender (and any participant) need
not await the running of any applicable grace period hereunder,
but Xxxxxx (and such participant as agent for Lender) shall have
and be deemed to have the immediate right of set-off and may
apply the funds or amount thus set-off against any Obligations.
8.6 Confession of Judgment:
(a) EACH BORROWER HEREBY IRREVOCABLY AND INDEPENDENTLY
AUTHORIZES AND EMPOWERS ANY ATTORNEY(S) OR THE PROTHONOTARY OR
CLERK OF ANY COURT OF RECORD IN THE COMMONWEALTH OF PENNSYLVANIA,
OR ELSEWHERE, FOLLOWING THE OCCURRENCE OF AN EVENT OF DEFAULT, TO
APPEAR FOR SUCH Borrower IN ANY SUCH COURT, WITH OR WITHOUT
DECLARATION FILED, AS OF ANY TERM OR TIME, AND CONFESS OR ENTER
JUDGMENT AGAINST SUCH BORROWER IN XXXXXX'S FAVOR FOR ALL
OBLIGATIONS DUE OR TO BECOME DUE BY SUCH BORROWER HEREUNDER, WITH
COSTS OF SUIT, RELEASE OF ERRORS AND TEN PERCENT (10%) OF SUCH
SUMS ADDED FOR REASONABLE ATTORNEYS' FEE; AND FOR THE PURPOSE
HEREOF A COPY OF THIS AGREEMENT SHALL BE SUFFICIENT WARRANT. SUCH
AUTHORITY AND POWER SHALL NOT BE EXHAUSTED BY ANY EXERCISE
THEREOF AND JUDGMENT MAY BE CONFESSED FROM TIME TO TIME HEREUNDER
AS LENDER MAY DETERMINE.
(b) EACH BORROWER, BEING FULLY AWARE OF THE RIGHT TO
NOTICE AND A HEARING CONCERNING THE VALIDITY OF ANY AND ALL
CLAIMS THAT MAY BE ASSERTED AGAINST SUCH BORROWER BY XXXXXX
BEFORE A JUDGMENT CAN BE ENTERED HEREUNDER OR BEFORE EXECUTION
MAY BE LEVIED ON SUCH JUDGMENT AGAINST ANY AND ALL PROPERTY OF
SUCH BORROWER, HEREBY UNCONDITIONALLY WAIVES THESE RIGHTS AND
AGREES AND CONSENTS TO JUDGMENT BEING ENTERED BY CONFESSION IN
ACCORDANCE WITH THE TERMS HEREOF AND EXECUTION BEING LEVIED ON
SUCH JUDGMENT AGAINST ANY AND ALL PROPERTY OF XXXXXXXX, IN EACH
CASE WITHOUT FIRST GIVING NOTICE AND THE OPPORTUNITY TO BE HEARD
ON THE VALIDITY OF THE CLAIM OR CLAIMS UPON WHICH SUCH JUDGMENT
IS ENTERED.
SECTION 9. MISCELLANEOUS
9.1 Governing Law: This Agreement, and all related
agreements and documents shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania,
without regard to its otherwise applicable principles of
conflicts of laws. The provisions of this Agreement and other
agreements and documents referred to herein are to be deemed
severable, and the invalidity or unenforceability of any
provision shall not affect or impair the remaining provisions
which shall continue in full force and effect.
9.2 Integrated Agreement: The Revolving Credit Note, this
Agreement, and all other Loan Documents shall be construed as
integrated and complementary of each other, and as augmenting and
not restricting Lender's rights, remedies and security. If,
after applying the foregoing, an inconsistency still exists, the
provisions of this Agreement shall constitute an amendment
thereto and shall control.
9.3 Waivers, Releases and Indemnification:
(a) No omission or delay by Xxxxxx in exercising any
right or power under this Agreement or any other Loan Document
will impair such right or power or be construed to be a waiver of
any default, or Event of Default or an acquiescence therein, and
any single or partial exercise of any such right or power will
not preclude other or further exercise thereof or the exercise of
any other right, and no waiver of Lender's rights hereunder will
be valid unless in writing and signed by Xxxxxx, and then only to
the extent specified.
(b) Each Borrower expressly waives presentment for
payment, demand, notice of dishonor, protest, notice of protest,
diligence of collection, and any other notice of any kind, and
hereby consents to any number of renewals and extensions of time
of payment hereof, which renewals and extensions shall not affect
the liability of any party hereto. Each Borrower further agrees
that Lender may accept, by way of compromise or settlement, from
any one or more of the parties liable hereunder a sum or sums
less than the amount of the Obligations, and may give releases to
such parties without affecting the liability of any other party
for the unpaid balance. Any such renewals or extensions may be
made and any such partial payments accepted or releases given
without notice to any such party.
(c) Each Borrower hereby waives and releases all
errors, defects and imperfections in any proceedings instituted
by Lender under the terms of this Agreement, or of any of the
other Loan Documents, as well as all benefit that might accrue to
Borrower by virtue of any present or future laws exempting the
Property, or any other property, real, personal or mixed, or any
part of the proceeds arising from any sale of such property, from
attachment, levy or sale under execution, or providing for any
stay of execution, exemption from civil process, or extension of
time for payment. Each Borrower agrees that any real estate that
may be levied upon pursuant to a judgment obtained by virtue
hereof, or upon any writ of execution issued thereon, may be sold
upon any such writ in whole or in part in any order desired by
Xxxxxx.
(d) Each Borrower releases and shall indemnify, defend
and hold harmless Lender, its officers, employees and agents, of
and from any claims, demands, liabilities, obligations,
judgments, injuries, losses, damages and costs and expenses
(including, without limitation, reasonable attorneys' fees)
resulting from (i) acts or conduct of any Borrower under,
pursuant or related to this Agreement and the other Loan
Documents, (ii) any Borrower's breach or violation of any
representation, warranty, covenant or undertaking contained in
this Agreement or the other Loan Documents, and (iii) any
Borrower's failure to comply with any or all laws, statutes,
ordinances, governmental rules, regulations or standards, whether
federal, state or local, or court or administrative orders or
decrees (including, without limitation, environmental laws, etc.)
and all costs, expenses, fines, penalties or other damages
resulting therefrom. The Obligations of Borrowers under this
Section 9.3(d) shall survive the occurrence of any and all events
whatsoever, including, without limitation, payment of the
Obligations or investigations by or knowledge of Lender.
9.4 Time:
(a) Whenever any Borrower shall be required to make
any payment, or perform any act on a Saturday, Sunday or a legal
holiday under the laws of the Commonwealth of Pennsylvania or
such other jurisdiction where such Borrower may be required to
make any payment or perform any act, such payment may be made, or
such act may be performed, on the next succeeding Business Day.
(b) Time is of the essence in each Borrower's perfor
xxxxx under all provisions of this Agreement and all other Loan
Documents.
9.5 Expenses of Lender:
(a) At Closing and from time to time thereafter,
Borrowers will pay, immediately on demand, all reasonable
expenses (including, without limitation, the fees and expenses of
legal counsel for Lender) relating to this Agreement, the Loan
Documents, and all related agreements and documents, including,
without limitation, expenses incurred in the analysis, nego
tiation, preparation, closing, administration, audit and
enforcement of this Agreement, the Loan Documents, and all
related agreements and documents, the enforcement, protection and
defense of the rights of Lender in connection with the Revolving
Credit, this Agreement, the Collateral, Pledged Collateral or
otherwise hereunder, including the right to take possession of
any Collateral and the proceeds thereof and to hold, collect,
prepare for sale, sell and dispose of any Collateral and Pledged
Collateral, and any expenses relating to extensions, amendments,
waivers or consents pursuant to the provisions hereof, the Loan
Documents, or any related agreements and documents or relating to
agreements with other creditors, or termination of this Agreement
(collectively, the "Expenses").
(b) Expenses shall also include but not be limited to
the costs of (i) reproducing this Agreement, the Loan Documents
and related agreements and documents; (ii) filing and recording
fees; (iii) searches; and (iv) appraisal and verification fees.
9.6 Brokerage: Except for the involvement of Berwind
Financial Group, L.P. (to whom Borrowers have agreed to pay a
$90,000 fee, payable in RUSA stock), this transaction was brought
about and entered into by Xxxxxx and Borrowers acting as
principals and without any brokers, agents or finders being the
effective procuring cause hereof. Xxxxxxxxx represent that they
have not committed Lender to the payment of any brokerage fee,
commission or charge in connection with this transaction other
than as expressly set forth above. If any claim for any such
fee, commission or charge is made on Lender by any broker, finder
or agent or other Person (including but not limited to, Berwind
Financial Group, L.P.), Borrowers will jointly and severally
indemnify, defend and save Lender harmless against such claim and
further will defend any action or actions to recover on such
claim, at Borrowers' own costs and expense, including, without
limitation, Xxxxxx's counsel fees. Borrowers further agree that
until any such claim is adjudicated in Lender's favor, the amount
demanded shall be deemed a liability of Borrowers under this
Agreement, secured by the Collateral.
9.7 Notices:
(a) Any notices or consents required or permitted by
this Agreement shall be in writing and shall be deemed given if
delivered in person, sent by telegram (with messenger service
specified) or sent by nationally recognized overnight courier
service, or sent by certified or registered mail postage prepaid,
return receipt requested, as follows, unless such address is
changed by written notice hereunder:
If to Lender to: Mellon Bank, N.A.
000 Xxxx Xxxxxxxxxx Xxxx
Xxxxx 000
Xxxxxxxx Xxxxxxx ,XX 00000
Attn: Xxx X. Xxxxxxx
FAX: (000) 000-0000
With a copy to: Blank Rome Xxxxxxx & XxXxxxxx LLP
Xxx Xxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Attn: Xxxxxxxx Xxxxxxxxxxx, Esquire
FAX: (000) 000-0000
If to Borrowers: Response USA, Inc.
00-X Xxxxxxxx Xxxxx
Xxxxxxxxxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxx, President
FAX: (000) 000-0000
With a copy to: Squadron, Xxxxxxxx, Xxxxxxx
& Xxxxxxxxx,LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxxx X. Xxxx, Esquire
FAX: (000) 000-0000
(b) All notices sent by Lender or any Borrower by any
of the methods described above shall be deemed to be given when
so received.
9.8 Headings: The headings of any paragraph or Section of
this Agreement are for convenience only and shall not be used to
interpret any provision of this Agreement.
9.9 Survival: All warranties, representations, and
covenants made by Borrowers herein, or in any other Loan Document
or on any certificate, document or other instrument delivered by
it or on its behalf under this Agreement, shall be considered to
have been relied upon by Xxxxxx, and shall survive the delivery
to Lender of the Revolving Credit Note, regardless of any
investigation made by Lender or on its behalf. All statements in
any Loan Document, certificate or other instrument prepared
and/or delivered for the benefit of Lender shall constitute
warranties and representations by Borrowers hereunder. Except as
otherwise expressly provided herein, all covenants made by
Borrowers hereunder or under any other agreement or instrument
shall be deemed continuing until all Obligations are satisfied in
full.
9.10 Successors and Assigns: This Agreement shall inure to
the benefit of and be binding upon the successors and permitted
assigns of each of the parties. Lender may participate or assign
any or all of its rights or obligations hereunder, without notice
to or consent of Borrowers, to any commercial lender, financial
institution, or affiliate of such entity. No Borrower may
transfer, assign or delegate any of its duties or obligations
hereunder.
9.11 Duplicate Originals: Two or more duplicate originals
of this Agreement may be signed by the parties, each of which
shall be an original but all of which together shall constitute
one and the same instrument.
9.12 Modification: No modification hereof or any agreement
referred to herein shall be binding or enforceable unless in
writing and signed on behalf of the party against whom enforce
ment is sought.
9.13 Signatories: Each individual signatory hereto repre
sents and warrants that he/she is duly authorized to execute this
Agreement on behalf of his principal and that he/she executes the
Agreement in such capacity and not as a party.
9.14 Third Parties: No rights are intended to be created
hereunder, or under any related agreements or documents for the
benefit of any third party donee, creditor or incidental
beneficiary of any Borrower(s). Nothing contained in this
Agreement shall be construed as a delegation to Lender of any
Borrower's duty of performance, including, without limitation
such Borrower's duties under any account or contract in which
Xxxxxx has a security interest.
9.15 Discharge of Taxes, Borrowers' Obligations, Etc.:
Lender, in its discretion, shall have the right at any time, and
from time to time, with reasonable prior notice to Borrowers if
Borrowers fail to do so, to (a) obtain insurance covering any of
the Collateral as required hereunder (b) pay for the performance
of any of any Borrower's obligations hereunder, (c) discharge
taxes and Liens at any time levied or placed on any of the
Collateral in violation of this Agreement unless Borrowers are in
good faith with due diligence by appropriate proceedings, in the
judgment of Xxxxxx, contesting such taxes or Liens, (d) pay for
the maintenance and preservation of any of the Collateral.
Expenses and Advances by Xxxxxx under this paragraph shall bear
interest at the same rate applied to the Revolving Credit and
until reimbursed to Lender, shall be secured by the Collateral.
Such payments and Advances made by Xxxxxx shall not be construed
as a waiver by Xxxxxx of an Event of Default under this
Agreement.
9.16 Withholding and Other Tax Liabilities: Lender shall
have the right to refuse to make any Advances from time to time
unless Borrowers shall, at Xxxxxx's request, have given to Lender
evidence, reasonably satisfactory to Lender, that Borrowers have
properly deposited or paid, as required by law, all withholding
taxes and all federal, state, city, county or other taxes,
including, without limitation, excise taxes, due up to and
including the date of the loan. Until all of Obligations to
Lender have been paid in full, Lender shall be entitled to
continue to hold any and all of the Collateral until Borrowers
have given to Lender evidence, reasonably satisfactory to Lender,
that Borrowers have properly deposited or paid, as required by
law, all federal withholding taxes due up to and including the
date of such expiration or termination. Copies of deposit slips
showing payment shall likewise constitute satisfactory evidence
for such purpose. In the event that any Lien, assessment or tax
liability against Borrower shall arise in favor of any taxing
authority, whether or not notice thereof shall be filed or
recorded as may be required by law, Lender shall have the right
(but shall not be obligated, nor shall Lender hereby assume the
duty) upon reasonable prior notice to Borrowers to pay any such
lien, assessment or tax liability by virtue of which such charge
shall have arisen; provided, however, that Lender shall not pay
any such tax, assessment or Lien if the amount, applicability or
validity thereof is being contested in good faith and by
appropriate proceedings by Borrowers and further provided that
each Borrower's title to and its right to use, its respective
Collateral are not materially adversely affected and Lender's
lien and priority in the Collateral are not affected, altered or
impaired thereby. In order to pay any such Lien, assessment or
tax liability, Lender shall not be obliged to wait until said
Lien, assessment or tax liability is filed before taking such
action as hereinabove set forth. Any sum or sums which Lender
shall have paid for the discharge of any such lien shall be added
to the Revolving Credit and shall be paid by Borrowers to Lender
with interest thereon, upon demand, and Lender shall be subrogat
ed to all rights of such taxing authority against Borrowers.
9.17 Consent to Jurisdiction: Each Borrower irrevocably
consents to the jurisdiction of the Courts of Common Pleas of
Philadelphia and Xxxxxxxxxx County, Commonwealth of Pennsylvania
or the United States District Court for the Eastern District of
Pennsylvania in any and all actions and proceedings whether
arising hereunder or under any other agreement or undertaking and
irrevocably agrees to service of process as set forth in
Section 9.7 hereof, to the address of Borrower set forth herein.
9.18 Waiver of Jury Trial: EACH BORROWER AND XXXXXX XXXXXX
WAIVE ANY AND ALL RIGHTS EITHER MAY HAVE TO A JURY TRIAL IN
CONNECTION WITH ANY LITIGATION COMMENCED BY OR AGAINST LENDER
WITH RESPECT TO RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO.
9.19 Future Commitments: Except as expressly set forth in
this Agreement, Xxxxxx has made no agreement or commitment to
lend money or extend credit to Borrowers, and has made no
agreement or commitment to any Borrower to modify or consider any
modification of any nature whatsoever of the terms of this
Agreement.
IN WITNESS WHEREOF, the undersigned parties have executed
this Loan and Security Agreement the day and year first above
written.
MELLON BANK, N.A. RESPONSE USA, INC.
By:_________________________ By:
Title:
UNITED SECURITY SYSTEMS, INC.
By:
Title:
XXXXXXX SECURITY, INC. RESPONSE ABILITY SYSTEMS, INC.
By: By:
Title: Title:
MSG SECURITY SYSTEMS, INC. EMERGENCY RESPONSE SYSTEMS, INC.
By: By:
Title: Title:
RELIABLE-HAWK, INC.
By:________________________________
Title:_____________________________
LIST OF SCHEDULES AND EXHIBITS
Schedule 5.1 -- Qualification to do Business
Schedule 5.2 -- Insurance
Schedule 5.3 -- Litigation
Schedule 5.4 -- Existing Liens and Claims
Schedule 5.5 -- Patents, Copyrights, Trademarks, Licenses,
Franchises, etc.
Schedule 5.10 -- Subsidiaries
Schedule 5.11(a) -- Existing Guaranties, Investments and
Borrowings
Schedule 5.11(b) -- Written Contracts and Agreements
Schedule 5.11(e) -- Consulting Agreements
Schedule 5.11(g) -- Leases
Schedule 5.12 -- Employee Benefit Plans
Schedule 5.14 -- Names and Addresses
Schedule 5.15 -- Other Associations
Schedule 5.16 -- Environmental Matters
Schedule 5.18 -- Capital Stock, Warrants, Options
Schedule 5.21 -- Accounts that are not Qualified Accounts
Schedule 6.7 -- Permitted Accounts
Schedule 7.5 -- Indebtedness
Schedule 7.15 -- Subcontracting Arrangements
Exhibit "A" -- Controller's Certificate
