Exhibit 10(h)
MELLON BANK, N.A.
WITH
RESPONSE USA, INC.
UNITED SECURITY SYSTEMS, INC.
RESPONSE ABILITY SYSTEMS, INC.
EMERGENCY RESPONSE SYSTEMS, INC.
▇▇▇▇▇▇▇ SECURITY, INC.
AND
MSG SECURITY SYSTEMS, INC.
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LOAN AND SECURITY AGREEMENT
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TABLE OF CONTENTS
PAGE
SECTION 1. DEFINITIONS AND INTERPRETATION................................. 1
1.1 Terms Defined.................................................. 1
1.2 Accounting Principles.......................................... 10
SECTION 2. THE LOAN....................................................... 10
2.1 Revolving Line of Credit - Description......................... 10
2.2 Revolving Credit - Termination by Borrowers.................... 11
2.3 Interest....................................................... 11
2.4 Loan Disbursements............................................. 12
2.5 Fees........................................................... 12
2.6 Payments....................................................... 12
2.7 Use of Proceeds................................................ 13
2.8 Capital Adequacy............................................... 13
2.9 Mandatory Repayment............................................ 13
SECTION 3. COLLATERAL..................................................... 13
3.1 Description.................................................... 13
3.2 Lien Documents................................................. 14
3.3 Other Actions.................................................. 15
3.4 Collateral Pledge.............................................. 15
3.5 Searches....................................................... 15
3.6 Landlord's and Mortgagee's Waivers............................. 16
3.7 Filing Security Agreement...................................... 16
3.8 Power of Attorney.............................................. 16
SECTION 4. CLOSING AND CONDITIONS PRECEDENT TO ADVANCES................... 16
4.1 Resolutions, Opinions, and Other Documents..................... 17
4.2 Absence of Certain Events...................................... 18
4.3 Warranties and Representations at Closing...................... 18
4.4 Compliance with this Agreement................................. 18
4.5 Chief Executive Officer's Certificate.......................... 18
4.6 Verifications.................................................. 19
4.7 Sale of Preferred Stock........................................ 19
4.8 Closing........................................................ 19
4.9 Non-Waiver of Rights........................................... 19
4.10 Future Advances................................................ 19
4.11 Warranties and Representations upon Future Advances............ 19
SECTION 5. REPRESENTATIONS AND WARRANTIES................................. 20
5.1 Corporate Organization and Validity............................ 20
5.2 Insurance...................................................... 20
5.3 Litigation..................................................... 21
5.4 Title to Properties............................................ 21
5.5 Patents and Trademarks......................................... 21
5.6 Governmental Consent........................................... 21
5.7 Taxes.......................................................... 22
5.8 Financial Statements........................................... 22
5.9 Full Disclosure................................................ 22
5.10 Subsidiaries and Affiliates.................................... 22
5.11 Guarantees, Contracts, etc..................................... 22
5.12 Government Regulations and Compliance.......................... 23
5.13 Business Interruptions......................................... 25
5.14 Names and Addresses............................................ 25
5.15 Other Associations............................................. 25
5.16 Environmental Matters.......................................... 25
5.17 Regulation O................................................... 26
5.18 Capital Stock.................................................. 26
5.19 Solvency....................................................... 26
5.20 Monthly MRR.................................................... 26
5.21 Qualified Accounts............................................. 27
SECTION 6. AFFIRMATIVE COVENANTS.......................................... 27
6.1 Payment of Taxes and Claims.................................... 27
6.2 Maintenance of Properties, Collateral and Corporate
Existence...................................................... 27
6.3 Places of Business............................................. 29
6.4 Business Conducted............................................. 29
6.5 Litigation..................................................... 29
6.6 Certain Taxes.................................................. 29
6.7 Bank Accounts.................................................. 29
6.8 Employee Benefit Plans......................................... 29
6.9 Submission of Collateral Documents............................. 30
6.10 Other Governmental Contracts................................... 30
6.11 Financial Covenants............................................ 30
6.12 Financial and Business Information............................. 32
6.13 Officers' Certificates......................................... 33
6.14 Inspection and Verification.................................... 34
6.15 Tax Returns and Reports........................................ 34
6.16 Information to Participant..................................... 34
6.17 Material Adverse Developments.................................. 34
6.18 Lockbox Agreements............................................. 34
6.19 Executive Management........................................... 35
6.20 Interest Rate Cap Agreement.................................... 35
6.21 Notice of Certain Events....................................... 35
6.22 Board Nominee.................................................. 36
6.23 Board Observation.............................................. 36
6.24 Additional Policy.............................................. 36
6.25 Monitoring Agreements.......................................... 36
SECTION 7. NEGATIVE COVENANTS.............................................. 37
7.1 Sales, Merger, Consolidation, Dissolution or Liquidation....... 37
7.2 Acquisitions................................................... 37
7.3 Liens and Encumbrances......................................... 38
7.4 Transactions With Affiliates or Subsidiaries................... 38
7.5 Indebtedness or Guarantees..................................... 38
7.6 Distributions, Redemptions and Other Indebtedness.............. 39
7.7 Loans and Investments.......................................... 39
7.8 Use of Lender's Name........................................... 39
7.9 Change in Capital Stock........................................ 39
7.10 Method of Business............................................. 39
7.11 Officer/Shareholder Compensation............................... 40
7.12 Capital Expenditures........................................... 40
7.13 MRR Sales...................................................... 40
7.14 Purchases of MRR............................................... 40
7.15 Prohibited Transactions........................................ 40
7.16 Consulting Agreements.......................................... 40
7.17 Delinquencies.................................................. 40
7.18 Additional MRR Test............................................ 41
7.19 Modification of Financial Covenants............................ 41
7.20 Miscellaneous Covenants........................................ 41
SECTION 8. DEFAULT........................................................ 41
8.1 Events of Default.............................................. 41
8.2 Rights and Remedies............................................ 44
8.3 Continuation of Event of Default............................... 45
8.4 Nature of Remedies............................................. 45
8.5 Set-Off........................................................ 45
8.6 Confession of Judgment......................................... 45
SECTION 9. MISCELLANEOUS.................................................. 46
9.1 Governing Law.................................................. 46
9.2 Integrated Agreement........................................... 46
9.3 Waivers, Releases and Indemnification.......................... 46
9.4 Time........................................................... 48
9.5 Expenses of Lender............................................. 48
9.6 Brokerage...................................................... 48
9.7 Notices........................................................ 49
9.8 Headings....................................................... 50
9.9 Survival....................................................... 50
9.10 Successors and Assigns......................................... 50
9.11 Duplicate Originals............................................ 50
9.12 Modification................................................... 50
9.13 Signatories.................................................... 50
9.14 Third Parties.................................................. 50
9.15 Discharge of Taxes, Borrowers' Obligations, Etc................ 51
9.16 Withholding and Other Tax Liabilities.......................... 51
9.17 Consent to Jurisdiction........................................ 52
9.18 Waiver of Jury Trial........................................... 52
9.19 Future Commitments............................................. 52
LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement ("Agreement") is dated as of June 30,
1996 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"), ▇▇▇▇▇▇▇ SECURITY, INC., a New Jersey corporation ("SSI")
and MSG SECURITY SYSTEMS, INC., a Pennsylvania corporation ("MSG") (each a
"Borrower" and collectively "Borrowers") and MELLON BANK, N.A. ("Lender").
BACKGROUND
A. Borrowers desire to establish certain financing arrangements with and
borrow funds and obtain other credit accommodations from Lender, and Lender is
willing to establish such arrangements for and make loans and extensions of
credit to Borrowers under the terms and provisions hereinafter set forth.
B. The parties desire to define the terms and conditions of their
relationship and to reduce their agreements to writing.
NOW, THEREFORE, the parties hereto, intending to be legally bound hereby,
agree as follows:
SECTION 1. DEFINITIONS AND INTERPRETATIONSECTION 1. DEFINITIONS AND
INTERPRETATIONSECTION 1. DEFINITIONS AND INTERPRETATION
1.1 Terms Defined.1 Terms Defined.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.
Additional Policy - The life insurance policy to be issued by Banner
Life Insurance Company, to be owned by RUSA, insuring the life of ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇ in the face amount of $1,000,000.
Advances - Any monies advanced or credit extended to Borrowers by
Lender 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. ss.
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, income
taxes, depreciation 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 4.6.
Closing Date - As defined in Section 4.6.
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 Borrower provided to Lender
on or prior to the date hereof.
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.
Key Man Policies - The key man life insurance policies issued by
First Colony Insurance Company and Transamerica Occidental Life Insurance
Company, which are owned by RUSA, insure the life of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and
are in the aggregate face amount of $2,000,000.
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, encroachments, easements, rights-of-way, covenants, conditions,
restrictions, 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 holds 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.
Life Insurance Policies - The Key Man Policies and the Additional
Policy.
Loan Documents - This Agreement, the Revolving Credit Note, the
Pledge Agreement, 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 - Fifteen Million ($15,000,000)
Dollars, subject to reduction as provided in Sections 2.9 and 6.2(b) herein.
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 before tax income (or loss) of
Borrowers, 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) the Preferred Stock.
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 extensions, 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 Lender.
Operating Contracts - All Monitoring Agreements, Rental Agreements
and Service Agreements.
Permitted Bank Accounts - Borrowers' bank accounts listed on
Schedule "6.7" hereto, but only for the time periods set forth in Section 6.7
and only if there is compliance with Section 6.18 herein.
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 Agreement - A collateral pledge agreement from RUSA, of even
date herewith, 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.
Prime Rate - That rate designated by Lender in its discretion from
time to time as Lender'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 Lien 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
principal 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 the
date hereof 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.
Senior Funded Debt - The unpaid balance of Advances outstanding
under the Revolving Credit on the last day of 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.
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 the date hereof
issued by RUSA to Holdings, on the date hereof, there are 1,032,135 shares of
RUSA's Common Stock issuable thereunder.
Warrant Agreement - The Warrant Agreement dated the date hereof
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 accounting
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 Borrowers, and to be increased by future Advances
which may be made by Lender 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 Lender 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 Lender'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 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.
(c) The term of the Revolving Credit and Lender'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 Lender 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.
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 Lender, 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 Lender'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 Lender. 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
Borrowers 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 shall be unconditionally obligated to pay Lender One
Hundred Fifty Thousand ($150,000) Dollars on the Closing Date (the "Facility
Fee") to which Lender is entitled for committing to and creating the Revolving
Credit for the benefit of Borrowers; Borrowers shall be credited for payments
made by them to Lender prior to the Closing Date on account thereof.
(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 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.
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, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, 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 satisfy
Borrowers' borrowed indebtedness to its current lender 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 Lender 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 ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ (i) the
proceeds of the Life Insurance 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
"Collateral"):
(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 Borrower's respective now owned or
hereafter acquired Inventory of every nature and kind, wherever located;
(c) General Intangibles - All of such Borrower'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 Borrower'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 Lender's possession;
(g) Life Insurance - The Key Man Policies and the Additional Policy;
(h) Pledged Stock - The Pledged Stock; 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 Lender'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, 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 Lender
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.
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;
(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 Mortgagee's Waivers: 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 Lender 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 Lender'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 Borrowers;
(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
Borrowers addressed to Lender;
(g) such financial statements, reports, certifications and other
operational information concerning Borrowers, including, without limitation,
Borrowers' June 30, 1995 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, 1995 and March 31, 1996;
(i) payment by Borrowers of all fees and expenses including, without
limitation, the balance of 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, Financing Statements properly executed by Borrowers, and
payoff letters and UCC-3 termination statements terminating all Liens (other
than Permitted Liens) on the Collateral, properly executed by the secured
parties;
(k) the Pledge Agreement, accompanied by the original stock
certificates for all stock pledged thereunder and stock powers endorsed in
blank, all properly executed by RUSA;
(l) collateral assignments of the Key Man Policies, properly
executed by RUSA;
(m) the Warrant Documents, properly executed by RUSA;
(n) 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; and
(o) all Rental Agreements [and Monitoring Agreements] in effect; 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 either June 30, 1995 or March 31, 1996,
any material adverse change in the assets, operations, condition (financial
or otherwise), products or prospects of either 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 by 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 Sale of Preferred Stock: RUSA shall have sold all 7,500 shares of
Preferred Stock for an aggregate sale price of at least $7,500,000.
4.8 Closing: Subject to the conditions of this section, the initial
Advances 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
Lender.
4.9 Non-Waiver of Rights: By completing the Closing hereunder, or by
making Advances hereunder, Lender 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 Lender's claims and rights resulting from any
breach or misrepresentation by any Borrower are specifically reserved by
Lender.
4.10 Future Advances: Lender 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.
4.11 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 conjunction with the
execution, delivery and performance of this Agreement 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
proceedings for which appropriate reserves have been maintained under GAAP.
No Borrower is aware of any proposed additional tax assessment 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, 1995 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.
Borrower's unaudited consolidated and consolidating financial statements as at
and for the nine months ended March 31, 1996 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 March 31, 1996 or June 30, 1995.
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 contained 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: RUSA has no direct or indirect
Subsidiaries or Affiliates other than the other Borrowers.
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 agreement, 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 securities 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 Lender), "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 have been duly and
validly authorized and issued and are fully paid and nonassessable and have
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
Lender'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 notwithstanding 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
Collateral 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 Lender'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 transactions, 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 Lender'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 termination 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 (i) Borrowers' payroll account(s) and (ii) until
creation of the lockbox accounts required by Section 6.18 herein, the
Permitted Bank Accounts.
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 Borrower'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 Lender, 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 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
--------------------- -------------
September 30, 1996 1.50 to 1.0
December 31, 1996 2.00 to 1.0
March 31, 1997 2.25 to 1.0
June 30, 1997 2.50 to 1.0
September 30, 1997 2.75 to 1.0
December 31, 1997 and thereafter 3.00 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 Quarters 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
--------------------- -------------
September 30, 1996 5.00 to 1.0
December 31, 1996 4.75 to 1.0
March 31, 1997 4.50 to 1.0
June 30, 1997 4.00 to 1.0
September 30, 1997 4.00 to 1.0
December 31, 1997 3.75 to 1.0
March 31, 1998 3.75 to 1.0
June 30, 1998 and thereafter 3.50 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)
--------------------- -----------------
September 30, 1996 $(580)
December 31, 1996 (440)
March 31, 1997 (360)
June 30, 1997 (330)
September 30, 1997 (280)
December 31, 1997 (240)
March 31, 1998 (180)
June 30, 1998 (130)
September 30, 1998 (30)
December 31, 1998 20
March 31, 1999 20
June 30, 1999 20
September 30, 1999 120
and thereafter
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 Statements 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 ▇▇▇▇▇▇▇▇ & Co. for Fiscal Year 1996 and a Big Six
firm for all Fiscal Years thereafter) selected by Borrowers and acceptable to
Lender and (2) a Controller's Certificate, within one hundred five (105) 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 one hundred five (105) 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) 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 Financial 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 has 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 therewith 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 Lender, 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 within sixty (60) days
after Closing execute lockbox agreements satisfactory to Lender establishing
arrangements under which all of each 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; such lockbox agreements shall become effective (and shall be in
effect at all times thereafter) upon execution thereof. During the
continuance of an Event of Default, all lockbox collections may, at Lender's
discretion, be applied by Lender to the Obligations as Lender may determine
in accordance with applicable law. Until the lockboxes are created with
Lender, Borrowers shall cause all monies collected in the Permitted Accounts
to be immediately transferred to Borrowers' accounts with Lenders.
6.19 Executive Management: At all times (i) ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
("▇▇▇▇▇▇") shall be the Chairman, President and Chief Executive Officer of
RUSA, (ii) ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇") shall be the Chief Operating Officer
of RUSA, and (iii) ▇▇▇▇ ▇▇▇▇▇▇ shall be the President of USS. On or before
September 30, 1996, RUSA shall have hired a chief financial officer
acceptable to Lender and such person shall, at all times, remain such chief
financial officer, subject to RUSA's right to replace such person with
another individual reasonably acceptable to Lender.
6.20 Interest Rate Cap Agreement: Borrowers shall on or before
September 30, 1996 obtain and at all times 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 Borrower eliminates
its risk with respect to $7,500,000 of the Revolving Credit from increases in
the Prime Rate above ten and one-half percent (10.5%) per annum.
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 Lender 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 Policy: Within 60 days after Closing RUSA will (i)
obtain the Additional Policy and (ii) collaterally assign to Lender (by an
assignment in form and substance satisfactory to Lender) such Policy.
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 Lender.
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 does not exceed either $1,000,000 or 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 Borrower'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), and (iv) Subordinated Indebtedness, (v)
trade payables and other accrued liabilities incurred in the ordinary course
of business, and (vi) Indebtedness listed on Schedule "7.5" hereto, no
Borrower shall 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; (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 Lender, except (i) trade credit in the ordinary course of
business for the purchase of inventory to be sold in the ordinary course of
Borrower'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 Lender'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 Lender.
Borrowers may nevertheless disclose to third parties that they have a deposit
and borrowing relationship with Lender. Nothing herein contained is intended
to permit or authorize any Borrower to make any contract or commitment on
behalf of Lender.
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
▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ may not exceed $225,000 and $150,000, respectively, in any
Fiscal Year.
7.12 Capital Expenditures: Borrowers shall not expend, on an aggregate
basis, for Capital Expenditures (calculated on a non-cumulative basis) more
than $150,000 in any rolling twelve month period.
7.13 MRR Sales: No Borrower shall sell or otherwise dispose of
Operating Contracts without Lender'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 Lender'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 $500,000 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, Borrowers and Lender 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 automatically cause an acceleration of the Obligations):
(a) Payments - if any Borrower fails to make any payment 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 Lender'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 ▇▇▇▇▇▇ 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 Lender);
(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 Lender 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 Lender'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
Lender 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 Lender hereunder 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 Lender (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 LENDER'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 LENDER 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 BORROWER, 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 Lender 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 Lender, 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 Lender.
(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 performance 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, negotiation, 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 $450,000 fee), this transaction
was brought about and entered into by Lender and Borrowers acting as
principals and without any brokers, agents or finders being the effective
procuring cause hereof. Borrowers 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, Lender'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.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ Pike
Suite 200
Plymouth Meeting ,PA 19462
Attn: ▇▇▇ ▇. ▇▇▇▇▇▇▇
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: Blank Rome ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, Esquire
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
If to Borrowers: Response USA, Inc.
▇▇-▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇, Esquire
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
(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 Lender, 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 enforcement is sought.
9.13 Signatories: Each individual signatory hereto represents 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 Lender 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 Lender,
contesting such taxes or Liens, (d) pay for the maintenance and preservation
of any of the Collateral. Expenses and Advances by Lender 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 Lender shall not be construed as a waiver
by Lender 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 Lender'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 subrogated 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 ▇▇▇▇▇▇▇▇▇▇
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 LENDER HEREBY 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, Lender 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:
▇▇▇▇▇▇▇ SECURITY, INC. RESPONSE ABILITY SYSTEMS, INC.
By: By:
------------------------- -------------------------
Title:______________________ Title:______________________
MSG SECURITY SYSTEMS, INC. EMERGENCY RESPONSE SYSTEMS, INC.
By: By:
------------------------- -------------------------
Title:______________________ 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 5.11(a) -- Existing Guaranties, Investments and
Borrowings
Schedule 5.11(b) -- Written Contracts and Agreements
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
