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EXHIBIT 10.5.1
LINE OF CREDIT AGREEMENT
Bank One, Michigan (the "Bank"), whose address is 000 Xxxxxxxx Xxxxxx, Xxxxxxx,
Xxxxxxxx 00000-0000, has approved the credit facilities listed below
(collectively, the "Credit Facilities," and, individually, as designated below)
to Syntel, Inc. (the "Borrower"), whose address is 0000 Xxxxxxxxx, Xxxxx 000,
Xxxx, XX 00000 subject to the terms and conditions set forth in this agreement.
1.0 CREDIT FACILITIES.
1.1 FACILITY A (INCLUDING LETTERS OF CREDIT). The Bank has approved a
credit facility to the Borrower in the principal sum not to exceed
$40,000,000.00 in the aggregate at any one time outstanding
("Facility A"). Facility A shall include the issuance of standby
letters of credit not exceeding $5,000,000.00 in the aggregate at any
one time outstanding, expiring not later than February 28, 2002 (the
"Letters of Credit"). Each Letter of Credit shall be in form
acceptable to the Bank and shall bear a fee of 1% per year of the face
amount payable annually in advance. Credit under Facility A shall be
in the form of disbursements evidenced by credits to the Borrower's
account and shall be repayable as set forth in a Revolving Business
Credit Note executed concurrently (referred to in this agreement both
singularly and together with any other promissory notes referenced in
this Section 1 as the "Notes") or by issuance of a Letter of Credit
upon completion of an application acceptable to the Bank. The
proceeds of Facility A shall be used for the following purpose:
working capital. Facility A shall expire on August 31, 2001 unless
earlier withdrawn.
1.2 FACILITY B (PURCHASE MONEY TERM LOANS). The Bank has approved an
uncommitted credit authorization to the Borrower in the principal sum
not to exceed $15,000,000.00 in the aggregate at any one time
outstanding ("Facility B"). Facility B shall be in the form of loans
evidenced by the Borrower's notes on the Bank's form (referred to in
this agreement both singularly and together with any other promissory
notes referenced in this Section 1 as the "Notes") the proceeds of
which shall be used to acquire the following acquisition of companies.
Interest on each loan shall accrue at a rate to be agreed upon by the
Bank and the Borrower at the time the loan is made. The maturity of
each note shall not exceed 18 months from the note date. Facility B
shall expire on August 31, 2001 unless earlier withdrawn.
2.0 CONDITIONS PRECEDENT.
2.1 CONDITIONS PRECEDENT TO INITIAL EXTENSION OF CREDIT. Before the first
extension of credit under this agreement, whether by disbursement of a
loan, issuance of a letter of credit, the funding of a Lease or
otherwise, the Borrower shall deliver to the Bank, in form and
substance satisfactory to the Bank:
A. LESS DOCUMENTS. The Notes, and if applicable, the Leases, the
letter of credit applications, the security agreement, financing
statements, mortgage, guaranties, subordination agreements and
any other loan documents which the Bank may reasonably require to
give effect to the transactions described by this agreement;
B. EVIDENCE OF DUE ORGANIZATION AND GOOD STANDING. Evidence
satisfactory to the Bank of the due organization and good
standing of the Borrower and every other business equity that is
a party to this agreement or any other loan document required by
this agreement;
C. EVIDENCE OF AUTHORITY TO ENTER INTO LOAN DOCUMENTS. Evidence
satisfactory to the Bank that (i) each party to this agreement
and any other loan document required by this agreement is
authorized to enter into the transactions described by this
agreement and the other loan documents, and (ii) the person
signing on behalf of each party is authorized to do so; and
2.2 CONDITIONS PRECEDENT TO EACH EXTENSION OF CREDIT. Before any
extension of credit under this agreement, whether by disbursement of
a loan, issuance of a letter of credit, the funding of a Lease or
otherwise, the following conditions shall have been satisfied;
A. REPRESENTATIONS. The Representations contained in this agreement
shall be true on and as of the date of the extension of credit;
B. NO EVENT OF DEFAULT. No event of default shall have occurred and
be continuing or would result from the extension of credit;
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C. ADDITIONAL APPROVALS, OPINIONS, AND DOCUMENTS. The Bank shall
have received such other approvals, opinions and documents as it
may reasonably request.
D. OTHER CONDITIONS. Facility B Satisfactory receipt and review of
acquisition candidate financial statements and borrower's pro
forma.
3.0 FEES AND EXPENSES.
3.1 OUT-OF-POCKET EXPENSES. The Borrower shall reimburse the Bank for its
out-of-pocket expenses, and reasonable attorney's fees (including the
fees of in-house counsel) allocated to the Credit Facilities.
4.0 SECURITY.
4.1 Payments of the borrowings and all other obligations under the Credit
Facilities shall be secured by a first security interest and/or real
estate mortgage, as the case may be, covering the following property
and all its additions, substitutions, increments, proceeds and
products, whether now owned or later acquired ("Collateral"):
4.2 No forbearance or extension of time granted any subsequent owner of
the Collateral shall release the Borrower from liability.
4.3 ADDITIONAL COLLATERAL/SETOFF. To further secure payment of the
borrowings and all other obligations under the Credit Facilities and
all of the Borrower's other liabilities to the Bank, the Borrower
grants to the Bank a continuing security interest in: (i) all
securities and other property of the Borrower in the custody,
possession or control of the Bank (other than property held by the
Bank solely in a fiduciary capacity) and (ii) all balances of deposit
accounts of the Borrower with the Bank. The Bank shall have the right
at any time to apply its own debt or liability to the Borrower, or to
any other party liable for payment of the obligations under the Credit
Facilities, in whole or partial payment of such obligations or other
present or future liabilities, without any requirement of mutual
maturity.
4.4 CROSS LIEN. Any of the Borrower's other property in which the Bank
has a security interest to secure payment of any other debt, whether
absolute, contingent, direct or indirect, including the Borrower's
guaranties of the debts of others, shall also secure payment of and be
part of the Collateral for the Credit Facilities.
5.0 AFFIRMATIVE COVENANTS. So long as any debt or obligations remains
outstanding under the Credit Facilities, the Borrower, and each of its
subsidiaries, if any, shall:
5.1 INSURANCE. Maintain insurance with financially sound and reputable
insurers covering its properties and business against those casualties
and contingencies and in the types and amounts as shall be in
accordance with sound business and industry practices.
5.2 EXISTENCE. Maintain its existence and business operations as presently
in effect in accordance with all applicable laws and regulations, pay
its debts and obligations when due under normal terms, and pay on or
before their due date, all taxes, assessments, fees and other
governmental monetary obligations, except as they may be contested in
good faith if they have been properly reflected on its book and, at
the Bank's request, adequate funds or security has been pledged to
insure payment.
5.3 FINANCIAL RECORDS. Maintain proper books and records of account, in
accordance with generally accepted accounting principles where
applicable, and consistent with financial statements previously
submitted to the Bank. The Bank retains the right to inspect the
Collateral and business records related to it at such times and at
such intervals as the Bank may reasonably require.
5.4 NOTICE. Give prompt notice to the Bank of the occurrence of (i) any
Event of Default, and (ii) any other development, financial or
otherwise, which would affect the Borrower's business, properties or
affairs in a materially adverse manner.
5.5 COLLATERAL AUDITS. Permit the Bank or its agents to perform audits of
the Collateral. The Borrower shall compensate the Bank for such audits
in accordance with the Bank's schedule of fees as amended from time
to time.
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5.5 FINANCIAL REPORTS. Furnish to the Bank whatever information, books, and
records the Bank may reasonably request, including at a minimum: If the
Borrower has subsidiaries, all financial statements required will be
provided on a consolidated and on a separate basis.
A. Within 45 days after each quarterly period, a balance sheet as of
the end of that period and statements of income, cash flows, and
retained earnings from the beginning of that fiscal year to the end
of that period, certified as correct by one of its authorized
agents.
B. Within 180 days after, and as of the end of, each of its fiscal
years, a detailed audit including a balance sheet and statements of
income, retained earnings, and cash flows certified by an
independent certified public accountant of recognized standing.
6.0 NEGATIVE COVENANTS.
6.1 DEFINITIONS. As used in this agreement, the following terms shall
have the following respective meanings:
A. "Debt Service" means for any period, principal and interest payments
either paid or due during that period on all debt of the Borrower.
B. "EBITDA" means for any period, net income plus to the extent
deducted in determining net income, interest expense (including but
not limited to imputed interest on capital leases), tax expense,
depreciation, and amortization.
C. "Subordinated Debt" means debt subordinated to the Bank in manner
and by agreement satisfactory to the Bank.
D. "Tangible Net Worth" means total assets less intangible asses, total
liabilities, and all sums owing from stockholders, members, or
partners, as the case may be, and from officers, managers, and
directors. Intangible assets include goodwill, patents, copyrights,
mailing lists, catalogs, trademarks, bond discount and underwriting
expenses, organization expenses, and all other intangibles.
6.2 Unless otherwise noted, the financial requirements set forth in this
section shall be computed in accordance with generally accepted
accounting principles applied on a basis consistent with financial
statements previously submitted by the Borrower to the Bank.
6.3 Without the written consent of the Bank, so long as any debt or
obligation remains outstanding under the Credit Facilities, the Borrower
shall not: (where appropriate, covenants apply on a consolidated basis).
A. DIVIDENDS. Acquire or retire any of its shares of capital stock, or
declare or pay dividends or make any other distributions upon any
of its share of capital stock or percentage ownership interests,
except dividends payable in its capital stock and dividends payable
to "Subchapter S" corporation shareholders and distributions payable
to LLC members in amounts sufficient to pay the shareholders' or
members' income tax obligations related to the Borrower's taxable
income.
B. SALE OF SHARES. Issue, sell or otherwise dispose of any shares of
its capital stock or other securities, or rights, warrants or
options to purchase or acquire any such shares or securities.
C. DEBT. Incur, or permit to remain outstanding, debt for borrowed
money or installment obligations, except debt reflected in the
latest financial statement of the Borrower furnished to the Bank
prior to execution of this agreement and not to be paid with
proceeds of borrowings or leases under the Credit Facilities. For
purposes of this covenant, the sale of any accounts receivable
shall be deemed the incurring of debt for borrowed money.
D. GUARANTIES. Guarantee or otherwise become or remain secondarily
liable on the undertaking of another, except for endorsement of
drafts for deposit and collection in the ordinary course of
business.
E. LIENS. Create or permit to exist any lien on any of its property,
real or personal, except: existing liens known to the Bank; liens to
the Bank; liens incurred in the ordinary course of business
securing current nondelinquent liabilities
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for taxes, worker's compensation, unemployment insurance, social
security and pension liabilities; and liens for taxes being
contested in good faith.
F. ADVANCES AND INVESTMENTS. Purchase or acquire any securities of,
or make any loans or advances to, or investments in, any person,
firm or corporation, except obligations of the United States
Government, open market commercial paper rated one of the top
two ratings by a rating agency of recognized standing, or
certificates of deposit in insured financial institutions.
G. USE OF PROCEEDS. Use, or permit any proceeds of the Credit
Facilities to be used, directly or indirectly, for the purpose
of "purchasing or carrying any margin stock" within the meaning
of Federal Reserve Board Regulation U. At the Bank's request,
the Borrower shall furnish to the Bank a completed Federal
Reserve Board Form U-I.
H. TANGIBLE NET WORTH. Permit its Tangible Net Worth to be less
than $75,000,000,000.
I. LEVERAGE RATIO. Permit the ratio of its total liabilities to
its Tangible Net Worth to exceed 1.00 to 1.00*.
*TANGIBLE NET WORTH DEFINED AS TOTAL ASSETS LESS INTANGIBLE
ASSETS, LESS ALL SUMS OWING FROM STOCKHOLDERS, OFFICERS,
DIRECTORS, EMPLOYEES, AND INVESTMENTS IN RELATED ENTITIES, LESS
TOTAL LIABILITIES.
7.0 REPRESENTATIONS BY BORROWER. Each Borrower represents that: (a)
the execution and delivery of this agreement, the Notes, and the Leases
and the performance of the obligations they impose do not violate any
law, conflict with any agreement by which the Borrower is bound, or
require the consent or approval of any governmental authority or other
third party; (b) this agreement, the Notes, and the Leases are valid and
binding agreements, enforceable in accordance with their terms; and (c)
all balance sheets, profit and loss statements, and other financial
statements furnished to the Bank are accurate and fairly reflect the
financial condition of the organizations and persons to which they apply
on their effective dates, including contingent liabilities of every type,
which financial condition has not changed materially and adversely since
those dates. Each Borrower, if other than a natural person, further
represents that: (a) it is duly organized, existing and in good standing
under the laws of the jurisdiction under which it was organized; and (b)
the execution and delivery of this agreement, the Notes, and the Leases
and the performance of the obligations they impose (i) are within its
powers; (ii) have been duly authorized by all necessary action of its
governing body; and (iii) do not contravene the terms of its articles of
incorporation or organization, its bylaws, or any partnership, operating
or other agreement governing its affairs.
8.0 DEFAULT/ACCELERATION.
8.1 EVENTS OF DEFAULT/ACCELERATION. If any of the following events
occurs, the Credit Facilities shall terminate and all borrowings and
other obligations under them shall be due immediately, without
notice, at the Bank's option whether or not the Bank has made
demand.
A. The Borrower or any guarantor of any of the Credit Facilities,
the Notes or the Leases ("Guarantor") fails to pay when due any
amount payable under the Credit Facilities or under any agreement
or instrument evidencing debt to any creditor;
B. The Borrower or any Guarantor (a) fails to observe or perform
any other term of this agreement, the Notes, or the Leases; (b)
makes any materially incorrect or misleading representation,
warranty, or certificate to the Bank; (c) makes any materially
incorrect or misleading representation in any financial statement
or other information delivered to the Bank; or (d) defaults under
the terms of any agreement or instrument relating to any debt for
borrowed money (other than borrowings under the Credit
Facilities) such that the creditor declares the debt due before
its maturity;
C. There is a default under the terms of any loan agreement,
mortgage, security agreement or any other document executed as
part of the Credit Facilities, or any guaranty of the obligations
under the Credit Facilities becomes unenforceable in whole or in
part, or any Guarantor fails to promptly perform under its
guaranty;
D. A "reportable event" (as defined in the Employee Retirement
Income Security Act of 1974 as amended) occurs that would permit
the Pension Benefit Guaranty Corporation to terminate any
employee benefit plan of the Borrower or any affiliate of the
Borrower;
E. The Borrower or any Guarantor becomes insolvent or unable to pay
its debts as they become due;
F. The Borrower or any Guarantor (a) makes an assignment for the
benefit of creditors; (b) consents to the appointment of a
custodian, receiver or trustee for it or for a substantial part
of its assets; or (c) commences any proceeding under any
bankruptcy, reorganization, liquidation or similar laws of any
jurisdiction;
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G. A custodian, receiver or trustee is appointed for the Borrower or
any Guarantor or for a substantial part of its assets without its
consent and is not removed within 60 days after such appointment;
H. Proceedings are commenced against the Borrower or any Guarantor
under any bankruptcy, reorganization, liquidation, or similar
laws of any jurisdiction, and such proceedings remain undismissed
for 60 days after commencement; or the Borrower or Guarantor
consents to the commencement of such proceedings;
I. Any judgment is entered against the Borrower or any Guarantor, or
any attachment, levy or garnishment is issued against any
property of the Borrower or any Guarantor;
J. The Borrower or any Guarantor dies;
K. The Borrower or any Guarantor, without the Bank's written
consent, (a) is dissolved, (b) merges or consolidates with any
third party, (c) leases, sells or otherwise conveys a material
part of its assets or business outside the ordinary course of
business, (d) leases, purchases, or otherwise acquires a material
part of the assets of any other corporation or business entity,
except in the ordinary course of business, or (e) agrees to do
any of the foregoing, (notwithstanding the foregoing, any
subsidiary may merge or consolidate with any other subsidiary, or
with the Borrower, so long as the Borrower is the survivor);
L. The loan-to-value ratio of any pledged securities at any time
exceeds N/A%, and such excess continues for five (5) days after
notice from the Bank to the Borrower;
M. There is a substantial change in the existing or prospective
financial condition of the Borrower or any Guarantor which the
Bank in good faith determines to be materially adverse; or
N. The Bank in good faith shall deem itself insecure.
8.2 REMEDIES. If the borrowings and all other obligations under the Credit
Facilities are not paid at maturity, whether by acceleration or
otherwise, the Bank shall have all of the rights and remedies provided
by any law or agreement. Any requirement of reasonable notice shall be
met if the Bank sends the notice to the Borrower at least seven (7)
days prior to the date of sale, disposition or other event giving rise
to the required notice. The Bank is authorized to cause all or any
part of the Collateral to be transferred to or registered in its name
or in the name of any other person, firm or corporation, with or
without designation of the capacity of such nominee. The Borrower
shall be liable for any deficiency remaining after disposition of any
Collateral. The Borrower is liable to the Bank for all reasonable
costs and expenses of every kind incurred in the making or collection
of the Credit Facilities, including, without limitation, reasonable
attorney's fees and court costs (whether attributable to the Bank's
in-house or outside counsel). These costs and expenses shall include,
without limitation, any costs or expenses incurred by the Bank in any
bankruptcy, reorganization, insolvency or other similar proceeding.
9.0 MISCELLANEOUS
9.1 Notice from one party to another relating to this agreement shall be
deemed effective if made in writing (including telecommunications) and
delivered to the recipient's address, telex number or fax number set
forth under its name below by any of the following means: (a) hand
delivery, (b) registered or certified mail, postage prepaid, with
return receipt requested, (c) first class or express mail, postage
prepaid, (d) Federal Express or like overnight courier service or (e)
fax, telex or other wire transmission with request for assurance of
receipt in a manner typical with respect to communication of that
type. Notice made in accordance with this section shall be deemed
delivered upon receipt if delivered by hand or wire transmission, 3
business days after mailing if mailed by first class, registered or
certified mail, or one business day after mailing or deposit with an
overnight courier service if delivered by express mail or overnight
courier.
9.2 No delay on the part of the Bank in the exercise of any right or
remedy shall operate as a waiver. No single or partial exercise by the
Bank of any right or remedy shall preclude any other future exercise
of it or the exercise of any other right or remedy. No waiver or
indulgence by the Bank of any default shall be effective unless in
writing and signed be the Bank, nor shall a waiver on one occasion by
construed as a bar to or waiver of that right on any future occasion.
9.3 This agreement, the Notes, the Leases and any related loan documents
embody the entire agreement and understanding between the Borrower and
the Bank and supersede all prior agreements and understandings
relating to their subject matter. If any one or more of the
obligations of the Borrower under this agreement, the Notes or the
Leases shall be invalid, illegal or unenforceable in any jurisdiction,
the validity, legality and enforceability of the remaining obligations
of the Borrower shall not in any way be affected or impaired, and such
invalidity, illegality or unenforceability in one jurisdiction shall
not affect the validity, legality or enforceability of the obligations
of the Borrower under this agreement, the Notes or the Leases in any
other jurisdiction.
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9.4 The Borrower, if more than one, shall be jointly and severally liable.
9.5 This agreement is delivered in the State of Michigan and governed by
Michigan law. This agreement is binding on the Borrower and its
successors, and shall inure to the benefit of the Bank, its successors
and assigns.
9.6 Section headings are for convenience of reference only and shall not
affect the interpretation of this agreement.
10.0 INFORMATION SHARING. The Bank may provide, without any limitation
whatsoever, any information or knowledge the Bank may have about the
undersigned or any matter relating to this agreement and any related
documents to BANK ONE CORPORATION, or any of its subsidiaries or
affiliates or their successors, or to any one or more purchasers or
potential purchasers of this agreement or any related documents, and the
undersigned waives any right to privacy the undersigned may have with
respect to such matters. The Borrower agrees that the Bank may at any
time sell, assign or transfer one or more interests or participants in
all or any part of its rights or obligations in this agreement to one or
more purchasers whether or not related to the Bank.
11.0 CONTINUED VALIDITY. This agreement embodies the entire agreement and
understanding between the Bank and the Borrower and supersedes, amends,
replaces and restates all prior agreements and understandings relating to
its subject matter, including but not limited to the terms and conditions
of the CREDIT AUTHORIZATION Agreement dated SEPTEMBER 18, 1998, between
the Bank and the Borrower.
12.0 WAIVER OF JURY TRIAL. The Bank and the Borrower knowingly and
voluntarily waive any right either of them have a trial by jury in any
proceeding (whether sounding in contract or tort) which is in any way
connected with this or any related agreement, or the relationship
established under them. This provision may only be modified in a written
instrument executed by the Bank and the Borrower.
Executed by the parties on: AUGUST 31, 2000.
BANK ONE, MICHIGAN BORROWER: SYNTEL, INC.
BY:_______________________ BY:_________________________
XXXXXXX X. XXXXXXX, LO XXXXXX XXXXX, PRESIDENT
ADDRESS FOR NOTICES: ADDRESS FOR NOTICES:
2155 W. BIG BEAVER 0000 XXXXXXXXX, XXXXX 000
XXXX, XX 00000 XXXX, XX 00000
Fax No. (000) 000-0000 Fax/Telex No.
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