$25,000,000 LOAN AND SECURITY AGREEMENT by and between THE PRIVATEBANK AND TRUST COMPANY and ISI SECURITY GROUP, INC. Dated as of October 3, 2008 TABLE OF CONTENTS

ISI SECURITY GROUP, INC.

 

		Page
SECTION 1. DEFINITIONS		1
	1.1. Defined Terms	1
	1.2. Accounting Terms	15
	1.3. Other Terms Defined in UCC	16
	1.4. Other Interpretive Provisions	16
SECTION 2. COMMITMENT OF THE BANK		17
	2.1. Facility A Loans	17
	2.2. Facility B Loans	18
	2.3. Facility C Loan	19
	2.4. Additional LIBOR Loan Provisions	21
	2.5. Interest and Fee Computation; Collection of Funds	23
	2.6. Late Charge	23
	2.7.Letters of Credit	23
	2.8. Taxes	24
	2.9. All Loans to Constitute Single Obligation	25
	2.10 Guaranty	25
SECTION 3. CONDITIONS OF BORROWING		25
	3.1. Loan Documents	25
	3.2. Event of Default	27
	3.3. Material Adverse Effect	27
	3.4. Litigation	27
	3.5. Representations and Warranties	27
	3.6. Commitment Fee	27
	3.7. Escrow Agreement	27
SECTION 4. NOTES EVIDENCING LOANS		28
	4.1. Facility A Loan Note and Facility B Loan Note	28
	4.2. Facility C Note	28
SECTION 5. MANNER OF BORROWING		28
	5.1. Borrowing Procedures	28
	5.2. LIBOR Conversion and Continuation Procedures	29
	5.3. Letters of Credit	29
	5.4. Automatic Debit	30
	5.5. Discretionary Disbursements	30
SECTION 6. SECURITY FOR THE OBLIGATIONS		30
	6.1. Security for Obligations	30
	6.2. Other Collateral	31
	6.3. Possession and Transfer of Collateral	31

(continued)

		Page
	6.4. Financing Statements	31
	6.5. Additional Collateral	32
	6.6. Preservation of the Collateral	32
	6.7. Other Actions as to any and all Collateral	33
	6.8. Collateral in the Possession of a Warehouseman or Bailee	33
	6.9. Letter-of-Credit Rights	33
	6.10. Commercial Tort Claims	33
	6.11. Electronic Chattel Paper and Transferable Records	34
SECTION 7. REPRESENTATIONS AND WARRANTIES		34
	7.1. Borrower Organization and Name	34
	7.2. Authorization	34
	7.3. Validity and Binding Nature	34
	7.4. Consent; Absence of Breach	35
	7.5. Ownership of Properties; Liens	35
	7.6. Equity Ownership	35
	7.7. Intellectual Property	35
	7.8. Financial Statements	35
	7.9. Litigation and Contingent Liabilities	35
	7.10. Event of Default	36
	7.11. Adverse Circumstances	36
	7.12. Environmental Laws and Hazardous Substances	36
	7.13. Solvency, etc.	37
	7.14. ERISA Obligations	37
	7.15. Labor Relations	37
	7.16. Security Interest	37
	7.17. Lending Relationship	37
	7.18. Business Loan	38
	7.19. Taxes	38
	7.20. Compliance with Regulation U	38
	7.21. Governmental Regulation	38
	7.22. Bank Accounts	38
	7.23. Place of Business	38
	7.24. Complete Information	38
	7.25. Subordinated Debt	39
	7.26. Indebtedness	39
	7.27. Affiliate Transactions	39
SECTION 8. AFFIRMATIVE COVENANTS		39
	8.1. Compliance with Bank Regulatory Requirements; Increased Costs	39
	8.2. Borrower Existence	40
	8.3. Compliance With Laws	40
	8.4. Payment of Taxes and Liabilities	40

(continued)

 

		Page
	8.5. Maintain Property	40
	8.6. Maintain Insurance	41
	8.7. ERISA Liabilities; Employee Plans	41
	8.8. Financial Statements	42
	8.9. Supplemental Financial Statements	43
	8.10. Aged Accounts, Backlog Report and WIP Schedule	43
	8.11. Covenant Compliance Certificate	43
	8.12. Field Audits	43
	8.13. Other Reports	43
	8.14. Collateral Records	44
	8.15. Intellectual Property	44
	8.16. Notice of Proceedings	44
	8.17. Notice of Event of Default or Material Adverse Effect	44
	8.18. Environmental Matters	44
	8.19. Further Assurances	44
	8.20. Banking Relationship	44
	8.21. Non-Utilization Fee	45
	8.22. Interest Rate Protection	45
	8.23. Collateral Access Agreements	45
SECTION 9. NEGATIVE COVENANTS		45
	9.1. Debt	45
	9.2. Encumbrances	46
	9.3. Investments	46
	9.4. Transfer; Merger; Sales	47
	9.5. Issuance of Capital Securities	47
	9.6. Distributions	47
	9.7. Transactions with Affiliates	48
	9.8. Unconditional Purchase Obligations	48
	9.9. Cancellation of Debt	48
	9.10. Inconsistent Agreements	48
	9.11. Use of Proceeds	49
	9.12. Bank Accounts	49
	9.13. Business Activities; Change of Legal Status and Organizational Documents	49
SECTION 10. FINANCIAL COVENANTS		49
	10.1. Senior Debt to EBITDA	49
	10.2. Total Debt to EBITDA	49
	10.3. Fixed Charge Coverage	49
	10.4. Hedging	50
SECTION 11. EVENTS OF DEFAULT		50

(continued)

 

		Page
	11.1. Nonpayment of Obligations	50
	11.2. Misrepresentation	50
	11.3. Nonperformance	50
	11.4. Default under Loan Documents	50
	11.5. Default under Other Debt	50
	11.6. Other Material Obligations	50
	11.7. Bankruptcy, Insolvency, etc.	51
	11.8. Judgments	51
	11.9. Change in Control	51
	11.10. Collateral Impairment	51
	11.11. Material Adverse Effect	51
	11.12. Guaranty	51
	11.13. Subordinated Debt	51
SECTION 12. REMEDIES		51
	12.1. Possession and Assembly of Collateral	52
	12.2. Sale of Collateral	52
	12.3. Standards for Exercising Remedies	53
	12.4. UCC and Offset Rights	53
	12.5. Additional Remedies	54
	12.6. Attorney-in-Fact	55
	12.7. No Marshaling	55
	12.8. Application of Proceeds	55
	12.9. No Waiver	56
	12.10. Letters of Credit	56
SECTION 13. MISCELLANEOUS		56
	13.1. Obligations Absolute	56
	13.2. Entire Agreement	57
	13.3. Amendments; Waivers	57
	13.4. WAIVER OF DEFENSES	57
	13.5. FORUM SELECTION AND CONSENT TO JURISDICTION	57
	13.6. WAIVER OF JURY TRIAL	58
	13.7. Assignability	58
	13.8. Confirmations	58
	13.9. Confidentiality	58
	13.10. Binding Effect	59
	13.11. Governing Law	59
	13.12. Enforceability	59
	13.13. Survival of Borrower Representations	59
	13.14. Extensions of Bank’s Commitment	59
	13.15. Time of Essence	60
	13.16. Counterparts; Facsimile Signatures	60

(continued)

		Page
	13.17. Notices	60
	13.18. Release of Claims Against Bank	61
	13.19. Costs, Fees and Expenses	61
	13.21. Indemnification	62
	13.22. Revival and Reinstatement of Obligations	62

 

7.1	Business Names
7.6	Corporate Structure
7.9	Litigation
7.22	Bank Accounts
7.23	Places of Business
7.25	Subordinated Debt
7.26	Permitted Indebtedness
7.27	Affiliate Transactions
9.2	Permitted Liens
9.7	Transactions with Affiliates

 

This LOAN AND SECURITY AGREEMENT dated as of October 3, 2008 (the “Agreement”), is executed by and between ISI SECURITY GROUP, INC., a Delaware corporation, (the “Borrower”), which has its chief executive office located at 12903 Delivery Drive, San Antonio, Texas 78247, and THE PRIVATEBANK AND TRUST COMPANY, an Illinois banking corporation (the “Bank”), whose address is 70 W. Madison, 2^nd floor, Chicago, Illinois 60602.

 

RECITALS:

 

Pursuant to and subject to the terms and conditions of this Agreement, the Bank will make available to the Borrower (a) the Facility A Loan secured revolving line of credit in the maximum amount of $10,000,000.00 with a $5,000,000.00 sublimit for the issuance of letters of credit, (b) the Facility B Loan secured revolving line of credit in the maximum amount of $5,000,000.00, to be used solely for the issuance of letters of credit, and (c) the Facility C Loan term loan in the maximum amount of $10,000,000.00. The loans shall be used to refinance existing indebtedness, working capital and for other general corporate purposes. Payment by the Borrower of the amounts due hereunder will be secured by liens on and security interests in the personal property of the Borrower and guaranteed by the affiliates identified in this Agreement.

 

NOW THEREFORE, in consideration of the premises, and the mutual covenants and agreements set forth herein, the Borrower agrees to borrow from the Bank, and the Bank agrees to lend to the Borrower, subject to and upon the following terms and conditions:

 

 

Section 1. DEFINITIONS.

1.1. Defined Terms. For the purposes of this Agreement, in addition to the definitions included in the Preamble and Recitals above, the following capitalized words and phrases shall have the meanings set forth below.

 

“Affiliate” of any Person shall mean (a) any other Person which, directly or indirectly, controls or is controlled by or is under common control with such Person, (b) any officer or director of such Person, and (c) with respect to the Bank, any entity administered or managed by the Bank, or an Affiliate or investment advisor thereof and which is engaged in making, purchasing, holding or otherwise investing in commercial loans. A Person shall be deemed to be “controlled by” any other Person if such Person possesses, directly or indirectly, power to direct or cause the direction of the management and policies of such Person whether by contract, ownership of voting securities, membership interests or otherwise.

 

“Applicable Margin” shall mean the rate per annum added to the Prime Rate and LIBOR to determine the Interest Rate as determined by the ratio of Total Debt to EBITDA of the Borrower for the prior fiscal quarter, effective as of any Interest Rate Change Date, as set forth below:

 

FACILITY A LOAN AND FACILITY B LOAN AND LETTER OF CREDIT FEES											FACILITY C LOAN
Level		Ratio of Total Debt to  EBITDA			Applicable  Margin for  Prime Loans			Applicable  Margin for  LIBOR  Loans			Applicable  Margin for  Prime Loans			Applicable  Margin for  LIBOR  Loans
I			Greater than 3.50			1.00	%		3.00	%		1.50	%		3.50	%
II			Greater than 3.00 to 1.00 less than or equal to 3.50 to 1.00			0.75	%		2.75	%		1.25	%		3.25	%
III			Greater than 2.50 to 1.00; less than or equal to 3.00 to 1.00			0.50	%		2.50	%		1.00	%		3.00	%
IV			Greater than 2.00 to 1.00; less than or equal to 2.50 to 1:00			0.25	%		2.25	%		0.75	%		2.75	%
V			Less than or equal to 2.00 to 1.00			0.00	%		2.00	%		0.50	%		2.50	%

 

Level I pricing shall be in effect from the date hereof until the Bank’s receipt of the Borrower’s financial statements for the period ending September 30, 2008 at which time the Applicable Margin will be determined based on the Borrower’s ratio of Total Debt to EBITDA for the period ending September 30, 2008. Thereafter, the Applicable Margin shall be adjusted quarterly. Notwithstanding the foregoing, in the event that any financial statement or related Compliance Certificate is shown to be inaccurate (regardless of whether this Agreement is in effect or any of the Loans are outstanding when such inaccuracy is discovered), and such inaccuracy, if corrected, would have led to the application of a higher or lower Applicable Margin for any period (an “Applicable Period”) than the Applicable Margin actually applied during such Applicable Period, then (i) the Borrower shall immediately deliver to the Bank a corrected Compliance Certificate for such Applicable Period, (ii) the Applicable Margin shall be determined as if such higher or lower Level were applicable for such Applicable Period, and (iii) the Borrower shall immediately pay to the Bank the accrued additional interest owing as a result of an increased Applicable Margin for such Applicable Period, which payment shall be promptly applied by the Bank in accordance with the terms of this Agreement or the Bank shall repay to the Borrower the accrued additional interest overpaid as a result of a decreased Applicable Margin for such Applicable Period, which payment shall be promptly applied by the Bank against the outstanding Obligations in accordance with the terms of this Agreement, provided, however, that the Borrower shall not be responsible for payments attributable to a period more than one hundred fifty (150) days prior to timely delivery to the Bank of the corrected Compliance Certificate. This paragraph shall not limit the rights of the Bank with respect to its remedies under Section 12 hereof.

 

“Argyle” shall mean Argyle Security, Inc., a Delaware corporation.

 

“Asset Disposition” shall mean the sale, lease, assignment or other transfer for value (each a “Disposition”) by the Borrower or any Subsidiary to any Person (other than the Borrower or any Subsidiary) of any asset or right of the Borrower or any Subsidiary (including, the loss, destruction or damage of any thereof or any actual or threatened (in writing to the Borrower or such Subsidiary) condemnation, confiscation, requisition, seizure or taking thereof), other than (a) the Disposition of any asset which is to be replaced, and is in fact replaced, within sixty (60) days with another asset performing the same or a similar function, (b) the sale or lease of inventory in the ordinary course of business, and (c) other Dispositions in any fiscal year the net proceeds of which do not in the aggregate exceed $100,000.00.

 

“Bank Product Agreements” shall mean those certain agreements entered into from time to time by the Borrower or any Subsidiary with the Bank or any Affiliate of the Bank concerning Bank Products.

 

“Bank Product Obligations” shall mean all obligations, liabilities, contingent reimbursement obligations, fees, and expenses owing by the Borrower or any Subsidiary to the Bank or any Affiliate of the Bank pursuant to or evidenced by the Bank Product Agreements and irrespective of whether for the payment of money, whether direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising.

 

“Bank Products” shall mean any service or facility extended to the Borrower or any Subsidiary by the Bank or any Affiliate of the Bank, including: (a) credit cards, (b) credit card processing services, (c) debit cards, (d) purchase cards, (e) ACH transactions, (f) cash management, including controlled disbursement, accounts or services, or (g) Hedging Agreements.

 

“Bankruptcy Code” shall mean the United States Bankruptcy Code, as now existing or hereafter amended.

 

“Business Day” shall mean any day other than a Saturday, Sunday or a legal holiday on which banks are authorized or required to be closed for the conduct of commercial banking business in Chicago, Illinois.

 

“Capital Expenditures” shall mean all expenditures (including Capitalized Lease Obligations) which, in accordance with GAAP, would be required to be capitalized and shown on the consolidated balance sheet of the Borrower, but excluding expenditures made in connection with the replacement, substitution or restoration of assets to the extent financed (i) from insurance proceeds (or other similar recoveries) paid on account of the loss of or damage to the assets being replaced or restored or (ii) with awards of compensation arising from the taking by eminent domain or condemnation of the assets being replaced.

“Capital Lease” shall mean, as to any Person, a lease of any interest in any kind of property or asset, whether real, personal or mixed, or tangible or intangible, by such Person, as lessee, that is, or should be, in accordance with Financial Accounting Standards Board Statement No. 13, as amended from time to time, or, if such statement is not then in effect, such statement of GAAP as may be applicable, recorded as a “capital lease” on the financial statements of such Person prepared in accordance with GAAP.

 

“Capital Securities” shall mean, with respect to any Person, all shares, interests, participations or other equivalents (however designated, whether voting or non-voting) of such Person’s capital, whether now outstanding or issued or acquired after the date hereof, including common shares, preferred shares, membership interests in a limited liability company, limited or general partnership interests in a partnership or any other equivalent of such ownership interest.

 

“Capitalized Lease Obligations” shall mean, as to any Person, all rental obligations of such Person, as lessee under a Capital Lease which are or will be required to be capitalized on the books of such Person.

 

“Cash Equivalent Investment” shall mean, at any time, (a) any evidence of Debt, maturing not more than one year after such time, issued or guaranteed by the United States government or any agency thereof, (b) commercial paper, maturing not more than one year from the date of issue, or corporate demand notes, in each case (unless issued by the Bank or its holding company) rated at least A-l by Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc. or P-l by Moody’s Investors Service, Inc., (c) any certificate of deposit, time deposit or banker’s acceptance, maturing not more than one year after such time, or any overnight Federal Funds transaction that is issued or sold by the Bank or its holding company (or by a commercial banking institution that is a member of the Federal Reserve System and has a combined capital and surplus and undivided profits of not less than $500,000,000), (d) any repurchase agreement entered into with the Bank, or other commercial banking institution of the nature referred to in clause (c), which (i) is secured by a fully perfected security interest in any obligation of the type described in any of clauses (a) through (c) above, and (ii) has a market value at the time such repurchase agreement is entered into of not less than 100% of the repurchase obligation of the Bank, or other commercial banking institution, thereunder, (e) money market accounts or mutual funds which invest exclusively in assets satisfying the foregoing requirements, and (f) other short term liquid investments approved in writing by the Bank.

 

“Change in Control” shall mean the occurrence of any of the following events: (a) Argyle shall cease to own and control, directly or indirectly, at least 100% of the outstanding Capital Securities of the Borrower; (b) the Borrower shall cease to, directly or indirectly, own and control 100% of each class of the outstanding Capital Securities of each Subsidiary; or (c) the granting by Argyle, directly or indirectly, of a security interest in its ownership interest in the Borrower, which could result in a change in the identity of the individuals or entities in control of the Borrower. For the purpose hereof, the terms “control” or “controlling” shall mean the possession of the power to direct, or cause the direction of, the management and policies of the Borrower by contract or voting of securities or ownership interests.

“Collateral” shall have the meaning set forth in Section 6.1 hereof.

 

“Collateral Access Agreement” shall mean an agreement in form and substance reasonably satisfactory to the Bank pursuant to which a mortgagee or lessor of real property on which Collateral is stored or otherwise located, or a warehouseman, processor or other bailee of Inventory or other property owned by the Borrower or any Subsidiary, acknowledges the Liens of the Bank and waives any Liens held by such Person on such property, and, in the case of any such agreement with a mortgagee or lessor, permits the Bank reasonable access to and use of such real property following the occurrence and during the continuance of an Event of Default to assemble, complete and sell any collateral stored or otherwise located thereon.

 

“Compliance Certificate” shall have the meaning set forth in Section 8.12 hereof.

 

“Contingent Liability” and “Contingent Liabilities” shall mean, respectively and without duplication, each obligation and liability of the Borrower and all such obligations and liabilities of the Borrower incurred pursuant to any agreement, undertaking or arrangement by which the Borrower: (a) guarantees, endorses or otherwise becomes or is contingently liable upon (by direct or indirect agreement, contingent or otherwise, to provide funds for payment, to supply funds to, or otherwise to invest in, a debtor, or otherwise to assure a creditor against loss) the indebtedness, dividend, obligation or other liability of any other Person in any manner (other than by endorsement of instruments in the course of collection, guarantees of Debt of a Subsidiary that is reflected on the consolidated balance sheet of the Borrower, or with respect to surety bonds, bids, performance bonds, payment bonds and similar obligations, and letters of credit securing the foregoing), including any indebtedness, dividend or other obligation which may be issued or incurred at some future time; (b) guarantees the payment of dividends or other distributions upon the shares or ownership interest of any other Person; (c) undertakes or agrees (whether contingently or otherwise): (i) to purchase, repurchase, or otherwise acquire any indebtedness, obligation or liability of any other Person or any property or assets constituting security therefor, (ii) to advance or provide funds for the payment or discharge of any indebtedness, obligation or liability of any other Person (whether in the form of loans, advances, stock purchases, capital contributions or otherwise), or to maintain solvency, assets, level of income, working capital or other financial condition of any other Person, or (iii) to make payment to any other Person other than for value received; (d) agrees to lease property or to purchase securities, property or services from such other Person with the purpose or intent of assuring the owner of such indebtedness or obligation of the ability of such other Person to make payment of the indebtedness or obligation; (e) to induce the issuance of, or in connection with the issuance of, any letter of credit for the benefit of such other Person; or (f) undertakes or agrees otherwise to assure a creditor against loss. The amount of any Contingent Liability shall (subject to any limitation set forth herein) be deemed to be the outstanding principal amount (or maximum permitted principal amount, if larger) of the indebtedness, obligation or other liability guaranteed or supported thereby. If the Borrower and a Guarantor are responsible for or liable for the same obligation, such obligation shall be deemed to be only one obligation for the purposes of this definition. Notwithstanding the foregoing, “Contingent Liability” will not include any contingent liability that is also a Liability on the consolidated balance sheet of the Borrower.

“Debt” shall mean, as to any Person, without duplication, (a) all indebtedness of such Person; (b) all borrowed money of such Person (including principal, interest, fees and charges), whether or not evidenced by bonds, debentures, notes or similar instruments; (c) all obligations to pay the deferred purchase price of property or services; (d) all obligations, contingent or otherwise, with respect to the maximum face amount of all letters of credit (whether or not drawn), bankers’ acceptances and similar obligations issued for the account of such Person (including the Letters of Credit), and all unpaid drawings in respect of such letters of credit, bankers’ acceptances and similar obligations; (e) all indebtedness secured by any Lien on any property owned by such Person, whether or not such indebtedness has been assumed by such Person (provided, however, if such Person has not assumed or otherwise become liable in respect of such indebtedness, such indebtedness shall be deemed to be in an amount equal to the fair market value of the property subject to such Lien at the time of determination); (f) the aggregate amount of all Capitalized Lease Obligations of such Person; (g) all Contingent Liabilities of such Person, whether or not reflected on its balance sheet; (h) all Hedging Obligations of such Person; (i) all Debt of any partnership of which such Person is a general partner; and (j) all monetary obligations of such Person under (i) a so-called synthetic, off-balance sheet or tax retention lease, or (ii) an agreement for the use or possession of property creating obligations that do not appear on the balance sheet of such Person but which, upon the insolvency or bankruptcy of such Person, would be characterized as the indebtedness of such Person (without regard to accounting treatment). Notwithstanding the foregoing, Debt shall not include (i) trade payables and accrued expenses incurred by such Person in accordance with customary practices and in the ordinary course of business of such Person, or (ii) operating leases as defined by GAAP.

 

“Default Rate” shall mean a per annum rate of interest equal to rate then in effect plus two percent (2%).

 

“Deposit Account” shall have the meaning given to such term in Section 9.12 herein.

 

“Depreciation” shall mean the total amounts added to depreciation, amortization, obsolescence, valuation and other proper reserves, as reflected on the Borrower’s financial statements and determined in accordance with GAAP.

 

“EBITDA” shall mean, for any period, the sum for such period of: (i) Consolidated Net Income, plus (ii) Interest Charges, plus (iii) federal and state income taxes and the Texas Margin Tax, plus (iv) depreciation and amortization, plus (v) non-cash management compensation expense, plus (vi) all other non-cash charges.

 

“Employee Plan” includes any pension, stock bonus, employee stock ownership plan, retirement, profit sharing, deferred compensation, stock option, bonus or other incentive plan, whether qualified or nonqualified, or any disability, medical, dental or other health plan, life insurance or other death benefit plan, vacation benefit plan, severance plan or other employee benefit plan or arrangement, including those pension, profit-sharing and retirement plans of the Borrower described from time to time in the financial statements of the Borrower and any pension plan, welfare plan, Defined Benefit Pension Plans (as defined in ERISA) or any multi-employer plan, maintained or administered by the Borrower or to which the Borrower is a party or may have any liability or by which the Borrower is bound.

“Environmental Laws” shall mean all present or future federal, state or local laws, statutes, common law duties, rules, regulations, ordinances and codes, together with all administrative or judicial orders, consent agreements, directed duties, requests, licenses, authorizations and permits of, and agreements with, any governmental authority, in each case relating to any matter arising out of or relating to public health and safety, or pollution or protection of the environment or workplace, including any of the foregoing relating to the presence, use, production, generation, handling, transport, treatment, storage, disposal, distribution, discharge, emission, release, threatened release, control or cleanup of any Hazardous Substance.

 

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time.

 

“Event of Default” shall mean any of the events or conditions which are set forth in Section 11 hereof.

 

“Excess Cash Flow” shall mean, for any fiscal year of the Borrower, an amount equal to (a) EBITDA minus (b) income taxes and the Texas Margin Tax paid in cash by the Borrower and its Subsidiaries minus (c) cash Interest Charges minus (d) scheduled principal payments on all Debt minus (e) amounts due and payable during such fiscal year for Capital Expenditures not financed with Funded Debt (f) either (1) minus the increase in Working Capital or (2) plus the decrease in Working Capital as applicable, if any, by which the Working Capital of the Borrower and its Subsidiaries increased/decreased during the last preceding fiscal year (except as a result of the reclassification of items from long-term to short-term).

“Existing Indebtedness” shall mean the Debt evidenced by two Promissory Notes, each dated January 23, 2008, in the original principal amount of $12,000,000.00 and $4,250,000.00, respectively, made by the Borrower to the order of LaSalle Bank National Association.

“Facility A Letter of Credit Obligations” means the Letter of Credit Obligations in the maximum amount of $5,000,000.00 incurred by the Borrower under the Facility A Loan Commitment.

 

“Facility A Loan Availability” shall mean, at any time, an amount equal to the lesser of the Facility A Loan Commitment minus the Facility A Letter of Credit Obligations.

 

“Facility A Loan Commitment” means the commitment of the Bank to Advance Facility A Loans to the Borrower in the aggregate amount of $10,000,000.00 as provided in Section 2.1.

 

“Facility A Loan Letter of Credit Commitment” shall mean, at any time, an amount equal to the lesser of (a) the Facility A Loan Commitment minus the aggregate amount of all Facility A Loans outstanding, or (b) Five Million and 00/100 Dollars ($5,000,000.00).

 

“Facility A Loan Letter of Credit Maturity Date” shall mean October 3, 2011.

“Facility A Loan” means the $10,000,000.00 secured revolving line of credit with a $5,000,000.00 sublimit to provide standby letters of credit.

 

“Facility A Loan Note” means the promissory note in the principal amount of $10,000,000.00 evidencing the Facility A Loan, made by the Borrower and payable to the order of the Bank, substantially in the form of Exhibit A-1 hereto, as the same may be supplemented, modified, amended or restated from time to time in the manner provided herein.

 

“Facility A Loan Scheduled Maturity Date” means October 3, 2011.

 

“Facility B Letter of Credit Obligations” means the Letter of Credit Obligations in the maximum amount of $5,000,000.00 incurred by the Borrower under the Facility B Loan Commitment.

 

“Facility B Loan Availability” shall mean, at any time, an amount equal to the lesser of the Facility B Loan Commitment minus the Facility B Letter of Credit Obligations.

 

“Facility B Loan Commitment” means the commitment of the Bank to Advance Facility B Loans to the Borrower in the aggregate amount of $5,000,000.00 as provided in Section 2.2.

 

“Facility B Loan” means the $5,000,000.00 secured revolving line of credit to be used exclusively to provide standby letters of credit.

 

“Facility B Loan Note” means the promissory note in the principal amount of $5,000,000.00 evidencing the Facility B Loan, made by the Borrower and payable to the order of the Bank, substantially in the form of Exhibit A-2 hereto, as the same may be supplemented, modified, amended or restated from time to time in the manner provided herein.

 

“Facility B Loan Scheduled Maturity Date” means October 3, 2011.

 

“Facility C Loan Commitment” means the commitment of the Bank to Advance Facility C Loans to the Borrower in the aggregate amount of $10,000,000.00 as provided in Section 2.3.

 

“Facility C Loan” means the $10,000,000.00 term loan.

 

“Facility C Loan Scheduled Maturity Date” means October 3, 2011.

 

“Facility C Loan Note” means the promissory note in the principal amount of $10,000,000.00 evidencing the Facility C Loan, made by the Borrower and payable to the order of the Bank, substantially in the form of Exhibit A-3 hereto, as the same may be supplemented, modified, amended or restated from time to time in the manner provided herein.

 

“Facility C Loan Mandatory Prepayment” shall have the meaning set forth in Section 2.3(d) hereof.

 

“Federal Funds Rate” shall mean, for any day, a fluctuating interest rate equal for each day during such period to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by the Bank from three Federal funds brokers of recognized standing selected by the Bank. The Bank’s determination of such rate shall be binding and conclusive absent manifest error.

“Funded Debt” shall mean, as to any Person, all Debt of such Person that matures more than one year from the date of its creation (or is renewable or extendible, at the option of such Person, to a date more than one year from such date).

 

“GAAP” shall mean generally accepted accounting principles set forth from time to time in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board (or agencies with similar functions of comparable stature and authority within the U.S. accounting profession), which are applicable to the circumstances as of the date of determination, provided, however, that interim financial statements or reports shall be deemed in compliance with GAAP despite the absence of footnotes and fiscal year-end adjustments as required by GAAP.

 

“Guarantor” and “Guarantors” shall mean, respectively, each of and collectively, the following: Detention Contracting Group, Ltd., a Texas limited partnership, ISI Detention Contracting Group, Inc., a Texas corporation, ISI Detention Contracting Group, Inc., a California corporation, ISI Detention Contracting Group, Inc., a New Mexico corporation, ISI Detention Systems, Inc., a Texas corporation, ISI Systems, Ltd., a Texas limited partnership, Metroplex Control Systems, Inc., a Texas corporation, ISI Controls, Ltd., a Texas limited partnership, Metroplex Commercial Fire and Security Alarms, Inc., a Texas corporation, MCFSA, Ltd., a Texas limited partnership, Com-Tec Security, LLC, a Wisconsin limited liability company, Com-Tec California Limited Partnership, a Wisconsin limited partnership and any other Person who shall hereafter become a Subsidiary of Borrower or any Guarantor.

 

“Guaranty” shall have the meaning set forth in Section 3.1 hereof.

 

“Hazardous Substances” shall mean (a) any petroleum or petroleum products, radioactive materials, asbestos in any form that is or could become friable, urea formaldehyde foam insulation, dielectric fluid containing levels of polychlorinated biphenyls, radon gas and mold; (b) any chemicals, materials, pollutant or substances defined as or included in the definition of “hazardous substances”, “hazardous waste”, “hazardous materials”, “extremely hazardous substances”, “restricted hazardous waste”, “toxic substances”, “toxic pollutants”, “contaminants”, “pollutants” or words of similar import, under any applicable Environmental Law; and (c) any other chemical, material or substance, the exposure to, or release of which is prohibited, limited or regulated by any governmental authority or for which any duty or standard of care is imposed pursuant to, any Environmental Law.

 

“Hedging Agreement” shall mean any interest rate, currency or commodity swap agreement, cap agreement or collar agreement, and any other agreement or arrangement designed to protect a Person against fluctuations in interest rates, currency exchange rates or commodity prices.

“Hedging Obligation” shall mean, with respect to any Person, any liability of such Person under any Hedging Agreement.

 

“Indemnified Party” and “Indemnified Parties” shall mean, respectively, each of the Bank and any parent corporation, Affiliate or Subsidiary of the Bank, and each of their respective officers, directors, employees, attorneys and agents, and all of such parties and entities.

 

“Intellectual Property” shall mean the collective reference to all rights, priorities and privileges relating to intellectual property, whether arising under United States, multinational or foreign laws or otherwise, including copyrights, patents, service marks and trademarks, and all registrations and applications for registration therefor and all licensees thereof, trade names, domain names, technology, know-how and processes, and all rights to sue at law or in equity for any infringement or other impairment thereof, including the right to receive all proceeds and damages therefrom.

 

“Interest Charges” shall mean, for any period, the sum of: (a) all interest, charges and related expenses payable with respect to that fiscal period to a lender in connection with borrowed money or the deferred purchase price of assets that are treated as interest in accordance with GAAP, plus (b) the portion of Capitalized Lease Obligations with respect to that fiscal period that should be treated as interest in accordance with GAAP, plus (c) all charges paid or payable (without duplication) during that period with respect to any Hedging Agreements.

 

“Interest Period” shall mean successive one, two, three or six month periods, beginning and ending as provided in this Agreement.

 

“Interest Rate” shall mean the Borrower’s option from time to time of (i) a floating per annum rate of interest equal to the Prime Rate plus the Applicable Margin, or (ii) the LIBOR Rate plus the Applicable Margin.

 

“Interest Rate Change Date” shall mean the date two (2) Business Days after the delivery to the Bank of the quarterly or year-end financial statements of the Borrower, which initial Change Date shall occur after the delivery to the Bank of the financial statements of the Borrower for the fiscal quarter ending December 31, 2008.

 

“Investment” shall mean, with respect to any Person, any investment in another Person, whether by acquisition of any debt or equity security, by making any loan or advance, by becoming obligated with respect to a Contingent Liability in respect of obligations of such other Person (other than travel and similar advances to employees in the ordinary course of business).

 

“Letter of Credit” and “Letters of Credit” shall mean, respectively, a standby letter of credit and all such standby letters of credit issued by the Bank, in its sole discretion, upon the execution and delivery by the Borrower and the acceptance by the Bank of a Master Letter of Credit Agreement and a Letter of Credit Application, as set forth in Section 2.7 of this Agreement.

“Letter of Credit Application” shall mean, with respect to any request for the issuance of a Letter of Credit, a letter of credit application in the form being used by the Bank at the time of such request for the type of Letter of Credit requested.

 

“Letter of Credit Obligations” shall mean, at any time, an amount equal to the aggregate of the original face amounts of all Letters of Credit minus the sum of (i) the amount of any reductions in the original face amount of any Letter of Credit which did not result from a draw thereunder, (ii) the amount of any payments made by the Bank with respect to any draws made under a Letter of Credit for which the Borrower has reimbursed the Bank, (iii) the amount of any payments made by the Bank with respect to any draws made under a Letter of Credit which have been converted to a Facility A Loan or Facility B Loan, as applicable, as set forth in Section 2.7, and (iv) the portion of any issued but expired Letter of Credit which has not been drawn by the beneficiary thereunder. For purposes of determining the outstanding Letter of Credit Obligations at any time, the Bank’s acceptance of a draft drawn on the Bank pursuant to a Letter of Credit shall constitute a draw on the applicable Letter of Credit at the time of such acceptance.

 

“Liabilities” shall mean at all times all liabilities of the Borrower that would be shown as such on a balance sheet of the Borrower prepared in accordance with GAAP.

 

“LIBOR” shall mean a rate of interest equal to (a) the per annum rate of interest at which United States dollar deposits for a period equal to the relevant Interest Period are offered in the London Interbank Eurodollar market at 11:00 a.m. (London time) two Business Days prior to the commencement of such Interest Period (or three Business Days prior to the commencement of such Interest Period if banks in London, England were not open and dealing in offshore United States dollars on such second preceding Business Day), as displayed in the Bloomberg Financial Markets system (or other authoritative source selected by the Bank in its sole discretion), divided by (b) a number determined by subtracting from 1.00 the then stated maximum reserve percentage for determining reserves to be maintained by member banks of the Federal Reserve System for Eurocurrency funding or liabilities as defined in Regulation D (or any successor category of liabilities under Regulation D), or as LIBOR is otherwise determined by the Bank in its sole and absolute discretion. The Bank’s determination of LIBOR shall be conclusive, absent manifest error.

 

“LIBOR Loan” or “LIBOR Loans” shall mean that portion, and collectively those portions, of the aggregate outstanding principal balance of the Loans that bear interest at the LIBOR Rate, of which at any time, the Borrower may identify no more than five (5) advances of the Facility A Loans, Facility B Loans and Facility C Loans which bear interest at the LIBOR Rate.

 

“LIBOR Rate” shall mean a per annum rate of interest equal to LIBOR for the relevant Interest Period, plus the Applicable Margin, which LIBOR Rate shall remain fixed during such Interest Period.

 

“Lien” shall mean, with respect to any Person, any interest granted by such Person in any real or personal property, asset or other right owned or being purchased or acquired by such Person (including an interest in respect of a Capital Lease) which secures payment or performance of any obligation and shall include any mortgage, lien, encumbrance, title retention lien, charge or other security interest of any kind, whether arising by contract, as a matter of law, by judicial process or otherwise.

“Loans” shall mean, collectively, all Facility A Loans, Facility B Loans and Facility C Loans made by the Bank to the Borrower and all Letter of Credit Obligations, under and pursuant to this Agreement.

 

“Loan Documents” shall mean each of the agreements, documents, instruments and certificates set forth in Section 3.1 hereof, and any and all such other instruments, documents, certificates and agreements from time to time executed and delivered by the Borrower, the Guarantors or any of its/their Subsidiaries for the benefit of the Bank pursuant to any of the foregoing, and all amendments, restatements, supplements and other modifications thereto.

 

“Master Letter of Credit Agreement” shall mean, at any time, with respect to the issuance of Letters of Credit, a Master Letter of Credit Agreement in a form acceptable to Bank.

 

“Material Adverse Effect” shall mean (a) a material adverse change in, or a material adverse effect upon, the assets, business, properties, prospects, condition (financial or otherwise) or results of operations of the Borrower and its Subsidiaries taken as a whole, (b) a material impairment of the ability of the Borrower and its Subsidiaries to perform any of the Obligations under any of the Loan Documents, or (c) a material adverse effect on (i) any substantial portion of the Collateral, (ii) the legality, validity, binding effect or enforceability against the Borrower and its Subsidiaries of any of the Loan Documents, (iii) the perfection or priority of any Lien granted to the Bank under any Loan Document, or (iv) the rights or remedies of the Bank under any Loan Document.

 

“Net Cash Proceeds” shall mean:

 

(a) with respect to any Asset Disposition, the aggregate cash proceeds (including cash proceeds received pursuant to policies of insurance or by way of deferred payment of principal pursuant to a note, installment receivable or otherwise, but only as and when received) received by the Borrower pursuant to such Asset Disposition net of (i) the direct costs relating to such sale, transfer or other disposition (including sales commissions and legal, accounting and investment banking fees), (ii) taxes paid or reasonably estimated by the Borrower to be payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements), and (iii) amounts required to be applied to the repayment of any Debt secured by a Lien on the asset subject to such Asset Disposition (other than the Loans);

 

(b) with respect to any issuance of Capital Securities, the aggregate cash proceeds received by the Borrower pursuant to such issuance, net of the direct costs relating to such issuance (including sales and underwriters’ commissions; and

 

(c) with respect to any issuance of Debt, the aggregate cash proceeds received by the Borrower pursuant to such issuance, net of the direct costs of such issuance (including up-front, underwriters’ and placement fees).

“Net Income” shall mean, with respect to the Borrower and its Subsidiaries for any period, the consolidated net income (or loss) of the Borrower and its Subsidiaries for such period as determined in accordance with GAAP, excluding any gains from Asset Dispositions, any extraordinary gains and any gains from discontinued operations.

 

“Non-Excluded Taxes” shall have the meaning set forth in Section 2.7(a) hereof.

 

“Note” and “Notes” shall mean, respectively, each of and collectively, the Facility A Note, the Facility B Note and the Facility C Note.

 

“Obligations” shall mean the Loans, as evidenced by any Note, all interest accrued thereon (including interest which would be payable as post-petition in connection with any bankruptcy or similar proceeding, whether or not permitted as a claim thereunder), any fees due the Bank hereunder, any expenses incurred by the Bank hereunder, including without limitation, all liabilities and obligations under this Agreement, under any other Loan Document, any reimbursement obligations of the Borrower in respect of Letters of Credit and surety bonds, all Hedging Obligations of the Borrower which are owed to the Bank or any Affiliate of the Bank, and all Bank Product Obligations of the Borrower, and any and all other liabilities and obligations owed by the Borrower to the Bank from time to time, howsoever created, arising or evidenced, whether direct or indirect, joint or several, absolute or contingent, now or hereafter existing, or due or to become due, together with any and all renewals, extensions, restatements or replacements of any of the foregoing.

 

“Obligor” shall mean the Borrower, the Guarantors and any Subsidiary of the Borrower, and of any Guarantor, accommodation endorser, third party pledgor, or any other party liable with respect to the Obligations.

 

“Other Taxes” shall mean any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies which arise from the execution, delivery, enforcement or registration of, or otherwise with respect to, this Agreement or any of the other Loan Documents.

 

“Permitted Liens” shall mean (a) Liens for Taxes, assessments or other governmental charges not at the time delinquent or thereafter payable without penalty or being contested in good faith by appropriate proceedings and, in each case, for which it maintains adequate reserves in accordance with GAAP and in respect of which no Lien has been filed; (b) Liens arising in the ordinary course of business (i) in favor of landlords, carriers, warehousemen, mechanics and materialmen and other similar Liens imposed by law, and (ii) in the form of deposits or pledges incurred in connection with worker’s compensation, unemployment compensation and other types of social security (excluding Liens arising under ERISA); (c) Liens arising in the ordinary course of business in favor of the issuer of surety bonds, bids, performance bonds, payment bonds, and similar obligations, which do not in the aggregate exceed an amount equal to one-half (1/2) of Borrower’s aggregate Accounts Receivable; (d) Liens described on Schedule 9.2 as of the Closing Date and the replacement, extension or renewal of any such Lien upon or in the same property subject thereto arising out of the extension, renewal or replacement of the Debt secured thereby (without increase in the amount thereof); (e) attachments, appeal bonds, judgments and other similar Liens arising in connection with court proceedings, to the extent such judgments or awards do not constitute an Event of Default under Section 11.8 hereof; (f) easements, rights of way, restrictions, minor defects or irregularities in title and other similar Liens not interfering in any material respect with the ordinary conduct of the business of the Borrower or any of its Subsidiaries; (g) subject to the limitation set forth in Section 9.1(g), Liens arising in connection with Capitalized Lease Obligations (and attaching only to the property being leased); (h) subject to the limitation set forth in Section 9.1(h), Liens that constitute purchase money security interests on any property securing Debt incurred for the purpose of financing all or any part of the cost of acquiring such property, provided that any such Lien attaches solely to the property so acquired; (i) Liens granted to the Bank hereunder and under the Loan Documents, (j) Liens securing bonds related to accounts receivable, (k) Liens on amounts deposited by the Borrower arising out of the financing of insurance premiums, and (l) Liens of Bank of America for the period from the Closing Date until payment is received by Bank of America from the proceeds of the Loans to pay in full the Bank shall have received evidence satisfactory to it that all amounts due from the Borrower pursuant to the Existing Debt has been paid in full out of the proceeds of the Loan on the Effective Date, or provision for payment thereof in a manner acceptable to the Bank in its sole discretion, shall have been made by the Borrower and approved by the Bank, and the Bank shall have received executed termination statements, in form satisfactory for filing, evidencing the termination of the security interests in the Borrower’s properties which secured the Existing Debt.

“Person” shall mean any natural person, partnership, limited liability company, corporation, trust, joint venture, joint stock company, association, unincorporated organization, government or agency or political subdivision thereof, or other entity, whether acting in an individual, fiduciary or other capacity.

 

“Prime Loan” or “Prime Loans” shall mean that portion, and collectively, those portions of the aggregate outstanding principal balance of the Loans that bear interest at the Prime Rate plus the Applicable Margin.

 

“Prime Rate” shall mean the floating per annum rate of interest which at any time, and from time to time, shall be most recently announced by the Bank as its Prime Rate, which is not intended to be the Bank’s lowest or most favorable rate of interest at any one time. The effective date of any change in the Prime Rate shall for purposes hereof be the date the Prime Rate is changed by the Bank. The Bank shall not be obligated to give notice of any change in the Prime Rate.

 

“Regulatory Change” shall mean the introduction of, or any change in any applicable law, treaty, rule, regulation or guideline or in the interpretation or administration thereof by any governmental authority or any central bank or other fiscal, monetary or other authority having jurisdiction over the Bank or its lending office.

 

“Senior Debt” shall mean all Debt of the Borrower and its Subsidiaries other than Subordinated Debt.

 

“Subordinated Debt” shall mean that portion of the Debt of the Borrower which is subordinated to the Obligations in a manner satisfactory to the Bank, including right and time of payment of principal and interest.

“Subsidiary” and “Subsidiaries” shall mean, respectively, with respect to any Person, each and all such corporations, partnerships, limited partnerships, limited liability companies, limited liability partnerships, joint ventures or other entities of which or in which such Person owns, directly or indirectly, such number of outstanding Capital Securities as have more than fifty percent (50.00%) of the ordinary voting power for the election of directors or other managers of such corporation, partnership, limited liability company or other entity. Unless the context otherwise requires, each reference to Subsidiaries herein shall be a reference to Subsidiaries of the Borrower.

 

“Taxes” shall mean any and all present and future taxes, duties, levies, imposts, deductions, assessments, charges or withholdings, and any and all liabilities (including interest and penalties and other additions to taxes) with respect to the foregoing.

 

“Total Debt” shall mean all Debt of the Borrower and its Subsidiaries, determined on a consolidated basis, excluding (i) Contingent Liabilities (except to the extent constituting Contingent Liabilities in respect of the Debt of a Person other than the Borrower or any Subsidiaries), (ii) Hedging Obligations, (iii) Debt of the Borrower to Subsidiaries and Debt of Subsidiaries to the Borrower or to other Subsidiaries, and (iv) contingent obligations in respect of undrawn Letters of Credit.

 

“UCC” shall mean the Uniform Commercial Code in effect in the state of Illinois from time to time.

 

“United States Treasury Securities” means actively traded United States Treasury bonds, bills and notes.

 

“Unmatured Event of Default” shall mean any event which, with the giving of notice, the passage of time or both, would constitute an Event of Default.

 

“Voidable Transfer” shall have the meaning set forth in Section 13.21 hereof.

 

“Wholly-Owned Subsidiary” shall mean any Subsidiary of which or in which the Borrower owns, directly or indirectly, one hundred percent (100%) of the Capital Securities of such Subsidiary.

 

“Working Capital” shall mean the total of cash on hand, cash equivalents, marketable securities, Accounts minus adequate reserves for doubtful Accounts, and readily salable Inventory at the lower of cost or market value, minus the total of all liabilities payable within one year, all as determined in accordance with GAAP.

 

1.2. ACCOUNTING TERMS. Any accounting terms used in this Agreement which are not specifically defined herein shall have the meanings customarily given them in accordance with GAAP. Calculations and determinations of financial and accounting terms used and not otherwise specifically defined hereunder and the preparation of financial statements to be furnished to the Bank pursuant hereto shall be made and prepared, both as to classification of items and as to amount, in accordance with sound accounting practices and GAAP as used in the preparation of the financial statements of the Borrower on the date of this Agreement. If any changes in accounting principles or practices from those used in the preparation of the financial statements are hereafter occasioned by the promulgation of rules, regulations, pronouncements and opinions by or required by the Financial Accounting Standards Board or the American Institute of Certified Public Accountants (or any successor thereto or agencies with similar functions), which results in a material change in the method of accounting in the financial statements required to be furnished to the Bank hereunder or in the calculation of financial covenants, standards or terms contained in this Agreement, the parties hereto agree to enter into good faith negotiations to amend such provisions so as equitably to reflect such changes to the end that the criteria for evaluating the financial condition and performance of the Borrower will be the same after such changes as they were before such changes; and if the parties fail to agree on the amendment of such provisions, the Borrower will furnish financial statements in accordance with such changes, but shall provide calculations for all financial covenants, perform all financial covenants and otherwise observe all financial standards and terms in accordance with applicable accounting principles and practices in effect immediately prior to such changes. Calculations with respect to financial covenants required to be stated in accordance with applicable accounting principles and practices in effect immediately prior to such changes shall be reviewed and certified by the Borrower’s accountants.

1.3. OTHER TERMS DEFINED IN UCC. All other capitalized words and phrases used herein and not otherwise specifically defined herein shall have the respective meanings assigned to such terms in the UCC, to the extent the same are used or defined therein.

 

1.4. Other Interpretive Provisions.

 

(a) The meanings of defined terms are equally applicable to the singular and plural forms of the defined terms. Whenever the context so requires, the neuter gender includes the masculine and feminine, the single number includes the plural, and vice versa, and in particular the word “Borrower” shall be so construed.

 

(b) Section and Schedule references are to this Agreement unless otherwise specified. The words “hereof”, “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement.

 

(c) The term “including” is not limiting, and means “including, without limitation”.

 

(d) In the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including”; the words “to” and “until” each mean “to but excluding”, and the word “through” means “to and including”.

 

(e) Unless otherwise expressly provided herein, (i) references to agreements (including this Agreement and the other Loan Documents) and other contractual instruments shall be deemed to include all subsequent amendments, restatements, supplements and other modifications thereto, but only to the extent such amendments, restatements, supplements and other modifications are not prohibited by the terms of any Loan Document, and (ii) references to any statute or regulation shall be construed as including all statutory and regulatory provisions amending, replacing, supplementing or interpreting such statute or regulation.

(f) To the extent any of the provisions of the other Loan Documents are inconsistent with the terms of this Agreement, the provisions of this Agreement shall govern.

 

(g) This Agreement and the other Loan Documents may use several different limitations, tests or measurements to regulate the same or similar matters. All such limitations, tests and measurements are cumulative and each shall be performed in accordance with its terms.

 

Section 2. COMMITMENT OF THE BANK.

 

2.1. Facility A Loans.

 

(a) Facility A Loan Commitment. Subject to the terms and conditions of this Agreement and the other Loan Documents, and in reliance upon the representations and warranties of the Borrower set forth herein and in the other Loan Documents, the Bank agrees to make such Facility A Loans at such times as the Borrower may from time to time request until, but not including, the Facility A Loan Scheduled Maturity Date, and in such amounts as the Borrower may from time to time request, provided, however, that the aggregate principal balance of all Facility A Loans outstanding at any time shall not exceed the Facility A Loan Availability. Facility A Loans made by the Bank may be repaid and, subject to the terms and conditions hereof, borrowed again up to, but not including the Facility A Loan Scheduled Maturity Date unless the Facility A Loans are otherwise accelerated, terminated or extended as provided in this Agreement. The Facility A Loans shall be used by the Borrower for the purpose of paying in full the Existing Indebtedness, for working capital, for the issuance of standby Letters of Credit and repayment of drawings against any standby Letters of Credit in an amount not to exceed the Facility A Letter of Credit Commitment and other lawful purposes.

 

(b) Facility A Loan Interest and Payments. Except as otherwise provided in this Section 2.1(b), the principal amount of the Facility A Loans outstanding from time to time shall bear interest at the applicable Interest Rate. Accrued and unpaid interest on the unpaid principal balance of all Facility A Loans outstanding from time to time which are Prime Loans, shall be due and payable quarterly, in arrears, commencing on September 30, 2008 and continuing on the last Business Day of each June, September, December and March thereafter, and on the Facility A Loan Maturity Date. Accrued and unpaid interest on the unpaid principal balance of all Facility A Loans outstanding from time to time which are LIBOR Loans shall be payable on the last Business Day of each Interest Period (provided, however, that for Interest Periods of six months, accrued interest shall also be paid on the date which is three months from the first day of such Interest Period), commencing on the first such date to occur after the date hereof, on the date of any principal repayment of a LIBOR Loan and on the Facility A Loan Maturity Date. From and after maturity, or after the occurrence and during the continuation of an Event of Default, interest on the outstanding principal balance of the Facility A Loans, at the option of the Bank, may accrue at the Default Rate and shall be payable upon demand from the Bank.

(c) Facility A Loan Principal Payments.

 

(i) Facility A Loan Mandatory Payments. All Facility A Loans hereunder shall be repaid by the Borrower on the Facility A Loan Scheduled Maturity Date, unless payable sooner pursuant to the provisions of this Agreement. In the event the aggregate outstanding principal balance of all Facility A Loans and Letter of Credit Obligations hereunder exceeds the Facility A Loan Availability, the Borrower shall, without notice or demand of any kind, immediately make such repayments of the Facility A Loans or take such other actions as are satisfactory to the Bank as shall be necessary to eliminate such excess. Also, if the Borrower chooses not to continue any Facility A Loan which is a LIBOR Loan as a LIBOR Loan or the LIBOR Loan option is unavailable with respect to such Facility A Loan, then such Facility A Loan will automatically be converted to a Prime Loan on the last Business Day the then existing Interest Period or on such earlier date as required by law, all without further demand, presentment, protest or notice of any kind, all of which are hereby waived by the Borrower.

 

(ii) Optional Prepayments. The Borrower may from time to time prepay the Facility A Loans which are Prime Loans, in whole or in part, without any prepayment penalty whatsoever, provided that any prepayment of the entire principal balance of the Prime Loans shall include accrued interest on such Prime Loans to the date of such prepayment.

 

2.2. Facility B Loans.

(a) Facility B Loan Commitment. Subject to the terms and conditions of this Agreement and the other Loan Documents, and in reliance upon the representations and warranties of the Borrower set forth herein and in the other Loan Documents, the Bank agrees to make such Facility B Loans at such times as the Borrower may from time to time request until, but not including, the Facility B Loan Scheduled Maturity Date, and in such amounts as the Borrower may from time to time request, provided, however, that the aggregate principal balance of all Facility B Loans outstanding at any time shall not exceed the Facility B Loan Availability. Facility B Loans made by the Bank may be repaid and, subject to the terms and conditions hereof, borrowed again up to, but not including the Facility B Loan Scheduled Maturity Date unless the Facility B Loans are otherwise accelerated, terminated or extended as provided in this Agreement. The Facility B Loan Commitment shall be used by the Borrower for the exclusive purpose of the issuance of standby Letters of Credit and the repayment of drawings against such standby Letters of Credit.

 

(b) Facility B Loan Interest and Payments. Except as otherwise provided in this Section 2.2(b), the principal amount of the Facility B Loans outstanding from time to time shall bear interest at the applicable Interest Rate. Amounts drawn on Letters of Credit that are Facility B Loans shall be paid within two (2) Business Days of the draw on the Letter of Credit without notice or further demand from the Bank. Accrued and unpaid interest on the unpaid principal balance of all Facility B Loans outstanding from time to time which are Prime Loans, shall be due and payable quarterly, in arrears, commencing on September 30, 2008 and continuing on the last Business Day of each June, September, December and March thereafter, and on the Facility B Loan Maturity Date. From and after maturity, or after the occurrence and during the continuation of an Event of Default, interest on the outstanding principal balance of the Facility B Loans, at the option of the Bank, may accrue at the Default Rate and shall be payable upon demand from the Bank.

(c) Facility B Loan Principal Payments.

 

(i) Facility B Loan Mandatory Payments. Amounts drawn on Letters of Credit that are Facility B Loans shall be paid within two (2) Business Days of the draw on the Letter of Credit without notice or further demand from the Bank. All Facility B Loans hereunder shall be repaid by the Borrower on the Facility B Loan Scheduled Maturity Date, unless payable sooner pursuant to the provisions of this Agreement. In the event the aggregate outstanding principal balance of all Facility B Loans and Letter of Credit Obligations hereunder exceeds the Facility B Loan Availability, the Borrower shall, without notice or demand of any kind, immediately make such repayments of the Facility B Loans or take such other actions as are satisfactory to the Bank as shall be necessary to eliminate such excess. Also, if the Borrower chooses not to continue any Facility B Loan which is a LIBOR Loan as a LIBOR Loan or the LIBOR Loan option is unavailable with respect to such Facility B Loan, then such Facility B Loan will automatically be converted to a Prime Loan on the last Business Day the then existing Interest Period or on such earlier date as required by law, all without further demand, presentment, protest or notice of any kind, all of which are hereby waived by the Borrower.

 

(ii) Optional Prepayments. The Borrower may from time to time prepay the Facility B Loans which are Prime Loans, in whole or in part, without any prepayment penalty whatsoever, provided that any prepayment of the entire principal balance of the Prime Loans shall include accrued interest on such Prime Loans to the date of such prepayment.

 

2.3. Facility C Loan.

 

(a) Facility C Loan Commitment. Subject to the terms and conditions of this Agreement and the other Loan Documents, and in reliance upon the representations and warranties of the Borrower set forth herein and in the other Loan Documents, the Bank agrees to make a Facility C Loan equal to the Facility C Loan Commitment. The Facility C Loan shall be available to the Borrower in a single advance on the date of this Agreement for the exclusive purpose of paying in full the Existing Indebtedness. The Facility C Loan may be prepaid in whole or in part at any time without penalty, but shall be due in full on the Facility C Loan Maturity Date, unless the credit extended under the Facility C Loan is otherwise accelerated, terminated or extended as provided in this Agreement.

(b) Facility C Loan Interest and Payments. Except as otherwise provided in this Section 2.3(b), the principal amount of the Facility C Loan outstanding from time to time shall bear interest at the applicable Interest Rate. Accrued and unpaid interest on that portion of the principal balance of the Facility C Loan outstanding from time to time which is a Prime Loan, shall be due and payable quarterly, in arrears, commencing on the last Business Day of the first calendar month following the first advance under the Facility C Loan and continuing on the same day of each calendar quarter thereafter, and on the Facility C Loan Maturity Date. Accrued and unpaid interest on those portions of the principal balance of the Facility C Loan outstanding from time to time which are LIBOR Loans shall be payable on the last Business Day of each Interest Period (provided, however, that for Interest Periods of six months, accrued interest shall also be paid on the date which is three months from the first day of such Interest Period), commencing on the first such date to occur after the date hereof, on the date of any principal repayment of a LIBOR Loan and on the Facility C Loan Maturity Date.  From and after maturity, or after the occurrence and during the continuation of an Event of Default, interest on the outstanding principal balance of the Facility C Loan, at the option of the Bank, may accrue at the Default Rate and shall be payable upon demand from the Bank.

 

(c) Facility C Loan Principal Payments. The outstanding principal balance of the Facility C Loan shall be repaid in installments of $500,000.00 commencing on December 31, 2008 and continuing on the last day of March, June, September and December, together with an additional amount representing accrued and unpaid interest on the principal amount of the Facility C Loan outstanding as set forth above, with a final payment of all outstanding principal and accrued interest due on the Facility C Loan Scheduled Maturity Date. Principal amounts repaid on the Facility C Note may not be borrowed again. Also, if the Borrower chooses not to continue any Facility C Loan which is a LIBOR Loan as a LIBOR Loan or the LIBOR Loan option is unavailable with respect to such Facility C Loan, then such Facility C Loan will automatically be converted to a Prime Loan on the last Business Day of the then existing Interest Period or on such earlier date as required by law, all without further demand, presentment, protest or notice of any kind, all of which are hereby waived by the Borrower.

 

(d) Facility C Loan Mandatory Prepayment. The Borrower shall make a prepayment (the “Facility C Loan Mandatory Prepayment”) of the outstanding principal amount of the Facility C Loan until paid in full upon the occurrence of any of the following events, at the following times and in the following amounts:

 

(i) Concurrently with the receipt by the Borrower or by any Subsidiary of any Net Cash Proceeds from any Asset Disposition, in an amount equal to 100% of such Net Cash Proceeds.

 

(ii) Concurrently with the receipt by the Borrower of any Net Cash Proceeds from any issuance of Capital Securities  (excluding (A) any issuance of Capital Securities  pursuant to any employee or director option program, benefit plan or compensation program, and (B) any issuance by a Subsidiary to the Borrower or another Subsidiary), in an amount equal to 100% of such Net Cash Proceeds.

(iii) Within one hundred twenty (120) days after the end of the Borrower’s fiscal year, fifty percent (50%) of Excess Cash Flow, if any.

 

(e) Facility C Loan Optional Prepayments.

 

Provided that no Event of Default then exists under this Agreement or the Loans, the Borrower may voluntarily prepay the principal balance of the Facility C Loan, in whole or in part, at any time on or after the date hereof, subject to the following conditions:

 

(A) Not less than thirty (30) days prior to the date upon which the Borrower desires to make such prepayment, the Borrower shall deliver to the Bank written notice of its intention to prepay the Facility C, which notice shall be irrevocable and state the prepayment amount and the prepayment date (the “Facility C Loan Prepayment Date”);

 

(B) The Borrower shall pay to the Bank all accrued and unpaid interest on the Facility C through the date of such prepayment on the principal balance being prepaid. Each prepayment of the Facility C Loan shall be applied to the scheduled installments of the Facility C Loan in inverse order of maturity.

 

2.4. Additional LIBOR Loan Provisions.

 

(a) LIBOR Loan Prepayments. Notwithstanding anything to the contrary contained herein, the principal balance of any LIBOR Loan may not be prepaid in whole or in part at any time. If, for any reason, a LIBOR Loan is paid prior to the last Business Day of any Interest Period, whether voluntary, involuntary, by reason of acceleration or otherwise, each such prepayment of a LIBOR Loan will be accompanied by the amount of accrued interest on the amount prepaid and any and all costs, expenses, penalties and charges incurred by the Bank as a result of the early termination or breakage of a LIBOR Loan, plus the amount, if any, by which (i) the additional interest which would have been payable during the Interest Period on the LIBOR Loan prepaid had it not been prepaid, exceeds (ii) the interest which would have been recoverable by the Bank by placing the amount prepaid on deposit in the domestic certificate of deposit market, the eurodollar deposit market, or other appropriate money market selected by the Bank, for a period starting on the date on which it was prepaid and ending on the last day of the Interest Period for such LIBOR Loan. The amount of any such loss or expense payable by the Borrower to the Bank under this Section shall be determined in the Bank’s sole discretion based upon the assumption that the Bank funded its loan commitment for LIBOR Loans in the London Interbank Eurodollar market and using any reasonable attribution or averaging methods which the Bank deems appropriate and practical, provided, however, that the Bank is not obligated to accept a deposit in the London Interbank Eurodollar market in order to charge interest on a LIBOR Loan at the LIBOR Rate.

(b) LIBOR Unavailability. If the Bank determines in good faith (which determination shall be conclusive, absent manifest error) prior to the commencement of any Interest Period that (i) the making or maintenance of any LIBOR Loan would violate any applicable law, rule, regulation or directive, whether or not having the force of law, (ii) United States dollar deposits in the principal amount, and for periods equal to the Interest Period for funding any LIBOR Loan are not available in the London Interbank Eurodollar market in the ordinary course of business, (iii) by reason of circumstances affecting the London Interbank Eurodollar market, adequate and fair means do not exist for ascertaining the LIBOR Rate to be applicable to the relevant LIBOR Loan, or (iv) the LIBOR Rate does not accurately reflect the cost to the Bank of a LIBOR Loan, the Bank shall promptly notify the Borrower thereof and, so long as the foregoing conditions continue, none of the Loans may be advanced as a LIBOR Loan thereafter. In addition, at the Borrower’s option, each existing LIBOR Loan shall be immediately (1) converted to a Prime Loan on the last Business Day of the then existing Interest Period, or (2) prepaid without penalty or premium on the last Business Day of the then existing Interest Period.

 

(c) Regulatory Change. In addition, if, after the date hereof, a Regulatory Change shall, in the reasonable determination of the Bank, make it unlawful for the Bank to make or maintain the LIBOR Loans, then the Bank shall promptly notify the Borrower and none of the Loans may be advanced as a LIBOR Loan thereafter. In addition, at the Borrower’s option, each existing LIBOR Loan shall be immediately (1) converted to a Prime Loan on the last Business Day of the then existing Interest Period, or (2) prepaid without penalty or premium on the last Business Day of the then existing Interest Period.

 

(d) LIBOR Indemnity. If any Regulatory Change, or compliance by the Bank or any Person controlling the Bank with any request or directive of any governmental authority, central bank or comparable agency (whether or not having the force of law) shall (a) impose, modify or deem applicable any assessment, reserve, special deposit or similar requirement against assets held by, or deposits in or for the account of or loans by, or any other acquisition of funds or disbursements by, the Bank; (b) subject the Bank or any LIBOR Loan to any tax, duty, charge, stamp tax or fee or change the basis of taxation of payments to the Bank of principal or interest due from the Borrower to the Bank hereunder (other than a change in the taxation of the overall net income of the Bank); or (c) impose on the Bank any other condition regarding such LIBOR Loan or the Bank’s funding thereof, and the Bank shall determine (which determination shall be conclusive, absent manifest error) that the result of the foregoing is to increase the cost to, or to impose a cost on, the Bank or such controlling Person of making or maintaining such LIBOR Loan or to reduce the amount of principal or interest received by the Bank hereunder, then the Borrower shall pay to the Bank or such controlling Person, on demand, such additional amounts as the Bank shall, from time to time, determine are sufficient to compensate and indemnify the Bank for such increased cost or reduced amount.

2.5. Interest and Fee Computation; Collection of Funds. Except as otherwise set forth herein, all interest and fees shall be calculated on the basis of a year consisting of 360 days and shall be paid for the actual number of days elapsed. Principal payments submitted in funds not immediately available shall continue to bear interest until collected. If any payment to be made by the Borrower hereunder or under any Note shall become due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall be included in computing any interest in respect of such payment. Notwithstanding anything to the contrary contained herein, the final payment due under any of the Loans must be made by wire transfer or other immediately available funds. All payments made by the Borrower hereunder or under any of the Loan Documents shall be made without setoff, counterclaim, or other defense. To the extent permitted by applicable law, all payments hereunder or under any of the Loan Documents (including any payment of principal, interest, or fees) to, or for the benefit, of any Person shall be made by the Borrower free and clear of, and without deduction or withholding for, or account of, any taxes now or hereinafter imposed by any taxing authority.

 

2.6. Late Charge. If any payment of interest or principal due hereunder is not made within ten (10) days after such payment is due in accordance with the terms hereof, then, in addition to the payment of the amount so due, to defray part of the cost of collection and handling such late payment, the Borrower shall pay to the Bank a “late charge” in an amount equal to the lesser of (i) five cents for each whole dollar so overdue, or (ii) $500.00. The Borrower agrees that the damages to be sustained by the Bank for the detriment caused by any late payment are extremely difficult and impractical to ascertain, and that the amount set forth in this Section 2.6 is a reasonable estimate of such damages, does not constitute interest, and is not a penalty.

 

2.7.  Letters of Credit. Subject to the terms and conditions of this Agreement and upon (i) the execution by the Borrower and the Bank of a Master Letter of Credit Agreement in form and substance acceptable to the Bank (together with all amendments, modifications and restatements thereof, the “Master Letter of Credit Agreement”), and (ii) the execution and delivery by the Borrower, and the acceptance by the Bank, in its reasonable discretion, of a Letter of Credit Application, the Bank agrees to issue for the account of the Borrower from time to time up to, but not including, the Facility A Loan Maturity Date or the Facility B Loan Maturity Date, as applicable, such Letters of Credit in the standard form of the Bank and otherwise in form and substance acceptable to the Bank, provided that the Facility A Loan Letter of Credit Obligations may not at any time exceed the Facility A Loan Letter of Credit Commitment and that the Facility B Loan Letter of Credit Obligations may not at any time exceed the Facility B Loan Letter of Credit Commitment, and provided further, that no Letter of Credit shall have an expiration date later than the Facility A Loan Maturity Date or the Facility B Loan Maturity Date, as applicable. Letters of Credit requested by a Letter of Credit Application shall first be issued as Facility B Loan Letter of Credit Obligations, and if the issuance of a Letter of Credit would result in the Facility B Loan Letter of Credit Obligation at any time exceeding the Facility B Loan Letter of Credit Commitment, Letters of Credit requested by a Letter of Credit Application shall be issued as Facility A Letter of Credit Obligations if the issuance of such Letters of Credit do not exceed the Facility A Loan Availability. In the event that the Borrower fails to reimburse the Bank for the amount of any payments made by the Bank with respect to draws made by a beneficiary under a Letter of Credit within two (2) Business Days from the date of such payment to such beneficiary by the Bank, the Bank may make a Facility A Loan pursuant to a loan request and the terms and conditions of this Agreement for the purpose of reimbursing the Bank for the amount of such payment to such beneficiary by the Bank in an amount equal to the lesser of (i) the amount of such payment to such beneficiary by the Bank, or (ii) in an amount equal to any remaining Facility A Loan Availability. The Borrower shall reimburse the Bank for any part of a payment made by the Bank under a Letter of Credit that is not converted to a Facility A Loan within two (2) Business Days of the payment to the beneficiary by the Bank. Upon the occurrence of an Event of a Default and at the option of the Bank, all Letter of Credit Obligations shall be converted to Facility A Loans or Facility B Loans, as applicable, consisting of Prime Loans, all without demand, presentment, protest or notice of any kind, all of which are hereby waived by the Borrower. All amounts advanced on such Facility A Loans or Facility B Loans shall be held in a restricted cash collateral account to be maintained with Bank as additional Collateral for the Obligations. Bank may apply the balance of any such cash collateral account to the payment of any Letters of Credit subsequently drawn. Upon discharge of all Obligations and the expiration of all Letters of Credit, the funds remaining in such accounts shall be paid to the Persons who have a beneficial interest therein. To the extent the provisions of the Master Letter of Credit Agreement differ from, or are inconsistent with, the terms of this Agreement, the provisions of this Agreement shall govern.