Revolving Credit and Term Loan Agreement - Netsmart Technologies Inc. and Fleet National Bank
REVOLVING CREDIT AND TERM LOAN AGREEMENT
BY AND BETWEEN
NETSMART TECHNOLOGIES, INC.
AND
FLEET NATIONAL BANK
DATED AS OF JUNE 1, 2001
<PAGE>
TABLE OF CONTENTS
-----------------
SECTION 1: DEFINITIONS....................................................-6-
-----------
1.1 Defined Terms..................................................-6-
-------------
1.2 Accounting Terms..............................................-13-
----------------
SECTION 2: AMOUNT AND TERMS OF LOANS.....................................-13-
-------------------------
2.1 Loans.........................................................-14-
-----
2.2 Revolving Credit Commitment...................................-14-
---------------------------
2.3 Revolving Credit Note.........................................-14-
---------------------
2.4 Post Closing Commitment Fees..................................-14-
----------------------------
2.5 Procedure for Borrowing.......................................-14-
-----------------------
2.6 Term Loan.....................................................-15-
---------
2.7 Continuation and Conversion of Loans..........................-15-
------------------------------------
2.8 Payments......................................................-16-
--------
2.9 Interest......................................................-17-
--------
2.10 Optional Prepayments..........................................-17-
--------------------
2.11 Mandatory Payments............................................-18-
------------------
2.12 Regulatory Capital Requirements...............................-18-
-------------------------------
2.13 Increased Costs...............................................-18-
---------------
2.14 Indemnities...................................................-19-
-----------
2.15 Change in Legality............................................-19-
------------------
2.16 Use of Proceeds...............................................-20-
---------------
SECTION 3: REPRESENTATIONS .............................................-20-
---------------
3.1 Financial Condition...........................................-20-
-------------------
3.2 Subsidiaries..................................................-21-
------------
3.3 Existence.....................................................-21-
---------
3.4 Authority.....................................................-21-
---------
3.5 Binding Agreements............................................-21-
------------------
3.6 Litigation....................................................-21-
----------
3.7 No Conflicting Law or Agreements..............................-21-
--------------------------------
3.8 No Authorization..............................................-22-
----------------
3.9 Compliance with Applicable Laws...............................-22-
-------------------------------
3.10 Governmental Regulations......................................-22-
------------------------
3.11 Federal Reserve Regulations; Use of Proceeds..................-22-
--------------------------------------------
3.12 Contingent Liabilities........................................-22-
----------------------
3.13 Title to Properties...........................................-22-
-------------------
3.14 Taxes.........................................................-23-
-----
3.15 Default.......................................................-23-
-------
3.16 No Burdensome Agreements......................................-23-
------------------------
3.17 ERISA.........................................................-23-
-----
2
<PAGE>
3.18 Places of Business............................................-23-
------------------
3.19 Absence of Certain Changes....................................-24-
--------------------------
3.20 Security Documents:...........................................-24-
------------------
3.21 Environmental Matters.........................................-24-
---------------------
3.22 Labor Matters.................................................-24-
-------------
3.23 Inventory and Records Locations...............................-25-
-------------------------------
3.24 Intellectual Property.........................................-25-
---------------------
3.25 No Misrepresentations.........................................-25-
---------------------
SECTION 4: CONDITIONS TO LOANS...........................................-26-
-------------------
4.1 Conditions to the Initial Revolving Credit Loan and
---------------------------------------------------
the Term Loan.................................................-26-
-------------
4.2 Condition to All Loans........................................-28-
----------------------
4.3 Approval of Bank's Counsel....................................-28-
--------------------------
SECTION 5: AFFIRMATIVE COVENANTS.........................................-29-
---------------------
5.1 Information...................................................-29-
-----------
5.2 Existence.....................................................-31-
---------
5.3 Payment of Obligations........................................-32-
----------------------
5.4 Insurance.....................................................-32-
---------
5.5 Payment of Indebtedness and Performance of Obligations........-32-
------------------------------------------------------
5.6 Condition of Property.........................................-32-
---------------------
5.7 Observance of Legal Requirements..............................-32-
--------------------------------
5.8 Books and Records; Field Audit................................-32-
------------------------------
5.9 Financial Requirements........................................-33-
----------------------
5.10 New Subsidiaries..............................................-33-
----------------
5.11 Environmental Compliance......................................-33-
------------------------
SECTION 6: NEGATIVE COVENANTS............................................-34-
------------------
6.1 Debt..........................................................-34-
----
6.2 Limitation on Liens...........................................-34-
-------------------
6.3 Merger, Consolidation and Acquisition of Assets...............-34-
-----------------------------------------------
6.4 Sale, Transfer and Lease of Assets............................-34-
----------------------------------
6.5 Contingent Liabilities........................................-35-
----------------------
6.6 Obligation as Lessee..........................................-35-
--------------------
6.7 Investments; Loans............................................-35-
------------------
6.8 Sale of Receivables; Sale-Leasebacks..........................-35-
------------------------------------
6.9 Nature of Business............................................-35-
------------------
6.10 Dividends and Purchase of Stock...............................-35-
-------------------------------
6.11 No Lien Senior to or Equal to Loan Documents..................-35-
--------------------------------------------
6.12 Transactions with Affiliates..................................-36-
----------------------------
6.13 Change in Control.............................................-36-
-----------------
6.14 Changes.......................................................-36-
-------
6.15 Capital Expenditures; Capitalized Leases......................-36-
----------------------------------------
6.16 Accounting Changes............................................-36-
------------------
3
<PAGE>
SECTION 7: EVENTS OF DEFAULT.............................................-36-
-----------------
7.1 Events of Default.............................................-36-
-----------------
7.2 Remedies on Default...........................................-38-
-------------------
SECTION 8: COLLATERAL SECURITY...........................................-39-
-------------------
8.1 Collateral Security: Right of Set-Off.........................-39-
-------------------------------------
8.2 Additional Collateral Security................................-39-
------------------------------
SECTION 9: MISCELLANEOUS.................................................-40-
-------------
9.1 Final Agreement...............................................-40-
---------------
9.2 Survival of Representations...................................-40-
---------------------------
9.3 Successors and Assigns........................................-40-
----------------------
9.4 Liability in Acting...........................................-40-
-------------------
9.5 The Bank's Rights Not Waived; Cumulative Rights...............-40-
-----------------------------------------------
9.6 Expenses......................................................-40-
--------
9.7 Other Agreements..............................................-41-
----------------
9.8 Repayment.....................................................-41-
---------
9.9 Judicial Proceedings: .......................................-41-
--------------------
9.10 Entire Agreement..............................................-42-
----------------
9.11 Further Assurances............................................-42-
------------------
9.12 Headings......................................................-42-
--------
9.13 Notices.......................................................-42-
-------
9.14 Authority to Disclose.........................................-43-
---------------------
9.15 Severability..................................................-43-
------------
9.16 Counterparts..................................................-43-
------------
9.17 Pledge to Federal Reserve Bank................................-43-
------------------------------
9.18 Participations................................................-43-
--------------
9.19 Lost Documents................................................-44-
--------------
SECTION 10: WAIVER OF RIGHT TO JURY TRIAL................................-44-
-----------------------------
SECTION 11: GOVERNING LAW................................................-44-
-------------
SCHEDULE .................................................................-46-
Exhibit 5.1 (f)...........................................................-48-
EXHIBIT A FORM OF REVOLVING CREDIT NOTE......................Exhibit A Page 1
SCHEDULE OF LOANS AND PAYMENT OF PRINCIPAL...................Exhibit A Page 2
EXHIBIT B FORM OF TERM NOTE..................................Exhibit B Page 1
4
<PAGE>
5
<PAGE>
REVOLVING CREDIT AND TERM LOAN AGREEMENT
THIS AGREEMENT made as of the 1st day of June, 2001 by and between
NETSMART TECHNOLOGIES, INC., a Delaware corporation with its principal place of
business at 146 Nassau Avenue, Islip, New York 11751 (the "Company") and FLEET
NATIONAL BANK, a national banking association, having a place of business
located at 300 Broad Hollow Road, Melville, New York 11747 (the "Bank").
W I T N E S S E T H:
SECTION 1: DEFINITIONS
-----------
1.1 Defined Terms: As used in this Agreement the following
--------------
terms have the following meanings, unless the context otherwise requires:
Accounts: shall mean those accounts arising out of the sale
--------
or lease of goods or the rendition of services by the Company or any Guarantor.
Affiliate: as applied to any Person, shall mean any other
---------
Person (1) which directly or indirectly controls, or is controlled by, or is
under common control with that Person, (2) which directly or indirectly
beneficially owns or holds five (5%) percent or more of any class of voting
stock of that Person, or (3) five (5%) percent or more of the voting stock of
which is directly or indirectly beneficially owned or held by that Person. The
term "control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract, or otherwise.
Agreement: shall mean this Revolving Credit and Term Loan
---------
Agreement, as the same from time to time may be amended, supplemented or
modified.
Bank Obligations: shall mean all present and future
----------------
obligations and Debt of the Company to the Bank under this Agreement, any other
Loan Document or any other agreement, document, instrument or otherwise owing to
the Bank, including, without limitation, the obligation to pay the Debt
evidenced by the Notes, and the obligations to pay interest (including interest
accruing subsequent to the commencement of bankruptcy, insolvency or similar
proceedings with respect to the Company) and other fees, expenses, and charges
from time to time owed hereunder or under any other Loan Document.
Borrowing Base: shall mean the lesser of $1,500,000.00 or 75%
--------------
of Eligible Accounts Receivable.
Borrowing Base Certificate: shall mean a certificate
----------------------------
delivered pursuant to Section 5.1 (e) hereof, in form and detail acceptable to
the Bank.
6
<PAGE>
Business Day: shall mean any day other than a Saturday,
------------
Sunday, or other day on which commercial banks in New York are authorized or
required to close under the laws of New York, and, if the applicable day relates
to a LIBOR Rate Loan or an Interest Period for a LIBOR Rate Loan, the day on
which dealings in dollar deposits are also carried on in the London interbank
market and banks are open for business in London.
Capitalized Lease Obligations: shall mean as to any Person,
-----------------------------
the obligations of such Person to pay rent or other amounts under a lease of (or
other agreement conveying the right to use) real and/or personal property which
obligations are required to be classified and accounted for as a capital lease
on a balance sheet of such Person under GAAP and, for purposes of this
Agreement, the amount of such obligations shall be the capitalized amount
thereof, determined in accordance with GAAP.
Cash Compensation: shall mean, in connection with Permitted
-----------------
Acquisitions, the sum of purchase money financing payable to any seller but not
in excess of $250,000.00 in the aggregate ("Seller Notes"), plus cash paid, plus
assumed debt.
CERCLA: shall mean the Comprehensive Environmental
------
Response, Compensation and Liability Act, as amended, 42 U.S.C. Section 9601,
et seq., as amended from time to time, or any successor thereto, and the
rules and regulations issued thereunder, as from time to time in effect.
Collateral: shall mean the collateral as described in Section
----------
8.2 hereof.
Commitment Period: shall mean the period from and including
------------------
the next Business Day after the date hereof to, but not including the
Termination Date.
Debt: shall mean (1) indebtedness or liability for borrowed
----
money or for the deferred purchase price of property or services (including
trade obligations); (2) obligations as lessee under capital leases; (3) current
liabilities in respect of unfunded vested benefits under any Plan; (4)
obligations under letters of credit issued for the account of any Person; (5)
all guaranties, endorsements (other than for collection or deposit in the
ordinary course of business), and other contingent obligations to purchase, to
provide funds for payment, to supply funds to invest in any Person, or otherwise
to assure a creditor against loss; and (6) obligations secured by any Lien on
property owned by the Person, whether or not the obligations have been assumed.
Default: shall mean any of the events specified in Section 7.1
-------
hereof, whether or not any requirement for notice or lapse of time or any other
condition has been satisfied.
EBITDA: shall mean with respect to the Company, net income
------
before gain or loss from discontinued operations, plus depreciation,
amortization, non-cash financing costs related to warrants, interest and taxes.
Eligible Accounts Receivable: shall mean those Accounts of the
----------------------------
Company and the Guarantors arising in the ordinary course of business, which
7
<PAGE>
have been outstanding for not more than 120 days from the original due date and
which are subject to a first priority perfected Lien in favor of the Bank, to
Account debtors other than: (1) foreign Persons domiciled outside of the United
States, (2) Subsidiaries, (3) Affiliates and (4) Persons located in New Jersey
or Minnesota unless the Company: (x) with respect to such state, has received a
Certificate of Authority to do business and is in good standing in such state,
(y) has filed a Notice of Business Activities Report ("Report") with the New
Jersey Division of Taxation or the Minnesota Department of Revenue (as
applicable) for the then current year, or (z) has paid franchise taxes with such
state for the then current year and is not required to file a Report with such
state, and which are otherwise satisfactory in all respects to the Bank in its
sole discretion.
Environmental Laws: shall mean all environmental, health and
------------------
safety laws, rules and regulations, and ordinances, including, without
limitation: (i) CERCLA and all other federal, state and local rules and
regulations, ordinances, decrees, criteria and guidelines, and all other similar
documents and instruments of all courts and Governmental Authorities, bureaus
and agencies, whether issued by environmental regulatory agencies or otherwise,
and (ii) all federal, state and local laws, regulations, resolutions, ordinances
and decrees, in each case relating to Environmental Matters.
Environmental Liability: shall mean any liability of a Person
-----------------------
to any other Person under Environmental Laws and Regulations and under any other
applicable law relating to any Environmental Matter, and, including, without
limitation, any liability for the costs of any investigation, clean-up or other
remedial action with respect to or in connection with any Environmental Matter.
Environmental Matter: shall mean a release caused by the
--------------------
seeping, spilling, leaking, pumping, pouring, emitting, emptying, discharging,
injecting, escaping, leaching, dumping or disposing of hazardous wastes or other
toxic or chemical substance, pollutant or contaminant into the environment or
the generation, treatment, storage or disposal of any toxic or hazardous wastes
or other chemical substance, pollutant or contaminant.
Environmental Proceeding: shall mean any judgment, action,
------------------------
proceeding or investigation (including, without limitation, any federal or state
investigation evaluating whether any remedial action is needed to respond to an
Environmental Matter) pending before any court or Governmental Authority, bureau
or agency, including, without limitation, any environmental regulatory agency or
body, with respect to or threatened against or affecting the assets or liability
of a Person, including, without limitation, in respect of any "facility" owned,
leased or operated under CERCLA or under each other Environmental Law in
connection with any Environmental Matter.
ERISA: shall mean the Employee Retirement Income Security
-----
Act of 1974, as amended from time to time.
8
<PAGE>
ERISA Affiliate: shall mean any trade or business (whether or
---------------
not incorporated) which together with the Company would be treated as a single
employer under Section 4001 of ERISA.
Event of Default: shall mean any of the events specified in
----------------
Section 7.1 hereof, provided thatany requirement for notice or lapse of time
or any other condition has been satisfied.
Fluctuating Rate Loans: shall mean Loans hereunder that
------------------------
bear interest at a rate of interest based on the Prime Rate.
Funded Debt: shall mean, with respect to the Company, the
-----------
sum of Bank debt, lease debt and Seller Notes reflected on the Company's
financial statements delivered to the Bank.
GAAP: shall mean generally accepted accounting
----
principles as from time to time in effect, including the official
interpretations thereof by the Financial Accounting Standards Board,
consistently applied.
Governmental Authority: shall mean any foreign, federal,
-----------------------
state, municipal or other government, or any department, commission, board,
bureau, agency, public authority or instrumentality thereof or any court or
arbitrator.
Guaranties: shall mean the guaranties of the Guarantors on
----------
the Bank's standard form.
Guarantors: shall mean, collectively, Creative Socio-Medics
----------
Corp. and all other Subsidiaries of the Company, now existing or hereafter
acquired or created, except PsyMedex.
Installment Payment Date: shall mean any date on which all
--------------------------
or any portion of the principal amount of a Term Loan is due and payable.
Interest Period: shall mean any period during which a Loan
----------------
bears interest as a LIBOR Rate Loan as elected by the Company in accordance
with the terms of this Agreement.
(a) If any Interest Period would otherwise end on a day which
is not a Business Day, that Interest Period shall be extended to the next
succeeding Business Day unless such Interest Period is with respect to a LIBOR
Rate Loan and the result of such extension would be to extend such Interest
Period into another calendar month, in which event such Interest Period shall
end on the immediately preceding Business Day.
(b) No Interest Period shall extend beyond a stated Maturity
Date.
LIBOR Rate: shall mean as applicable to any LIBOR Rate Loan,
----------
the rate per annum as determined on the basis of the offered rates for deposits
in U.S. Dollars, for a period of time comparable to such LIBOR Rate Loan which
appears on the Telerate page 3750 as of 11:00 a.m. London time on the day that
is two London Business Days preceding the first day of such LIBOR Rate Loan;
9
<PAGE>
provided, however, if the rate described above does not appear on the Telerate
System on any applicable interest determination date, the LIBOR rate shall be
the rate (rounded upward, if necessary, to the nearest one hundred-thousandth of
a percentage point), determined on the basis of the offered rates for deposits
in U.S. dollars for a period of time comparable to such LIBOR Rate Loan which
are offered by four major banks in the London interbank market at approximately
11:00 a.m. London time, on the day that is two (2) London Business Days
preceding the first day of such LIBOR Rate Loan as selected by the Bank. The
principal London office of each of the four major London banks will be requested
to provide a quotation of its U.S. Dollar deposit offered rate. If at least two
such quotations are provided, the rate for that date will be the arithmetic mean
of the quotations. If fewer than two quotations are provided as requested, the
rate for that date will be determined on the basis of the rates quoted for loans
in U.S. dollars to leading European banks for a period of time comparable to
such LIBOR Rate Loan offered by major banks in New York City at approximately
11:00 a.m. New York City time, on the day that is two London Business Days
preceding the first day of such LIBOR Rate Loan. In the event that the Bank is
unable to obtain any such quotation as provided above, it will be deemed that
LIBOR pursuant to a LIBOR Rate Loan cannot be determined. In the event that the
Board of Governors of the Federal Reserve System shall impose a Reserve
Percentage with respect to LIBOR deposits of the Bank, then for any period
during which such Reserve Percentage shall apply, LIBOR shall be equal to the
amount determined above divided by an amount equal to 1 minus the Reserve
Percentage. "Reserve Percentage" shall mean the maximum aggregate reserve
requirement (including all basic, supplemental, marginal and other reserves)
which is imposed on member banks of the Federal Reserve System against
"Euro-currency Liabilities" as defined in Regulation D.
LIBOR Rate Loan: shall mean a Loan bearing interest at a
---------------
LIBOR based rate.
Lien: shall mean any mortgage, deed of trust, pledge, security
----
interest, encumbrance, lien or charge of any kind (including any agreement to
give any of the foregoing), any conditional sale or other title retention or
trust agreement, any lease in the nature thereof, and the filing or recording of
or agreement to give any financing statement or other document to be filed or
recorded under the Uniform Commercial Code of any jurisdiction.
Loan or Loans: shall mean, collectively, the Revolving Credit
-------------
Loans and the Term Loans.
Loan Documents: shall mean the Notes, the Guaranties, the
--------------
Security Agreements, UCC-1 financing statements, the Master Agreement, the
Subordination Agreements and any other documents executed by or on behalf of the
Company or a Guarantor in connection herewith or therewith.
Master Agreement: shall mean that certain ISDA Master
-----------------
Agreement dated as of May 22, 2001 entered into between the Company and the
Bank.
Material Adverse Change: shall mean a material adverse change
-----------------------
in the business, operations, results of operations, assets, liabilities or
financial condition of the Company, a Subsidiary or the Collateral, in each case
as may be reasonably determined by the Bank in its sole discretion.
10
<PAGE>
Maturity Date: shall mean the date that all or a portion of
-------------
the outstanding principal balance of a Loan is due and payable pursuant to the
terms hereof which shall include without limitation the Termination Date, each
Installment Payment Date and the final maturity date of a Term Loan.
Multiemployer Plan: shall mean a Plan described in Section
-------------------
4001(a)(3) of ERISA which covers employees of the Company or an ERISA Affiliate.
Note or Notes: shall mean, collectively, the Revolving Credit
-------------
Note and the Term Note.
Officers' Certificate: shall mean a certificate signed
----------------------
in the name of the Company or any Guarantor by its President, or one of its
Vice Presidents, and by its Treasurer or Secretary.
PBGC: shall mean the Pension Benefit Guaranty Corporation
----
established pursuant to Subtitle A of Title IV of ERISA.
Permitted Acquisitions: shall mean an acquisition, by the
----------------------
Company or any Subsidiary, of a Person within the same line of business as the
Company or its Subsidiaries by: merger, consolidation, purchase of a voting
majority of the stock of another Person, purchase of all or substantially all of
the assets of another Person or purchase of all or substantially all of the
assets of a division or other operating component of another Person (an
"Acquisition") if all of the following conditions are met:
(i) The Cash Compensation does not exceed $750,000.00 per
Acquisition, and not more than $2,000,000.00 in the aggregate for Acquisitions
within any fiscal year;
(ii) The Bank shall have received a set of projections setting
forth in reasonable detail the pro forma effect of such Acquisition and showing
compliance by the Company and its Subsidiaries with all covenants set forth in
this Agreement for the next succeeding year. The projections to be delivered
hereunder shall include and specify the assumptions used to prepare such
projections regarding growth of sales, margins on sales and cost savings
resulting from such Acquisition;
(iii) The Bank shall have received a certificate signed by the
chief financial officer of the Company to the effect that (and including
calculations indicating that) on a pro forma basis after giving effect to such
Acquisition: (a) all representations and warranties contained in the Loan
Documents will remain true and correct except those, if any, made as of a
specific time which shall have been true and correct when made, (b) the Company
is in compliance with and will remain in compliance with all covenants contained
in the Loan Documents, and (c) no Default or Event of Default has occurred and
is continuing or will occur as a result of the consummation of such Acquisition;
11
<PAGE>
(iv) Such Acquisition, in the case of a corporation being
acquired, has been (a) approved by the board of directors of such corporation
which is the subject of such Acquisition, (b) recommended for approval by such
board to the shareholders of such corporation and subsequently approved by such
shareholders as required under applicable law or the by-laws or the certificate
of incorporation of such corporation or (c) otherwise agreed to by all
shareholders of such corporation; and
(v) The Company has timely delivered the information required
pursuant to Section 5.1 hereof.
Person: shall mean and include an individual, a partnership, a
------
firm, a corporation, a trust, a joint venture, a limited liability company, an
unincorporated organization and a government or any department or agency
thereof.
Plan: shall mean any plan referred to in Section 4021(a) of
----
ERISA in respect of which the Company, a Subsidiary or an ERISA Affiliate is an
"employer" or a "substantial employer" as said terms are defined in Sections
3(5) and 4001(a)(2) of ERISA, respectively.
Post Default Rate: shall mean at any time a rate of interest
-----------------
equal to four (4%) percent per annum in excess of the otherwise applicable rate.
Prime Rate: shall mean the variable per annum rate of interest
----------
so designated from time to time by the Bank as its prime rate. The Prime Rate is
a reference rate and does not necessarily represent the lowest or best rate
being charged to any customer. Changes in the rate of interest resulting from
changes in the Prime Rate shall take place immediately without notice or demand
of any kind.
Prohibited Transaction: means any transaction set forth in
----------------------
Section 406 of ERISA or Section 4975 of the Internal Revenue Code of 1986, as
amended from time to time.
PsyMedex: means PsyMedex, Inc., a Subsidiary of Creative
--------
Socio-Medics Corp.
Reportable Event: shall mean any of the events set forth in
----------------
Section 4043(b) of ERISA.
Requirement of Law: shall mean, with respect to any Person,
------------------
articles of organization, the certificate of limited partnership, partnership
agreement, charter and by-laws, or other organizational or governing documents
of such Person, and any law, treaty, rule or regulation, or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon or affecting any such Person or any of its property or to
which such Person or any of its property is subject.
12
<PAGE>
Revolving Credit Loan: shall have the meaning assigned in
---------------------
Section 2.2 hereof.
Revolving Credit Note: shall have the meaning assigned in
---------------------
Section 2.3 hereof.
Seller Notes: shall have the meaning set forth in the
------------
definition of Cash Compensation.
Security Agreements: shall have the meaning assigned in
-------------------
Section 4.1(b) hereof.
Subordinated Debt: shall mean indebtedness subordinated on
------------------
terms acceptable to the Bank.
Subordination Agreements: shall have the meaning assigned in
------------------------
Section 4.1(e).
Subsidiary: shall mean any corporation, association,
----------
partnership, joint venture or other business entity of which the Company,
directly or indirectly, either (a) in respect of a corporation, owns or controls
50% or more of the outstanding stock having ordinary voting power to elect a
majority of the board of directors or similar managing body, irrespective of
whether or not a class or classes shall or might have voting power by reason of
the happening of any contingency, or (b) in respect of an association,
partnership, joint venture or other business entity, either (i) owns 50% or more
of the ownership interests therein or (ii) is otherwise entitled to share in 50%
or more of the profits and losses, however determined, including (without
limitation) any Subsidiary of a Subsidiary.
Taxes: shall mean any federal, state, local or foreign income,
-----
sales, use, transfer, payroll, personal, property, occupancy, franchise or other
tax, levy, impost, fee, imposition, license fee, assessment or similar charge,
together with any interest or penalties thereon.
Term Loan: shall mean the term loan made pursuant to Section
---------
2.6 hereof.
Term Note: shall have the meaning assigned in Section 2.6
---------
hereof.
Termination Date: shall mean June 1, 2003.
----------------
1.2 Accounting Terms: Each accounting term not defined in this
----------------
Agreement, and each accounting term partly defined in this Agreement, to the
extent not defined, shall have the meaning given to it under GAAP consistently
applied.
SECTION 2: AMOUNT AND TERMS OF LOANS
-------------------------
2.1 Loans: Subject to the terms and conditions of this Agreement, the
-----
Bank agrees to make Loans to the Company, whether Revolving Credit Loans or the
Term Loan, as provided for herein.
13
<PAGE>
2.2 Revolving Credit Commitment: Subject to the terms and conditions
---------------------------
hereof, the Bank agrees to extend credit to the Company for its working capital
needs by making loans (each such loan being hereinafter called a "Revolving
Credit Loan") to the Company from time to time during the Commitment Period,
provided that at any time the aggregate principal amount of the Revolving Credit
Loans shall not exceed at any one time outstanding the lesser of $1,500,000.00
or the Borrowing Base (the "Commitment"). During the Commitment Period, the
Company may use the Commitment for obtaining Revolving Credit Loans by
borrowing, paying and prepaying in whole or in part and reborrowing, in
accordance with the terms and conditions hereof.
2.3 Revolving Credit Note: The Revolving Credit Loans made by the Bank
---------------------
pursuant to Section 2.2 hereof shall be evidenced by a promissory note of the
Company, payable to the order of the Bank, substantially in the form of Exhibit
A hereto, with blanks appropriately completed (the "Revolving Credit Note")
representing the obligation of the Company to pay the aggregate unpaid amount of
all Revolving Credit Loans made by the Bank plus interest. The Revolving Credit
Note shall bear interest on the unpaid principal balance thereof from time to
time outstanding at a rate per annum to be elected by the Company in accordance
with the notice provisions set forth in Section 2.5 hereof, and in the case of
LIBOR Rate Loans for Interest Periods of 1, 2 or 3 months as therein specified,
equal to either (1) the LIBOR Rate plus 2.00% or (2) the Prime Rate. The
Revolving Credit Note shall be dated the date of this Agreement, be payable to
the order of the Bank and be stated to mature on the Termination Date. The Bank
is hereby irrevocably authorized by the Company to enter on the schedule
attached to the Revolving Credit Note the amount of each Revolving Credit Loan
made by it, each payment thereon, and the other information provided for on such
schedule; provided, however, that the failure to make any such entry with
respect to any Revolving Credit Loan shall not limit or otherwise affect the
obligation of the Company to repay the same and, in all events, the principal
amount owing by the Company in respect to the Revolving Credit Note shall be the
aggregate amount of all Revolving Credit Loans made by the Bank less all
payments of principal thereon made by the Company. The Bank may attach one or
more continuations to such schedule as and when required. The aggregate unpaid
principal balance of the Revolving Credit Loans set forth on the schedule
attached to the Revolving Credit Note shall be presumptive evidence of the
principal amount owing and paid thereon.
2.4 Post Closing Commitment Fees: The Company agrees to pay the Bank:
----------------------------
(i) a commitment fee of 1/2 of 1% of the amount of the Commitment, payable on
June 1, 2002, and (ii) a facility fee of 1/2 of 1% of the amount of the
Commitment, payable annually on June 1, 2002 and each anniversary thereafter, up
to and including, the Termination Date.
2.5 Procedure for Borrowing: The Company may borrow under the
-----------------------
Commitment during the Commitment Period on any Business Day by giving the Bank
irrevocable notice of a request for a Revolving Credit Loan hereunder one (1)
Business Day before a proposed borrowing, or three (3) Business Days if the
Revolving Credit Loan will be a LIBOR Rate Loan, or continuation, setting forth
(i) the amount of the Loan request, which shall, in the case of LIBOR Rate
Loans, not be less than Two Hundred Fifty Thousand ($250,000.00) Dollars and
14
<PAGE>
integral multiples of One Hundred Thousand ($100,000.00) Dollars in excess
thereof, and, in the case of Fluctuating Rate Loans, not be less than One
Hundred Thousand ($100,000.00) Dollars and integral multiples of One Hundred
Thousand ($100,000.00) Dollars in excess thereof, (ii) whether the Revolving
Credit Loan shall be a Fluctuating Rate Loan or a LIBOR Rate Loan, (iii) the
requested Interest Period commencement date, and (iv) the length of the Interest
Period therefor which shall not extend beyond the Termination Date. Such notice
shall be written (including, without limitation, via facsimile transmission) and
shall be sufficient if received by 1:00 p.m. on the date on which such notice is
to be given. Unless notification is otherwise furnished by the Company to the
Bank (in a manner consistent with the requirements of this Section 2.5), Loans
will be made by credits to the Company's demand deposit account maintained with
the Bank upon compliance with the requirements of this Agreement. If the Company
furnishes such notice but no election is made as to the Interest Period to be
applicable thereto, the Loan will automatically then be made as a Fluctuating
Rate Loan until such required information is furnished pursuant to the terms
hereof.
2.6 Term Loan. Subject to the terms hereof, the Bank agrees to make a
---------
term loan to the Company on the date hereof in the principal amount of Two
Million Five Hundred Thousand and 00/100 ($2,500,000.00) Dollars for a term of
five (5) years (the "Term Loan"). The Term Loan shall be evidenced by a
promissory note of the Company substantially in the form of Exhibit B hereto
with appropriate insertions (the "Term Note") and dated the date of the Term
Loan. The principal amount of the Term Note shall be payable in sixty (60)
consecutive monthly installments, the first fifty-nine (59) of which shall each
be in the amount of $41,666.00, and the final installment to be in the amount
equal to the then unpaid principal balance, payable on the first day of each
month commencing on the first such day to occur after the date of the Term Loan
until the entire unpaid principal balance of the Term Note together with all
interest accrued and unpaid shall be paid in full. The Term Note shall bear
interest on the unpaid principal amount thereof from time to time outstanding at
a rate per annum, to be elected at least three (3) days prior to the date of the
Term Loan and thereafter in accordance with the notice provisions set forth in
Section 2.7 hereof, and in the case of LIBOR Rate Loans for Interest Periods of
1, 2 or 3 months as therein specified, equal to either (y) the LIBOR Rate plus
2.50%, which may be swapped into a fixed rate equivalent for the term of the
Term Loan in accordance with the Master Agreement, or (z) the Prime Rate.
2.7 Continuation and Conversion of Loans: The Company shall have the
------------------------------------
right at any time on prior irrevocable written notice to the Bank (i) to
continue any Loan into a subsequent Interest Period and (ii) to convert any Loan
into another type of Loan permitted by this Agreement (specifying, in the case
of LIBOR Rate Loans, the Interest Period to be applicable thereto), subject to
the following:
(a) in the case of a conversion of less than all of the
outstanding Loans, the aggregate principal amount of Loans converted shall not
be less than the minimum amounts and multiples thereof specified in Section 2.5
hereof; and
(b) no Loan (other than a Fluctuating Rate Loan) shall be
converted at any time other than at the end of an Interest Period applicable
thereto.
In the event that the Company shall not give notice to continue a Loan
into a subsequent Interest Period, such Loan (unless prepaid) shall
automatically be converted into a Fluctuating Rate Loan. The Interest Period
15
<PAGE>
resulting from a conversion shall be specified by the Company in the irrevocable
notice delivered by the Company pursuant to this Section and Section 2.5 hereof;
provided, however, that, if such notice does not specify the Interest Period to
be applicable thereto, the Loan shall automatically be converted into, or
continued as, as the case may be, a Fluctuating Rate Loan until such required
information is furnished pursuant to the terms hereof. Notwithstanding anything
to the contrary contained above, if an Event of Default shall have occurred and
is continuing, no Loan may be continued into a subsequent Interest Period and no
Fluctuating Rate Loan may be converted into a LIBOR Rate Loan.
2.8 Payments: (a) Interest accrued on each Loan shall be
--------
payable, without duplication, on:
(i) the Maturity Date;
(ii) with respect to any portion of any Loan repaid
or prepaid pursuant to this Agreement, the date of
such repayment or prepayment, as the case may be; and
(iii) the first day of each month, commencing with
the first such date following the date of the making
of such Loans.
(b) All payments (including prepayments) to be made by the
Company on account of principal or interest with respect to any Loan or on
account of fees or any other obligations of the Company to the Bank hereunder
shall be made to the Bank at the offices of the Bank set forth in Section 10.1
hereof, or at such other place as the Bank may from time to time designate in
writing in lawful currency of the United States of America in immediately
available funds, without counterclaim or setoff and free and clear of, and
without any deduction or withholding for, any taxes or other payments. If any
payment to be so made hereunder, or under a Note, becomes due and payable on a
day other than a Business Day, such payment shall be extended to the next
succeeding Business Day and such extension of time shall be included in
computing interest and fees in connection with such payment.
(c) If the entire amount of any required principal and/or
interest payment is not paid in full within ten (10) days after the same is due,
the Company shall pay to the Bank a late fee equal to five (5%) percent of the
required payment.
(d) All payments shall be applied first to the payment of all
fees, expenses and other amounts due to the Bank (excluding principal and
interest), then to accrued interest, and the balance on account of outstanding
principal; provided, however, that after default, payments will be applied to
the obligations of the Company to the Bank as the Bank determines in its sole
discretion.
16
<PAGE>
2.9 Interest: (a) The interest rate applicable to each Note, while a
--------
fluctuating rate is in effect, shall change when and as the Prime Rate is
changed, and any such change in the Prime Rate shall become effective on the day
on which such change is adopted.
(b) Interest on the Loans shall be computed on the basis of a
year of three hundred sixty (360) days for actual days elapsed (including the
first but excluding the last) occurring in the period for which payable.
(c) Upon default (whether or not the Bank has accelerated
payment hereunder),or after maturity or after judgment has been rendered, the
Company's right to select pricing options shall cease, the unpaid principal of
all Loans, shall bear interest (payable on demand, and in any event on the first
day of each month, and computed daily on the basis of a 360-day year for actual
days elapsed) at the Post Default Rate.
(d) All agreements between the Company and the Bank are hereby
expressly limited so that in no contingency or event whatsoever, whether by
reason of acceleration of maturity of the Notes or otherwise, shall the amount
paid or agreed to be paid to the Bank for the use or the forbearance of the
Notes exceed the maximum permissible under applicable law. As used herein, the
term "applicable law" shall mean the law in effect as of the date hereof
provided, however, that in the event there is a change in the law which results
in a higher permissible rate of interest, then the Notes shall be governed by
such new law as of its effective date. In this regard, it is expressly agreed
that it is the intent of the Company and the Bank in the execution, delivery and
acceptance of the Notes to contract in strict compliance with the laws of the
State of New York from time to time in effect. If, under or from any
circumstances whatsoever, fulfillment of any provision hereof or of any of the
Loan Documents at the time of performance of such provision shall be due, shall
involve transcending the limit of such validity prescribed by applicable law,
then the obligation to be fulfilled shall automatically be reduced to the limits
of such validity, and if under or from circumstances whatsoever the Bank should
ever receive as interest an amount which would exceed the highest lawful rate,
such amount which would be excessive interest shall be applied to the reduction
of the principal balance evidenced hereby and not to the payment of interest.
This provision shall control every other provision of all agreements between the
Company and the Bank.
2.10 Optional Prepayments: (a) Subject to the provisions of (b) below
--------------------
and the provisions of Section 2.14 hereof, the Company may at its option at any
time or from time to time prepay a Loan in whole or in part, without premium or
penalty, upon at least one (1) Business Day prior written notice to the Bank
specifying the date and the amount of prepayment. Partial prepayments shall be
in the amount of Two Hundred Fifty Thousand and 00/100 ($250,000.00) Dollars or
an integral multiple thereof and each prepayment shall be made together with
interest accrued thereon to and including the date of prepayment. The Company
may not prepay any Loan (other than a Fluctuating Rate Loan) prior to the last
day of the Interest Period therefor. Any partial prepayment of the Term Loan
shall be applied to the last maturing installments in inverse order of their
respective maturities.
(b) The Company shall have the right to prepay LIBOR Rate
Loans in accordance with Section 2.14 hereof and upon payment of all of the
amounts due pursuant to Section 2.14 hereof.
17
<PAGE>
If by reason of an Event of Default the Bank elects to declare a Note
to be immediately due and payable, then any amounts due pursuant to Section 2.14
hereof with respect to such Note shall become due and payable in the same manner
as though the Company had exercised such right of prepayment.
2.11 Mandatory Payments: If at any time prior to the Termination Date
------------------
or the maturity of the Revolving Credit Note, the aggregate unpaid principal
balance of the Revolving Credit Loans is in excess of the Borrowing Base, the
Company shall immediately make a prepayment of principal on the Revolving Credit
Note, in a principal amount equal to such excess, together with accrued interest
on such amount being prepaid to the date of such prepayment. If the aggregate
principal amount of the Revolving Credit Loans exceeds the amount permitted by
Section 2.2 hereof, the Revolving Credit Loans shall be immediately prepaid in
the amount of such excess.
2.12 Regulatory Capital Requirements: If any existing or future law,
-------------------------------
regulation, or guideline or the interpretation thereof by any court or
administrative or Governmental Authority charged with the administration
thereof, or compliance by the Bank with any request or directive (whether or not
having the force of law) of any such authority, imposes, modifies, deems
applicable or results in the application of any capital maintenance, capital
ratio or similar requirement against loan commitments made by the Bank (or
participations therein) or the Bank in anticipation of the effectiveness of any
capital maintenance, capital ratio or similar requirement takes reasonable
action to enable itself to comply therewith, and the result thereof is to impose
upon the Bank or increase any capital requirement applicable as a result of the
making or maintenance of the Commitment or participations therein (which
imposition of or increase in capital requirements may be determined by the
Bank's reasonable allocation of the aggregate of such capital impositions or
increases) then, upon demand by the Bank, the Company shall immediately pay to
the Bank from time to time as specified by the Bank additional commitment fees
which shall be sufficient to compensate the Bank for such impositions of or
increase in capital requirements, together with interest on each such amount
from the date demanded until payment in full thereof at the rate provided in
this Agreement with respect to commitment fees not paid when due. A certificate
setting forth in reasonable detail the amounts necessary to compensate the Bank
as a result of an imposition of or increase in capital requirements submitted by
the Bank to the Company shall be conclusive, absent manifest error or bad faith,
as to the amount thereof.
2.13 Increased Costs. If the Bank determines that the effect of any
---------------
applicable law or government regulation, guideline or order or the
interpretation thereof by any Governmental Authority charged with the
administration thereof (such as, for example, a change in official reserve
requirements which the Bank is required to maintain in respect of loans or
deposits or other funds procured for funding such loans) is to increase the cost
to the Bank of making or continuing Loans hereunder or to reduce the amount of
any payment of principal or interest receivable by the Bank thereon, then the
Company will pay to the Bank on demand such additional amounts as the Bank may
determine to be required to compensate the Bank for such additional costs or
reduction. Any additional payment under this Section will be computed from the
effective date at which such additional costs have to be borne by the Bank. A
certificate as to any additional amounts payable pursuant to this Section 2.13
setting forth the basis and method of determining such amounts shall be
18
<PAGE>
conclusive, absent manifest error, as to the determination by the Bank set forth
therein if made reasonably and in good faith. The Company shall pay any amounts
so certified to it by such Bank within ten (10) days of receipt of any such
certificate. For purposes of this Section 2.13 all references to a "Bank" shall
be deemed to include any participant in the Bank's Commitment and/or the Loans.
2.14 Indemnities. The Company may prepay a LIBOR Loan only upon at
-----------
least three (3) Business Days prior written notice to the Bank (which notice
shall be irrevocable), and any such prepayment shall occur only on the last day
of the Interest Period for such LIBOR Loan. The Company shall pay to the Bank,
upon request of the Bank, such amount or amounts as shall be sufficient (in the
reasonable opinion of the Bank) to compensate it for any loss, cost, or expense
incurred as a result of: (i) any payment of a LIBOR Loan on a date other than
the last day of the Interest Period for such Loan; (ii) any failure by the
Company to borrow a LIBOR Loan on the date specified by the Company's written
notice; (iii) any failure by the Company to pay a LIBOR Loan on the date for
payment specified in the Company's written notice. Without limiting the
foregoing, the Company shall pay to the Bank a "yield maintenance fee" in an
amount computed as follows: The current rate for United States Treasury
securities (bills on a discounted basis shall be converted to a bond equivalent)
with a maturity date closest to the term chosen pursuant to the LIBOR Rate
Election as to which the prepayment is made, shall be subtracted from the LIBOR
in effect at the time of prepayment. If the result is zero or a negative number,
there shall be no yield maintenance fee. If the result is a positive number,
then the resulting percentage shall be multiplied by the amount of the principal
balance being prepaid. The resulting amount shall be divided by 360 and
multiplied by the number of days remaining in the term chosen pursuant to the
LIBOR Rate Election as to which the prepayment is made. Said amount shall be
reduced to present value calculated by using the above referenced United States
Treasury securities rate and the number of days remaining in the term chosen
pursuant to the LIBOR Rate Election as to which prepayment is made. The
resulting amount shall be the yield maintenance fee due to the Bank upon the
prepayment of a LIBOR Loan. Each reference in this paragraph to "LIBOR Rate
Election" shall mean the election by the Company of the LIBOR Rate. If by reason
of an Event of Default, the Bank elects to declare the Notes to be immediately
due and payable, then any yield maintenance fee with respect to a LIBOR Loan
shall become due and payable in the same manner as though the Company had
exercised such right of prepayment.
A certificate as to any additional amounts payable pursuant to this
Section 2.14 setting forth the basis and method of determining such amounts
shall be conclusive, absent manifest error, as to the determination by the Bank
set forth therein if made reasonably and in good faith. The Company shall pay
any amounts so certified to it by such Bank within ten (10) days of receipt of
any such certificate. For purposes of this Section 2.14, all references to the
"Bank" shall be deemed to include any participant in the Commitment or the Term
Loan.
2.15 Change in Legality: (a) Notwithstanding anything to the contrary
------------------
herein contained, if any change in any law or regulation or in the
interpretation thereof by any Governmental Authority charged with the
administration or interpretation thereof shall make it unlawful for a Bank to
make or maintain any LIBOR Rate Loan, then, by written notice to the Company,
the Bank may:
19
<PAGE>
(i) declare that LIBOR Rate Loans will not thereafter
be made by such Bank hereunder, whereupon the Company shall be
prohibited from requesting LIBOR Rate Loans from the Bank hereunder
unless such declaration is subsequently withdrawn; and
(ii) require that all outstanding LIBOR Rate Loans
made by it be converted to Fluctuating Rate Loans, in which event (x)
all such Loans made by such Bank shall be automatically converted to
Fluctuating Rate Loans as of the effective date of such notice as
provided in paragraph (b) below and (y) all payments and prepayments of
principal which would otherwise have been applied to repay the
converted LIBOR Rate Loans shall instead be applied to repay the
Fluctuating Rate Loans resulting from the conversion of such Loans.
(b) For purposes of this Section 2.15, a notice to
the Company by the Bank pursuant to paragraph (a) above shall be
effective on the day of receipt by the Company and (ii) for purposes of this
Section 2.15 all references to a "Bank" shall be deemed to include any
participant in the Commitment and/or the Loans.
2.16 Use of Proceeds: The Company hereby covenants and agrees that the
---------------
proceeds of the Revolving Credit Loan will be used for working capital support.
Up to $750,000.00 of the proceeds of the Term Loan will be used to research and
develop software systems upgrades to meet project requirements in California,
the balance of the Term Loan proceeds shall be used to partially fund Permitted
Acquisitions.
SECTION 3: REPRESENTATIONS
---------------
In order to induce the Bank to enter into this Agreement and to make
the Loans herein provided for, the Company hereby represents and warrants to the
Bank that:
3.1 Financial Condition.
-------------------
(a) The balance sheet of the Company and its Subsidiaries as
at December 31, 2000 and the related statements of income, retained earnings and
cash flows for the fiscal year ended on such date, audited by Richard A. Eisner
& Company, CPAs, copies of which certified statements have heretofore been
furnished to the Bank, are complete and correct and present fairly the financial
condition of the Company and its Subsidiaries for the fiscal year then ended.
Such certified financial statements, including schedules and notes thereto, have
been prepared in accordance with GAAP. Neither the Company nor any of its
Subsidiaries has any material contingent obligations, contingent liabilities or
liabilities for taxes, long-term leases or unusual forward or long-term
commitments, which are not reflected in the foregoing certified statements or in
the notes thereto. Since the date of the aforementioned financial statements,
there has been no material adverse change in the business, operations, assets or
financial or other condition of the Company or any Subsidiary.
20
<PAGE>
3.2 Subsidiaries: The Company does not have any Subsidiaries,
------------
other than Creative Socio-Medics Corp., a Delaware corporation. Creative
Socio-Medics Corp. does not have any Subsidiaries, other than PsyMedex.
3.3 Existence: The Company and each of its Subsidiaries is a
---------
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, and has the corporate power to own its assets and to
transact the business in which it is presently engaged and as proposed to be
conducted and is duly qualified as a foreign corporation to do business and is
in good standing in each jurisdiction in which the character of the properties
owned by it therein or the transaction of its business makes such qualification
necessary.
3.4 Authority: The execution, delivery and performance of this
---------
Agreement, the borrowings hereunder and the execution and delivery of the Loan
Documents and all other documents executed in connection with this Agreement by
the Company and the Guarantors have been duly authorized by all requisite
corporate action. No consent or approval of stockholders or members or consent,
approval, license or authorization of, or registration or declaration with, any
governmental or administrative authority, instrumentality, bureau or agency is
required as a condition to the execution, delivery, validity or enforceability
of this Agreement or the other Loan Documents.
3.5 Binding Agreements: This Agreement and the other Loan Documents to
------------------
which it is a party constitute the valid and legally binding obligations of the
Company and the Guarantors (as applicable) enforceable in accordance with their
respective terms except as may be limited by bankruptcy, insolvency or other
similar laws affecting the enforcement of creditors' rights.
3.6 Litigation: There are no actions, suits, proceedings or
----------
investigations pending or, to the best knowledge of the Company, threatened by
or against the Company or its Subsidiaries at law or in equity (whether or not
purportedly on behalf of the Company or any Subsidiary) before or by any Federal
or state court, municipal or other governmental department, commission, board,
bureau, agency or instrumentality, which (x) call into question the
enforceability or validity of, or (y) individually or together with such
actions, suits, proceedings and investigations, if adversely determined, would,
in the aggregate, cause a Material Adverse Change, or the ability of the Company
or the Subsidiaries to perform their respective obligations under this Agreement
or any Loan Document. To the best of its knowledge, neither the Company nor any
Subsidiary is in default with respect to any order, decree or judgment of any
court, arbitrator or Governmental Authority, bureau or agency.
3.7 No Conflicting Law or Agreements: There is no charter, by-law or
--------------------------------
provision of any preferred stock of the Company or any Subsidiary, and no
provision of any existing mortgage, indenture, contract, shareholder agreement
or other agreement binding on the Company or any Subsidiary or affecting their
respective properties, nor is there any existing statute, rule, regulation,
judgment, decree or order applicable to the Company or any Subsidiary binding
thereon or affecting the property thereof which would conflict with, result in a
breach of or constitute a default thereunder or in any way prevent the
execution, delivery, or carrying out of the terms of this Agreement or the Loan
Documents, or which would result in the creation or imposition of, or the
21
<PAGE>
obligation to create, any Lien upon the property thereof. Neither the Company
nor any Subsidiary is a party to any contract or agreement or subject to any
charge or other corporate restriction which materially adversely affects its
business, property, assets or financial condition.
3.8 No Authorization: No authorization or approval or other action by,
----------------
and no notice to or filing with, any Governmental Authority is required for the
due execution, delivery and performance by the Company or any Guarantor of this
Agreement or any other of the Loan Documents.
3.9 Compliance with Applicable Laws: Neither the Company nor any
-------------------------------
Subsidiary is in default under any judgment, order, writ, injunction, decree or
decision of any Governmental Authority applicable to the Company or any
Subsidiary. The Company and the Subsidiaries are in compliance in all material
respects with all statutes and regulations of all Governmental Authorities.
3.10 Governmental Regulations: Neither the Company nor any Subsidiary
------------------------
is subject to regulation under the Public Utility Holding Company Act of 1935,
the Federal Power Act or the Investment Company Act of 1940, and the Company is
not subject to any statute or regulation which prohibits or restricts the
incurrence of Debt for borrowed money under this Agreement or the Notes,
including, without limitation, statutes or regulations relative to common or
contract carriers or to the sale of electricity, gas, steam, water, telephone,
telegraph or other public utility services.
3.11 Federal Reserve Regulations; Use of Proceeds: Neither the Company
--------------------------------------------
nor any Subsidiary is engaged principally, or as one of its important
activities, in the business of extending credit for the purpose of purchasing or
carrying any margin stock within the meaning of Regulation U of the Board of
Governors of the Federal Reserve System, as amended ("Margin Stock"). No part of
the proceeds of the Loans will be used, directly or indirectly, for a purpose
which violates any law, rule or regulation of any Governmental Authority,
including, without limitation, the provisions of Regulations G, T, U or X of the
Board of Governors of the Federal Reserve System, as amended. No part of the
proceeds of the Loans will be used, directly or indirectly, in whole or in part,
for the purpose of purchasing or carrying any Margin Stock or to extend credit
to others for the purpose of purchasing or carrying any Margin Stock.
3.12 Contingent Liabilities: Neither the Company nor any Subsidiary is
----------------------
liable, directly or indirectly, in connection with the obligations, stock or
dividends of any other Person, whether by guarantee, endorsement, agreement to
supply or advance funds, agreement to purchase or repurchase goods or services
whether or not such goods or services are actually acquired, or otherwise.
3.13 Title to Properties: The Company and its Subsidiaries have valid
-------------------
leases on or good and marketable title to their respective properties and assets
including the properties and assets reflected in the balance sheets described in
Section 3.1 hereof. Such properties and assets are not subject to any Lien
except as reflected in the financial statements described in Section 3.1 hereof
and are all the properties and assets necessary to the business of the Company
and its Subsidiaries as presently conducted and as proposed to be conducted.
22
<PAGE>
3.14 Taxes: The Company and its Subsidiaries have filed or have
-----
obtained extensions for the filing of, all Federal, state and other tax returns
which are required to be filed and have paid or will pay all taxes shown as due.
All the tax liabilities of the Company and the Subsidiaries are adequately
provided for as of the date hereof. Neither the Company nor any Subsidiary has
received any notice from the Internal Revenue Service or any other taxing
authority proposing additional taxes.
3.15 Default: No Default or Event of Default has occurred and is
-------
continuing, nor will occur as the result of the consummation of the transactions
contemplated hereby and neither the Company nor any Subsidiary is in default in
any material respect in the observance or performance of any of the covenants,
terms or conditions of any agreement or instrument to which it is a party.
3.16 No Burdensome Agreements: Neither the Company nor any Subsidiary
------------------------
is a party to any agreement or instrument nor is subject to any Requirement of
Law, or any restriction under its certificate of incorporation or by-laws which
materially adversely affects the business, properties, assets, operations or
financial condition of the Company or any Subsidiary.
3.17 ERISA: The Company and each ERISA Affiliate are in compliance in
-----
all material respects with all applicable provisions of ERISA, the violation of
which would cause a Material Adverse Change. Neither a Reportable Event nor a
Prohibited Transaction has occurred and is continuing with respect to any Plan;
no notice of intent to terminate a Plan has been filed nor has any Plan been
terminated; no circumstances exist which constitute grounds under Section 4042
of ERISA entitling the PBGC to institute proceedings to terminate, or appoint a
trustee to administer a Plan, nor has the PBGC instituted such proceedings;
neither the Company nor any ERISA Affiliate has completely or partially
withdrawn under Sections 4201 or 4202 of ERISA from a Multiemployer Plan; the
Company, the Subsidiaries and each ERISA Affiliate have met their minimum
funding requirements under ERISA with respect to all of their Plans and the
present fair market value of all Plan assets exceeds the present value of all
vested benefits under each Plan, as determined on the most recent valuation date
of the Plan in accordance with the provisions of ERISA and the regulations
thereunder for calculating the potential liability of the Company, any
Subsidiary or any ERISA Affiliate to PBGC or the Plan under Title IV of ERISA;
and neither the Company, any Subsidiary nor any ERISA Affiliate has incurred any
liability to the PBGC under ERISA.
3.18 Places of Business: As of the date hereof, the principal place of
------------------
business and chief executive office of the Company and the Guarantors is the
address set forth in Section 9.13, and the books and records of the Company and
the Guarantors, and all chattel paper and all records of account are located at
the principal place of business and chief executive office of the Company and
the Guarantors.
3.19 Absence of Certain Changes: Neither the Company nor any Subsidiary
--------------------------
has, since the date of its formation, changed its name, operated or done
business under any fictitious, trade or assumed name, been the surviving
corporation or entity of a merger or consolidation or acquired all or
substantially all of the assets of any Person except for name changes and
assumed names disclosed in writing to the Bank.
23
<PAGE>
3.20 Security Documents:
------------------
(a) The Company and the Guarantors own, and have full
authority to pledge, assign and grant to the Bank a security interest in, the
Collateral. The provisions of the Security Agreements are effective to create in
favor of the Bank a legal, valid and enforceable security interest in all right,
title and interest of the Company and the Guarantors in the Collateral except as
such enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws relating to or limiting creditors' rights generally
or by equitable principles relating to enforceability (where enforcement is
sought by proceedings in equity or law). The financing statements which have
been filed in all appropriate offices and the Security Agreements constitutes
and creates a fully perfected first priority security interest in all right,
title and interest of the Company and the Guarantors in the Collateral, superior
in right to any other Liens, existing or future, which any Person may have
against the Collateral.
(b) Schedule 3.20(b) contains a true and complete list and
accurate description of all real property owned by the Company and the
Guarantors, of all leasehold interests of the Company and the Guarantors in all
real property leased by the Company and the Guarantors and of the leases related
thereto including the landlord and owner of such real property and an accurate
description of same.
3.21 Environmental Matters: The Company and its Subsidiaries have
---------------------
complied in all material respects with all applicable Environmental Laws,
including, without limitation, the financial responsibility requirements
contained in CERCLA and any analogous state law. Neither the Company nor its
Subsidiaries manage any hazardous wastes, hazardous substances, hazardous
materials, toxic substances or toxic pollutants in violation of any
Environmental Law or any other applicable law. To the best knowledge of the
Company, there are no known conditions or circumstances associated with the
currently or previously owned or leased properties or operations of the Company
or tenants thereof which may give rise to any Environmental Liabilities. Neither
the Company nor its Subsidiaries is a party to, nor has the Company or any
Subsidiary received written notice or otherwise learned of any Environmental
Proceeding against it, and neither the Company nor any Subsidiary is subject to
any threatened or actual Environmental Liability.
3.22 Labor Matters: Neither the Company nor any Subsidiary is engaged
-------------
in any unfair labor practice. There is (i) no unfair labor practice complaint
pending against the Company or any Subsidiary, nor, to the best knowledge of the
Company, threatened against the Company or any Subsidiary before the National
Labor Relations Board, and no grievance or arbitration proceeding arising out of
or under collective bargaining agreements is so pending against the Company or
any Subsidiary, or to the best of its knowledge, threatened against the Company
or any Subsidiary and (ii) no strike, labor dispute, slowdown or stoppage
pending against the Company or any Subsidiary or, to the best knowledge of the
Company, threatened against the Company or any Subsidiary.
24
<PAGE>
3.23 Inventory and Records Locations: There is no jurisdiction in which
-------------------------------
the Company or any Guarantor has any assets other than those jurisdictions
listed on Schedule 3.20(b) and those jurisdictions in which assets are located
on a temporary basis in the ordinary course of business.
3.24 Intellectual Property: The Company and each Guarantor possesses or
---------------------
has the right to use all franchises, copyrights, patents, trademarks, trademark
rights, trade names rights, permits, licenses and other rights as are necessary
for the conduct of its business as presently conducted and as proposed to be
conducted. Schedule 3.24 attached hereto sets forth (a) all of the federal,
state and foreign registrations of trademarks and of other marks, trade names or
other trade rights of the Company and each Guarantor and all pending
applications for any such registrations, (b) all of the patents and copyrights
of the Company and each Guarantor and all pending applications therefor and (c)
all other trademarks and other marks, trade names and other trade rights used by
the Company and each Guarantor in connection with its business (collectively,
the "Proprietary Rights"). The Company and each Guarantor is the owner of each
of the Proprietary Rights listed on Schedule 3.24 indicated as owned by them and
no other person, firm, corporation or association has the right to use any of
such marks in commerce. Each registered Proprietary Right of the Company and
each Guarantor listed on Schedule 3.24 has the corresponding registration number
and date set forth on Schedule 3.24. The Proprietary Rights listed on Schedule
3.24 are all those used in the business of the Company and each Guarantor. No
person has a right to receive any royalty or similar payment in respect of any
such Proprietary Rights pursuant to any contractual arrangements entered into by
the Company and each Guarantor, and no person otherwise has a right to receive
any royalty or similar payment in respect of any such Proprietary Rights.
Neither the Company nor any Guarantor has granted any license or sold or
otherwise transferred any interest in any of the Proprietary Rights to any other
Person. To the best of the Company's knowledge, the use of the Proprietary
Rights by the Company or any Guarantor is not infringing upon or otherwise
violating the rights of any third party in or to such Proprietary Rights, and no
proceedings have been instituted against or notices received by the Company or
any Guarantor that are presently outstanding alleging that the use of their
Proprietary Rights infringes upon or otherwise violates the rights of the
Company or any Guarantor in any of the Proprietary Rights. All of the
Proprietary Rights of the Company and the Guarantors are valid and enforceable
rights of the Company and the Guarantors and will not cease to be valid and in
full force and effect by reason of the execution and delivery of this Agreement
or the other Loan Documents or the consummation of the transactions contemplated
hereby or thereby.
3.25 No Misrepresentations: No representation or warranty contained
---------------------
herein or in any of the other Loan Documents, and no document, certificate or
report furnished or to be furnished by the Company or any Guarantor in
connection with the transactions contemplated hereby and thereby, contains or
will contain a misstatement of material fact, or omits or will omit to state a
material fact required to be stated in order to make the statements herein or
therein contained not misleading in the light of the circumstances under which
made.
SECTION 4: CONDITIONS TO LOANS
-------------------
25
<PAGE>
4.1 Conditions to the Initial Revolving Credit Loan and the Term Loan:
-----------------------------------------------------------------
The obligation of the Bank to make the initial Revolving Credit Loan and the
Term Loan hereunder is subject to compliance with the following conditions
precedent to the satisfaction of the Bank.
(a) Notes: There shall have been delivered to the Bank the
-----
Revolving Credit Note and the Term Note in proper form duly executed by the
Company and payable to the order of the Bank in the forms of Exhibit A and
Exhibit B, respectively, annexed hereto with blanks appropriately completed.
(b) Security Agreements: There shall have been delivered to
-------------------
the Bank: the continuing general security agreement of the Company and each
Guarantor on the Bank's standard form covering the personal property of the
Company as set forth therein; and the trademark and copyright security agreement
of the Company and each Guarantor (collectively, the "Security Agreements")
together with:
(i) security agreement questionnaire executed by the
Company and each Guarantor,
(ii) landlord waivers executed by each landlord of
any location at which the Company or any Guarantor has equipment or inventory
valued at greater than $100,000.00,
(iii) UCC-1 financing statements filed in the
appropriate jurisdictions executed by the Company and each Guarantor, as debtor,
and the Bank, as secured party, covering the Bank's security interest in all
personal property of the Company and each Guarantor,
(iv) UCC searches in all appropriate jurisdictions
for the Company and each Guarantor, and
(v) Trademark and Copyright searches in all
appropriate jurisdictions for the Company and each Guarantor.
(c) Insurance: There have been delivered to the Bank true and
---------
correct copies of certificates of insurance, with a responsible insurance
carrier having a rating by A.M. Bests of A or better acceptable to the Bank,
listing the Bank as loss payee and providing 30 days' notice of cancellation
together with evidence of the payment of premiums therefor.
(d) Guaranties: There shall have been delivered to the Bank
----------
the guaranties of the Guarantors on the Bank's standard form.
(e) Subordination Agreements: There shall have been delivered
------------------------
to the Bank the Agreements of Subordination and Assignment (collectively, the
"Subordination Agreements") subordinating any Seller Notes together with any
loans from the Subsidiaries, Affiliates or shareholders of the Company to the
Company.
26
<PAGE>
(f) Borrowing Base Certificate: There shall have been
--------------------------
delivered a borrowing base certificate in form and detail acceptable to the
Bank.
(g) Opinion of Counsel: There shall have been delivered to the
------------------
Bank an opinion of counsel to the Company and the Guarantors dated the date of
this Agreement in all respects satisfactory to the Bank and its counsel.
(h) Certified Copies and Other Documents: There shall have
------------------------------------
been delivered to the Bank such certificates and other documents relating to the
Company and each Guarantor with respect to the matters herein contemplated as
the Bank may request, including but not limited to:
(i) Certificate of good standing from the Secretary
of State of Delaware and certificates of authority to do business from each
other jurisdiction in which the Company conducts business;
(ii) Certificate of incorporation certified by the
Delaware Secretary of State;
(iii) An Officers' Certificate dated the date of this
Agreement certifying, (w) true and correct copies of the by-laws as in effect on
the date of adoption of the resolutions referred to in (x) of this subsection
(iii), (x) true and correct copies of resolutions adopted by the board of
directors (1) authorizing respectively, the borrowings from the Bank hereunder,
the execution and delivery of this Agreement, the Guaranty and the Loan
Documents (as the case may be) and the performance of its respective obligations
under this Agreement and the Loan Documents to which each is a party and the
granting of the lien and security interest contemplated thereby, (2) approving
forms in substantially execution form of this Agreement, the Guaranty and the
Loan Documents to which each is a party, and (3) authorizing officers to execute
and deliver this Agreement, the Guaranty and the Loan Documents and any related
documents, (y) the incumbency and specimen signatures of the officers executing
any documents delivered to the Bank in connection with the Loans, and, in the
case of any Guarantor, (z) the unanimous shareholders' consent of all the
shareholders of such Guarantor entitle to vote.
(i) Asset Audit: The Bank shall have received or performed an
-----------
asset audit at the Company's expense, covering the Assets of the Company and the
Guarantors, which shall be acceptable in all respects to the Bank, not later
than forty-five (45) days from the date hereof.
(j) Cash Available: The Bank shall have received evidence
--------------
acceptable to the Bank that, simultaneously with the funding of the Term Loan
hereunder, the Company has available in its account with the Bank not less than
$1,000,000.00.
(k) Job Status Report: The Bank shall have received a Job
-----------------
Status Report (as defined in Section 5.1(f) hereof, dated as of March 31, 2001.
27
<PAGE>
(l) Fees: The Company shall have paid a portion the Bank's
----
commitment fees: for the Revolving Credit Loans in the amount of $7,500.00 and
for the Term Loan in the amount of $25,000.00 together with the fees and
disbursements of the Bank's counsel.
(m) SWAP Documents: There shall have been delivered to the
--------------
Bank a duly executed Master Agreement, W-9 Form, Secretary's Certificate,
opinion of counsel and UCC-1 financing statements.
(n) Other Documents: The Bank shall have received such other
---------------
documents as the Bank shall reasonably require.
4.2 Condition to All Loans: The obligation of the Bank to make
----------------------
each subsequent Loan hereunder is subject to:
(a) Compliance Certificate: Receipt by the Bank of a
----------------------
certificate, dated the date of each Loan, to the effect that:
(i) the Company has complied with all the terms,
covenants and conditions of this Agreement and the Loan Documents to which it is
a party;
(ii) there exists no Default or Event of Default; and
(iii) the representations and warranties contained in
Section 3 hereof are true and correct, on the proposed borrowing date, both
prior and after giving effect to the requested Loan.
(b) Material Adverse Change: The Company shall not have had a
-----------------------
Material Adverse Change since the later of the date of this Agreement or the
last borrowing date hereunder.
4.3 Approval of Bank's Counsel: All of the documentation specified in
--------------------------
Sections 4.1 and 4.2 shall be in form and substance satisfactory to the Bank and
their counsel and all legal matters incident to the Loans hereunder shall be
satisfactory to counsel to the Bank.
28
<PAGE>
SECTION 5: AFFIRMATIVE COVENANTS
---------------------
The Company covenants and agrees that, so long as any Note remains
outstanding and unpaid, or any other amount is owing to the Bank hereunder, and
until the fulfillment of all obligations hereunder, it will and it will cause
its Subsidiaries to:
5.1 Information: Furnish to the Bank or cause to be furnished to
-----------
the Bank:
(a) Promptly after filing with the Securities and Exchange
Commission (the "SEC"), but not more than ninety (90) days after the close of
each fiscal year, the annual financial statements of the Company (on a
consolidated basis with the Subsidiaries) on form 10K, including a balance sheet
with related statements of income, retained earnings and cash flows for such
fiscal year, setting forth in each case in comparative form the figures for the
previous fiscal year, together with all other reports filed with the SEC, all
prepared in accordance with GAAP consistently applied and audited by a firm of
independent certified public accountants acceptable to the Bank. Such financial
statements shall be accompanied by a certificate of the President or chief
financial officer of the Company demonstrating compliance with the financial
covenants contained in Section 5.10 of this Agreement and to the effect that,
having read this Agreement and the Loan Documents and based upon an examination
which in the opinion of such officer was sufficient to enable such officer to
make an informed statement, nothing came to such officer's attention which would
cause such officer to believe that a Default or an Event of Default had occurred
hereunder or thereunder, and, if so, stating the facts with respect thereto and
whether the same has been cured prior to the date of such certificate, and, if
not, what action is proposed to be taken with respect thereto.
(b) Promptly after filing with the SEC, but not more than
forty-five (45) days after the close of the first three fiscal quarters of each
fiscal year, the quarterly financial statements of the Company (on a
consolidated basis with the Subsidiaries) on form 10Q, including its balance
sheet with related statements of income, retained earnings and cash flows for
the period commencing at the end of the previous fiscal year and ending with the
end of such quarter, setting forth in each case in comparative form the figures
for the comparable period of the previous fiscal year, together with all other
reports filed with the SEC, all prepared in accordance with GAAP consistently
applied and prepared by management and certified as true and correct by the
President or chief financial officer of the Company. Such financial statements
shall be accompanied by a certificate signed by the chief financial officer of
the Company as specified in paragraph (1) above.
(c) Within 10 days of filing, an executed copy of the annual
federal income tax returns of the Company and each Guarantor, inclusive of all
schedules.
(d) Within 15 days after the end of each month, an accounts
receivable aging schedule of the Company and the Guarantors in form and detail
acceptable to the Bank.
29
<PAGE>
(e) Within 15 days after the end of each month, a Borrowing
Base Certificate of the Company and the Guarantors in form and detail acceptable
to the Bank.
(f) Within 45 days after the end of each fiscal quarter of
each fiscal year, a job status report of the Company and the Guarantors,
covering projects totaling not less than 60% of the Company's and the
Guarantor's current work in progress in the form and detail attached hereto as
Exhibit 5.1(f), in all respects acceptable to the Bank (a "Job Status Report").
(g) Prompt written notice if: (i) any obligation (other than
an obligation under this Agreement) of the Company or any Subsidiary for
borrowed money or for the deferred purchase price of any property is declared or
shall become due and payable prior to its stated maturity, (ii) the holder of
any note (other than the Notes), or other evidence of Debt, certificate or
security evidencing any such obligation, has the right to declare such
obligation due and payable prior to its stated maturity, or (iii) to the
knowledge of any officer of the Company there shall occur and be continuing a
Default or an Event of Default hereunder.
(h) Prompt written notice of: (i) any citation, summons,
subpoena, order to show cause or other order naming the Company or any
Subsidiary as a party to any proceeding before any Governmental Authority which
if adversely determined would have a material adverse effect on the business,
financial condition or operations of the Company or any Subsidiary, and include
with such notice a copy of such citation, summons, subpoena, order to show cause
or other order, (ii) any lapse or other termination of a license, permit or
other authorization issued to the Company or any Subsidiary by any Governmental
Authority or Person, which lapse or other termination would have a material
adverse effect on the property, business, profits or conditions (financial or
otherwise) of the Company or any Subsidiary, (iii) any refusal by any
Governmental Authority or Person to renew or extend such license, permit or
other authorization, and (iv) any suit between the Company and any Governmental
Authority or Person or formal demand made upon the Company by any Governmental
Authority or Person which if adversely determined would cause a Material Adverse
Change.
(i) Prompt written notice in the event that (i) the Company or
any Subsidiary shall fail to make any payment when due and payable under any
Plan or (ii) the Company or any Subsidiary shall receive notice from the
Internal Revenue Service or the Department of Labor that it shall have failed to
meet the minimum funding requirements of any Plan, and include therewith a copy
of such notice.
(j) Copies of any request for a waiver of the funding
standards or any extension of the amortization periods required by Sections 303
and 304 of ERISA, or Section 402 of the Code, promptly after any such request is
submitted to the Department of Labor or the Internal Revenue Service, as the
case may be.
(k) Promptly after a Reportable Event occurs which may result
in a termination of a Plan, or the Company or any Subsidiary receives notice
that the PBGC has instituted or intends to institute proceedings under Section
4042 of ERISA to terminate a Plan, a copy of any notice of such Reportable Event
which is filed with the PBGC, or any notice delivered by the PBGC evidencing its
institution of such proceedings or its intent to institute such proceedings, or
any notice to the PBGC that a Plan is to be terminated, as the case may be.
30
<PAGE>
(l) Promptly upon becoming aware of the occurrence of any
Prohibited Transaction in connection with any Plan, a written notice specifying
the nature thereof, what action the Company or any Subsidiary is taking or
proposes to take with respect thereto, and, when known, any action taken by the
Internal Revenue Service with respect thereto.
(m) Promptly after the filing thereof, copies of each annual
report required to be filed pursuant to Section 103 of ERISA and copies of any
other reports required to be filed with respect to any Plan.
(n) At the time any officer of the Company obtains knowledge
of any Default, the Company shall furnish to the Bank a certificate of the chief
financial officer of the Company setting forth the details thereof and the
action which the Company is taking or proposes to take with respect thereto.
(o) Promptly upon request therefor, such other information and
reports relating to the financial condition and operations of the Company or any
Subsidiary as the Bank at any time or from time to time may reasonably request.
For each financial statement, report, certificate, form or other document
specified in this Section 5.1 (the "Reporting Documents") not received by the
Bank by the required date specified in such Section (the "Delivery Date"), the
Company shall pay the Bank a fee (the "Administrative Fee"), to compensate the
Bank for its additional costs and administrative expenses associated with
monitoring and insuring compliance with this Section. The Administrative Fee
shall be equal to the amount set forth in the table below for the corresponding
date of delivery:
# of days after the Delivery Date Administrative Fee
--------------------------------- ------------------
30-59 $ 250.00
60-89 $ 500.00
90 and more $1,000.00
The Company shall receive a credit for any amount of any Administrative Fee paid
by any Guarantor. The imposition of the Administrative Fee shall not be deemed a
waiver by the Bank of the timely receipt of the required Reporting Documents by
the Delivery Date.
5.2 Existence: Preserve and maintain its corporate and its
---------
rights, privileges and franchises.
5.3 Payment of Obligations: Pay and discharge all taxes, assessments
----------------------
and governmental charges or levies imposed upon it or upon its income and
profits, or upon any property belonging to it, prior to the date upon which
penalties attach thereto.
31
<PAGE>
5.4 Insurance: Maintain insurance, at all times throughout the term of
---------
this Agreement, on its property with responsible insurance carriers having a
rating by A.M. Bests of A or better acceptable to the Bank licensed to do
business in the State of New York and in each jurisdiction in which the Company
conducts business against such risks, loss, damage and liability (including
liability to third parties) and in such amounts as is customarily maintained by
similar businesses, including, without limitation, public liability and workers'
compensation insurance, each such policy which shall name the Bank as additional
insured and loss payee as its interests may appear and which shall require
thirty (30) days prior notice to the Bank of cancellation or termination thereof
and will file with the Bank within ten (10) days after request therefor a
detailed list of such insurance then in effect, stating the names of the
carriers thereof, the policy numbers, the insureds thereunder, the amounts of
insurance, dates of expiration thereof and the property and risks covered
thereby, together with a certificate of a duly authorized officer of the Company
certifying that in the opinion of the management of the Company such insurance
is adequate in nature and amount, complies with the obligations of the Company
under this Section, and is in full force and effect.
5.5 Payment of Indebtedness and Performance of Obligations: Pay and
------------------------------------------------------
discharge promptly all lawful claims for labor, materials and supplies or
otherwise which, if unpaid, would cause a Material Adverse Change.
5.6 Condition of Property: At all times, maintain, protect and keep in
---------------------
good repair, working order and condition, all property of the Company and its
Subsidiaries used or required in connection with the proper conduct of the
Company's or any Subsidiary's business, ordinary wear and tear excepted.
5.7 Observance of Legal Requirements: Observe and comply in all
--------------------------------
respects with all laws (including but not limited to ERISA), ordinances, orders,
judgments, rules, regulations, certifications, franchises, permits, licenses,
directions and requirements of all Governmental Authorities which now or at any
time thereafter may be applicable to the Company and its Subsidiaries, a
violation of which would have a material adverse effect on the property,
business, profits or conditions (financial or otherwise) of the Company or any
Subsidiary.
5.8 Books and Records; Field Audit: Keep proper books of record and
------------------------------
account in accordance with GAAP and permit the Bank or its duly authorized
agents upon reasonable notice during normal business hours to examine its books
and records and to conduct field audits at the Company's expense, provided
however that so long as there is no default hereunder, the Company shall not
have to pay for more than two field audits of the Company and each Subsidiary
per year.
5.9 Financial Requirements: Maintain (on a consolidated basis with the
----------------------
Subsidiaries) at all times during this Agreement, or at all times during the
periods indicated below, the following financial requirements:
(a) Equity. A minimum equity of not less than $9,000,000.00.
------
32
<PAGE>
(b) Liabilities to Net Worth. A maximum ratio of total
------------------------
liabilities to net worth of 1.50 to 1.00.
(c) Fixed Charge Coverage Ratio. A Fixed Charge Coverage Ratio, as
---------------------------
hereinafter defined, of at least the following:
Fiscal Quarter Ending Fixed Charge Coverage Ratio
--------------------- ---------------------------
3/31/01 1.75 to 1.0
6/30/01 1.75 to 1.0
9/30/01 1.75 to 1.0
12/31/01 1.75 to 1.0
3/31/02 and thereafter 2.00 to 1.0
As used herein, Fixed Charge Coverage Ratio shall mean: (y) EBITDA (based on a
rolling four quarters basis) less unfunded capital expenditures, capitalized
software development costs, taxes and dividends, divided by (z) the sum of
principal payments of debt made or scheduled to be made, plus interest expense.
(d) Funded Debt to EBITDA. A maximum ratio of Funded Debt to
---------------------
EBITDA (based on a rolling four quarters basis) of no greater than 2.25
to 1.00.
(e) Cash Reserve. A minimum aggregate Cash Reserve of not less
------------
than $500,000.00. For purposes of this covenant, Cash Reserve shall
mean funds deposited in bank accounts (at all times not less than
$300,000.00), money market accounts or certificates of deposit with
maturities of not greater than six months.
(f) No losses. A net profit of at least $1.00 at the end
---------
of the each fiscal quarter.
5.10 New Subsidiaries: Cause any Subsidiary formed after the date of
----------------
this Agreement to become a guarantor of all debts and obligations of the Company
under this Agreement and cause such Subsidiary to execute an agreement, in form
satisfactory to the Bank, subjecting it to the affirmative and negative
covenants contained in this Agreement and the Security Agreements together with
related security agreement questionnaires and UCC-1 financing statements.
5.11 Environmental Compliance: The Company and each Subsidiary will
------------------------
operate all property owned or leased by it such that no Environmental Liability
shall arise or continue to exist under any Environmental Law.
SECTION 6: NEGATIVE COVENANTS
------------------
The Company covenants and agrees that, so long as any Note remains
outstanding and unpaid, or any other amount is owing to the Bank hereunder, and
until the fulfillment of all obligations hereunder, the Company shall not and
shall not permit any Subsidiary to:
33
<PAGE>
6.1 Debt: Create, incur, assume or suffer to exist any Debt or
----
liability for borrowed money, or any other indebtedness or liability evidenced
by notes, bonds, debentures or similar obligations, except for (i) Debt to the
Bank, (ii) Debt inclusive of Capitalized Lease Obligations (but excluding Senior
Notes) not to exceed $100,000.00 in the aggregate at any time and (iii) Senior
Notes subordinate at all times to the Loans hereunder.
6.2 Limitation on Liens: Create, incur, assume or permit to exist any
-------------------
Lien upon, or any security interest in, any of its property or assets, whether
now owned or hereafter acquired, except (i) liens in favor of the Bank; (ii)
liens for taxes or assessments or other governmental charges or levies if not
yet due and payable; (iii) liens imposed by law, such as mechanic's,
materialman's, landlord's, warehouseman's and carrier's liens, and other similar
liens securing obligations in the ordinary course of business which are not past
due more than thirty (30) days or which are being contested in good faith by
appropriate proceedings and for which appropriate reserves are maintained; (iv)
liens, pledges or deposits under workers' compensation, unemployment insurance,
social security or similar legislation; and (v) subject to the Debt limitations
of Section 6.1 above, purchase money liens or security interests on any property
hereafter acquired incurred in connection with any conditional sale or other
title retention agreement or a financing lease, provided that any property
subject to any of the foregoing is acquired by the Company in the ordinary
course of its business as heretofore conducted and the lien or security interest
on any such property attaches to such asset concurrently or within thirty (30)
days after the acquisition thereof and that each such lien, encumbrance and
security interest shall attach only to the property so acquired or a lien or
security interest incurred in connection with any Capitalized Lease Obligation
and the total obligations secured by all such liens and security interests shall
not exceed the limit set forth in Section 6.1 above.
6.3 Merger, Consolidation and Acquisition of Assets: Merge into or
-----------------------------------------------
consolidate with any other Person, or permit any other Person to merge into it,
or acquire all or substantially all the properties or assets of any other Person
or become a partner of or venturer with any other Person, other than a Permitted
Acquisition, provided further that not more than four (4) Permitted Acquisitions
shall occur during any fiscal year.
6.4 Sale, Transfer and Lease of Assets: Sell, transfer, lease or
----------------------------------
otherwise dispose of all or any part of its assets or property, except for
inventory sold in the ordinary course of business and except for the sale or
other disposition of assets no longer used or useful in the conduct of its
business.
6.5 Contingent Liabilities: Except for the guarantees in favor of the
----------------------
Bank, assume, guarantee, endorse, sell with recourse, contingently agree to
purchase, discount, or otherwise become or remain liable with respect to any
Debt, obligation or other liability of any other Person, or enter into any
agreement for the purchase or other acquisition of any products, materials or
supplies, or for transportation or for the payment for services, if in any such
case payment therefor is to be made regardless of the non-delivery of the
products, materials or supplies or the non-furnishing of the transportation or
service except for the endorsement of negotiable instruments in the ordinary
course of business.
34
<PAGE>
6.6 Obligation as Lessee: Enter into any arrangements with any Person
--------------------
as an operating lessee of real or personal property, including machinery or
equipment leases that do not in the aggregate require the Company and its
Subsidiaries to make payments (including taxes, insurance, maintenance and
similar expenses which the Company and its Subsidiaries is required to pay under
the terms of any lease) in any fiscal year of the Company so as to exceed the
Debt limitations described in Section 6.1 above.
6.7 Investments; Loans: Purchase, acquire, exercise an option to
------------------
purchase or acquire, or own the assets, obligations, stock or any other interest
of or in, or make loans or advances to, or investments in, any Person,
whatsoever except for (i) investments in PsyMedex not greater than $500,000.00
in the aggregate, (ii) investments with the Bank or its affiliates upon the
Bank's prior written consent, (iii) investments in certificates of deposit
issued by banks with capital in excess of Two Hundred Million and 00/100
($200,000,000.00) Dollars or (iv) direct obligations of the United States
Government.
6.8 Sale of Receivables; Sale-Leasebacks: Sell, discount or otherwise
------------------------------------
dispose of notes, accounts receivables or other obligations owing to the
Company, with or without recourse, except for the purpose of collection in the
ordinary course of business; or sell any asset pursuant to an arrangement to
thereafter lease such asset form the purchaser thereof.
6.9 Nature of Business: Change the general nature of its business or
------------------
the general manner of conducting its business.
6.10 Dividends and Purchase of Stock: Declare or pay any dividends
-------------------------------
either in cash or property (other than dividends payable in capital stock of the
Company or its Subsidiaries) on any shares of any class of its capital stock or
apply any of its property or assets to the purchase, redemption or other
retirement of, or set apart any sum for the payment of any dividends on, or the
purchase, redemption or other retirement of, or make any other distribution by
reduction of capital or otherwise in respect of, any shares of any class of
capital stock of the Company or its Subsidiaries.
6.11 No Lien Senior to or Equal to Loan Documents: Create or cause to
--------------------------------------------
be created any lien or charge on any property subject to the security interests
of the Loan Documents which is superior or equal to the liens or security
interests of the Loan Documents.
6.12 Transactions with Affiliates: Except in the ordinary course of and
----------------------------
pursuant to the reasonable requirements of the Company's, and upon fair and
reasonable terms no less favorable to the Company than would obtain in a
comparable arm's length transaction with a Person not an Affiliate, enter into
any transaction, including, without limitation, the purchase, sale, or exchange
of property or the rendering of any service, with any Affiliate, including,
without limitation, the purchase, sale, or exchange of property or the rendering
of any service, with any Affiliate.
6.13 Change in Control. Permit a Change in Control, as hereinafter
-----------------
defined, to occur. As used herein, Change in Control shall mean (a) the
acquisition of ownership, directly or indirectly, beneficially or of record, by
any Person or group (within the meaning of the Securities Exchange Act of 1934
35
<PAGE>
and the rules of the Securities and Exchange Commission thereunder as in effect
on the date hereof), of shares representing more than 25% of the aggregate
ordinary voting power represented by the issued and outstanding capital stock of
the Company or any Subsidiary; or (b) occupation of a majority of the seats
(other than vacant seats) on the board of directors of the Company or any
Subsidiary by Persons who were neither (i) nominated by the board of directors
of the Company or such Subsidiary nor (ii) appointed by directors so nominated.
6.14 Changes: Change its name without giving at least ten (10) Business
-------
Days prior notice thereof to the Bank, make any material change in its business,
or in the nature of its operations, or liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution), or, without the prior written consent of
the Bank, convey, sell, assign, lease or otherwise dispose of, voluntarily or
involuntarily, in one transaction or a series of transactions, all or any part
of its business or property or assets, whether now owned or hereafter acquired
(including, without limitation, receivables and leasehold interests, other than
as permitted or required herein).
6.15 Capital Expenditures; Capitalized Leases: Expend in the aggregate
----------------------------------------
for the Company and all Subsidiaries in excess of the limitation described in
Section 6.1 above, including payments made on account of Capitalized Leases. For
purposes of the foregoing, Capital Expenditures shall include payments made on
account of deferred purchase price or on account of any indebtedness incurred to
finance any such purchase price.
6.16 Accounting Changes: Make, or permit any Subsidiary to make any
------------------
change in their accounting treatment or financial reporting practices except as
required or permitted by GAAP in effect from time to time.
SECTION 7: EVENTS OF DEFAULT
-----------------
7.1 Events of Default: "Event of Default", wherever used herein, means
-----------------
any one of the following events (whatever the reason for such Event of Default
and whether it shall be voluntary or involuntary or be effected by operation of
law or pursuant to any agreement, decree or order of any court or any order,
rule or regulation of any administrative or Governmental Authority):
(a) Default in the payment of the principal of or interest on
a Note or in the payment of any amount payable pursuant to Sections 2.4, 2.12,
2.13, or 2.14; or
(b) Any representation or warranty made by the Company herein
or any statement or representation made in any certificate, report or opinion
delivered pursuant hereto shall prove to have been incorrect in any material
respect when made; or
(c) Default in the due observance or performance of any
covenant, condition or agreement to be observed or performed pursuant to Section
5.2, Section 5.9 or Section 6 hereof; or
(d) Default in the due observance or performance of any other
covenant, condition or agreement to be observed or performed pursuant hereto
(other than a covenant, condition or agreement a default in the performance of
36
<PAGE>
which or a breach of which is elsewhere in this Section specifically dealt with)
and such default shall remain unremedied for ten (10) consecutive calendar days
after written notice shall have been given by the Bank; or
(e) Entry of a decree or order by a court having jurisdiction
in the premises adjudging the Company a bankrupt or insolvent, or approving as
properly filed a petition seeking reorganization, arrangement, adjustment or
composition of or in respect of the Company under the Federal Bankruptcy Code or
any other applicable Federal or state law, or appointing a receiver, liquidator,
assignee, trustee, (or other similar official) of the Company or of any
substantial part of their properties, or ordering the winding up or liquidation
of their affairs, and the continuance of any such decree or order unstayed and
in effect for a period of sixty (60) consecutive days; or
(f) The Company shall: (i) apply for or consent to the
appointment of a receiver, trustee or liquidator of the Company or any of its
properties or assets; (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 a 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 the
Company for the purpose of effecting any of the foregoing; or
(g) Rendering against the Company of a final judgment, decree
or order for the payment of money which judgment, decree or order and the
continuance of such judgment, decree or order unsatisfied and in effect for a
period of sixty (60) consecutive days without a stay of execution; or
(h) The Company shall default in any payment of principal of
or interest on any Debt or obligation for borrowed money (other than the Notes)
or for the deferred purchase price of property which Debt, obligation or
purchase price or defaults in the performance of any other agreement, term or
condition contained in any such obligation or in any agreement relating thereto,
if the effect of such default is to cause, or to permit the holder or holders of
such obligation (or a trustee on behalf of such holder or holders) to cause,
such obligation to become due prior to its stated maturity; or
(i) Any of the following events occur or exist with respect to
the Company or an ERISA Affiliate: (1) any Prohibited Transaction involving any
Plan, (2) any Reportable Event shall occur with respect to any Plan, (3) the
filing under Section 4041 of ERISA of a notice of intent to terminate any Plan
or the termination of any Plan, (4) any event or circumstance exists which might
constitute grounds entitling the PBGC to institute proceedings under Section
4042 of ERISA for the termination of, or for the appointment of a trustee to
administer, any Plan, or the institution by the PBGC of any such proceedings, or
(5) complete or partial withdrawal under Section 4201 or 4204 of ERISA from a
Multiemployer Plan or the reorganization, insolvency or termination of any
Multiemployer Plan, and in each case above, such event or condition, together
with all other events or conditions, if any, could in the opinion of the Bank
37
<PAGE>
subject the Company to any tax, penalty, or other liability to a Plan, a
Multiemployer Plan, the PBGC or otherwise (or a combination thereof) which in
the aggregate exceed or may exceed Twenty Five Thousand and 00/100 ($25,000.00)
Dollars.
(j) Any Loan Document shall cease to be in full force and
effect, a default shall occur thereunder or the Company or any Guarantor shall
assert that it has no further obligation to the Bank thereunder; or
(k) Any event specified in subsections (e),(f), (g) or (h)
shall occur with respect to any Subsidiary; or
(l) Default by the Company or any Subsidiary under any other
agreement with the Bank; or
(m) A Material Adverse Change shall have occurred.
Then, upon the happening of any of the foregoing Events of Default, the
Commitment and the obligation of the Bank to make further Loans shall terminate,
the principal of and accrued interest on the Notes shall become and be
immediately due and payable upon declaration to that effect delivered by the
Bank to the Company; provided, that, upon the happening of any event specified
in subsections (e) or (f) of this Section 7.1, the obligation of the Bank to
make further Loans shall terminate and the Notes shall be immediately due and
payable without declaration or other notice to the Company and the Company
expressly waives any presentment, demand, protest or other notice of any kind.
7.2 Remedies on Default: Upon the occurrence and continuance of an
-------------------
Event of Default, the Bank may proceed to enforce its rights whether by suit in
equity or by action at law, whether for specific performance of any covenant or
agreement contained in this Agreement or any Loan Document, or in aid of the
exercise of any power granted in either this Agreement or any Loan Document or
proceed to obtain judgment or any other relief whatsoever appropriate to the
enforcement of its rights, or proceed to enforce any other legal or equitable
right which the Bank may have by reason of the occurrence of any Event of
Default hereunder or under any Loan Document, including without limitation the
remedies of a secured creditor under the Uniform Commercial Code. Any amounts
collected pursuant to action taken under this Section 7.2 shall be paid to the
Bank and applied to the payment of, first, any costs incurred by the Bank in
taking such action, second, to payment of the accrued interest on and unpaid
principal of the Notes and any balance remaining after such payments shall be
paid to the Company.
If one or more Events of Default shall occur, the Bank shall have the
right, in addition to all other rights and remedies available to it, to set off
against the unpaid balance of the Notes any debt owing to the Company by the
Bank, including without limitation, any funds in any deposit account maintained
by the Company with the Bank, and nothing in this Agreement shall be deemed any
waiver or prohibition of the Bank's right of banker's lien or set-off.
38
<PAGE>
SECTION 8: COLLATERAL SECURITY
-------------------
8.1 Collateral Security:Right of Set-Off. The payment of any and all
------------------------------------
sums owing under the Loan Documents (including, without limitation, the Master
Agreement) and all other obligations, direct or contingent, joint, several or
independent, of the Company or any Guarantor now or hereafter existing due or to
become due to, or held or to be held by the Bank, whether created directly or
acquired by assignment or otherwise including, without limitation, any arising
under this Agreement (all of such obligations being hereinafter collectively
called the "Obligations"), are secured by and the Company and any Guarantor
hereby grant to the Bank, a continuing lien, security interest and right of
setoff as security for all liabilities and obligations to the Bank, whether now
existing or hereafter arising, upon and against all deposits, credits,
collateral and property, now or hereafter in the possession, custody,
safekeeping or control of the Bank or any entity under the control of
FleetBoston Financial Corporation, its successors and assigns, or in transit to
any of them. At any time, without demand or notice (any such notice being
expressly waived by the Company), the Bank may set off the same or any part
thereof and apply the same to any liability or obligation of Company or any
Guarantor even though unmatured and regardless of the adequacy of any other
collateral securing the Loans. ANY AND ALL RIGHTS TO REQUIRE THE BANK TO
EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH
SECURES THE TERM LOANS, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO
SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF THE COMPANY OR ANY GUARANTOR, ARE
HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.
8.2 Additional Collateral Security. In addition to the collateral
------------------------------
described in Section 8.1 hereof, payment of the Obligations is also secured by
(a) a first priority security interest in all personal property of the Company
and the Guarantors, whether now owned or hereafter acquired, to the extent
provided in the Security Agreements executed and delivered by the Company and
the Guarantors to the Bank, and (b) all right, title and interest of the Company
in and to the Master Agreement and each transaction entered thereunder
including, without limitation, all amounts payable or deliverable thereunder and
all proceeds of the foregoing in whatever form received, in each case whether
now owned or hereafter acquired.
SECTION 9: MISCELLANEOUS
-------------
9.1 Final Agreement: This Agreement is intended by the parties as the
---------------
final, complete and exclusive statement of the transactions evidenced by this
Agreement. All prior or contemporaneous promises, agreements and understandings,
whether oral or written, are deemed to be superceded by this Agreement, and no
party is relying on any promise, agreement or understanding not set forth in
this Agreement. This Agreement may not be amended or modified except by a
written instrument describing such amendment or modification executed by the
Company and the Bank.
39
<PAGE>
9.2 Survival of Representations: All representations, warranties,
---------------------------
covenants and agreements made by the Company in connection herewith shall
survive the execution and delivery of this Agreement and the Notes.
9.3 Successors and Assigns: All covenants and agreements herein shall
----------------------
bind and inure to the benefit of the respective successors and assigns of the
parties hereto, provided the Company may not transfer or assign any of its
rights or interests hereunder without the specific written consent of the Bank.
9.4 Liability in Acting: In connection with this Agreement and the
-------------------
Loans, the Bank will be protected in acting upon any notice, request, consent,
certificate, agreement, writing, signature, resolution, application or other
paper or document believed by it to be genuine and to have been signed,
executed, passed, presented or delivered by the proper party or parties.
9.5 The Bank's Rights Not Waived; Cumulative Rights: Wherever in this
-----------------------------------------------
Agreement or in any other manner an option, power or right is granted the Bank,
it may be exercised without notice to the Company or the Guarantors, except as
in this Agreement specifically provided. Each and every right and remedy granted
to the Bank hereunder or under any other document delivered hereunder or in
connection herewith, or allowed it by law or equity, shall be cumulative and may
be exercised from time to time. No failure on the part of the Bank to exercise,
or delay in exercising, any right or remedy shall operate as a waiver thereof,
nor shall any single or partial exercise by the Bank of any right or remedy
preclude any other or future exercise thereof or the exercise of any other right
or remedy. No delay, omission or failure to act on the part of the Bank in
exercising any option, power or right, shall operate as a waiver thereof, nor
shall any single or partial exercise thereof preclude the other, later or
further exercise thereof or the exercise of any other power or right.
9.6 Expenses: The Company shall pay on demand all expenses of Bank in
--------
connection with the preparation, administration, default, collection, waiver or
amendment of loan terms, or in connection with the Bank's exercise, preservation
or enforcement of any of its rights, remedies or options hereunder, including,
without limitation, reasonable fees of outside legal counsel or the allocated
costs of in-house legal counsel, accounting, consulting, brokerage or other
similar professional fees or expenses, and any fees or expenses associated with
travel or other costs relating to any appraisals or examinations conducted in
connection with the loan or any collateral therefor, and the amount of all such
expenses shall, until paid bear interest at the rate applicable to principal
hereunder (including the Post Default Rate) and be an obligation secured by any
collateral.
9.7 Other Agreements: The rights and remedies granted to the Bank by
----------------
the Company or the Guarantors hereunder are cumulative and in addition to the
rights granted by every other agreement which the Company and the Guarantors at
any time executes and delivers to the Bank, and no such agreement shall be read
or construed to limit, restrict or otherwise modify in any way the rights given
hereby, except as the intent to limit is expressly set forth in such agreement
and likewise no provision of this Agreement shall be deemed to limit, restrict
or otherwise modify in any way any rights or remedies granted to the Bank by
other agreements by the Company or a Guarantor. All agreements herein contained
and contained in any such other written agreement, whether typed or otherwise,
40
<PAGE>
shall be fully effective and fully enforceable in favor of the Bank and against
the Company and the Guarantors, except that if there by a conflict in the
provisions of such agreements with this Agreement, the agreement requiring the
higher or greater degree of performance shall prevail, and if there are similar
but not identical provisions, such agreements and this Agreement shall be read
and interpreted separately and the Company and the Guarantors shall comply with
all such provisions.
9.8 Repayment: The Company hereby covenants and agrees to repay to the
---------
Bank its obligations hereunder, both principal and interest, as and when the
same shall become due and payable, and faithfully to perform every term,
condition and covenant of this Agreement and of any instrument evidencing such
obligation, and every other agreement securing or relating to the same.
9.9 Judicial Proceedings:
--------------------
(a) Venue: Any judicial proceeding brought against the Company
-----
or a Guarantor with respect to this Agreement, any other Loan Document or any
property of the Company or a Guarantor, may be brought in any court of competent
jurisdiction located in the State of New York, counties of Nassau or Suffolk. By
execution and delivery of this Agreement, the Company accepts, generally and
unconditionally, the nonexclusive jurisdiction of such courts and any related
appellate court, and irrevocably agrees to be bound by any judgment thereby in
connection therewith.
(b) Waiver of Counterclaim: The Company and the Guarantors
----------------------
irrevocably waive any objection they may now or hereafter have as to the venue
of any suit, action or proceeding with respect to this Agreement or any other
Loan Document or any property of the Company or a Guarantor brought in a court
located in the State of New York or any claim that such court is an inconvenient
forum. The Company and the Guarantors further hereby waive the right to
interpose any counterclaim.
(c) Proceedings by Company or a Guarantor against the Bank:
------------------------------------------------------
Any judicial proceeding by the Company or a Guarantor against the Bank
involving, directly or indirectly, any matter in any way arising out of, related
to, or connected with this Agreement or any other Loan Document, shall be
brought only in a court located in the counties of Nassau or Suffolk, State of
New York.
9.10 Entire Agreement: The Company and the Bank agree that this
----------------
Agreement, and all documents executed and delivered in connection herewith
including the Notes represent the entire understanding of the parties. No
modification, amendment or waiver of any provision of this Agreement or the
Notes, nor consent to any departure by the Company shall in any event be
effective unless the same shall be in writing and signed by the Bank and then
such waiver or consent shall be effective only in the specific instance and for
the purpose for which given. As of the date hereof, no representations have been
made by the Bank or anyone acting or purporting to act for the Bank concerning
the handling, treatment, release or modification of the Loans, the security
therefor, accounts or other relationships or accommodations with the Bank, nor
concerning any future, larger or different loans, accounts or other
accommodations of or to the Company or any other Person, except as specifically
41
<PAGE>
set forth in this Agreement, and the Company represents to and covenants with
the Bank that it has not relied on any such representation.
9.11 Further Assurances: The Company and the Guarantors agree at any
------------------
time and from time to time at its expense, upon request of the Bank, to promptly
execute, deliver, or obtain or cause to be executed, delivered or obtained any
and all further instruments and documents and to take or cause to be taken all
such other action as the Bank may deem reasonably desirable in obtaining the
full benefits of, or in preserving the liens and/or security interests of the
Loan Documents.
9.12 Headings: The headings herein are for convenience only and shall
--------
not limit or affect the meaning or construction of the provisions herein.
9.13 Notices: Notices and consents provided herein shall be in writing
-------
and shall be given to the other party by overnight mail, personal delivery or
certified mail, return receipt requested, in a prepaid wrapper directed to the
other party at its address stated below or such other address as from time to
time designated in writing by one party to the other:
(a) if to the Company: Netsmart Technologies, Inc.
146 Nassau Avenue
Islip, New York 11751
Attn: Mr. James L. Conway
Chief Executive Officer
(b) if to the Bank: Fleet National Bank
300 Broad Hollow Road
Melville, New York 11747
Attn: Ms. Patricia A. Calcado
Vice President
Any notice, request, consent, demand, waiver or communication given in
accordance with the provisions of this Section 9.13 shall be conclusively deemed
to have been received by a party hereto and to be effective on the day on which
delivered to such party at its address specified above, or, if sent by mail, on
the third Business Day after the day when deposited in the mail, postage
prepaid, and addressed to such party at such address, provided that notices of
change of address shall be deemed to be effective when actually received.
9.14 Authority to Disclose: All Federal, state, municipal and other
---------------------
authorities (including the United States Treasury Department and the Internal
Revenue Service) and all banks, trust companies and other banking or financial
corporations, and organizations and all accountants, auditors, appraisers and
examiners with which or whom the Company has heretofore, now has or hereafter
may have banking or professional relations, are hereby irrevocably authorized
and directed to permit representatives of the Bank to have full access during
regular business hours and from time to time upon reasonable request to make
copies of and extracts from all reports, examinations, audits, appraisals, and
returns by or with respect to the Company and all information concerning the
42
<PAGE>
Company from time to time contained in their files and records. The Bank shall
hold information so obtained in confidence in accordance with its customary
procedures for handling confidential information of this nature and in
accordance with safe and sound banking practices except that it may disclose
such information as it may be required by law to disclose with notice to the
Company if permitted by law and the Bank's policy.
9.15 Severability: In the event that any one or more of the provisions
------------
of this Agreement or any document executed in connection herewith shall be
invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein and therein shall
not in any way be affected or impaired thereby.
9.16 Counterparts: This Agreement may be executed simultaneously in two
------------
or more counterparts, each of which shall be deemed an original. It shall not be
necessary in making proof of this Agreement to produce or account for more than
one counterpart.
9.17 Pledge to Federal Reserve Bank: The Bank may at any time pledge
------------------------------
all or any portion of its rights under the Loan Documents including any portion
of the Notes to any of the twelve (12) Federal Reserve Banks organized under
Section 4 of the Federal Reserve Act, 12 U.S.C. Section 341. No such pledge or
enforcement thereof shall release the Bank from its obligations under any of the
Loan Documents.
9.18 Participations: The Bank shall have the unrestricted right at any
--------------
time and from time to time, and without the consent of or notice to Company, to
grant to one or more banks or other financial institutions (each, a
"Participant") participating interests in the Bank's obligation to lend
hereunder and/or any or all of the loans held by the Bank hereunder. In the
event of any such grant by the Bank of a participating interest to a
Participant, whether or not upon notice to the Company, the Bank shall remain
responsible for the performance of its obligations hereunder and the Company
shall continue to deal solely and directly with the Bank in connection with the
Bank's rights and obligations hereunder. The Bank may furnish any information
concerning the Company in its possession from time to time to prospective
Participants, provided that the Bank shall require any such prospective
Participant to agree in writing to maintain the confidentiality of such
information.
9.19 Lost Documents: Upon receipt of an affidavit of an officer of the
--------------
Bank as to the loss, theft, destruction or mutilation of a Note or any other
security document which is not of public record, and, in the case of any such
loss, theft, destruction or mutilation, upon cancellation of such Note or other
security document, the Company will issue, in lieu thereof, a replacement note
or other security document in the same principal amount thereof and otherwise of
like tenor.
SECTION 10: WAIVER OF RIGHT TO JURY TRIAL
-----------------------------
THE COMPANY, THE GUARANTORS AND THE BANK MUTUALLY HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF
ANY CLAIM BASED HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENTS CONTEMPLATED TO BE EXECUTED IN CONNECTION
43
<PAGE>
HEREWITH OR ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER
VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY INCLUDING, WITHOUT LIMITATION, ANY
COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS OR ACTIONS OF THE BANK
RELATING TO THE ADMINISTRATION OF THE LOANS OR ENFORCEMENT OF THE LOAN
DOCUMENTS, AND AGREE THAT NEITHER PARTY WILL SEEK TO CONSOLIDATE ANY SUCH ACTION
WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED.
EXCEPT AS PROHIBITED BY LAW, THE COMPANY HEREBY WAIVES ANY RIGHT IT MAY HAVE TO
CLAIM OR RECOVER IN ANY LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR
CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL
DAMAGES. THE COMPANY CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE
BANK HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE BANK WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER. THIS WAIVER
CONSTITUTES A MATERIAL INDUCEMENT FOR THE BANK TO ACCEPT THIS AGREEMENT AND MAKE
THE LOANS.
SECTION 11: GOVERNING LAW
-------------
The validity, interpretation and enforcement of this Agreement and the
rights and obligations of the parties hereunder shall be governed by and
construed and interpreted in accordance with the laws of the State of New York
(excluding the laws applicable to conflicts or choice of law).
44
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement the year and date first above written.
NETSMART TECHNOLOGIES, INC.
By: /*/
-------------------------
James Conway
Chief Executive Officer
FLEET NATIONAL BANK
By: /*/
-------------------------
Patricia A. Calcado
Vice President
45
<PAGE>
SCHEDULE
--------
Schedule 3.20 (b) - real property owned:
-Netsmart Technologies, Inc. ("Netsmart"): None
-Creative Socio-Medics Inc. ("CSM"): None
- real property leased:
-Netsmart: None
-CSM: See herein
1. 146 Nassau Avenue, Islip, New York 11751
2. 1335 Dublin Road, Columbus, Ohio 43215
3. 7590 Fay Avenue, La Jolla, California
Schedule 3.24 - intellectual property
Patents, Trademarks and Copyrights:
----------------------------------
A. Netsmart: None
B. CSM: See herein
1. Patents None
2. Trademarks: See herein
(a) Registered None
(b) Unregistered
(i) "Creative" and "CSM" for behavioral health care systems.
(ii) "AIMS" for behavioral health care systems and
correctional institutions systems.
(iii) "AVATAR/Practice Management"
"AVATAR/CLINICIAN WORKSTATION (CWS)"
"AVATAR/MANAGED CARE SYSTEM (MCO, PROVIDER AND EAP)"
46
<PAGE>
"AVATAR/DECISION SUPPORT SYSTEM (DSS)"
"AIMS Behavioral Health Care System"
"AIMS Correctional Institution System", each for CSM
software systems.
3. Copyrights
(a) Registered
Title of Software * Date of Registration Number
Registration
CSM Human Services Information System 11/09/99 TXu 867-215
(non GUI)
CSM Human Services Information System 01/04/00 TXu 931-953
CSM Clinical Work Station System 11/09/99 TXu 925-446
M3/J5 Medical Management System 10/27/99 TXu 923-199
CSM Nursing Station System 10/27/99 TXu 923-760
CSM Behavioral Health Information System 11/09/99 TXu 928-577
CSM Psychiatric Hospital Information System 11/24/99 TXu 928-334
* The names of CSM systems were consolidated and changed in 2000 to
"AVATAR"
(a) Unregistered
The AIMS Behavioral Health Care System and
AIMS Correctional Institution System are protected by
unregistered copyrights.
4. CSM considers all of the above software systems to be protected by
trade secrets rights of CSM.
5. None of the above software systems are embedded in goods.
47
<PAGE>
Exhibit 5.1 (f)
---------------
INSERT JOB STATUS REPORT
------------------------
48
<PAGE>
EXHIBIT A
---------
FORM OF REVOLVING CREDIT NOTE
-----------------------------
$1,500,000.00 Melville, New York June 1, 2001
NETSMART TECHNOLOGIES, INC., a Delaware corporation (the "Company"),
for value received, hereby promises to pay to the order of FLEET NATIONAL BANK
(the "Bank") on the Termination Date as defined in the Agreement herewith
referred to, at the office of the Bank specified in Section 9.13 of the
Agreement, in lawful money of the United States of America and in immediately
available funds the principal amount of ONE MILLION FIVE HUNDRED THOUSAND AND
00/100 ($1,500,000.00) DOLLARS or, if less than such principal amount, the
aggregate unpaid principal amount of all Revolving Credit Loans made by the Bank
to the Company pursuant to Section 2.2 of the Agreement. The Company further
promises to pay interest at said office in like money on the unpaid principal
balance of this Note from time to time outstanding at an annual rate as selected
by the Company pursuant to the terms of Section 2 of the Agreement. Interest
shall be computed on the basis of a 360-day year for actual days elapsed and
shall be payable as provided in the Agreement. All Revolving Credit Loans made
by the Bank pursuant to Section 2.2 of the Agreement and payments of the
principal thereon may be endorsed by the holder of this Note on the schedule
annexed hereto, to which the holder may add additional pages. The aggregate net
unpaid amount of the Revolving Credit Loans set forth in such schedule shall be
presumed to be the principal balance hereof. After the stated or any accelerated
maturity hereof, this Note shall bear interest at a rate as set forth in the
Agreement, payable on demand, but in no event in excess of the maximum rate of
interest permitted under applicable law.
This Note is the Revolving Credit Note referred to in the Agreement
dated as of June 1, 2001 by and between the Company and Fleet National Bank, as
same may be amended from time to time (the "Agreement"). Terms defined in the
Agreement shall have then defined meanings when used in this Note. This Note is
entitled to the benefits of this Agreement thereof and may be prepaid, and is
required to be prepaid, in whole or in part (subject to the indemnity provided
in the Agreement) as provided therein. This Note is secured by the collateral
described in the Security Agreement.
Upon the occurrence of any one or more of the Events of Default
specified in the Agreement, all amounts then remaining unpaid on this Note may
be declared to be immediately due and payable as provided in the Agreement.
This Note shall be construed in accordance with and governed by the
laws of the State of New York.
NETSMART TECHNOLOGIES, INC.
SCHEDULE OF LOANS AND PAYMENT OF PRINCIPAL
Exhibit A Page 1
<PAGE>
TO REVOLVING CREDIT NOTE
DATED AS OF JUNE 1, 2001
NETSMART TECHNOLOGIES, INC.
TO
FLEET NATIONAL BANK
Last Day Balance
Amount Interest of Interest Principal Remaining Notation
Date of Loan Rate Period Paid Unpaid Made By
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Exhibit A Page 2
<PAGE>
EXHIBIT B
---------
FORM OF TERM NOTE
-----------------
$2,500,000.00 Melville, New York June 1, 2001
NETSMART TECHNOLOGIES, INC., a Delaware corporation (the "Company"),
for value received, hereby promises to pay to the order of FLEET NATIONAL BANK
(the "Bank") at the office of the Bank specified in Section 9.13 of the
Agreement hereinafter referred to, in lawful money of the United States and in
immediately available funds, the principal sum of TWO MILLION FIVE HUNDRED
THOUSAND AND 00/100 ($2,500,000.00) DOLLARS payable in 60 consecutive monthly
installments of principal and interest, the first fifty-nine (59) of which shall
be in the amount of $41,666.00 payable on the first day of each month commencing
July 1, 2001 and the last and final installment equal to the then unpaid
principal balance of this Note payable on June 1, 2006. The Company further
promises to pay interest at said office in like money on the unpaid principal
balance of this Note from time to time outstanding at an annual rate as selected
by the Company pursuant to the terms of Section 2 of the Agreement. Interest
shall be computed on the basis of a 360-day year for actual days elapsed and
shall be payable as provided in the Agreement. After the stated or accelerated
maturity hereof, this Note shall bear interest at a rate as set forth in the
Agreement, payable on demand, but in no event in excess of the maximum rate of
interest permitted under any applicable law.
This Note is the Term Note referred to in the Agreement dated as of
June 1, 2001 by and between the Company and Fleet National Bank, as same may be
amended from time to time (the "Agreement"). Terms defined in the Agreement
shall have then defined meanings when used in this Note. This Note is entitled
to the benefits of this Agreement thereof and may be prepaid, and is required to
be prepaid, in whole or in part (subject to the indemnity provided in the
Agreement) as provided therein. This Note is secured by the collateral described
in the Security Agreement.
Upon the occurrence of any one or more of the Events of Default
specified in the Agreement, all amounts then remaining unpaid under this Note
may be declared immediately due and payable as provided in the Agreement.
This Note shall be construed in accordance with and governed by the
laws of the State of New York.
NETSMART TECHNOLOGIES, INC.
Exhibit B Page 1