Exhibit 10.4
________________________________________
FINANCING AND SECURITY AGREEMENT
Dated as of October 18, 1995
by and among
THE FIRST NATIONAL BANK OF MARYLAND
and
PRODUCTION GROUP INTERNATIONAL, INC.
EXECUTOURS, INC.
SAFARIS EVENTS, INC.
KALEIDOSCOPE EVENTS, INC.
AGENDA WASHINGTON INC.
WASHINGTON, INC.
C.H.L. VENTURES, INC.
and
PGI ACQUISITION COMPANY E
__________________________________________
TABLE OF CONTENTS
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Page
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1. DEFINITIONS
1.1 Defined Terms.......................................... 1
1.2 Uniform Commercial Code Terms.......................... 11
1.3 Accounting Terms....................................... 11
1.4 ERISA Terms............................................ 11
1.5 Other Definitional Provisions.......................... 12
2. THE WORKING CAPITAL LINE OF CREDIT
2.1 Advances under the Working Capital Line
of Credit............................................ 12
2.2 Repayment and Prepayment under Working Capital
Line of Credit Advances.............................. 13
3. THE ACQUISITION FACILITY
3.1 Advances under the Acquisition Facility................ 14
3.2 Repayment and Prepayment of Advances under
the Acquisition Facility............................. 14
4. THE EQUIPMENT FACILITY
4.1 Advances under the Equipment Facility.................. 15
4.2 Repayment and Prepayment of Advances of the
Equipment Facility................................... 15
5. GENERAL CREDIT PROVISIONS
5.1 Payments............................................... 16
5.2 Illegality............................................. 16
5.3 Increased Costs........................................ 17
5.4 Computations........................................... 18
5.5 Application of Payments................................ 18
5.6 Reliance by Bank on Communications
and Authorizations from Production Group
International, Inc. on behalf of Borrowers........... 19
5.7 Joint and Several Liability; Right of
Contribution......................................... 19
6. SECURITY
6.1 Financing Documents.................................... 19
6.2 Collateral............................................. 20
6.3 Location of Collateral; Principal Place of
Business............................................. 21
6.4 Loss of Collateral..................................... 21
6.5 Filing of Financing Statements; Perfection
of Security Interest in Collateral.................... 21
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7. REPRESENTATIONS AND WARRANTIES
7.1 Subsidiaries............................................ 22
7.2 Good Standing........................................... 22
7.3 Corporation Authority................................... 23
7.4 Binding Obligations..................................... 23
7.5 Litigation.............................................. 23
7.6 No Conflicting Agreements............................... 23
7.7 Financial Condition..................................... 23
7.8 Tax Returns............................................. 24
7.9 Compliance with Laws Generally.......................... 24
7.10 Margin Stock............................................ 24
7.11 ERISA................................................... 24
7.12 Governmental Consent.................................... 25
7.13 No Default or Event of Default.......................... 25
7.14 Other Liens............................................. 25
7.15 Prior Names, Trade Names, Principal Places
of Business........................................... 25
7.16 Nature of Financing; Usury.............................. 25
8. CONDITIONS PRECEDENT
8.1 Receipt and Approval of Documents required
by Bank Commitment Letter............................. 25
8.2 Approval of Bank's Counsel.............................. 26
8.3 Compliance.............................................. 26
8.4 Bank's Fees and Expenses................................ 26
9. AFFIRMATIVE COVENANTS
9.1 Financial Reporting..................................... 26
9.2 Taxes and Claims........................................ 27
9.3 Insurance............................................... 27
9.4 Corporate Existence..................................... 28
9.5 Changes in Management................................... 28
9.6 Compliance with Laws Generally.......................... 28
9.7 Books and Records; Inspection........................... 28
9.8 Litigation.............................................. 29
9.9 Notification of Certain Events, Events of
Default and Adverse Developments...................... 29
9.10 Addition of New Subsidiaries as Borrowers............... 29
10. FINANCIAL COVENANTS
10.1 Working Capital........................................ 30
10.2 Backlog of Purchase Orders............................. 30
10.3 Net Worth.............................................. 30
10.4 Intangible Assets...................................... 30
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11. NEGATIVE COVENANTS
11.1 Impairment of Security................................ 30
11.2 No Change in Control.................................. 31
11.3 Stock in Subsidiaries................................. 31
11.4 Sale, Transfer or Encumbrance of Property............. 31
11.5 No Additional Indebtedness............................ 31
11.6 Merger; Dissolution or Sale of Assets................. 31
11.7 Dividends or Distributions to Stockholders............ 31
11.8 Payments, Advances and Salaries to Stockholders....... 31
11.9 ERISA Compliance...................................... 32
12. EVENTS OF DEFAULT; REMEDIES
12.1 Events of Default..................................... 32
12.2 Remedies.............................................. 32
13. MISCELLANEOUS
13.1 Notices............................................... 37
13.2 Survival of Agreement; Successors and Assigns......... 38
13.3 Fees and Expenses of Bank............................. 38
13.4 Applicable Law; Jurisdiction; Consent to
Service of Process.................................. 39
13.5 Waiver of Trial by Jury............................... 39
13.6 Confession of Judgment................................ 40
13.7 Modifications......................................... 40
13.8 No Waiver of Rights by Bank........................... 41
13.9 No Liability of Bank; No Warranty by Bank............. 41
13.10 Indemnification....................................... 41
13.11 No Partnership........................................ 42
13.12 Time of Essence....................................... 42
13.13 Illegality............................................ 42
13.14 Counterparts.......................................... 42
13.15 Captions and Headings................................. 42
13.16 Borrowers' Obligations Absolute and
Unconditional....................................... 42
13.17 Extension of Termination Date ........................ 43
13.18 Confidentiality....................................... 44
EXHIBITS AND SCHEDULES
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Exhibit A - Form of Application and Agreement for Standby Letters of Credit
Exhibit B - Form of Borrowing Base Certificate
Exhibit C - Form of Customer Backlog Certificate
Exhibit D - Form of Subordination Agreement for Acquisition Debt
Exhibit E - Form of Assumption Agreement for New Subsidiaries
Schedule I - Description of Permitted Liens
Schedule II - Schedule of Prior Names; Trade Names; Principal Places of
Business
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FINANCING AND SECURITY AGREEMENT
--------------------------------
THIS FINANCING AND SECURITY AGREEMENT (this "Agreement") is made as of this
____ day of October, 1995, among THE FIRST NATIONAL BANK OF MARYLAND, a national
banking association (the "Bank"), and PRODUCTION GROUP INTERNATIONAL, INC., a
Virginia corporation ("Production Group"), and its subsidiaries, EXECUTOURS,
INC., a Massachusetts corporation, SAFARIS EVENTS, INC., a Virginia corporation,
KALEIDOSCOPE EVENTS, INC., a Virginia corporation, AGENDA WASHINGTON INC., a
Virginia corporation, WASHINGTON, INC., a District of Columbia corporation,
C.H.L. VENTURES, INC., a California corporation, and PGI ACQUISITION COMPANY E,
a Virginia corporation (Production Group and each of its identified subsidiaries
being hereinafter identified each as a "Borrower" and collectively as the
"Borrowers").
RECITALS
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The Borrowers have applied to the Bank for credit facilities in the total
aggregate principal amount at any one time outstanding of United States Ten
Million Dollars (U.S. $10,000,000) to be comprised of the following
(collectively, the "Credit Facilities"):
(a) A working capital line of credit in the amount of up to
$4,000,000, which shall be available for direct loan advances and standby
letters of credit until September 30, 1996 (the "Working Capital Line of
Credit");
(b) An acquisition facility in the amount of up to $5,000,000, which
shall be available to finance Eligible Acquisitions and the purchase of shares
from minority shareholders until May 31, 1998 (the "Acquisition Facility"); and
(c) An equipment facility in the amount of up to $1,000,000, which
shall be available to purchase new equipment and to refinance existing equipment
until May 31, 1996 (the "Equipment Facility").
The Bank is willing to extend the Credit Facilities to the Borrowers upon
the terms and subject to the conditions of this Agreement.
AGREEMENTS
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NOW, THEREFORE, in consideration of the mutual agreements herein and other
good and valuable consideration, the Borrowers and the Bank hereby agree as
follows:
ARTICLE I
DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the following terms shall
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have the following meanings:
"Acquisition Facility" shall mean the line of credit established
--------------------
pursuant to Article III of this Agreement to finance Eligible Acquisitions and
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the purchase of shares from minority shareholders by any Borrower.
"Acquisition Facility Commitment" shall mean the commitment by the
-------------------------------
Bank to make direct loan advances to any Borrower to fund any of the approved
purposes for which the Acquisition Facility was established, in the aggregate
principal amount at any one time outstanding not to exceed United States Five
Million Dollars (U.S. $5,000,000).
"Acquisition Facility Obligations" shall mean the joint and several
--------------------------------
obligations of the Borrowers to repay all advances of the Acquisition Facility,
with interest thereon, at the times and in the amounts provided in the
Acquisition Facility Promissory Note, and any related obligations for the
payment of fees and expenses provided for by the terms of this Agreement.
"Acquisition Facility Promissory Note" shall mean the promissory note
------------------------------------
of even date herewith executed by the Borrowers in favor of the Bank and
containing the terms and conditions under which the principal amount of advances
made under the Acquisition Facility, together with interest thereon, will be
repaid.
"Advance Rate Percentage" shall mean the percentage of the Borrowers'
-----------------------
Eligible Receivables for purposes of determining the Receivables Collateral
Value which percentage will be determined on the basis of the Borrowers'
aggregate Dilution Rate for Receivables for the immediately preceding fiscal
quarter, as follows:
Dilution Rate Advance Rate Percentage
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0 greater than 5% 85%
5 greater than 10% 80%
10 greater than 15% 75%
greater than 15% 60%
"Agreement" shall mean this Financing and Security Agreement, as it
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may from time to time be amended, supplemented or otherwise modified in
accordance with the terms hereof.
"Application and Agreement for Standby Letter of Credit" shall mean an
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Application and Agreement for Standby Letter of Credit in the form attached
hereto as Exhibit A and made a part hereof, or in such other form which is
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provided by the Bank to the Borrowers as the form of Application and Agreement
which is then in use by the Bank in connection with the issuance of its Standby
Letters of Credit, which is executed by a Borrower and delivered to the Bank in
connection with a request for the issuance of a Standby Letter of Credit.
"Available Acquisition Facility Commitment" shall mean, at any
-----------------------------------------
particular time, an amount equal to the amount of the
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Acquisition Facility Commitment at such time, minus the Utilized Portion of the
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Acquisition Facility Commitment.
"Available Equipment Facility Commitment" shall mean, at any
---------------------------------------
particular time, an amount equal to the amount of the Equipment Facility
Commitment at such time, minus the Utilized Portion of the Equipment Facility
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Commitment.
"Available Working Capital Line of Credit Commitment" shall mean, at
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any particular time, an amount equal to the lesser of (a) the amount of the
Working Capital Line of Credit Commitment at such time, and (b) the Receivables
Collateral Value at such time, minus the Utilized Portion of the Working Capital
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Line of Credit Commitment.
"Bank Commitment Letter" shall mean the Bank's Commitment Letter dated
----------------------
August 30, 1995, addressed to the Borrowers.
"Borrowers' Account" shall mean the Production Group account with the
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Bank.
"Borrowers' Obligations" shall mean, collectively, the Acquisition
----------------------
Facility Obligations, the Equipment Facility Obligations and the Working Capital
Line of Credit Obligations, together with all other sums due from the Borrowers
to the Bank under the terms of the Financing Documents.
"Business Day" shall mean a day on which commercial banking
------------
institutions are open for business in Baltimore, Maryland.
"Collateral" shall have the meaning given to such term in Section 6.2
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of this Agreement.
"Commitment Period" shall mean the period during which each of the
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Acquisition Facility Commitment, the Equipment Facility Commitment and the
Working Capital Facility Commitment, respectively, will be available to be
accessed by the Borrowers, which period begins on the date of this Agreement and
ends on the Termination Date applicable to each of the Credit Facilities.
"Credit Facilities" shall mean, collectively, the Acquisition
-----------------
Facility, the Equipment Facility and the Working Capital Line of Credit.
"Default" shall mean any of the events specified in Section 12.1
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hereof, whether or not any requirement for the giving of notice, the lapse of
time, or both, or any other condition, has been satisfied.
"Dilution Rate" shall mean the aggregate percentage of the Borrowers'
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Receivables which were subject to write-off or write-down, were determined by
the applicable Borrower to be "uncollectible" in accordance with that Borrower's
standard credit and collection policies, or were not for any reason collected
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within 180 days of the invoice date, during the Borrowers' previous fiscal
quarter.
"Dollars" and the sign "$" shall mean dollars in lawful money of the
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United States of America and, in relation to all payments in Dollars hereunder,
(i) same day funds paid through the Baltimore Clearing House Interbank Payments
Systems, or (ii) immediately available funds paid through the Baltimore Federal
Reserve Bank, or (iii) such other funds as may then be required by the customary
procedure of member banks of the Baltimore Clearing House Association for the
settlement of payments in Dollars.
"Eligible Acquisitions" shall mean any corporation which satisfies the
-----------------------
following eligibility requirements or is otherwise approved in writing by the
Bank for financing under the Acquisition Facility:
(a) the corporation conducts a business which is within the same or
related lines of service businesses as those conducted by the Borrowers;
(b) the corporation has not been generating net losses on an
historical basis, taking into account any adjustments which are typically made
in accordance with generally accepted accounting principles as interpreted by
the "Big 6" international accounting firms when filing pro-forma post-
acquisition financial statements with the Securities and Exchange Commission
(the "SEC") (i.e. the inclusion of debt and related interest costs incurred to
finance the acquisition and the exclusion of income, charges and operating costs
and owner compensation beyond customary and reasonable salary all of which are
non-recurring in nature and which will be non-recurring following the
acquisition);
(c) Production Group has delivered to the Bank a certificate of each
of its chief financial officer or chief executive officer and, in the event that
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the total purchase price of the Eligible Acquisition exceeds $2,000,000, of
Production Group's independent auditors or another independent auditor who is
engaged by Production Group to represent it in connection with the Acquisition,
to the effect that, on a pro-forma combined basis for the most recent fiscal
quarter of the Borrowers, the purchase of the Eligible Acquisition, if it had
occurred during such fiscal quarter, would not have resulted in a violation of
any of the financial covenants contained in the Financing Documents; taking into
account any adjustments which are typically made in accordance with generally
accepted accounting principles as interpreted by the "Big 6" international
accounting firms when filing pro-forma post-acquisition financial statements
with the SEC (i.e. the inclusion of debt and related interest costs incurred to
finance the acquisition and the exclusion of income, charges and operating costs
which are non-recurring in nature and which will be non-recurring following the
acquisition);
(d) any financing extended to the Borrowers by one or more sellers of
the corporation shall be (i) repaid (on an
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average weighted basis) over a period in excess of that which would be
determined on the basis of a three-year straight-line amortization schedule,
except for the Spearhead Communications Limited subordinated debt, which does
not satisfy this requirement and (ii) subordinated as to collection to the
Borrowers' obligations to the Bank in respect of the Acquisition Facility, which
subordination shall be documented in an agreement among the seller(s), Borrowers
and Bank in substantially the form attached hereto as Exhibit D and made a part
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hereof; and (e) the purchase by the Borrowers of the corporation shall not
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immediately or with the passage of time cause a Default or an Event of Default
under the Financing Documents.
"Eligible Receivable" and "Eligible Receivables" mean, at any time of
--------------------- ----------------------
determination thereof, each account which conforms and continues to conform to
the following criteria to the satisfaction of the Bank. A Receivable which is
at any time an Eligible Receivable, but which subsequently fails to meet the
requirements of the Bank for eligibility shall cease for all purposes to be an
Eligible Receivable. In addition to any other criteria for eligibility
determined by the Bank, a Receivable shall not be deemed to be eligible unless
it meets the following minimum requirements (except as the Bank may otherwise
expressly consent in writing):
(a) the Receivable is genuine and is in all respects what it
purports to be;
(b) the Receivable arose in the ordinary course of the business
of any Borrower from a bona fide outright sale or lease of goods by a Borrower,
or from services performed by a Borrower, and (i) such goods have been delivered
to the appropriate account debtor or their respective designees, the appropriate
Borrower has in its possession shipping and delivery receipts evidencing such
shipment and delivery, no return, rejection or repossession has occurred, and
such goods have been finally accepted by the account debtor, or (ii) such
services have been satisfactorily completed and accepted by the appropriate
account debtor;
(c) the Receivable is based upon an enforceable written contract
for goods delivered or for services performed, and the same were shipped, held,
or performed in accordance with such order or contract; it being the intention
that advance ▇▇▇▇▇▇▇▇ not be considered as Receivables until such time as
performance is completed by the relevant Borrower;
(d) the title of the appropriate Borrower to the Receivable is
absolute and is not subject to any lien or security interest except in favor of
the Bank, and the appropriate Borrower otherwise has the full and unqualified
right and power to assign and grant a security interest in the Receivable to the
Bank as security and collateral for the payment of the Borrowers' obligations in
respect of the Financing;
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(e) the amount, which is shown on the books of the appropriate
Borrower and on any invoice, certificate, schedule or statement delivered to the
Bank, is owing to such Borrower and no partial payment has been received unless
accurately reflected and deducted from the principal amount of the Receivable
then due and \owing;
(f) the Receivable is not at that time and will not to the
knowledge of the Borrower be subject to any claim of reduction, counterclaim,
setoff, recoupment, or other defense in law or equity, or any claim for credits,
allowances, or adjustments by the account debtor because of returned, inferior,
or damaged goods or unsatisfactory services, or for any other reason;
(g) the account debtor has not returned or refused to retain, or
otherwise notified the Borrower of any dispute concerning, or claimed
nonconformity of, any of the goods or services from the sale of which the
account arose;
(h) the account debtor is not the subject of any bankruptcy or
insolvency proceedings, and the Receivable is not in the Bank's opinion unlikely
to be paid because of insolvency, potential bankruptcy, death or any other
reason;
(i) the Receivable is not subject to any potential claim of a
surety or bonding company;
(j) the Receivable does not arise from any transactions with any
affiliated entity or person of any Borrower, or employee of any Borrower;
(k) the Receivable does not represent the payment obligation of
any account debtor incorporated in or primarily conducting business outside of
the United States, unless (i) the transaction giving rise to the Receivable is
supported by a letter of credit, acceptance or other credit enhancement
acceptable to the Bank or (ii) the Receivable represents a credit risk which is
otherwise acceptable to the Bank, is denominated in U.S. Dollars, British
Sterling or other currency acceptable to the Bank and the assignment of the
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Receivable to the Bank as security for the Borrowers' Obligations has been
perfected to the satisfaction of the Bank;
(l) the Receivable does not arise from any sales on approval or
consignments, and the Receivable is not otherwise subject to any repurchase or
return agreements;
(m) if the account debtor is the United States or any
instrumentality thereof, the appropriate Borrower has assigned the rights to
receive payment to the Bank in compliance with the Assignment of Claims Act of
---------------------------
1940, as amended, and any applicable regulations;
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(n) the aggregate dollar amount of Receivables due from any
single account debtor do not exceed (i) 10% of the Borrower's aggregate annual
revenue and (ii) 25% of the Borrowers' aggregate Receivables represented in any
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one monthly aging report;
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(o) no more than 120 days have elapsed from the invoice date and
no more than 90 days have elapsed from the date on which payment was due under
the invoice;
(p) the Receivable is not payable by an account debtor with
respect to which 50% or more of the dollar amount of such account debtor's
Receivables to any Borrower are more than 120 days from the date of invoice or
more than 90 days due from the date on which payment was due under the invoice;
(q) the Receivable is not evidenced by Chattel Paper or
Instruments unless the Bank has agreed in writing that it may be deemed eligible
and all originals of such Chattel Paper or Instruments have been endorsed and
delivered to the Bank;
(r) the Receivable is not subject to any offset and is not
payable by any account debtor who is owed any sum by any Borrower except for
unrelated trade debt owned by any Borrower to a provider of services in the
ordinary course of business;
(s) no part of the Receivable represents a progress billing or a
retainage, and
(t) the Bank in the exercise of its sole and absolute discretion
has not deemed the Receivable ineligible because of uncertainty as to the
creditworthiness of the account debtor or because the Bank otherwise considers
the collateral value thereof to the Bank to be impaired or its ability to
realize such value to be insecure.
In the event of any dispute, under the foregoing criteria, as to whether an
account is, or has ceased to be, an Eligible Receivable, the decision of the
Bank in the exercise of its sole and absolute discretion shall control.
"Equipment Facility" shall mean the line of credit established
------------------
pursuant to Article IV of this Agreement to fund the purchase of new equipment
----------
or refinancing of existing equipment by any Borrower.
"Equipment Facility Commitment" shall mean the commitment by the Bank
-----------------------------
to make direct loan advances to any Borrower to fund any of the approved
purposes for which the Equipment Facility was established in the aggregate
principal amount at any one time outstanding not to exceed United States One
Million Dollars (U.S. $1,000,000).
"Equipment Facility Obligations" shall mean the joint and several
------------------------------
obligations of the Borrowers to repay all advances of the Equipment Facility,
with interest thereon, at the times and in the amounts provided in the Equipment
Facility Promissory Note, and any related obligations for the payment of fees
and expenses provided for by the terms of this Agreement.
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"Equipment Facility Promissory Note" shall mean the promissory note of
----------------------------------
even date herewith executed by the Borrowers in favor of the Bank and containing
the terms and conditions under which the principal amount of advances made under
the Equipment Facility, together with interest thereon, will be repaid.
"Event of Default" shall mean any of the events specified in Section
---------------- -------
12.1 hereof, provided that any requirement for the giving of notice, the lapse
----
of time, or both, or any other condition, has been satisfied.
"Financing Documents" shall mean, collectively, this Financing and
-------------------
Security Agreement, all Applications and Agreements for Standby Letters of
Credit and Standby Letters of Credit issued pursuant thereto, the Acquisition
Facility Promissory Note, the Equipment Facility Promissory Note and the Working
Capital Line of Credit Promissory Note and any other documents, certificates and
agreements which are hereafter executed and delivered by one or more Borrowers
or any other Person in connection with any of the Borrowers' Obligations.
"Governmental Authority or Authorities" shall mean any governmental or
-------------------------------------
quasi-governmental entity, court or tribunal including, without limitation, any
department, commission, board, bureau, agency, administration, service or other
instrumentality of any foreign or domestic governmental entity.
"Permitted Liens" shall mean (a) liens or security interests in favor
---------------
of the Bank; (b) existing liens described in Schedule I attached hereto and made
----------
a part hereof; (c) liens arising or created in the future with the prior written
consent of the Bank; and (d) purchase money security interests in equipment,
except to the extent that such equipment is financed or refinanced under the
Equipment Facility.
"Person" shall mean an individual, a partnership, a corporation, a
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trust, any other organization or entity or any government or governmental body
or authority.
"Prime Rate" shall mean the greater of (a) the floating and
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fluctuating per annum prime rate of interest established and declared by the
Bank from time to time, and (b) the average rate, rounded to the nearest one-
tenth of one percent (0.1%), for 90-day maturity dealer-placed commercial paper
for the week most recently reported in the Federal Reserve Statistical Release
number H-15, entitled "Selected Interest Rates" (or any succeeding publication).
The Prime Rate is an index determined by the Bank and does not represent the
lowest rate of interest charged by the Bank to any borrower or class of
borrowers. Each time the Prime Rate shall change, the rate of interest, which
is applicable to any of the Borrowers' Obligations bear interest on the basis of
the Prime Rate, shall change immediately and contemporaneously with each such
change of the Prime Rate.
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"Proceeds" or "proceeds" shall mean, when used with respect to any of
-------- --------
the Collateral, all cash and non-cash proceeds within the meaning of the Uniform
Commercial Code as adopted by the state in which the Collateral to which such
Proceeds relate is or was located, and shall include the proceeds of any an all
insurance policies.
"Receivables Collateral Value" shall mean the relevant Advance Rate
----------------------------
Percentage multiplied by the aggregate amount of the Borrowers' Eligible
Receivables for purposes of determining the Available Working Capital Line of
Credit Commitment.
"Standby Letter of Credit" shall mean a Standby Letter of Credit
------------------------
issued by the Bank under the Working Capital Line of Credit to a designated
beneficiary for the account of a Borrower, upon receipt of an executed
Application and Agreement for Standby Letter of Credit, which Standby Letter of
Credit will be in form and content satisfactory to the Bank in all respects.
"Subsidiary" shall mean, with respect to any Person, any other Person
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owning or controlling (a) securities having ordinary voting power to elect a
majority of the board of directors (or Persons having a similar function), or
(b) other ownership interests constituting a majority voting interest.
"Taxes" shall mean the taxes and assessments whether general or
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special, ordinary or extraordinary, or foreseen or unforeseen, which at any time
may be assessed, levied, confirmed or imposed on any Borrower or on any of its
properties or assets or any part thereof or in respect of any of its franchises,
businesses, income or profits.
"Termination Date" shall mean, for each of the Credit Facilities, the
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date set forth below:
Credit Facility Termination Date
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Acquisition Facility May 31, 1998
Equipment Facility September 30, 1996
Working Capital Line of Credit September 30, 1996
(unless such date is not a Business Day, in which case the Termination Date
shall be the next succeeding Business Day), unless the Termination Date is
otherwise accelerated in accordance with Section 12.2 hereof or unless such
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Termination Date is extended in accordance with Section 13.17 hereof. The
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effectiveness of this Agreement and of each of the other Financing Documents
shall not be determined on the basis of the Termination Date, it being the
intention of the parties that this Agreement and each of the other Financing
Documents remain in full force and effect until the Borrowers' Obligations have
been paid and performed in full.
"Utilized Portion of the Acquisition Facility Commitment" shall mean
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the sum of all outstanding advances under the
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Acquisition Facility with respect to which the Borrowers have not satisfied in
full their Acquisition Facility Obligations.
"Utilized Portion of the Equipment Facility Commitment" shall mean the
-----------------------------------------------------
sum of all outstanding advances under the Equipment Facility with respect to
which the Borrowers have not satisfied in full their Equipment Facility
Obligations.
"Utilized Portion of the Working Capital Line of Credit Commitment"
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shall mean the sum of (a) all outstanding loan advances with respect to which
the Borrowers have not satisfied in full their Working Capital Line of Credit
Advance Obligations, and (b) all amounts which have been drawn and not
reimbursed or are then available to be drawn by the beneficiaries of all Standby
Letters of Credit with respect to which the Borrowers have not satisfied in full
their Working Capital Line of Credit Obligations.
"Working Capital Line of Credit" shall mean the line of credit
------------------------------
established pursuant to Article II of this Agreement to provide direct loan
----------
advances and Standby Letters of Credit to finance the working capital needs of
any Borrower.
"Working Capital Line of Credit Commitment" shall mean the commitment
-----------------------------------------
by the Bank to make direct loan advances to any Borrower and to issue Standby
Letters of Credit for the account of any Borrower to satisfy any of the approved
financing needs for which the Working Capital Line of Credit was established,
the Borrowers' Obligations with respect to which shall not exceed United States
Four Million Dollars (U.S. $4,000,000) in the aggregate principal amount at any
one time outstanding.
"Working Capital Line of Credit Obligations" shall mean the joint and
------------------------------------------
several obligations of the Borrowers to repay all loan advances under the
Working Capital Line of Credit with interest thereon, at the time and in the
amounts provided in the Working Capital Line of Credit Promissory Note, and to
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reimburse the Bank for all drawings under Standby Letters of Credit, with
interest thereon, at the times and in the amounts provided in the Applications
and Agreements for Standby Letters of Credit, and any related obligations for
the payment of fees and expenses provided for by the terms of this Agreement.
"Working Capital Line of Credit Promissory Note" shall mean the
----------------------------------------------
promissory note of even date herewith executed by the Borrowers in favor of the
Bank and containing the terms and conditions under which the principal amount of
loan advances made under the Working Capital Line of Credit, together with
interest thereon, will be repaid.
1.2 Uniform Commercial Code Terms.
-----------------------------
"Accounts", "Chattel Paper", "Contract Rights", "Equipment", "General
-------- ------------- --------------- --------- -------
Intangibles", "Instruments" and "Inventory" shall, in addition to any meaning
----------- ----------- ---------
given to such term in this Agreement, have the respective meanings as are given
to those terms
- 10 -
in the Uniform Commercial Code as presently adopted and in effect in the States
in which any portion of the Collateral may be located, and shall also cover,
without limitation, (a) any property specifically included in this Agreement,
(b) all property included in these respective terms, whether now owned or
existing or hereafter acquired or created, and (c) all proceeds (cash and non-
cash) of the foregoing.
"Receivables" shall mean the Borrower's now owned or hereafter
-----------
acquired Accounts, Chattel Paper, Contract Rights, General Intangibles and
Instruments, and all cash and non-cash proceeds thereof.
1.3 Accounting Terms. Unless specifically provided otherwise, all
----------------
accounting terms (such as, by way of example, "Tangible Net Worth", "Net Worth",
"Debt", and "Debt Service") shall have the definitions given them in accordance
with United States generally accepted accounting principles as applied to the
applicable Person and its Subsidiaries, if any, on a consistent basis by its
accountants in the preparation of its previous annual financial statements, and
unless otherwise indicated, all accounting terms and covenants shall be applied
on a consolidated basis. For purposes of the financial covenants contained in
Article X of this Agreement, subordinated debt which satisfies the requirements
---------
of clause (d) of the definition of "Eligible Acquisitions" shall be treated as
equity.
1.4 ERISA Terms. Certain terms used in this Agreement are defined in the
-----------
Employee Retirement Income Security Act of 1974, as amended ("ERISA") or are
otherwise defined in the Internal Revenue Code of 1986, as amended (the "Code").
When and if used in this Agreement, such terms shall have the meanings given
them in ERISA. Specifically, the following terms shall have the following
meanings:
"Accumulated Funding Deficiency" means an "accumulated funding
------------------------------
deficiency" as defined in Section 302 of ERISA or Section 412(a) of the Code.
"Commonly Controlled Entity" means any Subsidiary or any other trade
--------------------------
or business (whether or not incorporated) which is under "common control" (as
defined in the Code) and of which any Borrower or any of its Subsidiaries is a
part.
"Multiemployer Plan" means a multiemployer plan (as defined in ERISA)
------------------
to which any Borrower or any Commonly Controlled Entity, as appropriate, has or
had an obligation to contribute.
"Plan" means any pension, profit sharing, savings, stock bonus or
----
other deferred compensation plan which is subject to the requirements of ERISA,
together with any related trusts.
"Prohibited Transaction" means a "prohibited transaction" as defined
----------------------
in Section 406 of ERISA or Section 4975 of the Code.
- 11 -
"Reportable Event" means a "reportable event" as defined by Title IV
----------------
of ERISA.
1.5 Other Definitional Provisions.
-----------------------------
(a) All terms defined in this Agreement shall have their defined
meanings when used in any certificate or other document made or delivered
pursuant hereto.
(b) The words "hereof," "herein" and "hereunder" and words of similar
import, when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and section, subsection,
schedule and exhibit references are to this Agreement unless otherwise
specified.
ARTICLE II
THE WORKING CAPITAL LINE OF CREDIT
2.1 Working Capital Line of Credit Advances.
---------------------------------------
(a) Direct Loan Advances. Subject to the provisions of this
--------------------
Agreement, including the satisfaction of the conditions precedent described in
Article VIII hereof, the Bank agrees to make direct loan advances under the
------------
Working Capital Line of Credit in Dollars from time to time during the
Commitment Period, in amounts not to exceed the then Available Working Capital
Line of Credit Commitment. Direct loan advances will be made by the Bank under
the Working Capital Line of Credit in amounts of not less than $10,000 to the
Borrowers' Account within one Business Day following receipt by the Bank of a
written request therefor, together with a completed and executed Borrowing Base
Certificate substantially in the form of Exhibit B attached hereto and made a
---------
part hereof.
(b) Issuance of Standby Letters of Credit. Subject to the provisions
-------------------------------------
of this Agreement, including the satisfaction of the conditions precedent
described in Article VIII hereof, and upon receipt of a completed and executed
------------
Application and Agreement for Standby Letter of Credit and a completed and
executed Borrowing Base Certificate in substantially the form attached hereto as
Exhibit B and made a part hereof, the Bank agrees to issue from time to time
---------
during the Commitment Period, Standby Letters of Credit under the Working
Capital Line of Credit to beneficiaries designated by a Borrower, in stated
amounts denominated in Dollars, not to exceed the then Available Working Capital
Line of Credit Commitment. No Standby Letter of Credit shall have an Expiry
Date which is later than one calendar year from the date of its issuance. In
the event that the expiry date of any Standby Letter of Credit occurs after the
Termination Date, the Borrowers will be obligated to prepay all of their Working
Capital Line of Credit Obligations relating to such Standby Letter of Credit on
the day immediately preceding the Termination Date. Standby Letters of Credit
will be issued by the Bank as soon as practicable following receipt of the
related Application and Agreement, the Borrowing Base Certificate and any other
information which the Bank may
- 12 -
require in order to issue the requested Standby Letter of Credit in form and
content satisfactory to the Bank in all respects.
2.2 Repayment and Prepayment of Working Capital Line of Credit Advances.
-------------------------------------------------------------------
(a) Repayment and Prepayment of Direct Loan Advances. All direct loan
------------------------------------------------
advances under the Working Capital Line of Credit, together with interest
thereon, must be repaid in accordance with the terms of the Working Capital Line
of Credit Promissory Note. The Borrowers' Working Capital Line of Credit
Obligations with respect to direct loan advances may be prepaid under the terms
of the Working Capital Line of Credit Promissory Note and must be prepaid from
Proceeds of Receivables received by any Borrower, as provided in the Working
Capital Line of Credit Promissory Note.
(b) Reimbursement of Drawings under Standby Letters of Credit.
---------------------------------------------------------
(i) The Borrowers' Working Capital Line of Credit Obligations
in respect of each Standby Letter of Credit, including (without limitation) the
Borrowers' obligations to reimburse the Bank for all drawings honored under each
Standby Letter of Credit, together with any interest thereon, shall be set forth
in the related Application and Agreement.
(ii) The terms of each Application and Agreement for Standby
Letters of Credit are incorporated herein by reference. To the extent that there
is any direct conflict between the terms of any Application and Agreement for
Standby Letter of Credit and this Agreement, the terms of this Agreement will
prevail, except to the extent of (i) definitions contained in any Application
and Agreement or (ii) any provision contained in any Application and Agreement
which subjects the Letter of Credit issued pursuant thereto to the "Uniform
Customs and Practice for Documentary Credits" of the International Chamber of
Commerce, as adopted from time to time.
(iii) (A) Working Capital Line of Credit Obligations may be
prepaid by the Borrowers, in whole but not in part for any one Standby Letter of
Credit, at any time, without premium or penalty; provided, however, that the
Borrowers shall give the Bank written notice of any prepayment no later than 12
noon on the date of such prepayment, and the Borrowers shall not be entitled to
(I) a rebate of the amount so prepaid, unless the Standby Letter of Credit to
which such prepayment relates expires without having been drawn by the
beneficiary thereof, or (II) any interest on the amount so prepaid, unless the
Borrowers elect to prepay the Working Capital Line of Credit Obligations
relating to Standby Letters of Credit due to the imposition by the Bank of
increased costs in accordance with the provisions of Section 5.3 hereof, in
-----------
which case, at the time that either (1) the stated amount of each such Standby
Letter of Credit is fully drawn by the beneficiary thereof and such drawing is
honored by the Bank, or (2) each such Standby Letter of Credit expires without
having been drawn by the
- 13 -
beneficiary thereof, the Bank shall remit to the Borrowers interest on the
amount prepaid, for the period from the date of prepayment to the date of the
occurrence described in clause (1) or (2) above, at a rate equal to the bid rate
obtainable by the Bank in the Interbank Eurodollar Market one Business Day after
the date of the prepayment for deposits in a principal amount equal to the
amount prepaid and with a maturity approximating the period from the date of
prepayment to the date of the occurrence described in clause (1) or (2), minus
all reasonable costs and expenses of the Bank incurred as a result of such
prepayment and/or as a result of the investment of such prepaid sums.
(B) Working Capital Line of Credit Obligations relating to any Standby
Letter of Credit having an expiry date which is later than the Termination Date
must be prepaid in full on the day immediately preceding the Termination Date,
as this date may be accelerated in accordance with Section 12.2(a) of this
---------------
Agreement or extended in the sole and absolute discretion of the Bank in
accordance with Section 13.17 of this Agreement.
-------------
(C) Unless the remaining Receivables Collateral Value continues to
support the then outstanding Borrowers' Working Capital Line of Credit
Obligations, the Borrowers' Working Capital Line of Credit Obligations relating
to Standby Letters of Credit must be prepaid from Proceeds of Receivables
received by any Borrower in amounts which exceed the Borrowers' Working Capital
Line of Credit Obligations relating to direct loan advances.
ARTICLE III
THE ACQUISITION FACILITY
3.1 Advances under the Acquisition Facility. Subject to the provisions of
---------------------------------------
this Agreement, including the satisfaction of the conditions precedent described
in Article VIII hereof, the Bank agrees to make direct loan advances under the
------------
Acquisition Facility in Dollars from time to time during the Commitment Period,
in amounts not to exceed the then Available Acquisition Facility Commitment.
Direct loan advances under the Acquisition Facility will be made by the Bank in
amounts of not less than $10,000 to the Borrowers' Account within one Business
Day following receipt by the Bank of written request therefore, together with
all of the documents needed to substantiate the financing of an Eligible
Acquisition. On or about the Effective Date of this Agreement and provided that
all conditions precedent described in Article VIII hereof have been satisfied,
------------
an initial advance of the Acquisition Facility will be made for the purpose of
refinancing the bridge loan in the original principal amount of $2,500,000 which
was extended to the Borrowers pursuant to the terms of the Bank Commitment
Letter and related loan documents.
3.2 Repayment and Prepayment of Advances of the Acquisition Facility. The
----------------------------------------------------------------
principal amount of all direct loan advances under the Acquisition Facility,
together with interest thereon, must be
- 14 -
repaid and may be prepaid in accordance with the terms of the Acquisition
Facility Promissory Note.
ARTICLE IV
THE EQUIPMENT FACILITY
4.1 Advances of the Equipment Facility. (a) Subject to the provisions of
----------------------------------
this Agreement, including the satisfaction of the conditions precedent described
in Article VIII hereof, the Bank agrees to make direct loan advances under the
------------
Equipment Facility in Dollars from time to time during the Commitment Period, in
the amount of up to 75% of the cost of new Equipment or 60% of the cost of used
Equipment, not to exceed the then Available Equipment Facility Commitment.
Direct loan advances under the Equipment Facility will be made by the Bank in
amounts of not less than $100,000 to the Borrowers' Account within one Business
Day following receipt by the Bank of a written request therefor, together with a
completed and executed Borrowing Base Certificate in substantially the form
attached hereto as Exhibit B-2 and made a part hereof and information describing
-----------
the particular items of equipment to be financed or refinanced and evidence of
the release and termination of record of any liens covering such equipment.
(b) At the written request of a Borrower, advances will be made in the
form of a loan to fund the purchase of a portion of the cost of a particular
item of equipment by the Bank (with the balance of the purchase price to be paid
in cash by applicable Borrower prior to purchase), subject to an equipment lease
to the Borrower.
4.2 Repayment and Prepayment of Advances of the Equipment Facility. (a)
--------------------------------------------------------------
The principal amount of all direct loan advances under the Equipment Facility,
together with interest thereon, must be repaid and may be prepaid in accordance
with the terms of the Equipment Facility Promissory Note. The Equipment
Facility Obligations must be prepaid from any Proceeds of the Equipment
resulting from any sale for fair market value, casualty or otherwise, as
provided in the Equipment Facility Promissory Note.
(b) In the event that advances of the Equipment Facility are made to
finance a portion of the purchase price of the cost of a particular item of
equipment by the Bank, subject to a lease to a Borrower, the repayment of the
advances, together with the financing cost associated with the lease
transaction, will be made in accordance with an equipment lease between the Bank
and applicable Borrower, with the joint and several guaranty of the other
Borrowers, in the standard form used by the Bank in connection with similar
equipment lease transactions.
- 15 -
ARTICLE V
GENERAL CREDIT PROVISIONS
5.1 Payments.
--------
(a) All payments by the Borrowers under this Agreement and the other
Financing Documents of the Borrowers' Obligations, except as may be otherwise
specifically provided in the Financing Documents, shall be made to the Bank at
its office located at ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, not
later than 2:00 P.M., prevailing Washington, D.C. time, on the due date for such
payment. If any amount payable to the Bank hereunder by the Borrowers shall not
be paid when due or the payment is made in funds which are not immediately
available, the Borrowers agree to pay to the Bank interest, to the extent
permitted by applicable law, on such amount from such due date until such amount
shall be paid in full or until funds are immediately available, as the case may
be, at a rate which is at all times equal to (i) the then applicable rate for
such overdue Borrowers' Obligations, plus two percent (2%) per annum, or (ii) in
---- --- -----
the case of overdue fees and expense reimbursements as to which no interest rate
is anticipated, the Prime Rate, plus two percent (2%) per annum. If any amount
---- --- -----
payable hereunder shall become due on a day other than a Business Day, then such
due date shall be the next succeeding Business Day.
(b) All payments to be made hereunder by the Borrowers shall be made
in Dollars, without set-off or counterclaim and free and clear of, and without
deduction for or on account of, any present or future income, stamp or other
taxes, levies, imposts, duties, charges, fees, deductions, withholdings or
restrictions or conditions of any nature whatsoever now or hereafter imposed,
levied, collected, withheld or assessed against any Borrower (collectively
referred to in this paragraph as "Withholding Taxes"). If any Withholding Taxes
are imposed and required to be withheld from any such payment, the Borrowers
shall (i) increase the amount of such payment so that the Bank will receive a
net amount (after giving effect to the payment of such additional amount and to
the deduction of all Withholding Taxes) equal to the amount due hereunder, (ii)
pay such Withholding Taxes to the appropriate taxing authority for the account
of the Bank, and (iii) as promptly as possible thereafter, send the Bank an
original receipt (or a copy thereof that has been stamped by the appropriate
taxing authority to certify payment) showing payment thereof, together with such
additional documentary evidence as the Bank may from time to time reasonably
require. If the Borrowers fail to perform their obligations to the Bank under
parts (ii) or (iii) of the preceding sentence, the Borrowers shall jointly and
severally indemnify the Bank for any such Withholding Taxes that are paid by the
Bank plus all incremental Withholding Taxes, interest or penalties that may
----
become payable as a consequence of such failure.
5.2 Illegality. Notwithstanding any other provision of this Agreement, in
----------
the event that it shall become unlawful for the Bank to maintain any aspect of
its commitment to provide the Credit Facilities contemplated by this Agreement,
including (without
- 16 -
limitation) the issuance of Credit Facilities for the benefit of, or in
connection with any transaction involving, any Person resident of a country in
which the Bank is not permitted by the Office of Foreign Assets and Control of
the United States Treasury Department or any other Governmental Authority to do
business, the commitment of the Bank to extend any of the Credit Facilities so
affected shall be cancelled, and, the Borrowers agree to prepay to the Bank,
within thirty (30) calendar days of receipt of written demand by the Bank, all
of the outstanding Borrowers' Obligations to which that portion of the
commitment which is terminated as a result of illegality relates. The Bank
agrees that it will take such steps as may be reasonably available to it to
avoid or mitigate any illegality, provided that the taking of such steps shall
not in the opinion of the Bank be materially prejudicial to it.
5.3 Increased Costs. In the event that any change in applicable law,
---------------
treaty, regulation or directive, or in the interpretation or application
thereof, or compliance by the Bank with any request (whether or not having the
force of law) of any relevant central bank or other comparable agency, shall
affect obligations such as the Borrowers' Obligations or credit facilities such
as the Credit Facilities with the result of any of the following:
(a) subject the Bank to any tax of any kind whatsoever (other than
Withholding Taxes referred to in Section 5.1(b) hereof for which the Bank was
--------------
reimbursed by the Borrowers pursuant to the terms of that Section) with respect
to this Agreement or any of the other Financing Documents, any portion of the
Credit Facilities which are contemplated to be extended hereunder or of the
Borrowers' Obligations with respect thereto, or any other transactions
contemplated hereby or by the terms of any of the other Financing Documents, or
(b) change the basis of taxation of payments to the Bank of any
portion of the Borrowers' Obligations, fees, commissions or any other amounts
payable under this Agreement or under the other Financing Documents (except for
changes in the rate of tax on the overall net income of the Bank), or
(c) impose, modify or deem applicable any reserve, special deposit or
similar requirement against foreign assets held by, or deposits in or for the
account of, or advances or loans by, or acceptances created by, or any other
acquisition of funds by, any office of the Bank, or
(d) increase the amount of capital required or expected to be
maintained by the Bank, or by any corporation controlling the Bank (a "Parent"),
or reduce the rate of return on capital earned by the Bank or any Parent, (as
determined by the Bank or any Parent taking into consideration their internal
policies with respect to capital adequacy and desired return on capital), which
increased capital or reduced rate of return on capital is applied to assets
- 17 -
such as the Credit Facilities or Borrowers' Obligations or any portion thereof,
or
(e) impose upon the Bank any other condition with respect to this
Agreement or the transactions contemplated hereby or by the other Financing
Documents, the result of which is to increase the actual cost to the Bank of
extending any of the Credit Facilities under this Agreement or the other
Financing Documents or to reduce any amount receivable by the Bank under this
Agreement or under the other Financing Documents or to increase the capital or
reduce the rate of return on capital which the Bank or any Parent is required or
expected to maintain as a result of this Agreement, the other Financing
Documents, the Credit Facilities, the Borrowers' Obligations, or any portion
thereof,
then the Borrowers shall pay to the Bank within thirty (30) days of a written
----
demand by the Bank, additional amounts which will compensate the Bank or any
Parent so affected for such increased cost, reduced amount receivable, increased
capital or reduced return on capital, as the case may be. Each such demand by
the Bank shall be accompanied by a certificate setting forth in reasonable
detail (i) the change that gave rise to such increased cost, reduced amount
receivable, increased capital or reduced rate of return on capital, (ii) the
additional amounts payable pursuant to the foregoing sentence, and (iii) a
calculation of such amount, which certificate shall be conclusive absent
manifest error.
Upon the occurrence of any of the foregoing events, the Borrowers shall
have the option, upon not less than five (5) Business Days' prior written notice
to the Bank, to prepay to the Bank all of the then outstanding Borrowers'
Obligations to which such increased costs relate and all other related sums due
by the Borrowers under the terms of this Agreement and the other Financing
Documents, in which event that portion of the Bank's commitment to extend the
Credit Facilities so affected shall immediately be cancelled. In the event that
the Borrowers elect to prepay the Borrowers' Obligations or any portion thereof
in accordance with the preceding sentence, all provisions herein regarding
prepayment shall apply and the Borrower will still be obligated to pay to the
Bank the additional amounts described by this Section 5.3 with respect to all
-----------
periods in which the affected Borrowers' Obligations remained outstanding.
5.4 Computations. All computations of interest and fees shall be made on
------------
the basis of a 360-day year of twelve 30-day months.
5.5 Application of Payments. All payments (including prepayments) made by
-----------------------
the Borrower in respect of the Borrowers' Obligations shall be applied by the
Bank first to the payment of any prepayment fee then due, second to the payment
----- ------
of accrued and unpaid interest, and then to the payment of the principal amount
----
of the Borrowers' Obligations to which such payment pertains. All partial
prepayments of the Acquisition Facility and the Equipment Facility shall be
applied to principal installments in the inverse
- 18 -
order of their maturity as specified in the Acquisition Facility Promissory Note
and the Equipment Facility Promissory Note, respectively. All partial
prepayments of the Working Capital Line of Credit shall be applied first to the
repayment of direct loan advances and then to prepayment of reimbursement
obligations in respect of Standby Letters of Credit.
5.6 Reliance by Bank on Communications and Authorizations from Production
---------------------------------------------------------------------
Group International, Inc. on behalf of the Borrowers. In making advances or
----------------------------------------------------
issuing the Standby Letters of Credit under any of the Credit Facilities
contemplated by this Agreement, the Bank shall be authorized to rely on any
request, direction, notice or other communication which appears to have been
executed and delivered by any one or more of the authorized officers of
Production Group International, Inc. who are designated in the certificate
delivered to the Bank as required by the terms of the Bank Commitment Letter.
In the event that the officer(s) authorized to deliver such documents or to take
action hereunder on behalf of the Borrowers become unavailable or unable to do
so, the President of Production Group International, Inc. shall appoint a
successor or successors and shall furnish the Bank with a certified copy of the
authorizing resolution and the specimen signature of each officer so appointed
to act on behalf of the Borrowers pursuant to this Agreement and the other
Financing Documents.
5.7 Joint and Several Liability: Right of Contribution. All of the
--------------------------------------------------
Borrowers' Obligations are the joint and several obligations of all of the
Borrowers and all parties which hereafter become Subsidiaries of any Borrower,
which are required by the terms of Section 9.10 of this Agreement to become
------------
Borrowers by executing and delivering an Assumption Agreement in the form
attached hereto as Exhibit E and made a part hereof.
---------
Notwithstanding the foregoing, each Borrower shall have a right of
contribution to obtain reimbursement from each other Borrower for any payment
made by such Borrower in respect of the Borrowers' Obligations to the extent
that such payment exceeds the benefit realized by such Borrower under the Credit
Facilities. Any right of contribution among the Borrowers which arises as a
result of payments made in respect of the Borrowers' Obligations under the
Financing Documents shall be subordinate in all respect to the Bank's right to
receive payment in full of the Borrowers' Obligations. The Borrowers
acknowledge and agree that the right of contribution set forth above shall not
in any event be construed in a manner inconsistent with the joint and several
liability of each of the Borrowers for the Borrowers' Obligations.
- 19 -
ARTICLE VI
SECURITY
6.1 Financing Documents.
-------------------
The Borrowers' Obligations to the Bank in respect of the Credit
Facilities are evidenced and secured by the Financing Documents.
6.2 Collateral. As security and collateral for the repayment of the
----------
Borrowers' Obligations, each Borrower hereby grants to the Bank a lien on and
security interest in all of the following (collectively, the "Collateral"),
subject only to Permitted Liens securing purchase money or lease financing of
equipment which has not been refinanced under the Equipment Facility:
a. All Equipment. All of the now owned and hereafter acquired
-------------
machinery, equipment, furniture, fixtures (whether or not attached to real
property), vehicles, supplies and other tangible personal property of the
Borrower, including any leasehold interests therein and all substitutions,
replacement parts and annexations thereto, and including all improvements
and accessions thereto and all spare parts, tools, accessories and
attachments now owned or hereafter acquired in connection therewith, and
any maintenance agreements applicable thereto, and all proceeds and
products thereof, including sales proceeds, and all rights thereto.
b. Receivables. All of the Borrower's now owned and hereafter
-----------
acquired and/or created accounts, accounts receivable, contracts, contract
rights, instruments, documents, chattel paper, notes, notes receivable,
drafts, acceptances, general intangibles (including, but not limited to,
trademarks, tradenames, licenses and patents), and other choses in action
(not including salary or wages), and all proceeds and products thereof, and
all rights thereto, including, but not limited to, proceeds of inventory
and returned goods and proceeds arising from the sale or lease of or the
providing of inventory, goods, or services by the Borrower, as well as all
other rights of any kind, contingent or non-contingent, of each Borrower to
receive payment, benefit, or credit from any person or entity, including,
but not limited to, the right to receive tax refunds or tax rebates.
c. Inventory. All of the Borrower's now owned and hereafter acquired
---------
inventory, wherever located, including, but not limited to, goods, wares,
merchandise, materials, raw materials, parts, containers, goods in process,
finished goods, work in progress, bindings or component materials,
packaging and shipping materials and other tangible or intangible personal
property held for sale or lease or furnished or to be furnished under
contracts of service or which contribute to the finished products or the
sale, promotion, storage and shipment thereof, all goods returned
- 20 -
for credit, repossessed, reclaimed or otherwise reacquired by the Borrower,
whether located at facilities owned or leased by the Borrower, in the
course of transport to or from account debtors, placed on consignment, or
held at storage locations, and all proceeds and products thereof and all
rights thereto, including, but not limited to, all sales proceeds, all
chattel paper related to any of the foregoing and all documents, including,
but not limited to, documents of title, bills of lading and warehouse
receipts related to any of the foregoing.
d. Other Property. All now owned and hereafter acquired assets of
--------------
the Borrower, other than receivables, equipment and inventory, including,
but not limited to, all leases, rents chattels, leasehold improvements,
installment purchase and/or sales contracts, bonds, stocks, certificates,
deposits, trademarks, tradenames, licenses, patents and insurance policies,
including cash values.
Notwithstanding the foregoing, the Bank acknowledges and agrees that the
Collateral does not include (i) deposits held in escrow or trust by any Borrower
for another Person, or (ii) deposits held for payroll taxes.
The Borrowers further agrees that the Bank shall have in respect of the
Collateral all of the rights and remedies of a secured party under the Uniform
Commercial Code of each of the States in which the Collateral or any portion
thereof is located, as well as those provided in this Agreement.
6.3 Location of Collateral; Principal Place of Business. Each Borrower
---------------------------------------------------
agrees to (a) keep the Bank informed as to the location of the Collateral and
the address of the Borrower's principal place of business, (b) give the Bank
prior notice of any contemplated changes of location of Collateral (other than
any changes to the location of any other Borrower's principal place of business
or other office location described in Schedule II attached hereto and made a
-----------
part hereof), (c) give the Bank prior notice of any contemplated changes in the
Borrower's principal place of business, and (d) not change the location of any
of the Collateral (other than any changes to the location of any other
Borrower's principal place of business or other office location described in
Schedule II attached hereto and made a part hereof), or the Borrower's principal
-----------
place of business, without the prior written consent of the Bank.
6.4 Loss of Collateral. The Bank shall not be liable for any loss of any
------------------
Collateral in its possession other than losses which occur as a direct result of
the gross negligence or wilful misconduct of the Bank's officers, directors or
employees. No loss of any Collateral shall diminish the debt due pursuant to
this Agreement and the other Financing Documents.
6.5 Filing of Financing Statements; Perfection of Security Interest in
------------------------------------------------------------------
Collateral. The security interest created by this Agreement shall be perfected
----------
by the filing of financing statements
- 21 -
which fully comply with Article 9 of the Uniform Commercial Code, as adopted by
each of the States in which the Collateral or any portion thereof may be
located, in such offices as may be required by the Bank. The parties agree
that:
(a) with respect to any such financing statement, a carbon,
photographic or other reproduction of a security agreement or a financing
statement is sufficient as a financing statement for purposes of Section 9-402
of the Uniform Commercial Code;
(b) all necessary continuation statements shall be filed by the
secured party or its assigns named therein within the time prescribed by Article
9 of the Uniform Commercial Code, as adopted by each of the States in which the
Collateral or any portion thereof may be located, in order to continue the
perfection of the security interests created by this Agreement;
(c) if at any time any of the information contained in any financing
statement filed in connection with the security interests created by this
Agreement, including without limitation, the description or location of the
Collateral or the name and address of the applicable Borrower, shall change in
such manner as to cause such financing statement to become misleading in any
material respect or as may impair the perfection of the security interests
intended to be created by this Agreement, then the appropriate Borrower shall
promptly prepare an amendment to such financing statement as may be necessary to
continue the perfection of the security interest intended to be created by this
Agreement, obtain the signatures of the debtor and secured party upon such
amendment, and file the same in any office where such amendment is required to
be filed to continue the perfection of the security interests created by this
Agreement;
(d) upon the request of the Bank, the Borrowers shall prepare, have
executed and file any amendments to the financing statements filed with respect
to the security interests created by this Agreement in such form as the Bank may
require; and
(e) the Borrower shall bear all costs of any and all of the filings
described in this Section 6.5, including any recordation taxes payable as a
result of such filings; and
(f) upon request by the Bank (i) at any time after the occurrence of a
Default or Event of Default under the Financing Agreement or any of the other
Financing Documents referred to therein, (ii) for the purpose of enabling the
Bank to comply with the Financial Institutions Reform, Recovery and Enforcement
Act of 1989, as amended, or (iii) at any time that the Bank reasonably believes
that the security for the Borrowers' Obligations may be impaired, the Borrowers
shall provide, at their expense, an opinion of counsel as to the effectiveness
and perfection of the Bank's lien on the Collateral or any portion thereof.
- 22 -
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
To induce the Bank to make the Credit Facilities available to the
Borrowers pursuant to this Agreement and the other Financing Documents, each
Borrower represents and warrants to the Bank as follows, each of such
representations and warranties to be reconfirmed by each Borrower at the time
each direct loan advance is made and each Standby Letter of Credit is issued
under any of the Credit Facilities, it being the affirmative obligation of each
Borrower to notify the Bank in writing of any facts which would in any way
affect its ability to make the representations contained in the Article VII at
-----------
any subsequent date:
7.1 Subsidiaries. The only subsidiaries of Production Group
------------
International, Inc. are the other Borrowers. No other Borrower has any
Subsidiaries.
7.2 Good Standing. The Borrower (i) is a corporation duly organized and
-------------
existing, in good standing, under the laws of the jurisdiction of its
incorporation, (ii) has the corporate power to own its property and to carry on
its business as now being conducted, and (iii) is duly qualified to do business
and is in good standing in each jurisdiction in which the character of the
properties owned by it therein or in which the transaction of its business makes
such qualification necessary.
7.3 Corporate Authority. The Borrower has full corporate power and
-------------------
authority to enter into and execute and deliver this Agreement and each of the
other Financing Documents executed and delivered by the Borrower, and to incur
and perform the Borrowers' Obligations provided for herein and therein, all of
which have been duly authorized by all proper and necessary corporate action and
all material governmental licenses, authorizations, consents and approvals
required. No consent or approval of stockholders or of any other person or
public authority or regulatory body is required as a condition to the validity
or enforceability of this Agreement or any of the other Financing Documents, or
if required the same has been duly obtained.
7.4 Binding Obligations. This Agreement and each of the other Financing
-------------------
Documents executed and delivered by the Borrower have been properly executed by
the Borrower, constitute valid and legally binding obligations of the Borrower,
and are fully enforceable against the Borrower in accordance with their
respective terms.
7.5 Litigation. There is no litigation or proceeding pending or, so far
----------
as the Borrower knows, threatened before any court or administrative agency
which, in the opinion of the officers of the Borrower, will materially adversely
affect the financial condition or operations of the Borrower or the authority of
the Borrower to enter into, or the validity or enforceability of, this Agreement
or any of the other Financing Documents executed and delivered by the Borrower.
- 23 -
7.6 No Conflicting Agreements. There is (A) no charter, by-law or
-------------------------
preference stock provision of the Borrower and no provision of any existing
contract or agreement binding on the Borrower or affecting its property, and (B)
to the knowledge of the Borrower, no law binding upon the Borrower or affecting
any of its property, which would conflict with or in any way prevent the
execution, delivery or performance of the terms of this Agreement or of any of
the other Financing Documents executed and delivered by the Borrower, or which
would be in default or violated as a result of such execution, delivery or
performance.
7.7 Financial Condition. The consolidated and consolidating balance
-------------------
sheets of the Borrowers as of November 30, 1994, together with statements of
profit and loss and of surplus for the period then ended, certified by Ernst &
Young, together with the seven-month interim statement for the period ended June
30, 1995, prepared by the Borrowers, both of which were heretofore delivered to
the Bank, are complete and correct and fairly present the financial position of
the Borrowers and the results of their operations and transactions in their
surplus account(s) as of the dates and for the periods referred to and have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis throughout the period involved; provided, however, that to
the extent such balance sheets reflect the financial information of any
corporation acquired by the Borrowers during the current fiscal year, such
financial information complies with generally accepted accounting principles to
the best of the Borrower's knowledge except as specifically noted, since full
audit of the acquired corporation's financial information will not take place
until the fiscal year end. There are no liabilities (of the type required to be
reflected on balance sheets prepared in accordance with generally accepted
accounting principles), direct or indirect, fixed or contingent, of any Borrower
as of the date of such balance sheets which are not reflected therein or in the
notes thereto. There has been no material adverse change in the financial
condition or operations of any Borrower since the date of such balance sheets
(and to any Borrower's knowledge no such material adverse change is pending or
threatened), and no Borrower has guaranteed the obligations of, or made any
investment in or loans to, any person except as disclosed in such balance
sheets. Each Borrower has good and marketable title to all of its properties
and assets, and all of such properties and assets are free and clear of
encumbrances, except as reflected on such balance sheets or in the notes
thereto.
7.8 Tax Returns. The Borrower has filed or caused to be filed all
-----------
required federal, state and local tax returns and has paid all taxes as shown on
such returns to the extent that such taxes have become due. No claims have been
assessed and are unpaid with respect to such taxes except as shown in the
financial statements referred to in Section 7.7 above.
-----------
7.9 Compliance with Laws Generally. To the best of its knowledge, the
------------------------------
Borrower is not in violation of any law, ordinance, governmental rule or
regulation to which the Borrower is subject
- 24 -
(including, without limitation, any laws relating to employment practices or to
environmental, occupational and health standards and controls) and the violation
of which would have a material adverse effect on the conduct of the Borrower's
business, and the Borrower has obtained any and all licenses, permits,
franchises and other governmental authorizations necessary for the ownership and
operation of its properties and business.
7.10 Margin Stock. None of the proceeds of any of the Credit Facilities
------------
will be used, directly or indirectly, by the Borrower for the purpose of
purchasing or carrying, or for the purpose of reducing or retiring any
indebtedness which was originally incurred to purchase or carry, any "margin
security" within the meaning of Regulation G (12 CFR Part 207), or "margin
stock" within the meaning of Regulation U (12 CFR Part 221), of the board of
Governors of the Federal Reserve System (herein called "margin security" and
"margin stock") or for any other purpose which might make the transactions
contemplated herein a "purpose credit" within the meaning of said Regulation G
or Regulation U, or cause this Agreement to violate any other regulation of the
Board of Governors of the Federal Reserve System or the Securities Exchange Act
of 1934 or the Small Business Investment Act of 1958, as amended, or any rules
or regulations promulgated under any of such statutes.
7.11 ERISA. (i) Any Plan established and maintained by the Borrower or
-----
any Commonly Controlled Entity is a qualifying plan under the applicable
requirements of ERISA, and there is no current matter which would materially
adversely affect the qualified tax-exempt status of any Plan; (ii) neither the
Borrower nor any Commonly Controlled Entity has engaged in or is engaging in any
Prohibited Transaction or has incurred any Accumulated Funding Deficiency in
connection with any such Plan, whether or not waived, and no Reportable Event
has occurred with respect to any Plan subject to the minimum funding
requirements of Section 412 of the Code; (iii) no Multiemployer Plan has
"terminated", as that term is defined in ERISA; (iv) neither the Borrower nor
any Commonly Controlled Entity has "withdrawn" or "partially withdrawn" from any
Multiemployer Plan; and (v) no Multiemployer Plan is in "reorganization" nor has
notice been received from the administrator of any Multiemployer Plan that any
such Plan will be placed in "reorganization".
7.12 Governmental Consents. Neither the nature of the Borrower's business
---------------------
or properties, nor any relationship between the Borrower and any other entity or
person, nor any circumstance in connection with the extension of the Credit
Facilities is such as to require a consent, approval or authorization of, or
filing, registration or qualification with, any Governmental Authority, on the
part of the Borrower, as a condition to the execution and delivery of this
Agreement or any of the other Financing Documents.
7.13 No Default or Event of Default. No event has occurred which would
------------------------------
constitute a Default or an Event of Default under this Agreement or any of the
other Financing Documents. The Borrower is not in default under the terms of
any other agreement or instrument
- 25 -
to which the Borrower may be a party or by which any of the security for any of
the Credit Facilities may be bound or subject.
7.14 Other Liens. The Borrower represents and warrants that, except for
-----------
Permitted Liens, there are no liens or encumbrances of any kind affecting the
Collateral or any of the Borrower's assets or property, and the Borrower has
made no contract or arrangement of any kind the performance of which by the
other party thereto would give rise to a lien on the Collateral or any other
security for the Borrowers' Obligations.
7.15 Prior Names; Trade Names; Principal Place of Business. The Borrower's
-----------------------------------------------------
correct name, including any prior names and trade names, and the location of its
principal place of business, within the meaning of the Uniform Commercial Code,
and any other offices maintained by it are correctly represented in Schedule III
------------
attached hereto and made a part hereof.
7.16 Nature of Financing; Usury. The Credit Facilities are being extended
--------------------------
to a business or commercial organization, or solely for the purpose of enabling
the Borrowers to conduct a business or commercial enterprise.
ARTICLE VIII
CONDITIONS PRECEDENT
The obligation of the Bank to extend any of the Credit Facilities to
or on behalf of any Borrower is subject to the following conditions precedent:
8.1 Receipt and Approval of Documents Required by Bank Commitment Letter.
---------------------------------------------------------------------
All of the documents required by the Bank Commitment Letter shall have been
received and approved by the Bank and its counsel, and the Bank shall be
satisfied that the Borrowers have otherwise complied with all of the terms and
conditions of the Bank Commitment Letter.
8.2 Approval of Bank's Counsel. All legal matters incident to the Credit
--------------------------
Facilities and all documents necessary in the opinion of the Bank to the
extension of such Credit Facilities shall be satisfactory in all respects to
counsel for the Bank.
8.3 Compliance. As of the date of the execution and delivery of this
----------
Agreement, (a) the Borrowers shall have complied with, and shall then be in
compliance with, all the terms, covenants, and conditions of this Agreement and
in the other Financing Documents which are binding upon it, (b) there shall
exist no Default or Event of Default, and (c) the representations and warranties
contained in Article VII hereof shall be true and correct.
-----------
8.4 Bank's Fees and Expenses. The Borrowers shall have paid all of the
------------------------
fees and expenses described in Section 13.3 hereof which are then due and
------------
payable.
- 26 -
ARTICLE IX
AFFIRMATIVE COVENANTS
Until payment and performance in full of the Borrowers' Obligations,
each Borrower will perform each of the covenants contained in this Article IX.
----------
9.1 Financial Reporting. The Borrower shall provide to the Bank the
-------------------
following financial information:
(a) as soon as available but in no event more than 45 days after the
end of each fiscal quarter, a consolidated and consolidating balance sheet of
the Borrowers as of the close of such period and consolidated and consolidating
income and expense statements for such period, prepared in accordance with
United States generally accepted accounting principles and certified by the
chief financial officer or chief executive officer of Production Group
International, Inc. and accompanied by a certificate of that officer as to (i)
compliance with all covenants contained in the Financing Documents and (ii) the
occurrence of any Default or Event of Default under this Agreement or any of the
other Financing Documents, and, if so, stating the facts with respect thereto;
and
(b) as soon as available but in no event more than 120 days after the
close of its fiscal years, the Borrowers shall provide the Bank with a copy of
their consolidated and consolidating balance sheets as of the close of such
period and their consolidated and consolidating income and expense statements
for such period, prepared in accordance with United States generally accepted
accounting principals and examined and certified by an independent accountant
satisfactory to the Bank and accompanied by a certificate of the chief financial
officer or chief executive officer of Production Group International, Inc. as to
(i) compliance with all covenants contained in the Financing Documents and (ii)
the occurrence of any Default under this Agreement or any of the other Financing
Documents, and, if so, stating the facts with respect thereto;
(c) as soon as available but in no event more than 30 days after
filing with the Internal Revenue Service, the Borrowers shall provide the Bank
with a copy of their Federal income tax return for the immediately preceding
fiscal year;
(d) whenever requested by the Bank, but in any event no less
frequently than once per calendar month, within 15 days after the end of the
previous month, reports with respect to (A) the Borrowers' Receivables and
inventory, which reports shall include (without limitation) customer name,
dollar amount, invoice date and number of days outstanding for each Receivable
and location of each item of inventory, (B) the Borrowers' backlog of purchase
orders and the status of completion of each, which report shall be in
substantially the form of the Form of Backlog Certificate attached hereto as
Exhibit C and made a part hereof, and have attached thereto copies of all new
---------
contracts for purchase orders, (C) the
- 27 -
Borrowers' prepayment aging report, and (D) the Borrowers' General Ledger
Account for Deferred Revenue; and
(e) such other information, reports or statements as the Bank may from
time to time reasonably request.
9.2 Taxes and Claims. The Borrower shall pay and discharge all Taxes due
----------------
and owing by the Borrower to all governmental authorities, prior to the date on
which penalties attach thereto, and all lawful claims which, if unpaid, might
become a lien or encumbrance upon any of its properties; provided, however, that
in the event of a good faith dispute over Taxes, the Borrower shall provide the
Bank with a bond or other evidence satisfactory to the Bank in its discretion of
the Borrower's ability to pay such Taxes, together with any applicable interest
and penalties.
9.3 Insurance. The Borrowers shall provide or cause to be provided to the
---------
Bank, and shall maintain, or cause to be maintained, in full force and effect at
all times during the term of any of the Credit Facilities and at all times prior
to the payment and performance in full of the Borrowers' Obligations, such
policies of insurance as are normally maintained by similar businesses operating
in the same vicinity as each of the Borrowers, which are underwritten by a
company or companies and are in form and amounts reasonably satisfactory to the
Bank, including, by way of example and not by way of limitation, at least the
following:
(a) permanent fire and hazard insurance or property damage insurance
covering all real property improvements and all Equipment and Inventory and
other personal property of all Borrowers wherever located, affording protection
against at least loss or damage by fire or other hazards covered by the standard
all-risk "extended coverage" endorsement (non-reporting form), including
vandalism and malicious mischief and such other risks as shall be customarily
covered with respect to similar property or as the Bank may from time to time
otherwise require, in amounts not less than the lesser of (i) the aggregate
principal amount of the Credit Facilities (whether or not such Credit Facilities
have been fully utilized by the Borrowers from time to time) and (ii) the
maximum amount available to the Borrowers from time to time, naming the Bank as
mortgagee and loss payee;
(b) public liability and property damage insurance for each Borrower
to afford protection in amounts of not less than (i) $1,000,000 per occurrence
and $3,000,000 for all annual occurrences in respect of bodily injury, and (ii)
$250,000 per occurrence and $500,000 for all annual occurrences in respect of
property damage, together with an endorsement naming the Bank as an additional
insured; and
(c) workers' compensation insurance of each Borrower with coverage
limits in accordance with the requirements of applicable laws or regulations.
- 28 -
Each such policy shall provide that the policy may not be surrendered,
cancelled or substantially modified (including, without limitation, cancellation
for nonpayment of premiums) without at least thirty (30) days' prior written
notice to the Bank.
9.4 Corporate Existence. The Borrower shall maintain in good standing its
-------------------
existence in the State of its incorporation and shall maintain its qualification
to do business in each jurisdiction in which such qualification is necessary for
the conduct of its business in such jurisdiction.
9.5 Change in Management. The Borrower shall give the Bank written notice
--------------------
within thirty (30) days following any change in the offices of president, chief
executive officer or chief financial officer of any Borrower.
9.6 Compliance With Laws Generally. The Borrower shall comply with all
------------------------------
applicable laws, ordinances, governmental rules or regulations to which the
Borrower is or becomes subject (including, without limitation, any laws relating
to employment practices or to environmental, occupational and health standards
and controls) and the violation of which would have a material adverse effect on
the conduct of the Borrower's business, and the Borrower will maintain any and
all licenses, permits, franchises and other governmental authorizations
necessary for the ownership and operation of its properties and business.
9.7 Books and Records; Inspection. The Borrower will keep adequate
-----------------------------
records and books of account with respect to its business, in accordance with
generally accepted accounting principles; and permit the Bank, by its
accountants, attorneys, officers or other agents to examine such records and
books of account and to discuss the affairs, finances and accounts pertaining
thereto with officers of the Borrower at its offices at any time during normal
business hours.
9.8 Litigation. The Borrower shall give prompt notice in writing, with a
----------
full description to the Bank, of all litigation and any other proceedings before
any court or any governmental or regulatory agency affecting the Borrower which,
if adversely decided, would materially adversely affect the conduct of the
Borrower's business, the financial condition of the Borrower, or in any manner
affect the security for the Credit Facilities or the Borrowers' Obligations.
9.9 Notification of Certain Events, Events of Default and Adverse
-------------------------------------------------------------
Developments. The Borrower shall promptly notify the Bank in writing within
------------
fifteen (15) Business Days of obtaining knowledge of the occurrence of the
following (in each case describing in detail satisfactory to the Bank the nature
thereof and the action the Borrower proposes to take with respect thereto):
(a) any Default or Event of Default under this Agreement or any of the
other Financing Documents;
- 29 -
(b) all actions, suits and proceedings before any court or
governmental department, commission, board, bureau, agency, or instrumentality,
domestic or foreign, affecting the Borrower which, if determined adversely to
the Borrower, could have a materially adverse effect on the financial condition,
properties or operations of the Borrower or could materially adversely affect
the security for the Borrowers' Obligations or the ability of each Borrower to
pay or perform in full the Borrowers' Obligations;
(c) any notice, claim or demand from any governmental agency which
alleges that the Borrower is in violation of any of the terms of, or has failed
to comply with, any applicable order issued pursuant to any federal or state
statute regulating its operation of business, including, but not limited to, the
Occupational Safety and Health Act and the Environmental Protection Act;
(d) any other development in the business or affairs of the Borrower
which could have a material adverse effect on the Borrower or could adversely
affect the security for the Borrowers' Obligations of the ability of each
Borrower to pay or perform in full the Borrowers' Obligations.
9.10 Addition of New Subsidiaries as Borrowers. The Borrower hereby agrees
-----------------------------------------
to cause any entity which becomes a Subsidiary to become a Borrower under this
Agreement by executing and delivering to the Bank an Assumption Agreement in
substantially the form attached hereto as Exhibit D and made a part hereof,
---------
whereupon such new Subsidiary shall become jointly and severally liable,
together with all other Borrowers, for the Borrowers' Obligations and will be
entitled to have access to each of the Credit Facilities to the same extent as
all other Borrowers. As a condition precedent to having access to the Credit
Facilities, each new Subsidiary shall provide the Bank with certified copies of
its corporate documents, resolutions authorizing the incurrence of joint and
several liability for the Borrowers' Obligations, and Uniform Commercial Code,
tax lien, judgment and pending suit searches in all jurisdictions designated by
the Bank.
ARTICLE X
FINANCIAL COVENANTS
Until payment and performance in full of the Borrowers' Obligations, the
Borrowers will comply with each of the financial covenants contained in this
Article X.
---------
10.1 Working Capital. On a consolidated basis, the Borrowers shall
---------------
maintain Working Capital (defined in accordance with United States generally
accepted accounting principles, but not including any advances outstanding under
the Working Capital Line of Credit) in an amount equal to or greater than two
months' consolidated expenses (which shall be determined on the basis of
aggregate cash expenses incurred during the four previous fiscal quarters
divided by six, without taking into consideration non-recurring acquisition
expenses).
- 30 -
10.2 Backlog of Purchase Orders. On a consolidated basis, the Borrowers
--------------------------
shall maintain a backlog of contracted purchase orders sufficient to generate
gross revenues equal to or greater than two months' consolidated expenses (which
shall be determined on the basis of aggregate cash expenses incurred during the
four previous fiscal quarters divided by six, without taking into consideration
non-recurring acquisition expenses).
10.3 Net Worth. On a consolidated basis, the Borrowers shall maintain Net
---------
Worth (defined in accordance with United States generally accepted accounting
principles) of not less than $13,000,000, which amount shall be increased on a
cumulative basis by an amount equal to 50% of the consolidated net income
generated during each fiscal quarter.
10.4 Intangible Assets. On a consolidated basis, the value attributed to
-----------------
the Borrowers' goodwill and other intangible assets shall not exceed the sum of
stockholders' equity and the Borrowers' outstanding subordinated debt.
ARTICLE XI
NEGATIVE COVENANTS
Until payment and performance in full of all of the Borrowers' Obligations,
without the written consent of the Bank, none of the Borrowers will fail to
comply with any of the following covenants.
11.1 Impairment of Security. The Borrower shall not take any action, and
----------------------
shall not permit any Person to take any action, which shall impair in any manner
the value of the Collateral or any portion thereof or any other security for the
Borrowers' Obligations or the validity, priority or security of the security
interest granted to the Bank in the Collateral.
11.2 No Change in Control. No Borrower shall cause or permit any change to
--------------------
occur in the ownership of the controlling interest in the voting stock in
Production Group International, Inc..
11.3 Stock in Subsidiaries. Production Group International, Inc. shall not
---------------------
sell, transfer or otherwise encumber any shares of capital stock now or
hereafter owned by it in any of the other Borrowers, except for the pledge of
shares in any acquired corporation to secure seller financing which satisfies
the criteria for an Eligible Acquisition.
11.4 Sale, Transfer or Encumbrance of Collateral. Except for (a) the sale
-------------------------------------------
of Inventory in the ordinary course of business, and (b) sales or transfers of
Equipment for fair market value in the ordinary course of business, and (c)
Permitted Liens, the Borrower shall not sell, transfer, lease or further
encumber, or permit any Person to sell, transfer, lease or further encumber, any
of its assets, including the Collateral or any other security for the Borrowers'
Obligations.
- 31 -
11.5 No Additional Indebtedness. Without the prior written consent of
--------------------------
the Bank, the Borrowers will not create or incur any liability for borrowed
money or obligations in respect of operating leases in excess of $250,000 in the
aggregate at any one time outstanding, except for (a) short-term trade
indebtedness incurred in the ordinary course of the business operations of the
Borrowers, and (b) subordinated debt to the seller of an acquired corporation
which debt satisfies all of the requirements of clause (d) of the definition of
"Eligible Acquisition."
11.6 Merger; Dissolution or Sale of Assets. The Borrower shall not enter
-------------------------------------
into any merger, consolidation or dissolution or sale, lease, or otherwise
disposition of any substantial portion of its assets (except assets disposed of
in the ordinary course of business for fair market value), except for (a)
Collateral covered by Permitted Liens, and (b) mergers and consolidations of any
Borrower into any other Borrower.
11.7 Distributions or Dividends to Stockholders. Production Group
------------------------------------------
International, Inc. will not make any distribution, loan, advance or payment of
dividend to any of its stockholders for any purpose whatsoever at any time
during the existence of a Default or Event of Default.
11.8 Payments, Advances and Salaries to Stockholders. Production Group
-----------------------------------------------
International, Inc. will not pay, advance or lend, or permit any payment
(including the payment of salaries in excess of amounts contemplated by existing
employment contracts to holders of more than 5% of stock in any Borrower who are
also officers of any Borrower), advance or loan of, either directly or
indirectly, any sum or sums of money to any of its stockholders or directors for
any purpose whatsoever, except the reimbursement of expenses incurred in the
normal course of business on behalf of any Borrowers, in excess of the lesser of
(a) $250,000 in the aggregate, and (b) any amount which would cause the
---
Borrowers to default in compliance with any financial covenant contained in the
Financing Documents.
11.9 ERISA Compliance. The Borrower shall not (a) Restate or amend any
----------------
Plan established and maintained by the Borrower or any Commonly Controlled
Entity, in a manner designed to disqualify such Plan under the applicable
requirements of the Code; (b) permit any officers of the Borrower or any
Commonly Controlled Entity to materially adversely affect the qualified tax-
exempt status of any Plan of the Borrower or any Commonly Controlled Entity; (c)
engage in or permit any Commonly Controlled Entity to engage in any Prohibited
Transaction; (d) incur or permit any Commonly Controlled Entity to incur any
Accumulated Funding Deficiency, whether or not waived, in connection with any
Plan; (e) take or permit any Commonly Controlled Entity to take any action or
fail to take any action which causes a termination of any Plan in a manner which
could result in the imposition of a lien on the property of the Borrower or any
Commonly Controlled Entity pursuant to Section 4068 of ERISA; (f) fail to notify
the Bank that notice has been received of a termination of any Multiemployer
Plan to which the Borrower or
- 32 -
any Commonly Controlled Entity has an obligation to contribute; (g) incur or
permit any Commonly Controlled Entity to incur a complete or partial withdrawal
from any Multiemployer Plan to which the Borrower or any Commonly Controlled
Entity has an obligation to contribute; or (h) fail to notify the Bank that
notice has been received from the administrator of any Multiemployer Plan to
which the Borrower or any Commonly Controlled Entity has an obligation to
contribute that any such plan will be placed in "reorganization".
ARTICLE XII
EVENTS OF DEFAULT; REMEDIES
12.1 Events of Default. Any one or more of the following events shall
-----------------
constitute an Event of Default under this Agreement:
(a) Failure to Pay Borrowers' Obligations. The Borrowers shall fail
-------------------------------------
to pay the amount of any of the Borrowers' Obligations as and when the same are
due and payable in accordance with the terms of this Agreement and the other
Financing Documents.
(b) Breach of Representation and Warranties. Any representation or
---------------------------------------
warranty made herein or in any of the Financing Documents, or in any report,
certificate, opinion (including any opinion of counsel for the Borrowers),
financial statement or other instrument delivered in connection with this
Agreement or any of the other Financing Documents shall prove to be false or
misleading in any material respect when made.
(c) Failure to Comply with Covenants. Default shall be made in the
--------------------------------
due observance or performance of any covenant, conditions or agreement contained
in Section 9.2, Section 9.3, Article X or Article XI hereof.
-------------------------------------------------
(d) Other Defaults. Default shall be made in the due observance or
--------------
performance of any other term, covenant or agreement contained in this Agreement
or in any of the other Financing Documents, and such default shall have
continued unremedied for a period of thirty (30) days after written notice
thereof shall have been given to Production Group International, Inc. by the
Bank, or default shall occur under any of the other Financing Documents.
(e) Change in Control. A change shall occur in the ownership of the
-----------------
controlling interest in the voting stock in Production Group International,
Inc., whether or not such change occurs as a result of a violation of the
covenant contained in Section 11.2 of this Agreement.
------------
(f) Default Under Other Indebtedness. Default shall be made with
--------------------------------
respect to any other evidence of indebtedness or liability for borrowed money of
any Borrower (i) to the Bank, or (ii) to any other Person, if, in the case of
clause (ii) only, the effect of such default is to accelerate the maturity of
such evidence of indebtedness or liability or to permit the holder or obligee
thereof to cause any indebtedness to become due prior to
- 33 -
its stated maturity, or any such indebtedness shall not be paid as and when due
and payable.
(g) Receiver; Bankruptcy. Any Borrower shall (i) apply for or consent
--------------------
to the appointment of a receiver, trustee or liquidator of itself or any of its
property, (ii) admit in writing its inability to pay its debts as they mature,
(iii) make a general assignment for the benefit of creditors, (iv) be
adjudicated as bankrupt or insolvent, or (v) file a voluntary petition in
bankruptcy, or a petition or an answer seeking reorganization or an arrangement
with creditors or to take advantage of any bankruptcy, reorganization,
insolvency, readjustment of debt, dissolution or liquidation law or statute, or
an answer admitting the material allegations of a petition filed against it in
any proceeding under any such law, or if corporate action shall be taken by any
Borrower for the purposes of effecting any of the foregoing, or (vi) by any act
indicate its consent to, approval or acquiescence in any such proceeding or the
appointment of any receiver of or trustee for any Borrower or any substantial
part of its property, or suffers any such receivership, trusteeship or
proceeding to continue undischarged for a period of 30 days.
(h) Involuntary Receiver; Bankruptcy. An order, judgment or decree
--------------------------------
shall be entered, without the application, approval or consent of any Borrower
by any court of competent jurisdiction, approving a petition seeking
reorganization of any Borrower or of all or a substantial part of the assets of
any Borrower or appointing a receiver, trustee or liquidator of any Borrower and
such order, judgment or decree shall continue unstayed and in effect for a
period of 30 days.
(i) Judgments. Any judgment in excess of $250,000 or judgments
---------
aggregating in excess of $500,000 against one or more Borrowers or any
attachment or other levy against the property of any Borrower with respect to a
claim, remains unpaid, unstayed on appeal, undischarged, unbonded, or
undismissed for a period of 30 days.
(j) Execution; Attachment. Any execution or attachment shall be
---------------------
levied against the Collateral or any other security for the Borrowers'
Obligations, and such execution or attachment shall not be set aside, discharged
or stayed within thirty (30) days after the same shall have been levied.
(k) Collateral Value Exceeded. The Working Capital Line of Credit
-------------------------
Obligations shall exceed the Receivables Collateral Value, and the Borrowers
shall fail to either reduce the outstanding Working Capital Line of Credit
Obligations or satisfy the Bank that the Receivables Collateral Value will be
increased, within five (5) Business Days after written notice thereof shall have
been given to Production Group International, Inc. by the Bank.
12.2 Remedies. Upon the occurrence of any Event of Default, and in every
--------
such Event of Default and at any time thereafter,
- 34 -
unless such Event of Default shall be cured to the satisfaction of the Bank, the
Bank may exercise any one or more of the following remedies.
(a) Accelerate Termination Date. Accelerate the Termination Date
---------------------------
whereupon the Acquisition Facility Commitment, the Equipment Facility Commitment
and the Working Capital Line of Credit Commitment shall terminate as of the
accelerated Termination Date.
(b) Accelerate the Borrowers' Obligations. Demand immediate payment
-------------------------------------
in full of all of the Borrowers' Obligations under this Agreement and the other
Financing Documents, including (without limitation) all accrued and unpaid
interest thereon, whether or not the Credit Facilities to which such Borrowers'
Obligations relate have become due and payable or, as in the case of Standby
Letters of Credit, may remain outstanding following repayment of the Borrowers'
Obligations relating thereto, whereupon all outstanding Borrowers' Obligations
shall become immediately due and payable without presentment, demand, protest,
or any other notice of any kind, all of which are hereby expressly waived,
anything contained in this Agreement or in the other Financing Documents to the
contrary notwithstanding. The occurrence or non-occurrence of an Event of
Default under this Agreement shall in no way affect or condition the right of
the Bank to demand payment at any time of any of the Borrowers' Obligations
which are payable on demand regardless of whether or not an Event of Default has
occurred.
(c) Liquidation of Security Interest in Collateral. Upon the
----------------------------------------------
occurrence of any Event of Default, and at any time during the continuance
thereof, the Bank shall have, in addition to all other rights and remedies, the
remedies of a secured party under the Uniform Commercial Code, or under any
other governing laws, including, without limitation, the right to take
possession of the Collateral (to which the Borrowers hereby specifically
consent), and for that purpose the Bank may, so far as the Borrowers can give
authority therefor, enter upon any premises on which the Collateral may be
situated and remove the same therefrom. Upon request of the Bank, the Borrowers
shall assemble and make the Collateral available to the Bank at a place to be
designated by the Bank. Unless the Collateral is perishable or threatens to
rapidly decline in value, or is of a type customarily sold on a recognized
market, the Bank shall give the Borrowers at least five (5) days' prior notice
of the time and place of any public sale or the time after which any private
sale or any other intended disposition is to be made. The Bank may at any time
in its discretion transfer any securities (i.e., stock or bonds) or other
----
property constituting the Collateral into its own name or that of its nominee
and receive the income thereon and hold the same as collateral for Borrowers'
Obligations or apply it to principal, or interest or other costs, fees or
charges due on, or with respect to, the Borrowers' Obligations. The Borrowers
hereby irrevocably constitute and appoint the Bank as the Borrowers' true and
lawful attorney in fact, with full power of substitution, at the sole cost and
expense
- 35 -
of the Borrowers, but for the sole benefit of the Bank, to convert the
Collateral to cash, including without limitation, completing the manufacturing
process of work in process, and the sale (either public or private) of all or
any portion of the Collateral, to enforce collection of the Collateral, either
in its own name or in the name of the Borrowers, compromising or settling with
any account debtors and prosecuting, defending, compromising or releasing any
action relating to the Collateral; to receive, open and dispose of all mail
addressed to the Borrowers and to take therefrom any remittances on or proceeds
of the Collateral in which Bank has a security interest; to notify United States
Post Office authorities to change the address for delivery of mail addressed to
the Borrowers to such address as the Bank may designate; to endorse the name of
the Borrowers in favor of the Bank upon any and all checks, drafts, money
orders, notes, acceptances or other instruments of the same or different nature;
to sign and endorse the name of the Borrowers on and to receive as secured party
any of the Collateral, any invoices, schedules of collateral, freight or express
receipts and/or other documents of title of the same or different nature
relating to the Collateral; to sign the name of the Borrowers on any notice to
the account debtors or on verification of the Collateral; and to sign and file
or record on behalf of the Borrowers any financing or continuation statements or
other statements in order to perfect, keep perfected or protect the Bank's
security interest in the Collateral. The Bank shall not be obliged to do any of
the acts or exercise any of the powers hereinabove authorized, but if the Bank
elects to do any such act or exercise any such power, it shall not be
responsible to the Borrowers except for the Bank's own willful misconduct or
gross negligence. All powers conferred upon the Bank by this Agreement, being
coupled with an interest, shall be irrevocable as long as any of the Borrowers'
Obligations to the Bank shall remain unpaid.
Upon the occurrence of any Event of Default hereunder, the Borrowers
shall assemble all of the Collateral and make the same available at a central
location designated by the Bank. Any notification required by Section 9-504 of
the Uniform Commercial Code shall be deemed reasonably and properly given if
given in the manner specified for other notices under this Agreement, at least 5
days before any sale or other disposition of the Collateral, which time period
may be decreased in the event that the Bank reasonably determines that it is
necessary to dispose of any portion of the Collateral in a more expeditious
manner because declining Collateral Value or the like so dictates. Disposition
shall be deemed commercially reasonable if made pursuant to a public offering
advertised at least twice in a newspaper of general circulation in the community
where the Collateral is located.
(d) Borrowers Remain Liable for Deficiency. The Borrowers are liable
--------------------------------------
for the entire amount of the Borrowers' Obligations and will remain responsible
for any deficiency in any proceeds realized upon any liquidation of Collateral.
(e) Other Rights and Remedies. In addition to any other rights or
-------------------------
remedies specifically set forth herein, the Bank shall
- 36 -
have available to it all rights and remedies under any of the Financing
Documents and any other rights and remedies afforded to it at law or in equity.
(f) Performance by Bank. If the Borrowers shall fail to pay any of
-------------------
the Borrowers' Obligations or the Borrowers shall otherwise fail to perform,
observe or comply with any of the conditions, covenants, terms, stipulations or
agreements contained in this Agreement or any of the other Financing Documents
and the same results in an Event of Default hereunder, the Bank, without notice
to or demand upon any Borrower, and without waiving or releasing any of the
Borrowers' Obligations or any Event of Default, and in addition to any rights or
remedies available to it under any of the other Financing Documents, may (but
shall be under no obligation to) at any time thereafter make such payment or
perform such act for the account and at the expense of the Borrowers, and may,
to the extent permitted by law, enter upon the premises of any Borrower for that
purpose and take all such action thereon as the Bank may consider necessary or
appropriate for such purpose. All sums so paid or advanced by the Bank and all
costs and expenses (including, without limitation, reasonable attorneys' fees
and expenses) incurred in connection therewith (the "Expense Payments") together
with interest thereon from the date of payment, advance or incurring until paid
in full at the rate of two percent (2%) per annum in excess of the Prime Rate
shall be paid by the Borrowers to the Bank on demand and shall constitute and
become a part of the Borrowers' Obligations.
(g) No Conditions Precedent to Exercise of Remedies. The Borrowers
-----------------------------------------------
shall not be relieved of any obligation by reason of the failure of the Bank to
comply with any request of any Borrower or of any other person to take action to
sell any of the Collateral, or otherwise to enforce any provision of the
Financing Documents, or by reason of the release, regardless of consideration,
of all or any part of the Collateral or other security for the Borrowers'
Obligations, or by reason of any agreement or stipulation between any subsequent
owner of the Collateral or other security for the Borrowers' Obligations, or the
Bank extending the time of payment or modifying the terms of the Financing
Documents without first having obtained the consent of any Borrower; and in the
latter event, the Borrowers shall continue to be liable to make payments
according to the terms of any such extension or modification agreement, unless
expressly released and discharged in writing by the Bank.
(h) Remedies Cumulative and Concurrent. No remedy herein conferred
----------------------------------
upon or reserved to the Bank is intended to be exclusive of any other remedies
provided for in the Financing Documents, and each and every such remedy shall be
cumulative, and shall be in addition to every other remedy given hereunder, or
under the Financing Documents, or now or hereafter existing at law or in equity
or by statute. Every right, power and remedy given by the Financing Documents
to the Bank shall be concurrent and may be pursued separately, successively or
together against the Borrowers or any of them, the Collateral or other security
for the Borrowers'
- 37 -
Obligations or any part thereof, and every right, power and remedy given by the
Financing Documents may be exercised from time to time as often as may be deemed
expedient by the Bank.
(i) No Waiver. No delay or omission of the Bank to exercise any
---------
right, power or remedy accruing upon the happening of an Event of Default shall
impair any such right, power or remedy or shall be construed to be a waiver of
any such Event of Default or any acquiescence therein. No delay or omission on
the part of the Bank to exercise any remedy hereunder, or acceptance by the Bank
of any partial payment on account of the Borrowers' Obligations shall constitute
a waiver of any such Event of Default and each of the remedies herein provided
shall remain continuously available to the Bank.
ARTICLE XIII
MISCELLANEOUS
13.1 Notices. All communications between the parties or notices in
-------
connection with this Agreement and any of the other Financing Documents shall be
in writing (unless otherwise specified herein), hand delivered or sent by
registered airmail, postage prepaid, or by telex, telecopy or other electronic
transmission, addressed to the intended recipient at the address therefor set
forth below. All such communications and notices shall be effective upon
delivery. Either party may change its address or other information for notices
by giving notice to the other party in accordance with the provisions of this
Section.
(a) if to the Borrowers:
Production Group International, Inc.
One Courthouse Metro, Suite 200
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
President
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ and Cross
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
- 38 -
(b) if to the Bank:
The First National Bank of Maryland
▇▇▇▇ ▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇
Vice President
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Allner
Miles & Stockbridge
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
13.2 Survival of Agreement; Successors and Assigns.
---------------------------------------------
(a) All covenants, agreements, representations and warranties made
herein and in the certificates delivered pursuant hereto shall survive the
extension by the Bank of any of the Credit Facilities, and the execution and
delivery to the Bank of this Agreement and all of the other Financing Documents
and shall continue in full force and effect until all of the Borrowers'
Obligations have been paid and performed in full.
(b) Whenever in this Agreement any of the parties hereto is referred
to, such reference shall be deemed to include the successors and assigns of such
party; and all covenants, promises and agreements by or on behalf of the
Borrowers which are contained in this Agreement or in the other Financing
Documents shall inure to the benefit of the successors and assigns of the Bank.
No Borrower may assign any interest that it may have under this Agreement,
including (without limitation) the right to receive the benefit of any of the
Credit Facilities to be extended hereunder, without the prior written consent of
the Bank. Any assignment made or attempted by any Borrower without the prior
written consent of the Bank shall be void and of no effect. No consent by the
Bank to an assignment by any Borrower shall release the Borrowers as the parties
primarily obligated and liable under the terms of this Agreement unless any
Borrower shall be released specifically by the Bank in writing. No consent by
the Bank to an assignment shall be deemed to be a waiver of the requirement of
prior written consent by the Bank with respect to each and every further
assignment and as a condition precedent to the effectiveness of such assignment.
13.3 Fees and Expenses of Bank. (a) Expenses. The Borrowers will pay all
------------------------- --------
out-of-pocket expenses incurred by the Bank in connection with (i) the
preparation and negotiation of this Agreement and the other Financing Documents,
(ii) the extension by the Bank of any of the Credit Facilities, (iii) the
protection of
- 39 -
the Collateral and any other security for the repayment of the Borrowers'
Obligations, and (iv) the enforcement and protection of the rights of the Bank
in connection with this Agreement or any of the other Financing Documents,
including, but not limited to (A) the fees and disbursements of Miles &
Stockbridge, Baltimore, Maryland, or other counsel employed by the Bank, and (B)
the fees of the Bank's auditors.
(b) Fees Relating to Working Capital Line of Credit. (i) On December
-----------------------------------------------
1, 1995, and on the first day of each fiscal quarter thereafter prior to the
maturity of the Working Capital Line of Credit, the Borrowers shall pay to the
Bank a fee in the amount of one quarter of one percent (1/4%) of the average
daily unused portion of the Working Capital Line of Credit commitment without
regard to whether availability is constrained by the borrowing base. The unused
commitment fee shall be deemed to have been earned by the Bank for the previous
quarter at the time of billing and shall be non-refundable.
(ii) At the time of issuance of each Standby Letter of Credit, the
Borrowers shall pay the Bank an issuance fee in the amount of 1% per annum of
--- -----
the stated amount thereof, subject to a minimum issuance fee of $500. The
issuance fee for each Standby Letter of Credit shall be deemed to have been
earned by the Bank at the time of billing and shall be non-refundable.
(c) Fee Relating to the Acquisition Facility. Upon execution and
----------------------------------------
delivery of this Agreement, the Borrowers shall pay to the Bank a facility fee
in the amount of one-half of one percent (1/2%) of the Acquisition Facility
Commitment, or $25,000 [less the $12,500 paid upon acceptance of the Bank
------- -------
Commitment Letter]. This fee shall be deemed to have been earned by the Bank at
the time of billing and shall be non-refundable.
(d) Fee Relating to the Equipment Facility. Upon execution and
--------------------------------------
delivery of this Agreement, the Borrowers shall pay to the Bank a facility fee
in the amount of one-half of one percent (1/2%) of the Equipment Facility
Commitment, or $5,000. This fee shall be deemed to have been earned by the Bank
------
at the time of billing and shall be non-refundable.
13.4 Applicable Law; Jurisdiction; Consent to Service of Process. This
-----------------------------------------------------------
Agreement and all of the other Financing Documents (except where expressly
indicated therein to the contrary) shall be construed in accordance with and
governed by the laws of the State of Maryland. The Bank and the Borrower hereby
submit to the non-exclusive jurisdiction of any Maryland court or federal court
sitting in Baltimore City over any suit, action or proceeding arising out of or
relating to this Agreement. The Borrowers hereby collectively and irrevocably
appoint the President of Production Group International, Inc. at the address set
forth in Section 13.1 of this Agreement to act as agent to accept service of
------------
process for them and on their behalf in any proceeding brought pursuant to the
provisions of this subsection and to receive any notices required pursuant to or
by the terms of this Agreement.
- 40 -
13.5 Waiver of Trial by Jury. Each of the Borrowers and the Bank hereby
-----------------------
waive trial by jury in any action or proceeding to which the Borrowers or any of
them and the Bank may be parties, arising out of or in any way pertaining to
this Agreement or any of the other Financing Documents. It is agreed and
understood that this waiver constitutes a waiver of trial by jury of all claims
against all parties to such actions or proceedings, including claims against
parties who are not parties to this Agreement.
This waiver is knowingly, willingly and voluntarily made by each of
the Borrowers and the Bank, and the Borrowers hereby represent that no
representations of fact or opinion have been made by any individual to induce
this waiver of trial by jury or to in any way modify or nullify its effect. The
Borrowers further represent that they have had the opportunity to be represented
in the signing of this Agreement and in the making of this waiver by independent
legal counsel, selected of their own free will, and that they have had the
opportunity to discuss this waiver with counsel.
13.6 Confession of Judgment. EACH BORROWER HEREBY AUTHORIZES ANY
----------------------
ATTORNEY DESIGNATED BY THE BANK OR ANY CLERK OF ANY COURT OF RECORD TO APPEAR
FOR THE BORROWER IN ANY COURT OF RECORD AND CONFESS JUDGMENT WITHOUT PRIOR
HEARING AGAINST THE BORROWER IN FAVOR OF THE BANK FOR AND IN THE AMOUNT OF THE
UNPAID BORROWERS' OBLIGATIONS UNDER THIS AGREEMENT AND ANY OF THE OTHER
FINANCING DOCUMENTS, COSTS OF SUIT, AND ATTORNEYS' FEES OF FIFTEEN PERCENT (15%)
OF THE UNPAID BORROWERS' OBLIGATIONS. NOTWITHSTANDING THE FACT THAT THE AMOUNT
OF THE JUDGMENT WHICH MAY BE CONFESSED AGAINST THE BORROWER MAY INCLUDE
ATTORNEYS' FEE OF FIFTEEN PERCENT (15%) OF THE UNPAID BORROWERS' OBLIGATIONS,
THE BANK SHALL BE ENTITLED TO COLLECT ONLY ITS ACTUAL ATTORNEYS' FEES, WHETHER
SUCH AMOUNT SHALL BE GREATER OR LESS THAN FIFTEEN PERCENT (15%) OF THE UNPAID
BORROWERS' OBLIGATIONS. THE AUTHORITY AND POWER TO APPEAR FOR AND ENTER
JUDGMENT AGAINST THE BORROWER SHALL NOT BE EXHAUSTED BY ONE OR MORE EXERCISES
THEREOF OR BY ANY IMPERFECT EXERCISE THEREOF AND SHALL NOT BE EXTINGUISHED BY
ANY JUDGMENT ENTERED PURSUANT THERETO. SUCH AUTHORITY MAY BE EXERCISED ON ONE
OR MORE OCCASIONS OR FROM TIME TO TIME IN THE SAME OR DIFFERENT JURISDICTIONS AS
OFTEN AS THE BANK SHALL DEEM NECESSARY OR DESIRABLE, FOR ALL OF WHICH THIS
AGREEMENT SHALL BE A SUFFICIENT WARRANT.
It is understood and agreed that this power of attorney shall be deemed to
be a power coupled with an interest which cannot be revoked. Said attorney-in-
fact shall also have the power to prosecute and defend all actions or
proceedings in connection with the Collateral and all other security for the
Borrowers' Obligations and to take such actions and to require such performance
as the Bank may deem necessary.
13.7 Modifications. No modification or waiver of any provision of this
-------------
Agreement or of any of the other Financing Documents, nor consent to any
departure by any Borrower therefrom, shall be effective unless the same shall be
in writing, and then such waiver or consent shall be effective only in the
specific
- 41 -
instance and for the purpose for which it is given. No notice to or demand on
any Borrower in any case shall entitle any Borrower to any other or further
notice or demand in the same, similar or other circumstances.
13.8 No Waiver of Rights by Bank. Neither any failure nor any delay on the
---------------------------
part of the Bank in exercising any right, power or privilege hereunder or under
this Agreement or any of the other Financing Documents shall operate as a waiver
thereof, nor shall a single or partial exercise thereof preclude any other or
further exercise or the exercise of any other right, power or privilege.
13.9 No Liability of Bank. The Bank shall not be liable for any act or
--------------------
omission by it pursuant to the provisions of this Agreement in the absence of
fraud or gross negligence. The Borrowers hereby agree that the Bank shall not
be chargeable for any negligence, mistake, act or omission of any accountant,
examiner, agency or attorney employed by the Bank in making examinations,
investigations or collections, or otherwise in perfecting, maintaining,
protecting or realizing upon any lien or security interest or any other interest
in the Collateral or any other security for the Borrowers' Obligations. The
Bank shall incur no liability to any Borrower or any other party in connection
with the acts or omissions of the Bank in reliance upon any certificate or other
paper believed by the Bank to be genuine or with respect to any other thing
which the Bank may do or refrain from doing, unless such act or omission amounts
to fraud or gross negligence.
By accepting or approving anything required to be observed, performed or
fulfilled by the Borrowers or to be given to the Bank pursuant to this
Agreement, including, without limitation, any certificate, balance sheet,
statement of profit and loss or other financial statement, survey, receipt,
appraisal or insurance policy, the Bank shall not be deemed to have warranted or
represented the sufficiency, legality, effectiveness or legal effect of the
same, or of any term, provision or condition thereof and any such acceptance or
approval thereof shall not be or constitute any warranty or representation with
respect thereto by the Bank.
13.10 Indemnification. All acts, including any failure to act,
---------------
relating to the Collateral and any other security for the Borrowers' Obligations
by any agent, representative or designee of the Bank are performed solely for
the benefit of the Bank to assure repayment of the Borrowers' Obligations and
are not for the benefit of the Borrowers, or for the benefit of any other
person, including without limitation, purchasers, tenants or other occupants.
The Borrowers agree to jointly and severally indemnify the Bank and to hold the
Bank harmless against any loss or expense (including reasonable attorneys' fees)
resulting from any and all claims, actions, settlements, or liability for acts
or failure to act in connection with the Collateral and any other security for
the Borrowers' Obligations, except for those claims which directly result from
the gross negligence or wilful misconduct of the Bank's
- 42 -
officers, directors or employees. In addition to all amounts payable hereunder,
the Borrowers hereby jointly and severally protect, indemnify and hold harmless
the Bank from and against, and hereby agree to defend the Bank against, any and
all claims, damages, losses, liabilities, costs or expenses whatsoever which the
Bank may, at any time, sustain or incur by reason of or in consequence of or
arising out of the extension of the Credit Facilities; it being the intention of
the parties that this Agreement shall be construed and applied to protect and
indemnify the Bank against any and all risks involved in the extension of the
Credit Facilities, including (without limitation) the issuance of the Standby
Letters of Credit, all of which risks are hereby assumed by the Borrowers,
including, without limitation, any and all risks of the acts or omissions,
whether rightful or wrongful, of any present or future de jeure or de facto
-- ----- -- -----
Governmental Authority. The provisions of this Section shall survive the
expiration of the Credit Facilities, this Agreement and the other Financing
Documents.
13.11 No Partnership. Nothing contained in this Agreement shall be
--------------
construed in a manner to create any relationship between the Borrowers and the
Bank other than the relationship of borrowers and lender, and the Borrowers and
the Bank shall not be considered partners or co-venturers for any purpose on
account of this Agreement.
13.12 Time of Essence. Time shall be of the essence for each and every
---------------
provision of this Agreement of which time is an element.
13.13 Illegality. If fulfillment of any provision hereof or any
----------
transaction related hereto or to any of the other Financing Documents, at the
time performance of such provision shall be due, shall involve transcending the
limit of validity prescribed by law, then ipso facto, the obligation to be
---- -----
fulfilled shall be reduced to the limit of such validity; and if any clause or
provisions herein contained other than the provisions hereof pertaining to
repayment of the Borrowers' Obligations operates or would prospectively operate
to invalidate this Agreement in whole or in part, then such clause or provision
only shall be void, as though not herein contained, and the remainder of this
Agreement shall remain operative and in full force and effect; and if such
provision pertains to repayment of the Borrowers' Obligations, then, at the
option of the Bank, all of the Borrowers' Obligations to the Bank shall become
immediately due and payable.
13.14 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be considered an original for all purposes;
provided, however, that all such counterparts shall together constitute one and
the same instrument.
13.15 Captions and Headings. The captions and headings contained in this
---------------------
Agreement are included herein for convenience of reference only and shall not be
considered a part hereof and are not in any way intended to limit or enlarge the
terms hereof.
- 43 -
13.16 Borrowers' Obligations Absolute and Unconditional. All of the
-------------------------------------------------
Borrowers' Obligations shall be absolute and unconditional, irrespective of any
set-off or counterclaim or the genuineness, validity, priority or enforceability
of this Agreement or any of the other Financing Documents or any other
circumstance which might otherwise constitute a legal or equitable discharge.
13.17 Extension of Termination Date. The Bank shall have the option, in
-----------------------------
its sole and absolute discretion, to extend the Termination Date for additional
periods. In the event that the Bank determines to make one or more extensions
of the Termination Date, it will give written notice to Production Group
International, Inc. not more than thirty (30) and no fewer than ten (10) days
prior to the then scheduled Termination Date. If Production Group
International, Inc. does not receive written notice from the Bank, during the
time period specified in the preceding sentence, indicating that the Bank has
extended the Termination Date, the then scheduled Termination Date shall be
effective for all purposes of this Agreement.
13.18 Confidentiality. The Bank agrees that any confidential
---------------
information obtained from the Borrowers in connection with the Bank's initial
underwriting and ongoing administration of the Credit Facilities shall not be
disclosed to any Person, except for its regulators or any other Government
Authority requesting or requiring such information or any perspective
participant in the Credit Facilities, without the prior written consent of
Production Group, on behalf of the Borrowers. Notwithstanding the foreging, the
Bank shall not be required to treat as confidential any legal, marketing,
financial or technical information concerning the Borrowers which:
(a) was already in possession of the Bank prior to receipt of
such information from the Borrowers;
(b) is, or becomes, the subject of a publication, or is otherwise
made available to the public without the fault of the Bank; or
(c) is received by the Bank without restriction of
confidentiality from a third party who is not under, or in violation of any
obligation of confidentiality to the Borrowers. The Bank agrees to obtain the
written consent of Production Group, on behalf of the Borrowers, prior to
advertising the provision of the Credit Facilities.
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IN WITNESS WHEREOF, each of the Borrowers and the Bank have caused this
Financing Agreement to be duly executed, sealed and delivered by their duly
authorized officers, all as of the day and year first above written.
WITNESS: THE FIRST NATIONAL BANK OF MARYLAND
By: (SEAL)
------------------------- ---------------------------
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇,
Vice President
ATTEST: PRODUCTION GROUP INTERNATIONAL, INC.
[SIGNATURE APPEARS HERE] By:/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ (SEAL)
------------------------- ---------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: President
EXECUTOURS, INC.
[SIGNATURE APPEARS HERE] By:/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ (SEAL)
------------------------- --------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Chief Executive Officer
and Treasurer
SAFARIS EVENTS, INC.
[SIGNATURE APPEARS HERE] By:/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ (SEAL)
------------------------- --------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Chief Executive Officer
KALEIDOSCOPE EVENTS, INC.
[SIGNATURE APPEARS HERE] By:/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ (SEAL)
------------------------- --------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Chief Executive Officer
AGENDA WASHINGTON INC.
[SIGNATURE APPEARS HERE] By:/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ (SEAL)
------------------------- --------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Secretary
- 45 -
ATTEST: WASHINGTON, INC.
[SIGNATURE APPEARS HERE] By:/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ (SEAL)
------------------------- --------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Chief Executive Officer,
Secretary and Treasurer
C.H.L. VENTURES, INC.
[SIGNATURE APPEARS HERE] By:/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ (SEAL)
------------------------- --------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Secretary
PGI ACQUISITION COMPANY E
[SIGNATURE APPEARS HERE] By:/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ (SEAL)
------------------------- --------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Secretary
- 46 -
