Document:

Exhibit 10.37

 

CREDIT AND SECURITY AGREEMENT

 

by and among

 

STARTEK, INC,

 

and

 

STARTEK USA, INC.,

 

as Borrowers,

 

and

 

WELLS FARGO BANK, NATIONAL ASSOCIATION,

 

as Lender

 

Dated as of February 28, 2012

 

[*] = Certain confidential information contained in this document, marked with brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment made pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

 

 

TABLE OF CONTENTS

 

	
 
    	
 
    	
 
    	
PAGE
    
	
1.
    	
DEFINITIONS AND CONSTRUCTION
    	
1
    
	
 
    	
1.1
    	
Definitions, Code Terms, Accounting Terms and Construction
    	
1
    
	
 
    	
 
    	
 
    	
 
    
	
2.
    	
LOANS AND TERMS OF PAYMENT
    	
1
    
	
 
    	
2.1
    	
Revolving Loan Advances
    	
1
    
	
 
    	
2.2
    	
Reserved
    	
1
    
	
 
    	
2.3
    	
Borrowing Procedures
    	
1
    
	
 
    	
2.4
    	
Payments; Prepayments
    	
2
    
	
 
    	
2.5
    	
Clearance Charge
    	
3
    
	
 
    	
2.6
    	
Interest Rates: Rates, Payments, and Calculations
    	
4
    
	
 
    	
2.7
    	
Designated Account
    	
5
    
	
 
    	
2.8
    	
Maintenance of Loan Account; Statements of Obligations
    	
5
    
	
 
    	
2.9
    	
Maturity Termination Dates
    	
5
    
	
 
    	
2.10
    	
Effect of Maturity
    	
6
    
	
 
    	
2.11
    	
Termination or Reduction by Borrowers
    	
6
    
	
 
    	
2.12
    	
Fees
    	
7
    
	
 
    	
2.13
    	
Letters of Credit
    	
7
    
	
 
    	
2.14
    	
Illegality; Impracticability; Increased Costs
    	
9
    
	
 
    	
2.15
    	
Capital Requirements
    	
10
    
	
 
    	
2.16
    	
Extent of Each Borrower’s Liability, Contribution
    	
10
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
3.
    	
SECURITY INTEREST
    	
12
    
	
 
    	
3.1
    	
Grant of Security Interest
    	
12
    
	
 
    	
3.2
    	
Borrowers Remain Liable
    	
13
    
	
 
    	
3.3
    	
Assignment of Insurance
    	
13
    
	
 
    	
3.4
    	
Financing Statements
    	
14
    
	
 
    	
 
    	
 
    	
 
    
	
4.
    	
CONDITIONS
    	
14
    
	
 
    	
4.1
    	
Conditions Precedent to the Initial Extension of Credit
    	
14
    
	
 
    	
4.2
    	
Conditions Precedent to all Extensions of Credit
    	
14
    
	
 
    	
4.3
    	
Conditions Subsequent
    	
14
    
	
 
    	
 
    	
 
    	
 
    
	
5.
    	
REPRESENTATIONS AND WARRANTIES
    	
15
    
	
 
    	
 
    	
 
    	
 
    
	
6.
    	
AFFIRMATIVE COVENANTS
    	
15
    
	
 
    	
6.1
    	
Financial Statements, Reports, Certificates
    	
15
    
	
 
    	
6.2
    	
Collateral Reporting
    	
15
    
	
 
    	
6.3
    	
Existence
    	
15
    
	
 
    	
6.4
    	
Maintenance of Properties
    	
16
    
	
 
    	
6.5
    	
Taxes
    	
16
    
	
 
    	
6.6
    	
Insurance
    	
16
    
	
 
    	
6.7
    	
Inspection
    	
17
    
	
 
    	
6.8
    	
Account Verification
    	
17
    
	
 
    	
6.9
    	
Compliance with Laws
    	
17
    
	
 
    	
6.10
    	
Environmental
    	
17
    
	
 
    	
6.11
    	
Disclosure Updates
    	
18
    
	
 
    	
6.12
    	
Collateral Covenants
    	
19
    
	
 
    	
6.13
    	
Material Contracts
    	
24
    
	
 
    	
6.14
    	
Location of Inventory, Equipment and Books
    	
24
    
	
 
    	
6.15
    	
Further Assurances
    	
24
    
	
 
    	
 
    	
 
    	
 
    
	
7.
    	
NEGATIVE COVENANTS
    	
25
    

 

 

	
 
    	
7.1
    	
Indebtedness
    	
25
    
	
 
    	
7.2
    	
Liens
    	
25
    
	
 
    	
7.3
    	
Restrictions on Fundamental Changes
    	
25
    
	
 
    	
7.4
    	
Disposal of Assets
    	
26
    
	
 
    	
7.5
    	
Change Name
    	
26
    
	
 
    	
7.6
    	
Nature of Business
    	
26
    
	
 
    	
7.7
    	
Prepayments and Amendments
    	
26
    
	
 
    	
7.8
    	
Change of Control
    	
27
    
	
 
    	
7.9
    	
Restricted Junior Payments
    	
27
    
	
 
    	
7.10
    	
Accounting Methods
    	
27
    
	
 
    	
7.11
    	
Investments; Controlled Investments
    	
27
    
	
 
    	
7.12
    	
Transactions with Affiliates
    	
28
    
	
 
    	
7.13
    	
Use of Proceeds
    	
28
    
	
 
    	
7.14
    	
Limitation on Issuance of Stock
    	
29
    
	
 
    	
7.15
    	
Consignments
    	
29
    
	
 
    	
7.16
    	
Inventory and Equipment with Bailees
    	
29
    
	
 
    	
 
    	
 
    	
 
    
	
8.
    	
FINANCIAL COVENANTS
    	
29
    
	
 
    	
 
    	
 
    	
 
    
	
9.
    	
EVENTS OF DEFAULT
    	
30
    
	
 
    	
 
    	
 
    	
 
    
	
10.
    	
RIGHTS AND REMEDIES
    	
33
    
	
 
    	
10.1
    	
Rights and Remedies
    	
33
    
	
 
    	
10.2
    	
Disposition of Pledged Interests by Lender
    	
34
    
	
 
    	
10.3
    	
Voting and Other Rights in Respect of Pledged Interests
    	
35
    
	
 
    	
10.4
    	
Additional Rights and Remedies
    	
35
    
	
 
    	
10.5
    	
Lender Appointed Attorney in Fact
    	
37
    
	
 
    	
10.6
    	
Remedies Cumulative
    	
38
    
	
 
    	
10.7
    	
Crediting of Payments and Proceeds
    	
38
    
	
 
    	
10.8
    	
Marshaling
    	
38
    
	
 
    	
10.9
    	
License
    	
38
    
	
 
    	
 
    	
 
    	
 
    
	
11.
    	
WAIVERS; INDEMNIFICATION
    	
38
    
	
 
    	
11.1
    	
Demand; Protest; etc.
    	
38
    
	
 
    	
11.2
    	
Lender’s Liability for Collateral
    	
39
    
	
 
    	
11.3
    	
Indemnification
    	
39
    
	
 
    	
 
    	
 
    	
 
    
	
12.
    	
NOTICES
    	
40
    
	
 
    	
 
    	
 
    	
 
    
	
13.
    	
CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER
    	
41
    
	
 
    	
 
    	
 
    	
 
    
	
14.
    	
ASSIGNMENTS; SUCCESSORS
    	
42
    
	
 
    	
 
    	
 
    	
 
    
	
15.
    	
AMENDMENTS; WAIVERS
    	
43
    
	
 
    	
 
    	
 
    	
 
    
	
16.
    	
TAXES
    	
43
    
	
 
    	
 
    	
 
    	
 
    
	
17.
    	
GENERAL PROVISIONS
    	
44
    
	
 
    	
17.1
    	
Effectiveness
    	
44
    
	
 
    	
17.2
    	
Section Headings
    	
44
    
	
 
    	
17.3
    	
Interpretation
    	
44
    
	
 
    	
17.4
    	
Severability of Provisions
    	
44
    
	
 
    	
17.5
    	
Debtor-Creditor Relationship
    	
44
    
	
 
    	
17.6
    	
Counterparts; Electronic Execution
    	
44
    
	
 
    	
17.7
    	
Revival and Reinstatement of Obligations
    	
45
    

 

ii

 

	
 
    	
17.8
    	
Confidentiality
    	
45
    
	
 
    	
17.9
    	
Lender Expenses
    	
46
    
	
 
    	
17.10
    	
Setoff
    	
46
    
	
 
    	
17.11
    	
Survival
    	
46
    
	
 
    	
17.12
    	
Patriot Act
    	
46
    
	
 
    	
17.13
    	
Integration
    	
47
    
	
 
    	
17.14
    	
Bank Product Providers
    	
47
    

 

	
EXHIBITS AND SCHEDULES
    
	
 
    	
 
    	
 
    
	
Schedule   1.1
    	
 
    	
Definitions
    
	
Schedule   2.12
    	
 
    	
Fees
    
	
Schedule   6.1
    	
 
    	
Financial   Statement, Reports, Certificates
    
	
Schedule   6.2
    	
 
    	
Collateral   Reporting
    
	
 
    	
 
    	
 
    
	
Exhibit A
    	
 
    	
Form of   Compliance Certificate
    
	
Exhibit B
    	
 
    	
Conditions   Precedent
    
	
Exhibit C
    	
 
    	
Conditions   Subsequent
    
	
Exhibit D
    	
 
    	
Representations   and Warranties
    
	
Exhibit E
    	
 
    	
Information   Certificate
    
	
Exhibit F
    	
 
    	
Form of   Pledged Interest Addendum
    
	
Schedule   A-1
    	
 
    	
Collection   Account
    
	
Schedule   A-2
    	
 
    	
Authorized   Person
    
	
Schedule   D-1
    	
 
    	
Designated   Account
    
	
Schedule   P-1
    	
 
    	
Permitted   Investments
    
	
Schedule   P-2
    	
 
    	
Permitted   Liens
    
	
Schedule   R-1
    	
 
    	
Real   Property Collateral
    

 

iii

 

CREDIT AND SECURITY AGREEMENT

 

THIS CREDIT AND SECURITY AGREEMENT (this “Agreement”), is entered into as of February 28, 2012, by and among WELLS FARGO BANK, NATIONAL ASSOCIATION  (“Lender”), and Borrowers.

 

The parties agree as follows:

 

1.                                      DEFINITIONS AND CONSTRUCTION.

 

1.1                               Definitions, Code Terms, Accounting Terms and Construction.  Capitalized terms used in this Agreement shall have the meanings specified therefor on Schedule 1.1.  Additionally, matters of (i) interpretation of terms defined in the Code, (ii) interpretation of accounting terms and (iii) construction are set forth in Schedule 1.1.

 

2.                                      LOANS AND TERMS OF PAYMENT.

 

2.1                               Revolving Loan Advances.

 

(a)                                 Subject to the terms and conditions of this Agreement, and during the term of this Agreement, Lender agrees to make revolving loans (“Advances”) to Borrowers in an amount at any one time outstanding not to exceed the lesser of:

 

(i)                                     the Maximum Revolver Amount less the Letter of Credit Usage at such time, and

 

(ii)                                  the Borrowing Base at such time less the Letter of Credit Usage at such time.

 

(b)                                 Amounts borrowed pursuant to this Section 2.1 may be repaid and, subject to the terms and conditions of this Agreement, reborrowed at any time during the term of this Agreement.  The outstanding principal amount of the Advances, together with interest accrued and unpaid thereon, shall be due and payable on the Termination Date.  Lender has no obligation to make an Advance at any time following the occurrence of a Default or an Event of Default.

 

(c)                                  If at any time the Maximum Revolver Amount is less than the amount of the Borrowing Base, the amount of Advances available under Section 2.1(a) above shall  be reduced by any Reserves established by Lender with respect to amounts that may be payable by any Borrower to third parties.

 

2.2                               Reserved.

 

2.3                               Borrowing Procedures.

 

(a)                                 Procedure for Borrowing.  Provided Lender has not separately agreed that Borrowers may use the Loan Management Service, each Borrowing shall be made by a written request by an Authorized Person delivered to Lender.  Such written request must be

 

 

received by Lender no later than 11:00 a.m. (Denver, Colorado time) on the Business Day that is the requested Funding Date specifying (i) the amount of such Borrowing, and (ii) the requested Funding Date, which shall be a Business Day. At Lender’s election, in lieu of delivering the above-described written request, any Authorized Person may give Lender telephonic notice of such request by the required time. Lender is authorized to make the Advances, and to issue the Letters of Credit, under this Agreement based upon telephonic or other instructions received from anyone purporting to be an Authorized Person.

 

(b)                                 Making of Loans.  Promptly after receipt of a request for a Borrowing pursuant to Section 2.3(a), Lender shall make the proceeds thereof available to Borrowers on the applicable Funding Date by transferring immediately available funds equal to such amount to the Designated Account; provided, however, that, Lender shall not have the obligation to make any Advance if (i) one (1) or more of the applicable conditions precedent set forth in Section 4 will not be satisfied on the requested Funding Date for the applicable Borrowing unless such condition has been waived by Lender, or (ii) the requested Borrowing would exceed the Availability on such Funding Date.

 

(c)                                  Loan Management Service.  If Lender has separately agreed that Borrowers may use the Loan Management Service, upon commencement of such use, Borrowers shall not request and Lender shall no longer honor a request for an Advance made in accordance with Section 2.3(a) and all Advances will instead be initiated by Lender and credited to the Designated Account as Advances as of the end of each Business Day in an amount sufficient to maintain an agreed upon ledger balance in the Designated Account, subject only to Availability as provided in Section 2.1. If Lender terminates Borrowers’ access to the Loan Management Service, Borrowers may continue to request Advances as provided in Section 2.3(a), subject to the other terms and conditions of this Agreement. Lender shall have no obligation to make an Advance through the Loan Management Service after the occurrence of a Default or an Event of Default, or in an amount in excess of Availability, and may terminate the Loan Management Service at any time in its sole discretion.

 

(d)                                 Protective Advances.  Lender may make an Advance for any reason at any time in its Permitted Discretion, without Borrowers’ compliance with any of the conditions of this Agreement, and (i) disburse the proceeds directly to third Persons in order to protect Lender’s interest in the Collateral or to perform any obligation of Borrowers under this Agreement or otherwise to enhance the likelihood of repayment of the Obligations, or (ii) apply the proceeds to outstanding Obligations then due and payable to Lender (such Advance, a “Protective Advance”).

 

2.4                               Payments; Prepayments.

 

(a)                                 Payments by Borrowers.  Except as otherwise expressly provided herein, all payments by Borrowers shall be made as directed by Lender or as otherwise specified in the applicable Cash Management Documents.

 

(b)                                 Payments by Account Debtors.  Borrowers shall either (i) instruct all Account Debtors to make payments directly to the Lockbox for deposit by Lender directly to the Collection Account, or (ii) instruct them to deliver such payments to Lender by wire transfer,

 

2

 

ACH, or other means as Lender may direct for deposit to the Lockbox or Collection Account or for direct application to reduce the outstanding Advances. If any Borrower receives a payment or Proceeds of Collateral directly, such Borrower will promptly deposit the payment or Proceeds into the Collection Account. Until so deposited, such Borrower will hold all such payments and Proceeds in trust for Lender without commingling with other funds or property.

 

(c)                                  Crediting Payments.  For purposes of calculating Availability and the accrual of interest on outstanding Obligations, unless otherwise provided in the applicable Cash Management Documents or as otherwise agreed between Borrowers and Lender, each payment shall be applied to the Obligations on the first Business Day following the Business Day of deposit to the Collection Account of immediately available funds or other receipt of immediately available funds by Lender. Any payment received by Lender that is not a transfer of immediately available funds shall be considered provisional until the item or items representing such payment have been finally paid under applicable law. Should any payment item not be honored when presented for payment, then Borrowers shall be deemed not to have made such payment, and that portion of Borrowers’ outstanding Obligations corresponding to the amount of such dishonored payment item shall be deemed to bear interest as if the dishonored payment item had never been received by Lender. Each reduction in outstanding Advances resulting from the application of such payment to the outstanding Advances shall be accompanied by an equal reduction in the amount of outstanding Accounts.

 

(d)                                 Application of Payments.  All Collections and all Proceeds of Collateral received by Lender shall be applied, so long as no Event of Default has occurred and is continuing, to reduce the outstanding Obligations in such manner as Lender shall determine in its discretion.  After payment in full in cash of all Obligations, any remaining balance shall be transferred to the Designated Account or otherwise to such other Person entitled thereto under applicable law.

 

(e)                                  Reserved.

 

(f)                                   Mandatory Prepayments.  If, at any time, the Revolver Usage exceeds (A) the Borrowing Base or (B) the Maximum Revolver Amount, less Reserves (in accordance with Section 2.1(c)) at such time (such excess amount being referred to as the “Overadvance Amount”), then Borrowers shall, immediately upon demand, prepay the Obligations in an aggregate amount equal to the Overadvance Amount.  If payment in full of the outstanding revolving loans is insufficient to eliminate the Overadvance Amount and Letter of Credit Usage continues to exceed the Borrowing Base, Borrowers shall maintain Letter of Credit Collateralization of the outstanding Letter of Credit Usage. Lender shall not be obligated to provide any Advances during any period that an Overadvance Amount is outstanding.

 

2.5                               Clearance Charge.  Collections received by  Lender shall be applied as provided in Sections 2.4 (c) and (d), but the Obligations paid with such Collections shall continue to accrue interest at the rate then applicable to Advances as provided under Section 2.6 through the end of the first Business Day following the Business Day that such Collections were applied to the Obligations.  This 1 Business Day clearance charge on all Collections is acknowledged by the parties to constitute an integral aspect of the pricing of the financing of Borrowers and shall apply irrespective of whether or not there are any outstanding monetary Obligations.  The parties

 

3

 

acknowledge and agree that the economic benefit of the foregoing provisions of this Section 2.5 shall accrue exclusively to Lender.

 

2.6                               Interest Rates: Rates, Payments, and Calculations.

 

(a)                                 Interest Rates.  Except as provided in Section 2.6(b), the principal amount of all Obligations (except for undrawn Letters of Credit and Bank Products) that have been charged to the Loan Account pursuant to the terms hereof shall bear interest on the Daily Balance thereof at a per annum rate equal to the Interest Rate plus the Interest Rate Margin.

 

(b)                                 Default Rate.  Upon the occurrence and during the continuation of an Event of Default and at any time following the Termination Date,

 

(i)                                     the principal amount of all Obligations (except for undrawn Letters of Credit and Bank Products) that have been charged to the Loan Account pursuant to the terms hereof shall bear interest on the Daily Balance thereof at a per annum rate equal to 3% above the per annum rate otherwise applicable thereunder, and

 

(ii)                                  the Letter of Credit fee provided for in Section 2.12 shall be increased by 3% above the per annum rate otherwise applicable hereunder.

 

(c)                                  Payment.  Except to the extent provided to the contrary in Section 2.12, all interest, all Letter of Credit fees, all other fees payable hereunder or under any of the other Loan Documents, all costs and expenses payable hereunder or under any of the other Loan Documents, and all Lender Expenses shall be due and payable, in arrears, on the first day of each month, or, if such day is not a Business Day, on the next Business Day, provided that interest shall continue to accrue during that time period.  Each Borrower hereby authorizes Lender, from time to time without prior notice to Borrowers, to charge all interest, Letter of Credit fees, and all other fees payable hereunder or under any of the other Loan Documents (in each case, as and when due and payable), all costs and expenses payable hereunder or under any of the other Loan Documents (in each case, as and when accrued or incurred), all Lender Expenses (as and when accrued or incurred), and all fees and costs provided for in Section 2.12 (as and when accrued or incurred), and all other payment obligations as and when due and payable under any Loan Document or any Bank Product Agreement (including any amounts due and payable to any Bank Product Provider in respect of Bank Products) to the Loan Account, which amounts shall thereupon constitute Advances hereunder and, shall accrue interest at the rate then applicable to Advances.  Any interest, fees, costs, expenses, Lender Expenses, or other amounts payable hereunder or under any other Loan Document or under any Bank Product Agreement that are charged to the Loan Account shall thereafter constitute Advances hereunder and shall accrue interest at the rate then applicable to Advances.

 

(d)                                 Computation.  All interest and fees chargeable under the Loan Documents shall be computed on the basis of a 360 day year, in each case, for the actual number of days elapsed in the period during which the interest or fees accrue.  In the event the Interest Rate is changed from time to time hereafter, the rates of interest hereunder based upon the Interest Rate automatically and immediately shall be increased or decreased by an amount equal to such change in the Interest Rate. A certificate of Lender as to each amount and rate of interest

 

4

 

or fees payable under the Loan Documents from time to time shall be conclusive evidence of such amount and rate, absent manifest error.

 

(e)                                  Intent to Limit Charges to Maximum Lawful Rate.  In no event shall the interest rate or rates payable under this Agreement, plus any other amounts paid in connection herewith, exceed the highest rate permissible under any law that a court of competent jurisdiction shall, in a final determination, deem applicable.  Borrowers and Lender, in executing and delivering this Agreement, intend legally to agree upon the rate or rates of interest and manner of payment stated within it; provided, however, that, anything contained herein to the contrary notwithstanding, if said rate or rates of interest or manner of payment exceeds the maximum allowable under applicable law, then, as of the date of this Agreement, Borrowers are and shall be liable only for the payment of such maximum amount as is allowed by law, and payment received from Borrowers in excess of such legal maximum, whenever received, shall be applied to reduce the principal balance of the Obligations to the extent of such excess.

 

2.7                               Designated Account.  Borrowers agree to establish and maintain one or more Designated Accounts, each in the name of a single Borrower, for the purpose of receiving the proceeds of the Advances requested by Borrowers and made by Lender hereunder.  Unless otherwise agreed by Lender and Borrowers, any Advance requested by Borrowers and made by Lender hereunder shall be made to the applicable Designated Account.

 

2.8                               Maintenance of Loan Account; Statements of Obligations.  Lender shall maintain an account on its books in the name of Borrowers (the “Loan Account”) in which will be recorded all Advances made by Lender to Borrowers or for Borrowers’ account, the Letters of Credit issued or arranged by Lender for Borrowers’ account, and all other payment Obligations hereunder or under the other Loan Documents, including accrued interest, fees and expenses, and Lender Expenses.  In accordance with Section 2.4 and Section 2.5, the Loan Account will be credited with all payments received by Lender from Borrowers or for Borrowers’ account.  All monthly statements delivered by Lender to the Borrowers regarding the Loan Account, including with respect to principal, interest, fees, and including an itemization of all charges and expenses constituting Lender Expenses owing, shall be subject to subsequent adjustment by Lender but shall, absent manifest error, be conclusively presumed to be correct and accurate and constitute an account stated between Borrowers and Lender unless, within 30 days after receipt thereof by Borrowers, Borrowers shall deliver to Lender written objection thereto describing the error or errors contained in any such statements.

 

2.9                               Maturity Termination Dates.  Lender’s obligations under this Agreement shall continue in full force and effect for a term ending on the earliest of (i) February 28, 2015 (the “Maturity Date”) or (ii) the date Borrowers terminate the Revolving Credit Facility, or (iii) the date the Revolving Credit Facility terminates pursuant to Sections 10.1 and 10.2 following an Event of Default (the earliest of these dates, the “Termination Date”).  The foregoing notwithstanding, Lender shall have the right to terminate its obligations under this Agreement immediately and without notice upon the occurrence and during the continuation of an Event of Default.  Each Borrower jointly and severally promises to pay the Obligations (including principal, interest, fees, costs, and expenses, including Lender Expenses) in full on the Termination Date (other than the Hedge Obligations, which shall be paid in accordance with the applicable Hedge Agreement).

 

5

 

2.10                        Effect of Maturity.  On the Termination Date, all obligations of Lender to provide additional credit hereunder shall automatically be terminated and all of the Obligations (other than Hedge Obligations which shall be terminated in accordance with the applicable Hedge Agreement) shall immediately become due and payable without notice or demand and Borrowers shall immediately repay all of the Obligations in full.  No termination of the obligations of Lender (other than cash payment in full of the Obligations and termination of the obligations of Lender to provide additional credit hereunder) shall relieve or discharge any Loan Party of its duties, obligations, or covenants hereunder or under any other Loan Document and Lender’s Liens in the Collateral shall continue to secure the Obligations and shall remain in effect until all Obligations have been paid in full in cash and Lender’s obligations to provide additional credit hereunder shall have been terminated.  Provided that there are no suits, actions, proceedings or claims pending or threatened against any Indemnified Person under this Agreement with respect to any Indemnified Liabilities, Lender shall, at Borrowers’ expense, release or terminate any filings or other agreements that perfect Lender’s Liens in the Collateral, upon Lender’s receipt of each of the following, in form and content satisfactory to Lender: (i) cash payment in full of all Obligations and completed performance by Borrowers with respect to their other obligations under this Agreement (including Letter of Credit Collateralization with respect to all outstanding Letter of Credit Usage), (ii) evidence that any obligation of Lender to make Advances to any Borrower or provide any further credit to any Borrower has been terminated, (iii) a general release of all claims against Lender and its Affiliates by each Borrower and each Loan Party relating to Lender’s performance and obligations under the Loan Documents, and (iv) an agreement by each Borrower, each Guarantor, and any new lender to any Borrower to indemnify Lender and its Affiliates for any payments received by Lender or its Affiliates that are applied to the Obligations as a final payoff that may subsequently be returned or otherwise not paid for any reason.  With respect to any outstanding Hedge Obligations which are not so paid in full, the Bank Product Provider may require Borrowers to cash collateralize the then existing Hedge Obligations in an amount acceptable to Lender prior to releasing or terminating any filings or other agreements that perfect Lender’s Liens in the Collateral.

 

2.11                        Termination or Reduction by Borrowers.

 

(a)                                 Borrowers may terminate the Revolving Credit Facility or reduce the Maximum Revolver Amount at any time prior to the Maturity Date, if they (i) deliver a notice to Lender of their intentions at least 30 days prior to the proposed action, (ii) pay to Lender the applicable termination fee or reduction fee set forth in Schedule 2.12, and (iii) pay the Obligations (other than the outstanding Hedge Obligations, which shall be paid in accordance with the applicable Hedge Agreement) in full or down to the reduced Maximum Revolver Amount.  Any reduction in the Maximum Revolver Amount shall be in multiples of $500,000, with a minimum reduction of at least $500,000.  Each such termination or reduction shall be irrevocable.  Once reduced, the Maximum Revolver Amount may not be increased.

 

(b)                                 The applicable termination fee and reduction fee set forth in Schedule 2.12 shall be presumed to be the amount of damages sustained by Lender as a result of an early termination or reduction, as applicable, and each Borrower agrees that it is reasonable under the circumstances currently existing (including, but not limited to, the borrowings that are reasonably expected by Borrowers hereunder and the interest, fees and other charges that are reasonably expected to be received by Lender hereunder).  In addition, Lender shall be entitled to

 

6

 

such early termination fee upon the occurrence of any Event of Default described in Sections 9.4 and 9.5 hereof, even if Lender does not exercise its right to terminate this Agreement, but elects, at its option, to provide financing to Borrowers or permit the use of cash collateral during an Insolvency Proceeding.  The early termination fee and reduction fee, as applicable, provided for in Schedule 2.12 shall be deemed included in the Obligations.

 

2.12                        Fees.  Borrowers shall pay to Lender the fees set forth on Schedule 2.12 attached hereto.

 

2.13                        Letters of Credit.

 

(a)                                 Subject to the terms and conditions of this Agreement, upon the request of Borrowers made in accordance with this Section 2.13, Lender agrees to issue a requested Letter of Credit.  Borrowers may request that Lender issue, amend or extend a Letter of Credit by delivering to Lender the applicable Letter of Credit Agreements, completed to the satisfaction of Lender, and such other certificates, documents and information as Lender may request.  Each such request shall be in form and substance reasonably satisfactory to Lender and shall specify (i) the amount of such Letter of Credit, (ii) the date of issuance, amendment, or extension of such Letter of Credit, (iii) the expiration date of such Letter of Credit, (iv) the name and address of the beneficiary of the Letter of Credit, and (v) such other information (including, in the case of an amendment, or extension, identification of the Letter of Credit to be so amended or extended) as shall be necessary to prepare, issue, amend or extend such Letter of Credit.  Upon receipt of any Letter of Credit Agreements, Lender shall process such Letter of Credit Agreements and the certificates, documents and information delivered to it in connection therewith in accordance with its customary procedures and shall, subject to this Section 2.13, issue the Letter of Credit requested thereby (but in no event shall Lender be required to issue any Letter of Credit earlier than 3 Business Days after its receipt of the Letter of Credit Agreements therefor and all such other certificates, documents and information relating thereto) by issuing the original of such Letter of Credit (or amendment or extension) to the beneficiary thereof or as otherwise may be agreed by Lender and Borrowers.  Each request for the issuance of a Letter of Credit, or the amendment or extension of any outstanding Letter of Credit, shall be made in writing by an Authorized Person and delivered to Lender via hand delivery, facsimile, or other electronic method of transmission reasonably in advance of the requested date of issuance, amendment or extension.  Each Letter of Credit shall (i) be denominated in Dollars in a minimum amount of $100,000, (ii) be a standby letter of credit or commercial letter of credit issued to support obligations of a Borrower or any of its Subsidiaries, contingent or otherwise, incurred in the ordinary course of business, (iii) expire on a date no more than 12 months after the date of issuance or last renewal of such Letter of Credit, which date shall be no later than the Maturity Date, and (iv) be subject to the Uniform Customs and/or ISP98, as set forth in the Letter of Credit Agreements or as determined by Lender and, to the extent not inconsistent therewith, the laws of the State which governs this Agreement.

 

(b)                                 Lender shall have no obligation to issue, amend or extend a Letter of Credit if after giving effect to the requested issuance, amendment or extension the Letter of Credit Usage would exceed the lesser of:

 

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(i)                                     the lesser of (x) the Borrowing Base less the outstanding amount of Advances, and (y) the Maximum Revolver Amount less the outstanding amount of Advances, less Reserves (in accordance with Section 2.1(c)), or

 

(ii)                                  $5,000,000.

 

(c)                                  If Lender makes a payment under a Letter of Credit, Borrowers shall pay to Lender an amount equal to the applicable Letter of Credit Disbursement on the date such Letter of Credit Disbursement is made and, in the absence of such payment, the amount of the Letter of Credit Disbursement immediately and automatically shall be deemed to be an Advance hereunder (notwithstanding any failure to satisfy any condition precedent set forth in Section 4 or this Section 2.13). If a Letter of Credit Disbursement is deemed to be an Advance hereunder, Borrowers’ obligation to pay the amount of such Letter of Credit Disbursement to Lender shall be automatically converted into an obligation to pay the resulting Advance.

 

(d)                                 Borrowers’ obligations under this Section 2.13 (including Borrowers’ reimbursement obligation) shall be absolute and unconditional under any and all circumstances and irrespective of any set off, counterclaim or defense to payment which any Borrower may have or have had against Lender or any beneficiary of a Letter of Credit or any other Person.  Each Borrower also agrees that Lender shall not be responsible for, and the Borrowers’ reimbursement obligation hereunder shall not be affected by, among other things, the validity or genuineness of documents or of any endorsements thereon, even though such documents shall in fact prove to be invalid, fraudulent or forged, or any dispute between or among any Borrower and any beneficiary of any Letter of Credit or any other party to which such Letter of Credit may be transferred or any claims whatsoever of any Borrower against any beneficiary of such Letter of Credit or any such transferee.  Lender shall not be liable for any error, omission, interruption or delay in transmission, dispatch or delivery of any message or advice, however transmitted, in connection with any Letter of Credit, except for errors or omissions caused by Lender’s gross negligence or willful misconduct, as determined by a court of competent jurisdiction by final non-appealable judgment.  Borrowers agree that any action taken or omitted by Lender under or in connection with any Letter of Credit or the related drafts or documents, if done in the absence of gross negligence or willful misconduct shall be binding on each Borrower and shall not result in any liability of Lender to any Borrower.  The responsibility of Lender to Borrowers in connection with any draft presented for payment under any Letter of Credit shall, in addition to any payment obligation expressly provided for in such Letter of Credit, be limited to determining that the documents (including each draft) delivered under such Letter of Credit in connection with such presentment are in conformity with such Letter of Credit.

 

(e)                                  Each Borrower hereby agrees to indemnify, save, defend, and hold Lender harmless from any damage, loss, cost, expense, or liability, and reasonable attorneys fees incurred by Lender arising out of or in connection with any Letter of Credit; provided, however, that no Borrower shall be obligated hereunder to indemnify Lender for any damage, loss, cost, expense, or liability that a court of competent jurisdiction finally determines to have resulted from the gross negligence or willful misconduct of Lender.  Each Borrower understands and agrees that Lender shall not be liable for any error, negligence, or mistake, whether of omission or commission, in following any Borrower’s instructions or those contained in the Letter of Credit or any modifications, amendments, or supplements thereto.  Each Borrower hereby

 

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acknowledges and agrees that Lender shall not be responsible for delays, errors, or omissions resulting from the malfunction of equipment in connection with any Letter of Credit.

 

(f)                                   If by reason of (i) any change after the date hereof in any applicable law, treaty, rule, or regulation or any change in the interpretation or application thereof by any Governmental Authority, or (ii) compliance by Lender with any direction, request, or requirement (irrespective of whether having the force of law) of any Governmental Authority or monetary authority, including Regulation D of the Federal Reserve Board as from time to time in effect (and any successor thereto):

 

(i)                                     any reserve, deposit, or similar requirement is or shall be imposed or modified in respect of any Letter of Credit issued or caused to be issued hereunder or hereby, or

 

(ii)                                  there shall be imposed on Lender any other condition regarding any Letter of Credit,

 

and the result of the foregoing is to increase, directly or indirectly, the cost to Lender of issuing, making, guaranteeing, or maintaining any Letter of Credit or to reduce the amount receivable in respect thereof, then, and in any such case, Lender may, at any time within a reasonable period after the additional cost is incurred or the amount received is reduced, notify Borrowers, and Borrowers shall pay within 30 days after demand therefor, such amounts as Lender may specify to be necessary to compensate Lender for such additional cost or reduced receipt, together with interest on such amount from the date of such demand until payment in full thereof at the rate then applicable to Advances hereunder; provided, however, that Borrowers shall not be required to provide any compensation pursuant to this Section 2.13(f) for any such amounts incurred more than 180 days prior to the date on which the demand for payment of such amounts is first made to Borrowers; provided  further, however, that if an event or circumstance giving rise to such amounts is retroactive, then the 180-day period referred to above shall be extended to include the period of retroactive effect thereof.  The determination by Lender of any amount due pursuant to this Section 2.13(f), as set forth in a certificate setting forth the calculation thereof in reasonable detail, shall, in the absence of manifest or demonstrable error, be final and conclusive and binding on all of the parties hereto.

 

(g)                                  As between Lender and Borrowers (but not any beneficiary of any Letter of Credit), to the extent that any provision of any Letter of Credit Agreement related to any Letter of Credit is inconsistent with the provisions of this Section 2.13, the provisions of this Section 2.13 shall apply.

 

2.14                        Illegality; Impracticability; Increased Costs.  In the event that (a) any change in any law, regulation, treaty, or directive, or any change therein or in the interpretation or application thereof makes it unlawful for Lender to fund or maintain extensions of credit with interest based upon Daily Three Month LIBOR or to continue such funding or maintaining, or to determine or charge interest rates based upon Daily Three Month LIBOR, (b) Lender determines that by reasons affecting the London interbank Eurodollar market, adequate and reasonable means do not exist for ascertaining Daily Three Month LIBOR, or (c) Lender determines that the interest rate based on the Daily Three Month LIBOR will not adequately and fairly reflect the

 

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cost to Lender of maintaining or funding Advances at the interest rate based upon Daily Three Month LIBOR, Lender shall give notice of such changed circumstances to Borrowers and (i) interest on the principal amount of such extensions of credit thereafter shall accrue interest at a rate equal to the Prime Rate plus the Interest Rate Margin applicable to Revolving Advances, and (ii) Borrowers shall not be entitled to elect Daily Three Month LIBOR until Lender determines that it would no longer be unlawful or impractical to do so or that such increased costs would no longer be applicable.

 

2.15                        Capital Requirements.  If, after the date hereof, Lender determines that (a) the adoption of or change in any law, rule, regulation or guideline regarding capital or reserve requirements for lenders, banks or bank holding companies, or any change in the interpretation, implementation, or application thereof by any Governmental Authority charged with the administration thereof, including those changes resulting from the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Basel III, regardless of the date enacted, adopted or issued, or (b) compliance by Lender or its parent bank holding company with any guideline, request or directive of any such entity regarding capital adequacy (whether or not having the force of law), has the effect of reducing the return on Lender’s or such holding company’s capital as a consequence of Lender’s loan commitments hereunder to a level below that which Lender or such holding company could have achieved but for such adoption, change, or compliance (taking into consideration Lender’s or such holding company’s then existing policies with respect to capital adequacy and assuming the full utilization of such entity’s capital) by any amount deemed by Lender to be material, then Lender may notify Borrowers thereof.  Following receipt of such notice, Borrowers agree to pay Lender on demand the amount of such reduction of return of capital as and when such reduction is determined, payable within 30 days after presentation by Lender of a statement of the amount and setting forth in reasonable detail Lender’s calculation thereof and the assumptions upon which such calculation was based (which statement shall be deemed true and correct absent manifest error).  In determining such amount, Lender may use any reasonable averaging and attribution methods.  Failure or delay on the part of Lender to demand compensation pursuant to this Section 2.15 shall not constitute a waiver of Lender’s right to demand such compensation; provided that Borrowers shall not be required to compensate Lender pursuant to this Section 2.15 for any reductions in return incurred more than 180 days prior to the date that Lender notifies Borrowers of such law, rule, regulation or guideline giving rise to such reductions and of Lender’s intention to claim compensation therefor; provided  further that if such claim arises by reason of the adoption of or change in any law, rule, regulation or guideline that is retroactive, then the 180-day period referred to above shall be extended to include the period of retroactive effect thereof.

 

2.16                        Extent of Each Borrower’s Liability, Contribution.

 

(a)                                 Joint and Several Liability.  Each Borrower agrees that it is jointly and severally liable for, and absolutely and unconditionally guarantees to Lender the prompt payment and performance of, all Obligations under this Agreement and all agreements under the Loan Documents.  Each Borrower agrees that its guaranty obligations hereunder constitute a continuing guaranty of payment and not of collection, that such obligations shall not be discharged until cash payment in full of the Obligations, and that such obligations are absolute and unconditional, irrespective of (i) the genuineness, validity, regularity, enforceability, subordination or any future modification of, or change in, any Obligations or Loan Document, or

 

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any other document, instrument or agreement to which any Borrower is or may become a party or be bound; (ii) the absence of any action to enforce this Agreement (including this Section 2.16) or any other Loan Document, or any waiver, consent or indulgence of any kind by Lender with respect thereto; (iii) the existence, value or condition of, or failure to perfect any of Lender’s Liens or to preserve rights against, any security or guaranty for the Obligations or any action, or the absence of any action, by Lender in respect thereof (including the release of any security or guaranty); (iv) the insolvency of any Borrower; (v) any election by Lender in an Insolvency Proceeding for the application of Section 1111(b)(2) of the Bankruptcy Code; (vi) any borrowing or grant of a Lien by any other Borrower, as debtor-in-possession under Section 364 of the Bankruptcy Code or otherwise; (vii) the disallowance of any claims of Lender against any Borrower for the repayment of any Obligations under Section 502 of the Bankruptcy Code or otherwise; or (viii) any other action or circumstances that might otherwise constitute a legal or equitable discharge or defense of a surety or guarantor, except cash payment in full of all Obligations.

 

(b)                                 Notwithstanding anything herein to the contrary, each Borrower’s liability under this Section 2.16 shall be limited to the greater of (i) all amounts for which such Borrower is primarily liable, as described below, and (ii) such Borrower’s Allocable Amount.

 

(c)                                  If any Borrower makes a payment under this Section 2.16 of any Obligations (other than amounts for which such Borrower is primarily liable) (a “Guarantor Payment”) that, taking into account all other Guarantor Payments previously or concurrently made by any other Borrower, exceeds the amount that such Borrower would otherwise have paid if each Borrower had paid the aggregate Obligations satisfied by such Guarantor Payments in the same proportion that such Borrower’s Allocable Amount bore to the total Allocable Amounts of all Borrowers, then such Borrower shall be entitled to receive contribution and indemnification payments from, and to be reimbursed by, each other Borrower for the amount of such excess, pro rata based upon their respective Allocable Amounts in effect immediately prior to such Guarantor Payment.  The “Allocable Amount” for any Borrower shall be the maximum amount that could then be recovered from such Borrower under this Section 2.16 without rendering such payment voidable under Section 548 of the Bankruptcy Code or under any applicable state fraudulent transfer or conveyance act, or similar statute or common law.

 

(d)                                 Each Borrower hereby agrees that it will not enforce any of its rights of contribution or subrogation against any other Borrower with respect to any liability incurred by it hereunder or under any of the other Loan Documents, any payments made by it to Lender with respect to any of the Obligations or any collateral security therefor until such time as all of the Obligations have been paid in full in cash.  Any claim which any Borrower may have against any other Borrower with respect to any payments to Lender hereunder or under any of the Bank Product Agreements are hereby expressly made subordinate and junior in right of payment, without limitation as to any increases in the Obligations arising hereunder or thereunder, to the prior payment in full in cash of the Obligations and, in the event of any insolvency, bankruptcy, receivership, liquidation, reorganization or other similar proceeding under the laws of any jurisdiction relating to any Borrower, its debts or its assets, whether voluntary or involuntary, all such Obligations shall be paid in full in cash before any payment or distribution of any character, whether in cash, securities or other property, shall be made to any other Borrower therefor.

 

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(e)                                  Nothing contained in this Section 2.16 shall limit the liability of any Borrower to pay extensions of credit made directly or indirectly to that Borrower (including revolving loans advanced to any other Borrower and then re-loaned or otherwise transferred to, or for the benefit of, such Borrower), Obligations relating to Letters of Credit issued to support such Borrower’s business, and all accrued interest, fees, expenses and other related Obligations with respect thereto, for which such Borrower shall be primarily liable for all purposes hereunder.  Lender shall have the right, at any time in its discretion, to condition an extension of credit hereunder upon a separate calculation of borrowing availability for each Borrower and to restrict the disbursement and use of such extensions of credit to such Borrower.

 

3.                                      SECURITY INTEREST.

 

3.1                               Grant of Security Interest.  Each Borrower hereby unconditionally grants, assigns, and pledges to Lender for the benefit of Lender and each Bank Product Provider, to secure payment and performance of the Obligations, a continuing security interest (hereinafter referred to as the “Security Interest”) in all of such Borrower’s right, title, and interest in and to the Collateral, as security for the payment and performance of all Obligations. Following request by Lender, each Borrower shall grant Lender a Lien and security interest in all Commercial Tort Claims that it may have against any Person. The Security Interest created hereby secures the payment and performance of the Obligations, whether now existing or arising hereafter.  Without limiting the generality of the foregoing, this Agreement secures the payment of all amounts which constitute part of the Obligations and would be owed by any Borrower to Lender or any other Bank Product Provider, but for the fact that they are unenforceable or not allowable (in whole or in part) as a claim in an Insolvency Proceeding involving any Borrower due to the existence of such Insolvency Proceeding.

 

Notwithstanding anything contained in this Agreement to the contrary, the term “Collateral” shall not include: (i) voting Stock of any CFC, solely to the extent that (y) such Stock represents more than 65% of the outstanding voting Stock of such CFC, and (z) pledging or hypothecating more than 65% of the total outstanding voting Stock of such CFC would result in material adverse tax consequences; or (ii) any rights or interest in any contract, lease, permit, license, or license agreement covering real or personal property of any Borrower if under the terms of such contract, lease, permit, license, or license agreement, or applicable law with respect thereto, the grant of a security interest or lien therein is prohibited as a matter of law or under the terms of such contract, lease, permit, license, or license agreement and such prohibition or restriction has not been waived or the consent of the other party to such contract, lease, permit, license, or license agreement has not been obtained (provided, that, (A) the foregoing exclusions of this clause (ii) shall in no way be construed (1) to apply to the extent that any described prohibition or restriction is unenforceable under Section 9-406, 9-407, 9-408, or 9-409 of the Code or other applicable law, or (2) to apply to the extent that any consent or waiver has been obtained that would permit Lender’s security interest or lien notwithstanding the prohibition or restriction on the pledge of such contract, lease, permit, license, or license agreement and (B) the foregoing exclusions of clauses (i) and (ii) shall in no way be construed to limit, impair, or otherwise affect any of Lender’s continuing security interests in and liens upon any rights or interests of any Borrower in or to (1) monies due or to become due under or in connection with any described contract, lease, permit, license, license agreement, or Stock (including any Accounts or Stock), or (2) any proceeds from the sale, license, lease, or other dispositions of any

 

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such contract, lease, permit, license, license agreement, or Stock); or (iii) any United States intent-to-use trademark applications to the extent that, and solely during the period in which, the grant of a security interest therein would impair the validity or enforceability of such intent-to-use trademark applications under applicable federal law, provided that upon submission and acceptance by the PTO of an amendment to allege use pursuant to 15 U.S.C. Section 1060(a) (or any successor provision), such intent-to-use trademark application shall be considered Collateral.

 

3.2                               Borrowers Remain Liable.  Anything herein to the contrary notwithstanding, (a) each Loan Party shall remain liable under the contracts and agreements included in the Collateral, including the Pledged Operating Agreements and the Pledged Partnership Agreements, to perform all of the duties and obligations thereunder to the same extent as if this Agreement had not been executed, (b) the exercise by Lender of any of the rights hereunder shall not release any Loan Party from any of its duties or obligations under such contracts and agreements included in the Collateral, and (c) Lender shall not have any obligation or liability under such contracts and agreements included in the Collateral by reason of this Agreement, nor shall Lender be obligated to perform any of the obligations or duties of any Loan Party thereunder or to take any action to collect or enforce any claim for payment assigned hereunder.  Until an Event of Default shall occur, except as otherwise provided in this Agreement or any other Loan Document, the Loan Parties shall have the right to possession and enjoyment of the Collateral for the purpose of conducting the ordinary course of their respective businesses, subject to and upon the terms hereof and of this Agreement and the other Loan Documents. Without limiting the generality of the foregoing, it is the intention of the parties hereto that record and beneficial ownership of the Pledged Interests, including all voting, consensual, dividend, and distribution rights, shall remain in the Loan Parties until (i) the occurrence and continuance of an Event of Default and (ii) Lender has notified Loan Parties of Lender’s election to exercise such rights with respect to the Pledged Interests pursuant to Section 10.3.

 

3.3                               Assignment of Insurance.  As additional security for the Obligations, each Borrower hereby assigns to Lender for the benefit of Lender and each Bank Product Provider all rights of such Borrower under every policy of insurance covering the Collateral and all other assets and property of each Borrower (including, without limitation business interruption insurance and proceeds thereof) and all business records and other documents relating to it, and all monies (including proceeds and refunds) that may be payable under any policy, and, except with respect to monies not exceeding $50,000 in the aggregate and not related to any portion of the Collateral constituting Accounts, each Borrower hereby directs the issuer of each policy to pay all such monies directly and solely to Lender.  At any time, whether or not a Default or Event of Default shall have occurred, Lender may (but need not), in Lender’s or any Borrower’s name, execute and deliver proofs of claim, receive payment of proceeds and endorse checks and other instruments representing payment of the policy of insurance, and adjust, litigate, compromise or release claims against the issuer of any policy.  Any monies received under any insurance policy assigned to Lender, other than liability insurance policies, or received as payment of any award or compensation for condemnation or taking by eminent domain, shall be paid to Lender and, as determined by Lender in its sole discretion, either be applied to prepayment of the Obligations or disbursed to Borrowers under payment terms reasonably satisfactory to Lender for application to the cost of repairs, replacements, or restorations of the affected Collateral which shall be effected with reasonable promptness and shall be of a value at least equal to the value of the items or property destroyed.

 

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3.4                               Financing Statements.  Each Borrower authorizes Lender to file financing statements describing Collateral to perfect Lender’s and each Bank Product Provider’s Security Interest in the Collateral, and Lender may describe the Collateral as “all personal property” or “all assets” or describe specific items of Collateral including without limitation any Commercial Tort Claims.  All financing statements filed before the date of this Agreement to perfect the Security Interest were authorized by such Borrower and are hereby ratified.

 

4.                                      CONDITIONS.

 

4.1                               Conditions Precedent to the Initial Extension of Credit.  The obligation of Lender to make the initial extension of credit provided for hereunder is subject to the fulfillment, to the satisfaction of Lender, of each of the conditions precedent set forth on Exhibit B.

 

4.2                               Conditions Precedent to all Extensions of Credit.  The obligation of Lender to make any Advances hereunder (or to extend any other credit hereunder) at any time shall be subject to the following conditions precedent:

 

(a)                                       the representations and warranties of each Borrower or its Subsidiaries contained in this Agreement or in the other Loan Documents shall be true and correct in all material respects (except that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof) on and as of the date of such extension of credit, as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date, in which case such representations and warranties shall continue to be true and correct as of such earlier date);

 

(b)                                       no Default or Event of Default shall have occurred and be continuing on the date of such extension of credit, nor shall either result from the making thereof;

 

(c)                                        there has been no Material Adverse Change;

 

(d)                                       after giving effect to any Advance or other extension of credit, Availability shall be not less than zero; and

 

(e)                                        Borrowers shall have delivered such further documentation (including Borrowing Base Certificates) and assurances as Lender may reasonably require.

 

Any request for an extension of credit shall be deemed to be a representation by each Borrower that the statements set forth in this Section 4.2 are correct as of the time of such request and (ii) if such extension of credit is a request for an Advance or a Letter of Credit, sufficient Availability exists for such Advance or Letter of Credit pursuant to Section 2.1(a) and Section 2.13.

 

4.3                               Conditions Subsequent.  The obligation of Lender to continue to make Advances (or otherwise extend credit hereunder) is subject to the fulfillment, on or before the date applicable thereto, of the conditions subsequent set forth on Exhibit C (the failure by any Borrower to so perform or cause to be performed such conditions subsequent as and when required by the terms thereof, shall constitute an Event of Default).

 

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5.                                      REPRESENTATIONS AND WARRANTIES.

 

In order to induce Lender to enter into this Agreement, each Borrower, on behalf of itself and the other Loan Parties, makes the representations and warranties to Lender set forth on Exhibit D.  Each of such representations and warranties shall be true, correct, and complete, in all material respects (except that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof), as of the Closing Date, and shall be true, correct, and complete, in all material respects (except that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof), as of the date of the making of each Advance or other extension of credit made thereafter, as though made on and as of the date of such Advance or other extension of credit (except to the extent that such representations and warranties relate solely to an earlier date in which case such representations and warranties shall continue to be true and correct as of such earlier date) and such representations and warranties shall survive the execution and delivery of this Agreement.

 

6.                                      AFFIRMATIVE COVENANTS.

 

Each Borrower covenants and agrees that, until termination of this Agreement and payment in full of the Obligations, each Borrower shall and shall cause each of the Loan Parties and their respective Subsidiaries to comply with each of the following:

 

6.1                               Financial Statements, Reports, Certificates.  Deliver to Lender copies of each of the financial statements, reports, and other items set forth on Schedule 6.1 no later than the times specified therein.  In addition, each Borrower agrees that no Subsidiary of a Borrower will have a fiscal year different from that of Borrowers.  Each Borrower agrees to maintain a system of accounting that enables such Borrower to produce financial statements in accordance with GAAP.  Each Loan Party shall also (a) keep a reporting system that shows all additions, sales, claims, returns, and allowances with respect to its and its Subsidiaries’ sales, and (b) maintain its billing systems/practices substantially as in effect as of the Closing Date and shall only make material modifications following prior notice to Lender.

 

6.2                               Collateral Reporting.  Provide Lender with each of the reports set forth on Schedule 6.2 at the times specified therein. In addition, each Borrower agrees to use commercially reasonable efforts in cooperation with Lender to facilitate and implement a system of electronic collateral reporting in order to provide electronic reporting of each of the items set forth on such Schedule.

 

6.3                               Existence.  Except as otherwise permitted under Section 7.3 or Section 7.4, at all times maintain and preserve in full force and effect (a) its existence (including being in good standing in its jurisdiction of organization) and (b) all rights and franchises, licenses and permits material to its business; provided, however, that no Loan Party nor any of its Subsidiaries shall be required to preserve any such right or franchise, licenses or permits if such Person’s board of directors (or similar governing body) shall determine that the preservation thereof is no longer desirable in the conduct of the business of such Person, and that the loss thereof is not disadvantageous in any material respect to such Person or to Lender; provided that Borrowers

 

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deliver at least 10 days prior written notice to Lender of such Loan Party’s election not to preserve any such right or franchise, license or permit.

 

6.4                               Maintenance of Properties.  Maintain and preserve all of its assets that are necessary or useful in the proper conduct of its business in good working order and condition, ordinary wear, tear and casualty excepted and Permitted Dispositions excepted (and except where the failure to so maintain and preserve such assets could not reasonably be expected to result in a Material Adverse Change), and comply with the material provisions of all material leases to which it is a party as lessee, so as to prevent the loss or forfeiture thereof, unless such provisions are the subject of a Permitted Protest.

 

6.5                               Taxes.

 

(a)                                 Cause all assessments and taxes imposed, levied, or assessed against any Loan Party or its Subsidiaries, or any of their respective assets or in respect of any of their income, businesses, or franchises to be paid in full, before delinquency or before the expiration of any extension period, except to the extent that the validity of such assessment or tax shall be the subject of a Permitted Protest and so long as, in the case of an assessment or tax that has or may become a Lien against any of the Collateral, (i) such contest proceedings conclusively operate to stay the sale of any portion of the Collateral to satisfy such assessment or tax, and (ii) any such other Lien is at all times subordinate to Lender’s Liens.

 

(b)                                 Each Loan Party will and will cause each of its Subsidiaries to make timely payment or deposit of all tax payments and withholding taxes required of it and them by applicable laws, including those laws concerning F.I.C.A., F.U.T.A., state disability, and local, state, and federal income taxes, and will, upon request, furnish Lender with proof reasonably satisfactory to Lender indicating that such Loan Party and its Subsidiaries have made such payments or deposits.

 

6.6                               Insurance.  At Borrowers’ expense, maintain insurance respecting each of the Loan Parties’ and their Subsidiaries’ assets wherever located, covering loss or damage by fire, theft, explosion, and all other hazards and risks as ordinarily are insured against by other Persons engaged in the same or similar businesses. Borrowers also shall maintain (with respect to each of the Loan Parties and their Subsidiaries) business interruption insurance, general liability insurance, flood insurance for Collateral located in a flood plain, product liability insurance, director’s and officer’s liability insurance, fiduciary liability insurance, foreign accounts receivable insurance (as applicable), and employment practices liability insurance, as well as insurance against larceny, embezzlement, and criminal misappropriation to the extent such insurance is ordinarily maintained by other Persons engaged in the same or similar businesses.  All such policies of insurance shall be with responsible and reputable insurance companies acceptable to Lender in its Permitted Discretion and in such amounts as is carried generally in accordance with sound business practice by companies in similar businesses similarly situated and located and in any event in amount, adequacy and scope reasonably satisfactory to Lender.  Except as set forth in Section 3.3, all property insurance policies covering the Collateral are to be made payable to Lender for the benefit of Lender, as its interests may appear, in case of loss, pursuant to a lender loss payable endorsement acceptable to Lender and are to contain such other provisions as Lender may reasonably require to fully protect Lender’s interest in the Collateral

 

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and to any payments to be made under such policies.  All certificates of property and general liability insurance are to be delivered to Lender, with the lender loss payable (but only in respect of Collateral) and additional insured endorsements (with respect to general liability coverage) in favor of Lender and shall provide for not less than 30 days (10 days in the case of non-payment) prior written notice to Lender of the exercise of any right of cancellation.  If Borrowers fail to maintain such insurance, Lender may arrange for such insurance, but at Borrowers’ expense and without any responsibility on Lender’s part for obtaining the insurance, the solvency of the insurance companies, the adequacy of the coverage, or the collection of claims.  Borrowers shall give Lender prompt notice of any loss exceeding $250,000 covered by their casualty or business interruption insurance.  Upon the occurrence and during the continuance of an Event of Default, Lender shall have the sole right to file claims under any property and general liability insurance policies in respect of the Collateral, to receive, receipt and give acquittance for any payments that may be payable thereunder, and to execute any and all endorsements, receipts, releases, assignments, reassignments or other documents that may be necessary to effect the collection, compromise or settlement of any claims under any such insurance policies.

 

6.7                               Inspection.  Permit Lender and each of Lender’s duly authorized representatives to visit any of its properties and inspect any of its assets or books and records, to conduct appraisals and valuations, to examine and make copies of its books and records, and to discuss its affairs, finances, and accounts with, and to be advised as to the same by, its officers and employees at such reasonable times and intervals as Lender may designate and, so long as no Default or Event of Default exists, with reasonable prior notice to Borrowers.

 

6.8                               Account Verification.  Permit Lender, in Lender’s name or in the name of a nominee of Lender, to verify the validity, amount or any other matter relating to any Account, by mail, telephone, facsimile transmission or otherwise.  Further, at the request of Lender, Borrowers shall send requests for verification of Accounts or send notices of assignment of Accounts to Account Debtors and other obligors.

 

6.9                               Compliance with Laws.  Comply with the requirements of all applicable laws, rules, regulations, and orders of any Governmental Authority, other than laws, rules, regulations, and orders the non-compliance with which, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Change.

 

6.10                        Environmental.

 

(a)                                       Keep any property either owned or operated by any Borrower or its Subsidiaries free of any Environmental Liens or post bonds or other financial assurances satisfactory to Lender and in an amount sufficient to satisfy the obligations or liability evidenced by such Environmental Liens;

 

(b)                                       Comply, in all material respects, with Environmental Laws and provide to Lender documentation of such compliance which Lender reasonably requests;

 

(c)                                       Promptly notify Lender of any release of which any Borrower has knowledge of a Hazardous Material in any reportable quantity from or onto property owned or operated by any Borrower or its Subsidiaries and take any Remedial Actions required to abate

 

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said release or otherwise to come into compliance, in all material respects, with applicable Environmental Law; and

 

(d)                                       Promptly, but in any event within 5 Business Days of its receipt thereof, provide Lender with written notice of any of the following:  (i) notice that an Environmental Lien has been filed against any of the real or personal property of any Borrower or its Subsidiaries, (ii) commencement of any Environmental Action or written notice that an Environmental Action will be filed against any Borrower or its Subsidiaries, and (iii) written notice of a violation, citation, or other administrative order from a Governmental Authority.

 

6.11                        Disclosure Updates.

 

(a)                                       Promptly and in no event later than 5 Business Days after obtaining knowledge thereof or after the occurrence thereof, whichever is earlier, notify Lender:

 

(i)                                     if any written information, exhibit, or report furnished to Lender contained, at the time it was furnished, any untrue statement of a material fact or omitted to state any material fact necessary to make the statements contained therein not misleading in light of the circumstances in which made.  Any notification pursuant to the foregoing provision will not cure or remedy the effect of the prior untrue statement of a material fact or omission of any material fact nor shall any such notification have the effect of amending or modifying this Agreement or any of the Schedules hereto;

 

(ii)                                  of all actions, suits, or proceedings brought by or against any Loan Party or any of its Subsidiaries before any court or other Governmental Authority which reasonably could be expected to result in a Material Adverse Change, provided that, in any event, such notification shall not be later than 5 days after service of process with respect thereto on any Loan Party;

 

(iii)                               of any disputes or claims by any Borrower’s customers exceeding $25,000 individually or $250,000 in the aggregate during any fiscal year;

 

(iv)                              of any material loss or damage to any Collateral or any substantial adverse change in the Collateral; or

 

(v)                                 of a violation of any law, rule or regulation, the non-compliance with which reasonably could be expected to result in a Material Adverse Change.

 

(b)                                       Immediately upon obtaining knowledge thereof or after the occurrence thereof, notify Lender of any event or condition which constitutes a Default or an Event of Default and provide a statement of the action that such Borrower proposes to take with respect to such Default or Event of Default.

 

Upon request of Lender, each Loan Party shall deliver to Lender any other materials, reports, records or information reasonably requested relating to the operations, business affairs, or financial condition of any Loan Party or its Subsidiaries or to the Collateral.

 

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6.12                        Collateral Covenants.

 

(a)                                 Possession of Collateral.  In the event that any Collateral, including Proceeds, is evidenced by or consists of Negotiable Collateral, Investment Related Property, or Chattel Paper, in each case, having an aggregate value or face amount of $25,000 or more for all such Negotiable Collateral, Investment Related Property, or Chattel Paper, the Loan Parties shall promptly (and in any event within 2 Business Days after receipt thereof), notify Lender thereof, and if and to the extent that perfection or priority of Lender’s Liens is dependent on or enhanced by possession, the applicable Loan Party, promptly (and in any event within 2 Business Days) after request by Lender, shall execute such other documents and instruments as shall be requested by Lender or, if applicable, endorse and deliver physical possession of such Negotiable Collateral, Investment Related Property, or Chattel Paper to Lender, together with such undated powers (or other relevant document of assignment or transfer acceptable to Lender) endorsed in blank as shall be requested by Lender, and shall do such other acts or things deemed necessary or desirable by Lender to enhance, perfect and protect Lender’s Liens therein;

 

(b)                                 Chattel Paper.

 

(i)                                     Promptly (and in any event within 2 Business Days) after request by Lender, each Loan Party shall take all steps reasonably necessary to grant Lender control of all electronic Chattel Paper of any Loan Party in accordance with the Code and all “transferable records” as that term is defined in Section 16 of the Uniform Electronic Transaction Act and Section 201 of the federal Electronic Signatures in Global and National Commerce Act as in effect in any relevant jurisdiction, to the extent that the individual or aggregate value or face amount of such electronic Chattel Paper equals or exceeds $25,000; and

 

(ii)                                  If any Loan Party retains possession of any Chattel Paper or instruments (which retention of possession shall be subject to the extent permitted hereby), promptly upon the request of Lender, such Chattel Paper and instruments shall be marked with the following legend: “This writing and the obligations evidenced or secured hereby are subject to the Security Interest of Wells Fargo Bank, National Association, as Lender”;

 

(c)                                  Control Agreements.

 

(i)                                     Except to the extent otherwise provided by Section 7.11, each Borrower shall obtain a Control Agreement from each bank (other than Lender) maintaining a Deposit Account for such Loan Party;

 

(ii)                                  Except to the extent otherwise provided by Section 7.11, each Borrower shall obtain a Control Agreement from each issuer of uncertificated securities, securities intermediary, or commodities intermediary issuing or holding any financial assets or commodities to or for any such Loan Party; and

 

(iii)                               Except to the extent otherwise provided by Section 7.11, each Borrower shall cause Lender to obtain “control”, as such term is defined in the Code, with respect to all of such Borrower’s investment property;

 

(d)                                 Letter-of-Credit Rights.  If the Loan Parties (or any of them) are or become the beneficiary of letters of credit having a face amount or value of $25,000 or more in the aggregate, then the applicable Loan Party or Loan Parties shall promptly (and in any event

 

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within 2 Business Days after becoming a beneficiary), notify Lender thereof and, promptly (and in any event within 2 Business Days) after request by Lender, enter into a tri-party agreement with Lender and the issuer or confirming bank with respect to letter-of-credit rights assigning such letter-of-credit rights to Lender and directing all payments thereunder to the Collection Account unless otherwise directed by Lender, all in form and substance satisfactory to Lender;

 

(e)                                  Commercial Tort Claims.  If the Loan Parties (or any of them) obtain Commercial Tort Claims having a value, or involving an asserted claim, in the amount of $25,000 or more in the aggregate for all Commercial Tort Claims, then the applicable Loan Party or Loan Parties (i) shall promptly (and in any event within 2 Business Days of obtaining such Commercial Tort Claim), notify Lender upon incurring or otherwise obtaining such Commercial Tort Claims and, promptly (and in any event within 2 Business Days) after request by Lender, amend Schedule 5.6(d) to the Information Certificate to describe such Commercial Tort Claims in a manner that reasonably identifies such Commercial Tort Claims and which is otherwise reasonably satisfactory to Lender, (ii) hereby authorize(s) the filing of additional financing statements or amendments to existing financing statements describing such Commercial Tort Claims, and (iii) agree(s) to do such other acts or things deemed necessary or desirable by Lender to give Lender a first priority, perfected security interest in any such Commercial Tort Claim, which Commercial Tort Claim shall not be subject to any other Liens;

 

(f)                                   Government Contracts.  Other than Accounts and Chattel Paper the aggregate value of which does not at any one time exceed $25,000, if any Account or Chattel Paper of any Loan Party arises out of a contract or contracts with the United States of America or any State or any department, agency, or instrumentality thereof, Loan Parties shall promptly (and in any event within 2 Business Days of the creation thereof) notify Lender thereof and, promptly (and in any event within 2 Business Days) after request by Lender, execute any instruments or take any steps reasonably required by Lender in order that all moneys due or to become due under such contract or contracts shall be assigned to Lender, for the benefit of Lender, and shall provide written notice thereof under the Assignment of Claims Act or other applicable law;

 

(g)                                  Intellectual Property.

 

(i)                                     Upon the request of Lender, in order to facilitate filings with the PTO and the United States Copyright Office, each Loan Party shall execute and deliver to Lender one or more Copyright Security Agreements or Patent and Trademark Security Agreements to further evidence Lender’s Lien on such Loan Party’s Patents, Trademarks, or Copyrights, and the General Intangibles of such Loan Party relating thereto or represented thereby;

 

(ii)                                  Each Loan Party shall have the duty, with respect to Intellectual Property that is necessary in the conduct of such Loan Party’s business, to protect and diligently enforce and defend at such Loan Party’s expense its Intellectual Property, including the following, to the extent that the failure to do any of the following would cause or would be reasonably likely to cause a Material Adverse Change: (A) to diligently enforce and defend, including promptly suing for infringement, misappropriation, or dilution and to recover any and all damages for such infringement, misappropriation, or dilution, and filing for opposition, interference, and cancellation against conflicting Intellectual Property rights of any Person, (B)

 

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to prosecute diligently any trademark application or service mark application that is part of the Trademarks pending as of the date hereof or hereafter until the termination of this Agreement, (C) to prosecute diligently any patent application that is part of the Patents pending as of the date hereof or hereafter until the termination of this Agreement, (D) to take all reasonable and necessary action to preserve and maintain all of such Loan Party’s Trademarks, Patents, Copyrights, Intellectual Property Licenses, and its rights therein, including paying all maintenance fees and filing of applications for renewal, affidavits of use, and affidavits of noncontestability, and (E) to require all employees, consultants, and contractors of each Loan Party who were involved in the creation or development of such Intellectual Property to sign agreements containing assignment to such Loan Party of Intellectual Property rights created or developed and obligations of confidentiality.  No Loan Party shall abandon any Intellectual Property or Intellectual Property License that is necessary in the conduct of such Loan Party’s business that would cause or would be reasonably likely to cause a Material Adverse Change.  Each Loan Party shall take the steps described in this Section 6.12(g)(ii) with respect to all new or acquired Intellectual Property to which it or any of its Subsidiaries is now or later becomes entitled that is necessary in the conduct of such Loan Party’s or Subsidiary’s business;

 

(iii)                               Each Borrower acknowledges and agrees that Lender shall have no duties with respect to any Intellectual Property or Intellectual Property Licenses of any Loan Party.  Without limiting the generality of this Section 6.12(g)(iii), each Borrower acknowledges and agrees that Lender shall not be under any obligation to take any steps necessary to preserve rights in the Collateral consisting of Intellectual Property or Intellectual Property Licenses against any other Person, but Lender may do so at its option from and after the occurrence and during the continuance of an Event of Default, and all expenses incurred in connection therewith (including reasonable fees and expenses of attorneys and other professionals) shall be for the sole account of the applicable Borrower and shall be chargeable to the Loan Account;

 

(iv)                              Each Loan Party shall promptly file an application with the United States Copyright Office for any Copyright that has not been registered with the United States Copyright Office if such Copyright is necessary in connection with the conduct of such Loan Party’s business.  Any expenses incurred in connection with the foregoing shall be borne by the Loan Parties; and

 

(v)                                 No Loan Party shall enter into any Intellectual Property License to receive any license or rights in any Intellectual Property of any other Person unless such Loan Party has used commercially reasonable efforts to permit the assignment of or grant of a Lien in such Intellectual Property License (and all rights of such Loan Party thereunder) to Lender (and any transferees of Lender);

 

(h)                                 Investment Related Property.

 

(i)                                     Upon the occurrence and during the continuance of an Event of Default, following the request of Lender, all sums of money and property paid or distributed in respect of the Investment Related Property that are received by any Loan Party shall be held by the Loan Parties in trust for the benefit of Lender segregated from such Loan Party’s other property, and such Loan Party shall deliver it promptly to Lender in the exact form received; and

 

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(ii)                                  Each Loan Party shall cooperate with Lender in obtaining all necessary approvals and making all necessary filings under federal, state, local, or foreign law to effect the perfection of the Security Interest on the Investment Related Property or to effect any sale or transfer thereof;

 

(i)                                     Real Property; Fixtures.  Upon the acquisition by any Loan Party of any fee interest in Real Property, such Loan Party will promptly (and in any event within 2 Business Days of acquisition) notify Lender of the acquisition of such Real Property and will grant to Lender a first priority Mortgage on each fee interest in Real Property now or hereafter owned by such Loan Party, which Real Property shall not be subject to any other Liens except Permitted Liens, and shall deliver such other documentation and opinions, in form and substance satisfactory to Lender, in connection with the grant of such Mortgage as Lender shall request in its Permitted Discretion, including appraisals, title insurance policies and endorsements, surveys, financing statements, fixture filings, flood insurance, flood insurance certifications and environmental audits and such Loan Party shall pay all recording costs, intangible taxes and other fees and costs (including reasonable attorneys fees and expenses) incurred in connection therewith.  All such appraisals, title insurance policies and endorsements, environmental audits and surveys shall be prepared or issued by parties reasonably acceptable to Lender. To the extent permitted by applicable law, all of the Collateral shall remain personal property regardless of the manner of its attachment or affixation to real property;

 

(j)                                    Controlled Accounts.

 

(i)                                     Within 75 days following the Closing Date (the “Cash Management Transition Period”), each Loan Party shall (A) establish and maintain at Lender all Cash Management Services, including all deposit accounts and lockbox services. Such Cash Management Services maintained by each Loan Party shall be of a type and on terms reasonably satisfactory to Lender;

 

(ii)                                  Until such time as the Loan Parties have established all of their Cash Management Services with Lender, during the Cash Management Transition Period each Loan Party shall maintain Cash Management Services of a type and on terms reasonably satisfactory to Lender at one or more of the banks set forth on Schedule 6.12(j) to the Information Certificate (each a “Controlled Account Bank”), and shall take reasonable steps to ensure that all of its and its Subsidiaries’ Account Debtors forward payment of the amounts owed by them directly to such Controlled Account Bank, and (B) deposit or cause to be deposited promptly, and in any event no later than the first Business Day after the date of receipt thereof, all of their Collections (including those sent directly by their Account Debtors to a Loan Party) into a bank account of such Loan Party (each, a “Controlled Account”) at one of the Controlled Account Banks;

 

(iii)                               During the Cash Management Transition Period, each Loan Party shall maintain Control Agreements with the applicable Controlled Account Bank, in form and substance reasonably acceptable to Lender.  Each such Control Agreement shall provide, among other things, that (A) the Controlled Account Bank will comply with any instructions originated by Lender directing the disposition of the collected funds in such Controlled Account without further consent by the applicable Loan Party, (B) the Controlled Account Bank waives, subordinates, or agrees not to exercise any rights of setoff or recoupment or any other claim

 

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against the applicable Controlled Account other than for payment of its service fees and other charges directly related to the administration of such Controlled Account and for returned checks or other items of payment, and (C) the Controlled Account Bank will forward, by daily standing wire transfer, all amounts in the applicable Controlled Account; and

 

So long as no Default or Event of Default has occurred and is continuing, during the Cash Management Transition Period, Borrowers may amend Schedule 5.15 to the Information Certificate to add or replace a Controlled Account Bank or Controlled Account; provided, however, that (A) such prospective Controlled Account and Controlled Account Bank shall be reasonably satisfactory to Lender, and (B) prior to the time of the opening of such Controlled Account, the applicable Loan Party and such prospective Controlled Account Bank shall have executed and delivered to Lender a Control Agreement.  Each Loan Party shall close its Controlled Accounts (and establish replacement Controlled Accounts in accordance with clause (iii) above) as promptly as practicable and in any event within thirty (30) days of notice from Lender that the operating performance, funds transfer, or availability procedures or performance of the Controlled Account Bank with respect to Controlled Accounts or Lender’s liability under any Control Agreement with such Controlled Account Bank is no longer acceptable to Lender in Lender’s reasonable judgment.

 

(k)                                 Affirmative Covenants.

 

(i)                                     If any Loan Party shall acquire, obtain, receive or become entitled to receive any Pledged Interests after the Closing Date, it shall promptly (and in any event within two (2) Business Days of acquiring or obtaining such Collateral) deliver to Lender a duly executed Pledged Interests Addendum identifying such Pledged Interests;

 

(ii)                                  Each Loan Party shall promptly deliver to Lender a copy of each material notice or other material communication received by it in respect of any Pledged Interests;

 

(iii)                               No Loan Party shall make or consent to any amendment or other modification or waiver with respect to any Pledged Interests, Pledged Operating Agreement, or Pledged Partnership Agreement, or enter into any agreement or permit to exist any restriction with respect to any Pledged Interests if the same is prohibited pursuant to the Loan Documents;

 

(iv)                              As to all limited liability company or partnership interests issued under any Pledged Operating Agreement or Pledged Partnership Agreement, each Loan Party hereby covenants that the Pledged Interests issued pursuant to such agreement (A) are not and shall not be dealt in or traded on securities exchanges or in securities markets, (B) do not and will not constitute investment company securities, and (C) are not and will not be held by such Loan Party in a securities account.  In addition, none of the Pledged Operating Agreements, the Pledged Partnership Agreements, or any other agreements governing any of the Pledged Interests issued under any Pledged Operating Agreement or Pledged Partnership Agreement, provide or shall provide that such Pledged Interests are securities governed by Section 8 of the Uniform Commercial Code as in effect in any relevant jurisdiction;

 

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6.13                        Material Contracts.  Contemporaneously with the delivery of each Compliance Certificate pursuant to Section 6.1, provide Lender with copies of (a) each Material Contract entered into since the delivery of the previous Compliance Certificate, (b) each material amendment or modification of any Material Contract entered into since the delivery of the previous Compliance Certificate, and (c) at the request of Lender,  “no-offset” letters in form and substance reasonably acceptable to Lender from each of the parties to any Material Contracts with Borrowers’ customers; provided that if no Event of Default has occurred and is continuing, Borrowers’ obligation shall be to use commercially reasonable efforts to obtain such “no-offset” letters, it being understood, however, that Borrowers’ inability to obtain any requested “no-offset” letter could result in a portion of one or more Accounts ceasing to be Eligible Accounts under subsection (i) of the definition of Eligible Accounts.  Borrowers shall maintain all Material Contracts in full force and effect and shall not default in the payment or performance of its obligations thereunder.

 

6.14                        Location of Inventory, Equipment and Books.  Keep each Loan Party’s and its Subsidiaries’ Inventory, Equipment (other than vehicles and Equipment out for repair) and Books only at the locations identified on Schedule 5.29 to the Information Certificate and keep their chief executive offices only at the locations identified on Schedule 5.6(b) to the Information Certificate; provided, however, that Borrowers may amend Schedule 5.29 to the Information Certificate so long as such amendment occurs by written notice to Lender not less than 10 days prior to the date on which such Inventory, Equipment or Books are moved to such new location, and so long as, at the time of such written notification, the applicable Loan Party provides Lender a Collateral Access Agreement with respect thereto if such location is not owned by such Loan Party.

 

6.15                        Further Assurances.

 

(a)                                 At any time upon the reasonable request of Lender, execute or deliver to Lender any and all financing statements, fixture filings, security agreements, pledges, assignments, endorsements of certificates of title, mortgages, deeds of trust, opinions of counsel, and all other documents (the “Additional Documents”) that Lender may reasonably request and in form and substance reasonably satisfactory to Lender, to create, perfect, and continue perfection or to better perfect Lender’s Liens in all of the assets of each Loan Party (whether now owned or hereafter arising or acquired, tangible or intangible, real or personal), to create and perfect Liens in favor of Lender in any Real Property acquired by any Loan Party after the Closing Date with a fair market value in excess of $25,000, and in order to fully consummate all of the transactions contemplated hereby and under the other Loan Documents.  To the maximum extent permitted by applicable law, if a Borrower refuses or fails to execute or deliver any reasonably requested Additional Documents within a reasonable period of time, not to exceed 30 days following the request to do so, such Borrower hereby authorizes Lender to execute any such Additional Documents in the applicable Borrower’s name, as applicable, and authorizes Lender to file such executed Additional Documents in any appropriate filing office.  In furtherance and not in limitation of the foregoing, each Borrower shall take such actions as Lender may reasonably request from time to time to ensure that the Obligations are guaranteed by the Guarantors and are secured by substantially all of the assets of each Borrower and all of the outstanding capital Stock of each Loan Party (subject to exceptions and limitations contained in the Loan Documents with respect to CFCs);

 

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(b)                                 Each Borrower authorizes the filing by Lender of financing or continuation statements, or amendments thereto, and such Loan Party will execute and deliver to Lender such other instruments or notices, as Lender may reasonably request, in order to perfect and preserve the Security Interest granted or purported to be granted hereby;

 

(c)                                  Each Borrower authorizes Lender at any time and from time to time to file, transmit, or communicate, as applicable, financing statements and amendments (i) describing the Collateral as “all personal property of debtor” or “all assets of debtor” or words of similar effect, (ii) describing the Collateral as being of equal or lesser scope or with greater detail, or (iii) that contain any information required by Part 5 of Article 9 of the Code for the sufficiency or filing office acceptance of such financing statement.  Each Borrower also hereby ratifies any and all financing statements or amendments previously filed by Lender in any jurisdiction; and

 

(d)                                 Each Borrower acknowledges that no Loan Party is authorized to file any financing statement or amendment or termination statement with respect to any financing statement filed in connection with this Agreement without the prior written consent of Lender, subject to such Loan Party’s rights under Section 9-509(d)(2) of the Code.

 

7.                                      NEGATIVE COVENANTS.

 

Each Borrower covenants and agrees that, until termination of all of the commitments of Lender hereunder to provide any further extensions of credit and payment in full of the Obligations, the Loan Parties will not and will not permit any of their Subsidiaries to do any of the following:

 

7.1                               Indebtedness.  Create, incur, assume, suffer to exist, guarantee, or otherwise become or remain, directly or indirectly, liable with respect to any Indebtedness, except for Permitted Indebtedness.

 

7.2                               Liens.  Create, incur, assume, or suffer to exist, directly or indirectly, any Lien on or with respect to any of its assets, of any kind, whether now owned or hereafter acquired, or any income or profits therefrom, except for Permitted Liens.

 

7.3                               Restrictions on Fundamental Changes.

 

(a)                                 Enter into any merger, consolidation, reorganization, or recapitalization, or reclassify its Stock, except for (i) any merger between Loan Parties, provided that a Borrower must be the surviving entity of any such merger to which it is a party, and (ii) any merger between Subsidiaries of a Borrower that are not Loan Parties;

 

(b)                                 Liquidate, wind up, or dissolve itself (or suffer any liquidation or dissolution), except for (i) the liquidation or dissolution of non-operating Subsidiaries of any Borrower with nominal assets and nominal liabilities, (ii) the liquidation or dissolution of a Loan Party (other than a Borrower) or any of its wholly-owned Subsidiaries so long as all of the assets (including any interest in any Stock) of such liquidating or dissolving Loan Party or Subsidiary are transferred to a Loan Party that is not liquidating or dissolving, or (iii) the liquidation or dissolution of a Subsidiary of a Borrower that is not a Loan Party (other than any such

 

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Subsidiary the Stock of which (or any portion thereof) is subject to a Lien in favor of Lender) so long as all of the assets of such liquidating or dissolving Subsidiary are transferred to a Subsidiary of a Borrower that is not liquidating or dissolving;

 

(c)                                  Suspend or cease operation of a substantial portion of its or their business, except as permitted pursuant to clauses 7.3(a) or (b) above or in connection with the transactions permitted pursuant to Section 7.4; or

 

(d)                                 Form or acquire any direct or indirect Subsidiary.

 

Notwithstanding the foregoing, Borrowers shall be permitted, without further consent of Lender, to do the following: (i) form one direct Subsidiary organized under the laws of Costa Rica and one direct Subsidiary organized under the laws of the Republic of the Philippines; (ii) transfer, assign, and convey assets and liabilities of StarTek International Limited related to (A) operations in Costa Rica to the newly-formed Subsidiary organized under the laws of Costa Rica and (B) operations in the Republic of the Philippines to the newly-formed Subsidiary organized under the laws of the Republic of the Philippines; and (iii) dissolve StarTek International Limited; provided that Borrowers shall cause all such newly-formed Subsidiaries to become parties to, and bound by, the terms and conditions of the Intercompany Subordination Agreement.

 

7.4                               Disposal of Assets.  Other than Permitted Dispositions or transactions expressly permitted by Sections 7.3 or 7.12, Loan Parties shall not sell, assign (by operation of law or otherwise) or otherwise dispose of, or grant any option with respect to, any of the Collateral or any other asset except as expressly permitted by this Agreement. Lender shall not be deemed to have consented to any sale or other disposition of any of the Collateral or any other asset except as expressly permitted in this Agreement or the other Loan Documents.

 

7.5                               Change Name.  Change any Borrower’s or any of its Subsidiaries’ name, organizational identification number, state of organization, organizational identity or “location” for purposes of Section 9-307 of the Code.

 

7.6                               Nature of Business.  Make any change in the nature of its or their business as conducted on the date of this Agreement or acquire any properties or assets that are not reasonably related to the conduct of such business activities; provided, however, that the foregoing shall not prevent any Borrower or any of its Subsidiaries from engaging in any business that is reasonably related or ancillary to its or their business and acquiring properties and assets related thereto in a manner consistent with the terms and conditions of this Agreement.

 

7.7                               Prepayments and Amendments.

 

(a)                                 Except in connection with Refinancing Indebtedness permitted by Section 7.1,

 

(i)                                     optionally prepay, redeem, defease, purchase, or otherwise acquire any Indebtedness of any Loan Party or any of its Subsidiaries, other than (A) the Obligations in accordance with this Agreement, and (B) Permitted Intercompany Advances, or

 

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(ii)                                  make any payment on account of Indebtedness that has been contractually subordinated in right of payment to the Obligations if such payment is not permitted at such time under the subordination terms and conditions, or

 

(b)                                 Directly or indirectly, amend, modify, or change any of the terms or provisions of:

 

(i)                                     any agreement, instrument, document, indenture, or other writing evidencing or concerning Permitted Indebtedness of at least $250,000 when aggregated with other Permitted Indebtedness amended, modified or changed after the date of this Agreement, other than (A) the Obligations in accordance with this Agreement, (B) Permitted Intercompany Advances, and (C) Indebtedness permitted under clauses (c), (e) and (f) of the definition of Permitted Indebtedness;

 

(ii)                                  any Material Contract except to the extent that such amendment, modification, or change could not, individually or in the aggregate, reasonably be expected to be materially adverse to the interests of Lender; or

 

(iii)                               the Governing Documents of any Loan Party or any of its Subsidiaries if the effect thereof, either individually or in the aggregate, could reasonably be expected to be materially adverse to the interests of Lender.

 

7.8                               Change of Control.  Cause, permit, or suffer, directly or indirectly, any Change of Control.

 

7.9                               Restricted Junior Payments.  Make any Restricted Junior Payment; provided, however, that, so long as it is permitted by law, and so long as no Default or Event of Default shall have occurred and be continuing or would result therefrom and so long as such Borrower is a “pass-through” tax entity for United States federal income tax purposes, and after first providing such supporting documentation as Lender may request (including the state and federal tax returns (and all related schedules) of each owner of Stock in such Borrower net of any prior year loss carry-forward, such Borrower may declare and pay Pass-Through Tax Liabilities.

 

7.10                        Accounting Methods.  Modify or change its fiscal year or its method of accounting (other than as may be required to conform to GAAP).

 

7.11                        Investments; Controlled Investments.

 

(a)                                 Except for Permitted Investments, directly or indirectly, make or acquire any Investment or incur any liabilities (including contingent obligations) for or in connection with any Investment.

 

(b)                                 Other than (i) an aggregate amount of not more than $50,000 at any one time, in the case of Borrowers and their Subsidiaries in the aggregate, and (ii) amounts deposited into Deposit Accounts identified on Schedule 5.15 to the Information Certificate which are specially and exclusively used for payroll, payroll taxes and other employee wage and benefit payments to or for each Borrower’s or their Subsidiaries’ employees, make, acquire, or permit to exist Permitted Investments consisting of cash, Cash Equivalents, or amounts credited to Deposit

 

27

 

Accounts or Securities Accounts unless such Borrower or its Subsidiaries, as applicable, and the applicable bank (as permitted solely pursuant to Section 6.12(j)) or securities intermediary have entered into Control Agreements with Lender governing such Permitted Investments in order to perfect (and further establish) Lender’s Liens in such Permitted Investments. Except as provided in Section 6.12(j) and Section 7.11(b)(i) and (ii), Borrowers shall not and shall not permit their Subsidiaries to establish or maintain any Deposit Account or Securities Account with a banking institution other than Lender; notwithstanding the provisions of Section 6.12(j) and Section 7.11(b)(i) and (ii), Borrowers shall not and shall not permit their Subsidiaries to: (y) permit to exist Permitted Investments consisting of cash, Cash Equivalents, or amounts credited to Deposit Accounts or Securities Accounts located outside the United States of America of greater than $3,500,000 in the aggregate at any one time, or (z) transfer Permitted Investments consisting of cash, Cash Equivalents, or amounts credited to Deposit Accounts or Securities Accounts from locations within the United States of American to locations outside the United States of America except in accordance with historical practices.

 

7.12                        Transactions with Affiliates.  Directly or indirectly enter into or permit to exist any transaction with any Affiliate of any Borrower or any of their Subsidiaries except for:

 

(a)                                 transactions between or among the Loan Parties;

 

(b)                                 transactions (other than the payment of management, consulting, monitoring, or advisory fees) between a Borrower or any other Loan Party or its Subsidiaries, on the one hand, and any Affiliate of a Borrower, any other Loan Party or its Subsidiaries, on the other hand, so long as such transactions (i) are fully disclosed to Lender prior to the consummation thereof, if they involve one or more payments by a Borrower or a Loan Party or its Subsidiaries in excess of $50,000 for any single transaction or series of related transactions, and (ii) are no less favorable, taken as a whole, to the Borrowers or the other Loan Parties or their Subsidiaries, as applicable, than would be obtained in an arm’s length transaction with a non-Affiliate;

 

(c)                                  so long as it has been approved by a Loan Party’s or its applicable Subsidiary’s board of directors (or comparable governing body) in accordance with applicable law, any indemnity provided for the benefit of directors (or comparable managers) of such Loan Party or its applicable Subsidiary;

 

(d)                                 so long as it has been approved by a Borrower’s or its applicable Subsidiary’s board of directors (or comparable governing body) in accordance with applicable law, the payment of reasonable compensation, severance, or employee benefit arrangements to employees, officers, and outside directors of a Borrower and its Subsidiaries in the ordinary course of business and consistent with industry practice; and

 

(e)                                  transactions permitted by Section 7.3 or Section 7.9, or any Permitted Intercompany Advance.

 

7.13                        Use of Proceeds.  Use the proceeds of any loan made hereunder for any purpose other than (a) on the Closing Date, (i) to repay, in full, the outstanding principal, accrued interest, and accrued fees and expenses owing under or in connection with Borrowers’ existing credit

 

28

 

facility with Existing Lender, (ii) to cover any book overdrafts, (iii) to fund accounts payable over 60 days past their due dates, (iv) to support Letters of Credit, and (v) to pay fees, costs, and expenses, including Lender Expenses, incurred in connection with this Agreement, the other Loan Documents, and the transactions contemplated hereby and thereby, and (b) thereafter, consistent with the terms and conditions hereof, general corporate and working capital purposes for their lawful and permitted purposes (including that no part of the proceeds of the loans made to Borrowers will be used to purchase or carry any such Margin Stock or to extend credit to others for the purpose of purchasing or carrying any such Margin Stock or for any purpose that violates the provisions of Regulation T, U or X of the Board of Governors of the Federal Reserve System).

 

7.14                        Limitation on Issuance of Stock.  Except for the issuance or sale of common stock or Permitted Preferred Stock by the Borrowers or the other Loan Parties, issue or sell or enter into any agreement or arrangement for the issuance and sale of any of their Stock.

 

7.15                        Consignments.  Consign any of its or their Inventory or sell any of its or their Inventory on bill and hold, sale or return, sale on approval, or other conditional terms of sale, except as set forth on Schedule 7.15 to the Information Certificate.

 

7.16                        Inventory and Equipment with Bailees.  Store the Inventory or Equipment of any Loan Party or its Subsidiaries at any time now or hereafter with a bailee, warehouseman, or similar party, except as set forth on Schedule 7.16 to the Information Certificate.

 

8.                                      FINANCIAL COVENANTS.

 

Each Borrower covenants and agrees that, until termination of all obligations of Lender to provide extensions of credit hereunder and payment in full of the Obligations, Borrowers will comply with each of the following financial covenants:

 

(a)                                 Minimum Adjusted EBITDA.  Achieve Adjusted EBITDA, measured on a month-end basis, of at least the required amount set forth in the following table for the applicable period set forth opposite thereto:

 

	
Applicable Amount
    	
 
    	
Applicable Period
    
	
$
    	
(1,669,000
    	
)
    	
For the 1-month period
   ending January 31, 2012
    
	
$
    	
(949,000
    	
)
    	
For the 2-month period
   ending February 29, 2012
    
	
$
    	
(332,000
    	
)
    	
For the 3-month period
   ending March 31, 2012
    
	
$
    	
(912,000
    	
)
    	
For the 4-month period
    

 

29

 

	
 
    	
 
    	
ending April 30, 2012
    
	
$
    	
(12,000
    	
)
    	
For the 5-month period
   ending May 31, 2012
    
	
$
    	
518,000
    	
 
    	
For the 6-month period
   ending June 30, 2012
    
	
$
    	
833,000
    	
 
    	
For the 7-month period
   ending July 31, 2012
    
	
$
    	
2,622,000
    	
 
    	
For the 8-month period
   ending August 31, 2012
    
	
$
    	
3,232,000
    	
 
    	
For the 9-month period
   ending September 30, 2012
    
	
$
    	
4,666,000
    	
 
    	
For the 10-month period
   ending October 31, 2012
    
	
$
    	
6,157,000
    	
 
    	
For the 11-month period
   ending November 30, 2012
    
	
$
    	
7,160,000
    	
 
    	
For the 12-month period
   ending December 31, 2012
    

 

(b)                                 Non-Financed Capital Expenditures.  Make Non-Financed Capital Expenditures in Fiscal Year 2012, tested monthly, in an amount less than or equal to, but not greater than, $6,500,000; provided that no Non-Financed Capital Expenditure shall be permitted if such Non-Financed Capital Expenditure would cause the ratio of Excess Availability (including such Non-Financed Capital Expenditure) to aggregate Non-Financed Capital Expenditures for such fiscal year (including such Non-Financed Capital Expenditure) to be less than 1.50:1.00; and provided, further, that the permitted aggregate amount of Non-Financed Capital Expenditures for Fiscal Year 2012 may be increased on a quarterly basis by an amount equal to 50% of any positive variance between budgeted year-to-date EBITDA and actual year-to-date EBITDA, each measured as of the end of the prior calendar quarter.

 

Notwithstanding the foregoing, Lender agrees to consider the impact of any Borrower’s material foreign expansion in Fiscal Year 2012 on the financial covenants contained in this Section 8, but any adjustments to such financial covenants shall be at Lender’s sole discretion.

 

9.                                      EVENTS OF DEFAULT.

 

Any one or more of the following events shall constitute an event of default (each, an “Event of Default”) under this Agreement:

 

9.1                               If any Borrower fails to pay when due and payable, or when declared due and payable, all or any portion of the Obligations consisting of principal, interest, fees, charges or

 

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other amounts due Lender or any Bank Product Provider, reimbursement of Lender Expenses, or other amounts (other than any portion thereof constituting principal) constituting Obligations (including any portion thereof that accrues after the commencement of an Insolvency Proceeding, regardless of whether allowed or allowable in whole or in part as a claim in any such Insolvency Proceeding);

 

9.2          If any Loan Party or any of its Subsidiaries:

 

(a)           fails to perform or observe any covenant or other agreement contained in any of (i) Sections 4.3, 6.1, 6.2, 6.5(b) 6.6, 6.7 (solely if any Loan Party refuses to allow Lender or its representatives or agents to visit such Loan Party’s properties, inspect its assets or books or records, examine and make copies of its books and records, or discuss such Loan Party’s affairs, finances, and accounts with officers and employees of such Loan Party), 6.8, 6.11, 6.12; 6.13 or 6.14 of this Agreement, (ii) Section 7 of this Agreement, or (iii) Section 8 of this Agreement;

 

(b)           fails to perform or observe any covenant or other agreement contained in any of Sections 6.3, 6.4, 6.5(a) (other than F.I.C.A., F.U.T.A., federal income taxes and any other taxes or assessments the non-payment of which may result in a Lien having priority over Lender’s Liens), 6.9, 6.10, and 6.15 of this Agreement and such failure continues for a period of 15 days (or in the case of any Loan Party failing to be in good standing in its jurisdiction of organization, 5 days) after the earlier of (i) the date on which such failure shall first become known to or should have been known by any officer of such Loan Party or (ii) the date on which written notice thereof is given to such Loan Party by Lender;

 

(c)           fails to perform or observe any covenant or other agreement contained in this Agreement, or in any of the other Loan Documents, in each case, other than any such covenant or agreement that is unable to be cured or is the subject of another provision of this Section 9 (in which event such other provision of this Section 9 shall govern), and such failure continues for a period of 30 days after the earlier of (i) the date on which such failure shall first become known to or should have been known by any officer of such Loan Party or (ii) the date on which written notice thereof is given to such Loan Party by Lender;

 

9.3          If one or more judgments, orders, or awards for the payment of money in an amount in excess of $250,000 in any one case or in excess of $500,000 in the aggregate (except to the extent fully covered (other than to the extent of customary deductibles) by insurance pursuant to which the insurer has not denied coverage or fully included in Reserves) is entered or filed against a Loan Party or any of its Subsidiaries, or with respect to any of their respective assets, and either (a) there is a period of 30 consecutive days at any time after the entry of any such judgment, order, or award during which (1) the same is not discharged, satisfied, vacated, or bonded pending appeal, or (2) a stay of enforcement thereof is not in effect, or (b) enforcement proceedings are commenced upon such judgment, order, or award;

 

9.4          If an Insolvency Proceeding is commenced by a Loan Party or any of its Subsidiaries;

 

9.5          If an Insolvency Proceeding is commenced against a Loan Party or any of its Subsidiaries and any of the following events occur: (a) such Loan Party or such Subsidiary

 

31

 

consents to the institution of such Insolvency Proceeding against it, (b) the petition commencing the Insolvency Proceeding is not timely controverted, (c) the petition commencing the Insolvency Proceeding is not dismissed within 60 calendar days of the date of the filing thereof, (d) an interim trustee is appointed to take possession of all or any substantial portion of the properties or assets of, or to operate all or any substantial portion of the business of, such Loan Party or its Subsidiary, or (e) an order for relief shall have been issued or entered therein; provided that Lender shall have no obligation to provide any extension of credit to Borrowers during such 60 calendar day period;

 

9.6          If any Loan Party or any of its Subsidiaries is enjoined, restrained, or in any way prevented by court order from continuing to conduct all or any material part of the business affairs of such Loan Party and its Subsidiaries, taken as a whole;

 

9.7          If there is (a) a default in one or more agreements to which a Loan Party or any of its Subsidiaries is a party with one or more third Persons relative to a Loan Party’s or any of its Subsidiaries’ Indebtedness involving an aggregate amount of $150,000 or more, and such default (i) occurs at the final maturity of the obligations thereunder, or (ii) results in a right by such third Person, irrespective of whether exercised, to accelerate the maturity of such Loan Party’s or its Subsidiary’s obligations thereunder, or (b) a default in or an involuntary early termination of one or more Hedge Agreements to which a Loan Party or any of its Subsidiaries is a party involving an aggregate amount of $150,000 or more;

 

9.8          If any warranty, representation, certificate, statement, or Record made herein or in any other Loan Document or delivered in writing to Lender in connection with this Agreement or any other Loan Document proves to be untrue in any material respect (except that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof) as of the date of issuance or making or deemed making thereof;

 

9.9          If the obligation of any Guarantor under its Guaranty is limited or terminated by operation of law or by such Guarantor (other than in accordance with the terms of this Agreement), or if any Guarantor fails to perform any obligation under its Guaranty, or repudiates or revokes or purports to repudiate or revoke any obligation under its Guaranty, or any individual Guarantor dies or becomes incapacitated, or any other Guarantor ceases to exist for any reason;

 

9.10        If this Agreement or any other Loan Document that purports to create a Lien, shall, for any reason, fail or cease to create a valid and perfected and, except to the extent of Permitted Liens which are permitted purchase money Liens or the interests of lessors under Capital Leases, first priority Lien on the Collateral covered thereby;

 

9.11        If any event or circumstance occurs that Lender in good faith believes may impair the prospect of payment of all or part of the Obligations, or any Loan Party’s ability to perform any of its material obligations under any of the Loan Documents, or any other document or agreement described in or related to this Agreement, or there occurs any Material Adverse Change in the business or financial condition of any Loan Party;

 

32

 

9.12        If any event or circumstance shall occur which, in the Permitted Discretion of Lender exercised in good faith, would be reasonably likely to cause Lender to suspect that any Loan Party has engaged in fraudulent activity with respect to the Collateral or other matters;

 

9.13        Any director, officer, or individual Guarantor is indicted for a felony offense under state or federal law, or a Loan Party hires an officer or appoints a director who has been convicted of any such felony offense;

 

9.14        If any Loan Party fails to pay any indebtedness or obligation owed to Lender or its Affiliates which is unrelated to the Revolving Credit Facility or this Agreement as it becomes due and payable or the occurrence of any default or event of default under any agreement between any Loan Party and Lender or its Affiliates unrelated to the Loan Documents; provided that if any Loan Party has a good faith dispute with respect to any fee, cost or expense payable to Lender or its Affiliates which is unrelated to the Revolving Credit Facility or this Agreement, such Loan Party shall have up to 15 days after the date on which such obligation becomes due and payable to resolve such dispute or pay such obligation; or

 

9.15        The validity or enforceability of any Loan Document shall at any time for any reason be declared to be null and void, or a proceeding shall be commenced by a Loan Party or its Subsidiaries, or by any Governmental Authority having jurisdiction over a Loan Party or its Subsidiaries, seeking to establish the invalidity or unenforceability thereof, or a Loan Party or its Subsidiaries shall deny that such Loan Party or its Subsidiaries has any liability or obligation purported to be created under any Loan Document; provided that if any Loan Party or any of its Subsidiaries has a good faith dispute with respect to any fee, cost or expense constituting a liability or obligation purported to be created under any Loan Document, such Loan Party or its Subsidiary shall have up to 15 days after the date on which such liability or obligation becomes due and payable to resolve such dispute or pay such liability or obligation.

 

9.16        Any covenant in Section 8 becomes inapplicable due to the lapse of time and Borrowers and Lender fail to come to agreement acceptable to Lender in Lender’s sole discretion to amend the covenant to apply to future periods.

 

10.          RIGHTS AND REMEDIES.

 

10.1        Rights and Remedies.  Upon the occurrence and during the continuation of an Event of Default, Lender may, in addition to any other rights or remedies provided for hereunder or under any other Loan Document or by applicable law, do any one or more of the following:

 

(a)           declare the Obligations (other than the Hedge Obligations, which may be accelerated in accordance with the terms of the applicable Hedge Agreement), whether evidenced by this Agreement or by any of the other Loan Documents immediately due and payable, whereupon the same shall become and be immediately due and payable and Borrowers shall be obligated to repay all of such Obligations in full, without presentment, demand, protest, or further notice or other requirements of any kind, all of which are hereby expressly waived by each Borrower;

 

33

 

(b)           declare the funding obligations of Lender under this Agreement terminated, whereupon such funding obligations shall immediately be terminated together with any obligation of Lender hereunder to make Advances or issue Letters of Credit;

 

(c)           give to an Account Debtor or other Person obligated to pay an Account, a General Intangible, Negotiable Collateral, or other amount due, notice that the Account, General Intangible, Negotiable Collateral or other amount due has been assigned to Lender for security and must be paid directly to Lender and Lender may collect the Accounts, General Intangible and Negotiable Collateral of each Borrower and each other Loan Party directly, and any collection costs and expenses shall constitute part of the Obligations under the Loan Documents;

 

(d)           in Lender’s name or in Borrowers’ name, as Borrowers’ agent and attorney-in-fact, notify the United States Postal Service to change the address for delivery of Borrowers’ mail to any address designated by Lender, and receive and open Borrowers’ mail, applying all Collateral as permitted under this Agreement and promptly forwarding all other mail to Borrowers’ last known address; provided that upon acceleration of the Obligations, Lender, pursuant to the terms of this subsection (d), also may intercept and dispose of Borrowers’ mail, and, after applying all Collateral as permitted under this Agreement, hold all other mail for Borrowers’ account;

 

(e)           without notice to or consent from any Borrower, and without any obligation to pay rent or other compensation, take exclusive possession of all locations where Borrowers conduct their business or have any rights of possession and use the locations to store, process, manufacture, sell, use, and liquidate or otherwise dispose of items that are Collateral, and for any other incidental purposes deemed appropriate by Lender in good faith; and

 

(f)            exercise in respect of the Collateral, in addition to other rights and remedies provided for herein, in the other Loan Documents, or otherwise available to it, all the rights and remedies of a secured party on default under the Code or any other applicable law, including the right to take possession of Collateral (without posting a bond or other form of security, which each Borrower hereby waives), to proceed with or without judicial process (without a prior hearing or notice of hearing, which each Borrower hereby waives) and to sell, lease or otherwise dispose of Collateral for cash or on credit (with or without giving warranties as to condition, fitness, merchantability or title to Collateral, and in the event of a credit sale, Borrowers’ Obligations shall be reduced only to the extent that payments are actually received), and each Borrower will upon Lender’s demand assemble the Collateral and make it available to Lender at any place designated by Lender which is reasonably convenient to all parties.

 

10.2        Disposition of Pledged Interests by Lender.  None of the Pledged Interests existing as of the date of this Agreement are, and none of the Pledged Interests hereafter acquired on the date of acquisition thereof will be, registered or qualified under the various federal or state securities laws of the United States and disposition thereof after an Event of Default may be restricted to one or more private (instead of public) sales in view of the lack of such registration.  Each Loan Party understands that in connection with such disposition, Lender may approach only a restricted number of potential purchasers and further understands that a sale under such circumstances may yield a lower price for the Pledged Interests than if the Pledged Interests were registered and qualified pursuant to federal and state securities laws and sold on the open market.

 

34

 

Each Loan Party, therefore, agrees that:  (a) if Lender shall, pursuant to the terms of this Agreement, sell or cause the Pledged Interests or any portion thereof to be sold at a private sale, Lender shall have the right to rely upon the advice and opinion of any nationally recognized brokerage or investment firm (but shall not be obligated to seek such advice and the failure to do so shall not be considered in determining the commercial reasonableness of such action) as to the best manner in which to offer the Pledged Interest or any portion thereof for sale and as to the best price reasonably obtainable at the private sale thereof; and (b) such reliance shall be conclusive evidence that Lender has handled the disposition in a commercially reasonable manner.

 

10.3        Voting and Other Rights in Respect of Pledged Interests.

 

Upon the occurrence and during the continuation of an Event of Default, (i) Lender may, at its option, and with two (2) Business Days prior notice to such Borrower or such other Loan Party, and in addition to all rights and remedies available to Lender under any other agreement, at law, in equity, or otherwise, exercise all voting rights, or any other ownership or consensual rights (including any dividend or distribution rights) in respect of the Pledged Interests owned by any Borrower or any other Loan Party, but under no circumstances is Lender obligated by the terms of this Agreement to exercise such rights, and (ii) if Lender duly exercises its right to vote any of such Pledged Interests, each Borrower and each other Loan Party hereby appoints Lender, such Borrower’s and such Loan Party’s true and lawful attorney-in-fact and IRREVOCABLE PROXY to vote such Pledged Interests in any manner Lender deems advisable for or against all matters submitted or which may be submitted to a vote of shareholders, partners or members, as the case may be.  The power-of-attorney and proxy granted hereby is coupled with an interest and shall be irrevocable.

 

For so long as such Borrower or such other Loan Party shall have the right to vote the Pledged Interests owned by it, such Borrower and such other Loan Party covenants and agrees that it will not, without the prior written consent of Lender, vote or take any consensual action with respect to such Pledged Interests which would materially adversely affect the rights of Lender or the value of the Pledged Interests.

 

10.4        Additional Rights and Remedies.  Without limiting the generality of the foregoing, each Borrower expressly agrees that:

 

(a)           Lender, without demand of performance or other demand, advertisement or notice of any kind (except a notice specified below of time and place of public or private sale) to or upon any Borrower, any other Loan Party or any other Person (all and each of which demands, advertisements and notices are hereby expressly waived to the maximum extent permitted by the Code or any other applicable law), may take immediate possession of all or any portion of the Collateral and (i) require Loan Parties to, and each Borrower hereby agrees that it will at its own expense and upon request of Lender forthwith, assemble all or part of the Collateral as directed by Lender and make it available to Lender at one or more locations designated by Lender where such Borrower or other Loan Party conducts business, and (ii) without notice except as specified below, sell the Collateral or any part thereof in one or more parcels at public or private sale, at any of Lender’s or Loan Party’s offices or elsewhere, for cash, on credit, and upon such other terms as Lender may deem commercially reasonable.  Each 

 

35

 

Borrower agrees that, to the extent notice of sale shall be required by law, at least 10 days notice to such Borrower of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification and such notice shall constitute a reasonable “authenticated notification of disposition” within the meaning of Section 9-611 of the Code.  Lender shall not be obligated to make any sale of Collateral regardless of notice of sale having been given.  Lender may adjourn any public or private sale from time to time, and such sale may be made at the time and place to which it was so adjourned.  Each Borrower agrees that the internet shall constitute a “place” for purposes of Section 9-610(b) of the Code.  Each Borrower agrees that any sale of Collateral to a licensor pursuant to the terms of a license agreement between such licensor and such Borrower is sufficient to constitute a commercially reasonable sale (including as to method, terms, manner, and time) within the meaning of Section 9-610 of the Code;

(b)           Lender may, in addition to other rights and remedies provided for herein, in the other Loan Documents, or otherwise available to it under applicable law and without the requirement of notice to or upon any Loan Party or any other Person (which notice is hereby expressly waived to the maximum extent permitted by the Code or any other applicable law), (i) with respect to any Loan Party’s Deposit Accounts in which Lender’s Liens are perfected by control under Section 9-104 of the Code, instruct the bank maintaining such Deposit Account for the applicable Loan Party to pay the balance of such Deposit Account to or for the benefit of Lender, and (ii) with respect to any Loan Party’s Securities Accounts in which Lender’s Liens are perfected by control under Section 9-106 of the Code, instruct the securities intermediary maintaining such Securities Account for the applicable Loan Party to (A) transfer any cash in such Securities Account to or for the benefit of Lender, or (B) liquidate any financial assets in such Securities Account that are customarily sold on a recognized market and transfer the cash Proceeds thereof to or for the benefit of Lender;

 

(c)           any cash held by Lender as Collateral and all cash Proceeds received by Lender in respect of any sale of, collection from, or other realization upon all or any part of the Collateral shall be applied against the Obligations in the order set forth in Section 10.5 of this Agreement.  In the event the Proceeds of Collateral are insufficient to satisfy all of the Obligations in full, each Borrower and each other Loan Party shall remain jointly and severally liable for any such deficiency; and

 

(d)           the Obligations arise out of a commercial transaction, and that if an Event of Default shall occur Lender shall have the right to an immediate writ of possession without notice of a hearing.  Lender shall have the right to the appointment of a receiver for each Loan Party or for the properties and assets of each Loan Party, and each Borrower hereby consents to such rights and such appointment and hereby waives any objection such Borrower may have thereto or the right to have a bond or other security posted by Lender.

 

Notwithstanding the foregoing or anything to the contrary contained in Section 10.1, upon the occurrence of any Default or Event of Default described in Section 9.4 or Section 9.5, in addition to the remedies set forth above, without any notice to any Borrower or any other Person or any act by Lender, all obligations of Lender to provide any further extensions of credit hereunder shall automatically terminate and the Obligations (other than the Hedge Obligations), inclusive of all accrued and unpaid interest thereon and all fees and all other amounts owing under this

 

36

 

Agreement or under any of the other Loan Documents, shall automatically and immediately become due and payable and each Borrower shall be obligated to repay all of such Obligations in full, without presentment, demand, protest, or notice of any kind, all of which are expressly waived by each Borrower.

 

10.5        Lender Appointed Attorney in Fact.  Each Borrower hereby irrevocably appoints Lender its attorney-in-fact, with full authority in the place and stead of such Borrower and in the name of such Borrower or otherwise, at such time as an Event of Default has occurred and is continuing, to take any action and to execute any instrument which Lender may reasonably deem necessary or advisable to accomplish the purposes of this Agreement, including:

 

(a)           to ask, demand, collect, sue for, recover, compromise, receive and give acquittance and receipts for moneys due and to become due under or in connection with the Accounts or any other Collateral of such Borrower;

 

(b)           to receive, indorse, and collect any drafts or other instruments, documents, Negotiable Collateral or Chattel Paper;

 

(c)           to file any claims or take any action or institute any proceedings which Lender may deem necessary or desirable for the collection of any of the Collateral of such Borrower or otherwise to enforce the rights of Lender with respect to any of the Collateral;

 

(d)           to repair, alter, or supply Goods, if any, necessary to fulfill in whole or in part the purchase order of any Person obligated to Borrower in respect of any Account of such Borrower;

 

(e)           to use any Intellectual Property or Intellectual Property Licenses of such Borrower including but not limited to any labels, Patents, Trademarks, trade names, URLs, domain names, industrial designs, Copyrights, or advertising matter, in preparing for sale, advertising for sale, or selling Inventory or other Collateral and to collect any amounts due under Accounts, contracts or Negotiable Collateral of such Borrower;

 

(f)            to take exclusive possession of all locations where each Borrower conducts its business or has rights of possession, without notice to or consent of any Borrower or any Loan Party and to use such locations to store, process, manufacture, sell, use, and liquidate or otherwise dispose of items that are Collateral, without obligation to pay rent or other compensation for the possession or use of any location;

 

(g)           Lender shall have the right, but shall not be obligated, to bring suit in its own name or in the applicable Loan Party’s name, to enforce the Intellectual Property and Intellectual Property Licenses and, if Lender shall commence any such suit, the appropriate Borrower shall, at the request of Lender, do any and all lawful acts and execute any and all proper documents reasonably required by Lender in aid of such enforcement; and

 

(h)           to the extent permitted by law, such Borrower hereby ratifies all that such attorney-in-fact shall lawfully do or cause to be done by virtue hereof.  This power of attorney is

 

37

 

coupled with an interest and shall be irrevocable until this Agreement is terminated and all Obligations have been paid in full in cash.

 

10.6        Remedies Cumulative.  The rights and remedies of Lender under this Agreement, the other Loan Documents, and all other agreements shall be cumulative.  Lender shall have all other rights and remedies not inconsistent herewith as provided under the Code, by law, or in equity.  No exercise by Lender of one right or remedy shall be deemed an election, and no waiver by Lender of any Event of Default shall be deemed a continuing waiver.  No delay by Lender shall constitute a waiver, election, or acquiescence by it.

 

10.7        Crediting of Payments and Proceeds.  In the event that the Obligations (other than the Hedge Obligations, which may be accelerated in accordance with the terms of the applicable Hedge Agreement) have been accelerated pursuant to Section 10.1 or Lender has exercised any remedy set forth in this Agreement or any other Loan Document, all payments received by Lender upon the Obligations and all net proceeds from the enforcement of the Obligations shall be applied in such manner as Lender shall determine in its discretion and, thereafter, to Borrowers (to be wired to the Designated Account) or such other Person entitled thereto under applicable law.

 

10.8        Marshaling.  Lender shall not be required to marshal any present or future collateral security (including but not limited to the Collateral) for, or other assurances of payment of, the Obligations or any of them or to resort to such collateral security or other assurances of payment in any particular order, and all of its rights and remedies hereunder and in respect of such collateral security and other assurances of payment shall be cumulative and in addition to all other rights and remedies, however existing or arising.  To the extent that it lawfully may, each Borrower and each other Loan Party hereby agrees that it will not invoke any law relating to the marshaling of collateral which might cause delay in or impede the enforcement of Lender’s rights and remedies under this Agreement or under any other instrument creating or evidencing any of the Obligations or under which any of the Obligations is outstanding or by which any of the Obligations is secured or payment thereof is otherwise assured, and, to the extent that it lawfully may, each Borrower hereby irrevocably waives the benefits of all such laws.

 

10.9        License.  Each Borrower hereby grants to Lender a non-exclusive, worldwide and royalty-free license to use or otherwise exploit all Intellectual Property rights of such Borrower for the purpose of: (a) completing the manufacture of any in-process materials following any Event of Default so that such materials become saleable Inventory, all in accordance with the same quality standards previously adopted by such Borrower for its own manufacturing; and (b) selling, leasing or otherwise disposing of any or all Collateral following any Event of Default.

 

11.          WAIVERS; INDEMNIFICATION.

 

11.1        Demand; Protest; etc.  Each  Borrower waives demand, protest, notice of protest, notice of default or dishonor, notice of payment and nonpayment, nonpayment at maturity, release, compromise, settlement, extension, or renewal of documents, instruments, chattel paper, and guarantees at any time held by Lender on which such Borrower may in any way be liable.

 

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11.2                        Lender’s Liability for Collateral.  Each Borrower hereby agrees that:  (a) so long as Lender complies with its obligations, if any, under the Code, Lender shall not in any way or manner be liable or responsible for:  (i) the safekeeping of the Collateral, (ii) any loss or damage thereto occurring or arising in any manner or fashion from any cause, (iii) any diminution in the value thereof, or (iv) any act or default of any carrier, warehouseman, bailee, forwarding agency, or other Person, and (b) all risk of loss, damage, or destruction of the Collateral shall be borne by each Borrower.

 

11.3                        Indemnification.  Each  Borrower shall pay, indemnify, defend, and hold the Lender-Related Persons (each, an “Indemnified Person”) harmless (to the fullest extent permitted by law) from and against any and all claims, demands, suits, actions, investigations, proceedings, liabilities, fines, costs, penalties, and damages, and all reasonable fees and disbursements of attorneys, experts, or consultants and all other costs and expenses actually incurred in connection therewith or in connection with the enforcement of this indemnification (as and when they are incurred and irrespective of whether suit is brought), at any time asserted against, imposed upon, or incurred by any of them (a) in connection with or as a result of or related to the execution and delivery, enforcement, performance, or administration (including any restructuring, forbearance or workout with respect hereto) of this Agreement, any of the other Loan Documents, or the transactions contemplated hereby or thereby or the monitoring of each Borrower and each other Loan Party’s and its respective Subsidiaries’ compliance with the terms of the Loan Documents, (b) with respect to any investigation, litigation, or proceeding related to this Agreement, any other Loan Document, or the use of the proceeds of the credit provided hereunder (irrespective of whether any Indemnified Person is a party thereto), or any act, omission, event, or circumstance in any manner related thereto, (c) in connection with the custody, preservation, use or operation of, or, upon an Event of Default, the sale of, collection from, or other realization upon, any of the Collateral in accordance with this Agreement and the other Loan Documents, (d) with respect to the failure by any Borrower or any other Loan Party to perform or observe any of the provisions hereof or any other Loan Document, (e) in connection with the exercise or enforcement of any of the rights of Lender hereunder or under any other Loan Document, and (f) in connection with or arising out of any presence or release of Hazardous Materials at, on, under, to or from any assets or properties owned, leased or operated by any Borrower or any other Loan Party or any Subsidiary of a Borrower or any other Loan Party or any Environmental Actions, Environmental Liabilities or Remedial Actions related in any way to any such assets or properties of such Loan Party or any of its Subsidiaries (each and all of the foregoing, the “Indemnified Liabilities”).  The foregoing to the contrary notwithstanding, no Borrower nor any other Loan Party shall have any obligation to any Indemnified Person under this Section 11.3 with respect to any Indemnified Liability that a court of competent jurisdiction finally determines to have resulted from the gross negligence or willful misconduct of such Indemnified Person or its officers, directors, employees, or attorneys.  This provision shall survive the termination of this Agreement and the repayment of the Obligations.  If any Indemnified Person makes any payment to any other Indemnified Person with respect to an Indemnified Liability as to which a Borrower or any other Loan Party was required to indemnify the Indemnified Person receiving such payment, the Indemnified Person making such payment is entitled to be indemnified and reimbursed by such Borrower or such other Loan Party with respect thereto.  WITHOUT LIMITATION, THE FOREGOING INDEMNITY SHALL APPLY TO EACH INDEMNIFIED PERSON WITH RESPECT TO INDEMNIFIED LIABILITIES WHICH IN WHOLE OR IN PART ARE CAUSED BY OR ARISE OUT OF ANY NEGLIGENT

 

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ACT OR OMISSION OF SUCH INDEMNIFIED PERSON OR OF ANY OTHER PERSON.

 

12.                               NOTICES.

 

Unless otherwise provided in this Agreement, all notices or demands relating to this Agreement or any other Loan Document shall be in writing and (except for financial statements and other informational documents which may be sent by first-class mail, postage prepaid) shall be personally delivered or sent by certified mail (postage prepaid, return receipt requested), overnight courier, electronic mail (at such email addresses as a party may designate in accordance herewith), or telefacsimile.  In the case of notices or demands to Borrowers, any other Loan Party or Lender, as the case may be, they shall be sent to the respective address set forth below:

 

If to Borrowers:                                                             STARTEK, INC.

STARTEK USA, INC.

44 Cook Street, Suite 400

Denver, CO 80206

Attn:  Dave M. Gomez, General Counsel

Fax No.: (303) 388-9970

 

with courtesy copies to

(which shall not constitute

Notice for purposes of this

Section 12):                                                                                  STARTEK, INC.

44 Cook Street, Suite 400

Denver, CO 80206

Attn: Lisa Weaver, Chief Financial Officer

Fax No.:  (303) 388-9970

 

and

 

FAEGRE BAKER DANIELS LLP

1470 Walnut Street, Suite 300

Boulder, CO 80302

Attn: John R. Marcil, Esq.

Fax No.: (303) 447-7800

 

If to Lender:                                                                              WELLS FARGO BANK, NATIONAL ASSOCIATION

MAC 7300-210

1740 Broadway

Denver, CO 80274

Attn: Timothy P. Ulrich

Fax No.:  (303) 863-4904

 

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with courtesy copies to

(which shall not constitute

Notice for purposes of this

Section 12)                                                                                          Markus Williams Young & Zimmermann LLC

1700 Lincoln Street, Suite 4000

Denver, CO 80203

Attn:  Thomas H. Keyse, Esq.

Fax No.:  (303) 830-0809

 

Any party hereto may change the address at which they are to receive notices hereunder, by notice in writing in the foregoing manner given to the other parties.  All notices or demands sent in accordance with this Section 12 shall be deemed received on the earlier of the date of actual receipt or 3 Business Days after the deposit thereof in the mail; provided, that (a) notices sent by overnight courier service shall be deemed to have been given when received, (b) notices by facsimile shall be deemed to have been given when sent (except that, if not given during normal business hours for the recipient, shall be deemed to have been given at the opening of business on the next Business Day for the recipient) and (c) notices by electronic mail shall be deemed received upon the sender’s receipt of an acknowledgment from the intended recipient (such as by the “return receipt requested” function, as available, return email or other written acknowledgment).  Any notice given by Lender to any Borrower as provided in this Section 12 shall be deemed sufficient notice as to all Borrowers, regardless of whether each Borrower is sent a separate copy of such notice or whether each Borrower is specifically identified in such notice.

 

13.                               CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.

 

(a)                                 THE VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (UNLESS EXPRESSLY PROVIDED TO THE CONTRARY IN ANOTHER LOAN DOCUMENT IN RESPECT OF SUCH OTHER LOAN DOCUMENT), THE CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT HEREOF AND THEREOF, AND THE RIGHTS OF THE PARTIES HERETO AND THERETO WITH RESPECT TO ALL MATTERS ARISING HEREUNDER OR THEREUNDER OR RELATED HERETO OR THERETO AS WELL AS ALL CLAIMS, CONTROVERSIES OR DISPUTES ARISING UNDER OR RELATED TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS AND NOT THE CONFLICTS OF LAW PROVISIONS OF THE STATE OF COLORADO.

 

(b)                                 THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS MAY BE TRIED AND LITIGATED IN THE STATE AND, TO THE EXTENT PERMITTED BY APPLICABLE LAW, FEDERAL COURTS LOCATED IN THE CITY AND COUNTY OF DENVER, STATE OF COLORADO; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT LENDER’S 

 

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OPTION, IN THE COURTS OF ANY JURISDICTION WHERE LENDER ELECTS TO BRING SUCH ACTION OR WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND.  EACH OF EACH BORROWER AND LENDER WAIVES, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO ASSERT THE DOCTRINE OF FORUM  NON  CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 13(b).

 

(c)                                  TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, EACH OF EACH BORROWER AND LENDER HEREBY WAIVES ITS RESPECTIVE RIGHTS, IF ANY, TO A JURY TRIAL OF ANY CLAIM, CONTROVERSY, DISPUTE OR CAUSE OF ACTION DIRECTLY OR INDIRECTLY BASED UPON OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS (EACH, A “CLAIM”).  EACH OF EACH BORROWER AND LENDER REPRESENTS THAT IT HAS REVIEWED THIS WAIVER AND KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.  IN THE EVENT OF LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

 

(d)                                 NO CLAIM MAY BE MADE BY ANY LOAN PARTY AGAINST LENDER OR, ANY AFFILIATE OF LENDER OR ANY, DIRECTOR, OFFICER, EMPLOYEE, COUNSEL, REPRESENTATIVE, AGENT, OR ATTORNEY-IN-FACT OF ANY OF THEM FOR ANY SPECIAL, INDIRECT, CONSEQUENTIAL, OR PUNITIVE DAMAGES IN RESPECT OF ANY CLAIM FOR BREACH OF CONTRACT OR ANY OTHER THEORY OF LIABILITY ARISING OUT OF OR RELATED TO THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY ACT, OMISSION, OR EVENT OCCURRING IN CONNECTION THEREWITH, AND EACH LOAN PARTY HEREBY WAIVES, RELEASES, AND AGREES NOT TO SUE UPON ANY CLAIM FOR SUCH DAMAGES, WHETHER OR NOT ACCRUED AND WHETHER OR NOT KNOWN OR SUSPECTED TO EXIST IN ITS FAVOR.

 

14.                               ASSIGNMENTS; SUCCESSORS.  This Agreement shall bind and inure to the benefit of the respective successors and assigns of each of the parties; provided, however, that no Borrower or any other Loan Party may assign this Agreement or any rights or duties hereunder without Lender’s prior written consent, which consent may be withheld by Lender in Lender’s sole and absolute discretion, and any prohibited assignment shall be absolutely void ab initio.  No consent to assignment by Lender shall release any Borrower or any other Loan Party from its Obligations.  Lender may assign this Agreement and the other Loan Documents in whole or in part and its rights and duties hereunder or grant participations in the Obligations hereunder and thereunder and no consent or approval by any Borrower or any other Loan Party is required in connection with any such assignment or participation; provided, however, that if within 10 days of receipt of notice from Lender of any such assignment, any Borrower notifies Lender in writing that it wishes to pay all 

 

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Obligations in full, such Borrower shall have a period of 45 days after the date of such written notification to Lender to complete such payment, and such payment may exclude any termination and reduction fees otherwise payable as set forth in Schedule 2.12.

 

15.                               AMENDMENTS; WAIVERS.  No amendment or modification of any Loan Documents, or any other document or agreement described in or related to this Agreement, shall be effective unless it has been agreed to by Lender and Borrowers in writing and specifically states that it is intended to amend or modify specific Loan Documents, or any other document or agreement described in or related to this Agreement.  No failure by Lender to exercise any right, remedy, or option under this Agreement or any other Loan Document, or delay by Lender in exercising the same, will operate as a waiver thereof.  No waiver by Lender will be effective unless it is in writing, and then only to the extent specifically stated.  No waiver by Lender on any occasion shall affect or diminish Lender’s rights thereafter to require strict performance by Borrowers or any other Loan Party of any provision of this Agreement.  Lender’s rights under this Agreement and the other Loan Documents will be cumulative and not exclusive of any other right or remedy that Lender may have.

 

16.                               TAXES.

 

(a)                                 All payments made by any Borrower or any other Loan Party hereunder or under any note or other Loan Document will be made without setoff, counterclaim, or other defense.  In addition, all such payments will be made free and clear of, and without deduction or withholding for, any present or future Taxes (other than overall net income taxes on the recipient imposed by the jurisdiction in which the recipient is organized or conducts business (other than any jurisdiction in which the recipient is deemed to conduct business solely as the result of entering into this Agreement or any other Loan Document or receiving any payment or taking any action thereunder) and taxes imposed by FATCA). In the event any deduction or withholding of Taxes is required, each Borrower shall comply with the next sentence of this Section 16(a).  If any Taxes are so levied or imposed, each Borrower and each other Loan Party agree(s) to pay the full amount of such Taxes and, except with respect to taxes imposed by FATCA, such additional amounts as may be necessary so that every payment of all amounts due under this Agreement, any note, or Loan Document, including any amount paid pursuant to this Section 16(a) after withholding or deduction for or on account of any Taxes, will not be less than the amount provided for herein; provided, however, that Borrowers or Loan Parties shall not be required to increase any such amounts if the increase in such amount payable results from Lender’s own willful misconduct or gross negligence (as finally determined by a court of competent jurisdiction).  Each Borrower and each other Loan Party will furnish to Lender as promptly as possible after the date the payment of any Tax is due pursuant to applicable law, certified copies of tax receipts evidencing such payment by such Borrower.

 

(b)                                 Each Borrower agrees to pay any present or future stamp, value added or documentary taxes or any other excise or property taxes, charges, or similar levies that arise from any payment made hereunder or from the execution, delivery, performance, recordation, or filing of, or otherwise with respect to, this Agreement or any other Loan Document.

 

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(c)                                  If a payment made to Lender under any Loan Document would be subject to U.S. federal withholding tax imposed by FATCA if Lender were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), Lender shall deliver to Borrowers at the time or times prescribed by law and at such time or times reasonably requested by Borrowers such documentation prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by Borrowers as may be necessary for Borrowers to comply with their obligations under FATCA and to determine that Lender has complied with Lender’s obligations under FATCA or to determine the amount to deduct and withhold from such payment.

 

17.                               GENERAL PROVISIONS.

 

17.1                        Effectiveness.  This Agreement shall be binding and deemed effective when executed by each Borrower and Lender.

 

17.2                        Section Headings.  Headings and numbers have been set forth herein for convenience only.  Unless the contrary is compelled by the context, everything contained in each Section applies equally to this entire Agreement.

 

17.3                        Interpretation.  Neither this Agreement nor any uncertainty or ambiguity herein shall be construed against Lender or any Loan Party, whether under any rule of construction or otherwise.  On the contrary, this Agreement has been reviewed by all parties and shall be construed and interpreted according to the ordinary meaning of the words used so as to accomplish fairly the purposes and intentions of all parties hereto.

 

17.4                        Severability of Provisions.  Each provision of this Agreement shall be severable from every other provision of this Agreement for the purpose of determining the legal enforceability of any specific provision.

 

17.5                        Debtor-Creditor Relationship.  The relationship between Lender, on the one hand, and the Loan Parties, on the other hand, is solely that of creditor and debtor.  Lender shall not have (and shall not be deemed to have) any fiduciary relationship or duty to any Loan Party arising out of or in connection with the Loan Documents or the transactions contemplated thereby, and there is no agency or joint venture relationship between Lender, on the one hand, and the Loan Parties, on the other hand, by virtue of any Loan Document or any transaction contemplated therein.

 

17.6                        Counterparts; Electronic Execution.  This Agreement may be executed in any number of counterparts and by different parties on separate counterparts, each of which, when executed and delivered, shall be deemed to be an original, and all of which, when taken together, shall constitute but one and the same Agreement.  Delivery of an executed counterpart of this Agreement by telefacsimile or other electronic method of transmission shall be equally as effective as delivery of an original executed counterpart of this Agreement.  Any party delivering an executed counterpart of this Agreement by telefacsimile or other electronic method of transmission also shall deliver an original executed counterpart of this Agreement but the failure to deliver an original executed counterpart shall not affect the validity, enforceability, and binding effect of this Agreement.

 

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17.7                        Revival and Reinstatement of Obligations.  If the incurrence or payment of the Obligations by any Borrower or any Guarantor or the transfer to Lender of any property should for any reason subsequently be asserted, or declared, to be void or voidable under any state or federal law relating to creditors’ rights, including provisions of the Bankruptcy Code relating to fraudulent conveyances, preferences, or other voidable or recoverable payments of money or transfers of property (each, a “Voidable Transfer”), and if Lender is required to repay or restore, in whole or in part, any such Voidable Transfer, or elects to do so upon the reasonable advice of its counsel, then, as to any such Voidable Transfer, or the amount thereof that Lender is required or elects to repay or restore, and as to all reasonable costs, expenses, and attorneys fees of Lender related thereto, the liability of such Borrower or Guarantor automatically shall be revived, reinstated, and restored and shall exist as though such Voidable Transfer had never been made and all of Lender’s Liens in the Collateral shall be automatically reinstated without further action.

 

17.8                        Confidentiality.

 

(a)                                 Lender agrees that material, non-public information regarding the Loan Parties and their Subsidiaries, their operations, assets, and existing and contemplated business plans (“Confidential Information”) shall be treated by Lender in a confidential manner, and shall not be disclosed by Lender to Persons who are not parties to this Agreement, except:  (i) to attorneys for and other advisors, accountants, auditors, and consultants to Lender and to employees, directors and officers of Lender (the Persons in this clause (i), “Lender Representatives” on a “need to know” basis in connection with this Agreement and the transactions contemplated hereby and on a confidential basis, (ii) to Subsidiaries and Affiliates of Lender, provided that any such Subsidiary or Affiliate shall have agreed to receive such information hereunder subject to the terms of this Section 17.8, (iii) as may be required by regulatory authorities, (iv) as may be required by statute, decision, or judicial or administrative order, rule, or regulation; provided that (x) prior to any disclosure under this clause (iv), the disclosing party agrees to provide Borrowers with prior notice thereof, to the extent that it is practicable to do so and to the extent that the disclosing party is permitted to provide such prior notice to Borrowers pursuant to the terms of the applicable statute, decision, or judicial or administrative order, rule, or regulation and (y) any disclosure under this clause (iv) shall be limited to the portion of the Confidential Information as may be required by such statute, decision, or judicial or administrative order, rule, or regulation, (v) as may be agreed to in advance in writing by Borrowers, (vi) as requested or required by any Governmental Authority pursuant to any subpoena or other legal process, provided, that, (x) prior to any disclosure under this clause (vi) the disclosing party agrees to provide Borrowers with prior written notice thereof, to the extent that it is practicable to do so and to the extent that the disclosing party is permitted to provide such prior written notice to Borrowers pursuant to the terms of the subpoena or other legal process and (y) any disclosure under this clause (vi) shall be limited to the portion of the Confidential Information as may be required by such Governmental Authority pursuant to such subpoena or other legal process, (vii) as to any such information that is or becomes generally available to the public (other than as a result of prohibited disclosure by Lender or Lender Representatives), (viii) in connection with any assignment, participation or pledge of Lender’s interest under this Agreement, provided that prior to receipt of Confidential Information any such assignee, participant, or pledgee shall have agreed in writing to receive such Confidential Information hereunder subject to the terms of this Section 17.8, (ix) in connection with any 

 

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litigation or other adversary proceeding involving parties hereto which such litigation or adversary proceeding involves claims related to the rights or duties of such parties under this Agreement or the other Loan Documents; and (x) in connection with, and to the extent reasonably necessary for, the exercise of any secured creditor remedy under this Agreement or under any other Loan Document.

 

(b)                                 Anything in this Agreement to the contrary notwithstanding, Lender may use the name, logos, and other insignia of the Loan Parties and the Maximum Credit provided hereunder in any “tombstone” or comparable advertising, on its website or in other marketing materials of Lender.

 

17.9                        Lender Expenses.  Each Borrower agrees to pay the Lender Expenses on the earlier of (a) the first day of the month following the date on which such Lender Expenses were first incurred, or (b) the date on which demand therefor is made by Lender and each Borrower agrees that its obligations contained in this Section 17.9 shall survive payment or satisfaction in full of all other Obligations.

 

17.10                 Setoff.  Lender may at any time, in its sole discretion and without demand or notice to anyone, setoff any liability owed to any Borrower, or any Guarantor or any other Loan Party by Lender against any of the Obligations, whether or not due.

 

17.11                 Survival.  All representations and warranties made by the Loan Parties in the Loan Documents and in the certificates or other instruments delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of the Loan Documents and the making of any loans and issuance of any Letters of Credit, regardless of any investigation made by any such other party or on its behalf and notwithstanding that Lender may have had notice or knowledge of any Default or Event of Default or incorrect representation or warranty at the time any credit is extended hereunder, and shall continue in full force and effect as long as the principal of or any accrued interest on any loan or any fee or any other amount payable under this Agreement is outstanding and unpaid or any Letter of Credit is outstanding and so long as the obligation of Lender to provide extensions of credit hereunder has not expired or been terminated.

 

17.12                 Patriot Act.  Lender hereby notifies the Loan Parties that, pursuant to the requirements of the Patriot Act, it is required to obtain, verify and record information that identifies each Loan Party, which information includes the name and address of each Loan Party and other information that will allow Lender to identify each Loan Party in accordance with the Patriot Act. In addition, if Lender is required by law or regulation or internal policies to do so, it shall have the right to periodically conduct (a) Patriot Act searches, OFAC/PEP searches, and customary individual background checks for the Loan Parties, and (b) OFAC/PEP searches and customary individual background checks of the Loan Parties’ senior management and key principals, and each Borrower agrees to cooperate in respect of the conduct of such searches and further agrees that the reasonable costs and charges for such searches shall constitute Lender Expenses hereunder and be for the account of Borrowers.

 

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17.13                 Integration.  This Agreement, together with the other Loan Documents, reflects the entire understanding of the parties with respect to the transactions contemplated hereby and shall not be contradicted or qualified by any other agreement, oral or written, before the date hereof.  The foregoing to the contrary notwithstanding, all Bank Product Agreements, if any, are independent agreements governed by the written provisions of such Bank Product Agreements, which will remain in full force and effect, unaffected by any repayment, prepayments, acceleration, reduction, increase, or change in the terms of any credit extended hereunder, except as otherwise expressly provided in such Bank Product Agreement.

 

17.14                 Bank Product Providers.  Each Bank Product Provider shall be deemed a third party beneficiary hereof and of the provisions of the other Loan Documents for purposes of any reference in a Loan Document to the parties for whom Lender is acting.  Lender hereby agrees to act as agent for such Bank Product Providers and, by virtue of entering into a Bank Product Agreement, the applicable Bank Product Provider shall be automatically deemed to have appointed Lender as its agent and to have accepted the benefits of the Loan Documents; it being understood and agreed that the rights and benefits of each Bank Product Provider under the Loan Documents consist exclusively of such Bank Product Provider’s being a beneficiary of the Liens and security interests (and, if applicable, guarantees) granted to Lender and the right to share in payments and collections of the Collateral as more fully set forth herein and in the other Loan Documents. In addition, each Bank Product Provider, by virtue of entering into a Bank Product Agreement, shall be automatically deemed to have agreed that Lender shall have the right, but shall have no obligation, to establish, maintain, relax, or release Reserves in respect of the Bank Product Obligations and that, if Reserves are established, there is no obligation on the part of Lender to determine or ensure whether the amount of any such Reserve is appropriate or not.  Notwithstanding anything to the contrary in this Agreement or any other Loan Document, no Bank Product Provider shall have any voting or approval rights hereunder solely by virtue of its status as the provider or holder of such agreements or products or the Obligations owing thereunder, nor shall the consent of any such provider or holder be required for any matter hereunder or under any of the other Loan Documents, including as to any matter relating to the Collateral or the release of Collateral or any other Loan Party.

 

[Signature pages to follow]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered under seal as of the date first above written.

 

BORROWERS:

 

	
 
    	
STARTEK, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Lisa Bullington-Weaver
    
	
 
    	
 
    	
 
    
	
 
    	
Name:
    	
Lisa   Bullington-Weaver
    
	
 
    	
 
    
	
 
    	
Title:
    	
Senior   Vice President and Chief Financial Officer
    
	
 
    	
 
    
	
 
    	
STARTEK   USA, INC.
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Lisa Bullington-Weaver
    
	
 
    	
 
    	
 
    
	
 
    	
Name:
    	
Lisa   Bullington-Weaver
    
	
 
    	
 
    
	
 
    	
Title:
    	
Senior   Vice President and Chief Financial Officer
    
	
 
    
	
 
    
	
LENDER:
    
	
 
    	
 
    
	
 
    	
WELLS   FARGO BANK, NATIONAL ASSOCIATION
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Josephine Camalian
    
	
 
    	
 
    	
 
    
	
 
    	
Name:
    	
Josephine   Camalian
    
	
 
    	
 
    	
 
    
	
 
    	
Title:   Authorized Signatory
    
						

 

Signature Page to Credit and Security Agreement

 

 

Schedule 1.1

 

TO CREDIT AND SECURITY AGREEMENT

 

DEFINITIONS

 

a.     Definitions.  As used in this Agreement, the following terms shall have the following definitions:

 

“Account” means an account (as that term is defined in Article 9 of the Code).

 

“Account Debtor” means an account debtor (as that term is defined in the Code).

 

“Additional Documents” has the meaning specified therefor in Section 6.15 of this Agreement.

 

“Adjusted EBITDA” means, with respect to any fiscal period, Borrowers’ consolidated net income (or loss), minus (i) extraordinary gains, (ii) interest income, (iii) non-operating income and income tax benefits, (iv) decreases in any change in LIFO reserves, (v) reductions in post-Closing Date restructuring accruals due to cash payments in such fiscal period and (vi) reductions in pre-Closing Date restructuring accruals due to cash payments in such fiscal period, but only to the extent that such cash payments exceed $1,300,000, plus (vii) non-cash extraordinary losses, (viii) Interest Expense, (ix) income taxes, (x) depreciation and amortization, (xi) increases in any change in LIFO reserves for such period and (xii) non-cash stock compensation, in each case determined on a consolidated basis in accordance with GAAP.

 

“Advances” has the meaning specified therefor in Section 2.1(a) of this Agreement.

 

“Affiliate” means, as applied to any Person, any other Person who controls, is controlled by, or is under common control with, such Person.  For purposes of this definition, “control” means the possession, directly or indirectly through one or more intermediaries, of the power to direct the management and policies of a Person, whether through the ownership of Stock, by contract, or otherwise; provided, however, that, for purposes of the definition of Eligible Accounts and Section 7.12 of this Agreement: (a) any Person which owns directly or indirectly 10% (or 30%, with respect to Parent) or more of the Stock having ordinary voting power for the election of the board of directors or equivalent governing body of a Person or 10% (or 30%, with respect to Parent) or more of the partnership or other ownership interests of a Person (other than as a limited partner of such Person) shall be deemed an Affiliate of such Person, (b) each director (or comparable manager) of a Person shall be deemed to be an Affiliate of such Person, and (c) each partnership in which a Person is a general partner shall be deemed an Affiliate of such Person.

 

“Agreement” means the Credit and Security Agreement to which this Schedule 1.1 is attached.

 

“Allocable Amount” has the meaning specified therefor in Section 2.16.

 

Schedule 1.1 - 1

 

“Authorized Person” means any one of the individuals identified on Schedule A-2, as such schedule is updated from time to time by written notice from Borrowers to Lender.

 

“Availability” means, as of any date of determination, the amount that Borrowers are entitled to borrow as Advances under Section 2.1 of this Agreement (after giving effect to all then outstanding Obligations).

 

“Bank Product” means any one or more of the following financial products or accommodations extended to a Borrower or any of its Subsidiaries by a Bank Product Provider:  (a) commercial credit cards, (b) commercial credit card processing services, (c) debit cards, (d) stored value cards, (e) purchase cards (including so-called “procurement cards” or “P-cards”), (f) Cash Management Services, or (g) transactions under Hedge Agreements.

 

“Bank Product Agreements” means those agreements entered into from time to time by a Borrower or any of its Subsidiaries with a Bank Product Provider in connection with the obtaining of any of the Bank Products, including, without limitation, all Cash Management Documents.

 

“Bank Product Collateralization” means providing cash collateral (pursuant to documentation reasonably satisfactory to Lender) to be held by Lender for the benefit of the Bank Product Provider in an amount determined by Lender as sufficient to satisfy the reasonably estimated credit exposure with respect to the then existing Bank Product Obligations (other than Hedge Obligations).

 

“Bank Product Obligations” means (a) all obligations, liabilities, reimbursement obligations, fees, or expenses owing by a Borrower or any of its Subsidiaries to Lender or another Bank Product Provider pursuant to or evidenced by a Bank Product Agreement 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, and (b) all Hedge Obligations.

 

“Bank Product Provider” means Lender or any of its Affiliates that provide Bank Products to a Borrower or any of its Subsidiaries.

 

“Bank Product Reserve Amount” means, as of any date of determination, the Dollar amount of Reserves that Lender has determined it is necessary or appropriate to establish (based upon Lender’s reasonable determination of the Bank Product Providers’ credit and operating risk exposure to Borrowers and their Subsidiaries in respect of Bank Product Obligations) in respect of Bank Products then provided or outstanding.

 

“Bankruptcy Code” means title 11 of the United States Code, as in effect from time to time.

 

“Benefit Plan” means a “defined benefit plan” (as defined in Section 3(35) of ERISA) for which any Borrower or any of its Subsidiaries or ERISA Affiliates has been an “employer” (as defined in Section 3(5) of ERISA) within the past six years.

 

Schedule 1.1 - 2

 

“Board of Directors” means the board of directors (or comparable managers) of a Borrower or any other Loan Party or any committee thereof duly authorized to act on behalf of the board of directors (or comparable managers).

 

“Books” means books and records (including a Borrower’s or any other Loan Party’s Records indicating, summarizing, or evidencing such Borrower’s or such other Loan Party’s assets (including the Collateral) or liabilities, such Borrower’s or such other Loan Party’s Records relating to such Borrower’s or such other Loan Party’s business operations or financial condition, or such Borrower’s or such other Loan Party’s Goods or General Intangibles related to such information).

 

“Borrowers” means StarTek, Inc., a Delaware corporation, and StarTek USA, Inc., a Colorado corporation, jointly and severally.

 

“Borrowing” means a borrowing consisting of Advances (i) requested by Borrowers, (ii) made automatically pursuant to Section 2.3(c) without the request of Borrowers, (iii) made by Lender pursuant to Section 2.6(c), or (iv) a Protective Advance.

 

“Borrowing Base” means, as of any date of determination, the result of:

 

(a)           85% (less the amount, if any, of the Dilution Reserve, if applicable) of the amount of Eligible Accounts, minus

 

(b)           85% (less the amount, if any, of the Dilution Reserve, if applicable) of the Transition Expense Estimate, minus

 

(c)           85% (less the amount, if any, of the Dilution Reserve, if applicable) of the FX Exposure Amount, minus

 

(d)           the aggregate amount of other Reserves, if any, established by Lender.

 

“Borrowing Base Certificate” means a form of borrowing base certificate in form and substance acceptable to Lender.

 

“Business Day” means any day that is not a Saturday, Sunday, or other day on which banks are authorized or required to close pursuant to the rules and regulations of the Federal Reserve System.

 

“Capital Expenditures” means, with respect to any Person for any period, the aggregate of all expenditures by such Person and its Subsidiaries during such period that are capital expenditures as determined in accordance with GAAP, whether such expenditures are paid in cash or financed.

 

“Capitalized Lease Obligation” means that portion of the obligations under a Capital Lease that is required to be capitalized in accordance with GAAP.

 

“Capital Lease” means a lease that is required to be capitalized for financial reporting purposes in accordance with GAAP.

 

Schedule 1.1 - 3

 

“Cash Equivalents” means (a) marketable direct obligations issued by, or unconditionally guaranteed by, the United States or issued by any agency thereof and backed by the full faith and credit of the United States, in each case maturing within 1 year from the date of acquisition thereof, (b) marketable direct obligations issued or fully guaranteed by any state of the United States or any political subdivision of any such state or any public instrumentality thereof maturing within 1 year from the date of acquisition thereof and having one of the two highest ratings obtainable from either Standard & Poor’s Rating Group (“S&P”) or Moody’s Investors Service, Inc. (“Moody’s”), (c) commercial paper maturing no more than 270 days from the date of creation thereof and, at the time of acquisition, having a rating of at least A-1 from S&P or at least P-1 from Moody’s, (d) certificates of deposit, time deposits, overnight bank deposits or bankers’ acceptances maturing within 1 year from the date of acquisition thereof issued by any bank organized under the laws of the United States or any state thereof or the District of Columbia or any United States branch of a foreign bank having combined capital and surplus of not less than $250,000,000, (e) Deposit Accounts maintained with (i) any bank that satisfies the criteria described in clause (d) above, or (ii) any other bank organized under the laws of the United States or any state thereof so long as the full amount maintained with any such other bank is insured by the Federal Deposit Insurance Corporation, (f) repurchase obligations of any commercial bank satisfying the requirements of clause (d) of this definition or recognized securities dealer having combined capital and surplus of not less than $250,000,000, having a term of not more than seven days, with respect to securities satisfying the criteria in clauses (a) or (d) above, (g) debt securities with maturities of six months or less from the date of acquisition backed by standby letters of credit issued by any commercial bank satisfying the criteria described in clause (d) above, and (h) Investments in money market funds substantially all of whose assets are invested in the types of assets described in clauses (a) through (g) above.

 

“Cash Management Documents” means the agreements governing each of the Cash Management Services of Lender utilized by a Borrower, which agreements shall currently include the Master Agreement for Treasury Management Services or other applicable treasury management services agreement, the “Acceptance of Services”, the “Service Description” governing each such treasury management service used by a Borrower, and all replacement or successor agreements which govern such Cash Management Services of Lender.

 

“Cash Management Services” means any cash management or related services including treasury, depository, return items, overdraft, controlled disbursement, merchant stored value cards, e-payables services, electronic funds transfer, interstate depository network, automatic clearing house transfer (including the Automated Clearing House processing of electronic funds transfers through the direct Federal Reserve Fedline system) and other cash management arrangements.

 

“Cash Management Transition Period” has the meaning specified in Section 6.12(j)(i) of this Agreement.

 

“CFC” means a controlled foreign corporation (as that term is defined in the IRC).

 

“Change of Control” means that (a) Borrowers fail to own and control, directly or indirectly, 100% of the Stock of each Borrower’s Subsidiaries having the right to vote for the election of members of the Board of Directors, (b) any “person” or “group” (within the meaning

 

Schedule 1.1 - 4

 

of Sections 13(d) and 14(d) of the Exchange Act), other than Borrowers, becomes the beneficial owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of 20%, or more, of the Stock of a Borrower’s Subsidiaries having the right to vote for the election of members of the Board of Directors, (c) a majority of the members of the Board of Directors of Parent do not constitute Continuing Directors, or (d) Parent shall fail to own and control 100% of the Stock of StarTek USA, Inc.

 

“Chattel Paper” means chattel paper (as that term is defined in the Code), and includes tangible chattel paper and electronic chattel paper.

 

“Closing Date” means the date of the making of the initial Advance (or other extension of credit) under this Agreement.

 

“Code” means the Colorado Uniform Commercial Code, as in effect from time to time; provided, however, that in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection, priority, or remedies with respect to Lender’s Lien on any Collateral is governed by the Uniform Commercial Code as enacted and in effect in a jurisdiction other than the State of Colorado, the term “Code” shall mean the Uniform Commercial Code as enacted and in effect in such other jurisdiction solely for purposes of the provisions thereof relating to such attachment, perfection, priority, or remedies.  To the extent that defined terms set forth herein shall have different meanings under different Articles under the Uniform Commercial Code, the meaning assigned to such defined term under Article 9 of the Uniform Commercial Code shall control.

 

“Collateral” means all of each Borrower’s now owned or hereafter acquired:

 

(a)           Accounts;

 

(b)           Books;

 

(c)           Chattel Paper;

 

(d)           Deposit Accounts, including the following Deposit Accounts with the Existing Lender:  [*];

 

(e)           Goods, including Equipment and Fixtures;

 

(f)            General Intangibles, including, without limitation, Intellectual Property and Intellectual Property Licenses;

 

(g)           Inventory;

 

(h)           Investment Related Property, including, without limitation, Permitted Investments;

 

(i)            Negotiable Collateral;

 

(j)            Supporting Obligations;

 

Schedule 1.1 - 5

 

(k)           Commercial Tort Claims;

 

(l)            money, Cash Equivalents, or other assets of such Loan Party that now or hereafter come into the possession, custody, or control of Lender (or its agent or designee);

 

(m)          the Real Property Collateral; and

 

(n)           all of the proceeds (as such term is defined in the Code) and products, whether tangible or intangible, of any of the foregoing, including proceeds of insurance or Commercial Tort Claims covering or relating to any or all of the foregoing, and any and all Accounts, Books, Chattel Paper, Deposit Accounts, Equipment, Fixtures, General Intangibles (including, without limitation, Intellectual Property and Intellectual Property Licenses), Inventory, Investment Related Property, Negotiable Collateral, Supporting Obligations, money, or other tangible or intangible property resulting from the sale, lease, license, exchange, collection, or other disposition of any of the foregoing, the proceeds of any award in condemnation with respect to any of the foregoing, any rebates or refunds, whether for taxes or otherwise, and all proceeds of any such proceeds, or any portion thereof or interest therein, and the proceeds thereof, and all proceeds of any loss of, damage to, or destruction of the above, whether insured or not insured, and, to the extent not otherwise included, any indemnity, warranty, or guaranty payable by reason of loss or damage to, or otherwise with respect to any of the foregoing (collectively, the “Proceeds”).  Without limiting the generality of the foregoing, the term “Proceeds” includes whatever is receivable or received when Investment Related Property or proceeds are sold, exchanged, collected, or otherwise disposed of, whether such disposition is voluntary or involuntary, and includes proceeds of any indemnity or guaranty payable to such Loan Party or Lender from time to time with respect to any of the Investment Related Property.

 

“Collateral Access Agreement” means a landlord waiver, bailee letter, or acknowledgement agreement of any lessor, warehouseman, processor, consignee, or other Person in possession of, having a Lien upon, or having rights or interests in a Loan Party’s or its Subsidiaries’ Books, Equipment, Accounts or Inventory, in each case, in favor of Lender with respect to the Collateral at such premises or otherwise in the custody, control or possession of such lessor, consignee or other Person and in form and substance reasonably satisfactory to Lender.

 

“Collection Account” means the Deposit Account identified on Schedule A-1.

 

“Collections” means all cash, checks, notes, instruments, and other items of payment (including insurance Proceeds, cash Proceeds of asset sales, rental Proceeds, and tax refunds).

 

“Commercial Tort Claims” means commercial tort claims (as that term is defined in the Code), and includes those commercial tort claims listed on Schedule 5.6(d) to the Information Certificate.

 

“Compliance Certificate” means a certificate substantially in the form of Exhibit C-1 delivered by each chief financial officer of Borrowers to Lender.

 

Schedule 1.1 - 6

 

“Confidential Information” has the meaning specified therefor in Section 17.8 of this Agreement.

 

“Continuing Director” means (a) any member of the Board of Directors who was a director (or comparable manager) of any Borrower on the Closing Date, and (b) any individual who becomes a member of the Board of Directors after the Closing Date if such individual was approved, appointed or nominated for election to the Board of Directors by a majority of the Continuing Directors, but excluding any such individual originally proposed for election in opposition to the Board of Directors in office at the Closing Date in an actual or threatened election contest relating to the election of the directors (or comparable managers) of any Borrower and whose initial assumption of office resulted from such contest or the settlement thereof.

 

“Control Agreement” means a control agreement, in form and substance reasonably satisfactory to Lender, executed and delivered by each Borrower, each other Loan Party or one of their Subsidiaries, Lender, and the applicable securities intermediary (with respect to a Securities Account) or bank (with respect to a Deposit Account) or issuer (with respect to uncertificated securities).

 

“Controlled Account” has the meaning specified therefor in Section 6.12(j) of this Agreement.

 

“Controlled Account Bank” has the meaning specified therefor in Section 6.12 (j) of this Agreement.

 

“Copyrights” means any and all rights in any works of authorship, including (i) copyrights and moral rights, (ii) copyright registrations and recordings thereof and all applications in connection therewith including those listed on Schedule 5.26(b) to the Information Certificate, (iii) income, license fees, royalties, damages, and payments now and hereafter due or payable under and with respect thereto, including payments under all licenses entered into in connection therewith and damages and payments for past, present, or future infringements thereof, (iv) the right to sue for past, present, and future infringements thereof, and (v) all of each Borrower’s and each other Loan Party’s rights corresponding thereto throughout the world.

 

“Copyright Security Agreement” means each Copyright Security Agreement executed and delivered by a Borrower or another Loan Party and Lender, in form and substance acceptable to Lender.

 

“Daily Balance” means, as of any date of determination and with respect to any Obligation, the amount of such Obligation owed at the end of such day.

 

“Daily Three Month LIBOR” means, for any day, the rate per annum for United States dollar deposits quoted by Lender for the purpose of calculating the effective Interest Rate for loans that reference Daily Three Month LIBOR as the Inter-Bank Market Offered Rate in effect from time to time for the 3 month delivery of funds in amounts approximately equal to the principal amount of such loans (rounded upward, if necessary, to the nearest whole 1/8th of one percent (1%)).  Borrowers understand and agree that Lender may base its quotation of the Inter-

 

Schedule 1.1 - 7

 

Bank Market Offered Rate upon such offers or other market indicators of the Inter-Bank Market as Lender in its discretion deems appropriate, including but not limited to the rate offered for U.S. dollar deposits on the London Inter-Bank Market.  When interest is determined in relation to Daily Three Month LIBOR, each change in the interest rate shall become effective each Business Day that Lender determines that Daily Three Month LIBOR has changed.

 

“Default” means an event, condition, or default that, with the giving of notice, the passage of time, or both, would be an Event of Default.

 

“Deposit Account” means any deposit account (as that term is defined in the Code).

 

“Designated Account” means the operating Deposit Account of Borrowers at Lender identified on Schedule D-1.

 

“Dilution” means, as of any date of determination, a percentage that is the result of dividing the Dollar amount of (a) bad debt write-downs, discounts, advertising allowances, credits, deductions, or other dilutive items as determined by Lender with respect to Borrowers’ Accounts, by (b) Borrowers’ billings with respect to Accounts.

 

“Dilution Reserve” means, as of any date of determination, an amount sufficient to reduce the advance rate against Eligible Accounts by 1 percentage point for each percentage point by which Dilution is in excess of 5%.

 

“Dollars” or “$” means United States dollars.

 

“EBITDA” means, with respect to any fiscal period, Borrowers’ consolidated net income (or loss), minus extraordinary gains, interest income, non-operating income and income tax benefits and decreases in any change in LIFO reserves, plus non-cash extraordinary losses, Interest Expense, income taxes, depreciation and amortization, and increases in any change in LIFO reserves for such period, in each case determined on a consolidated basis in accordance with GAAP.

 

“Eligible Accounts” means those Accounts created by each Borrower in the ordinary course of its business, that arise out of such Borrower’s sale of Goods or rendition of services, that comply with each of the representations and warranties respecting Eligible Accounts made in the Loan Documents, and that are not excluded as ineligible by virtue of one or more of the excluding criteria set forth below; provided, however, that such criteria may be revised from time to time by Lender in Lender’s Permitted Discretion.  In determining the amount to be included, Eligible Accounts shall be calculated net of customer deposits, credits and unapplied cash.  Eligible Accounts shall not include the following:

 

(a)           Accounts that the Account Debtor has failed to pay within 60 days of original due date, not to exceed 120 days from original invoice date;

 

(b)           Accounts with selling terms of more than 60 days;

 

Schedule 1.1 - 8

 

(c)           Accounts owed by an Account Debtor (or its Affiliates) where 25% or more of all Accounts owed by that Account Debtor (or its Affiliates) are deemed ineligible under clauses (a) or (b) above or clauses (i) or (s) below;

 

(d)           Accounts with respect to which the Account Debtor is an Affiliate of such Borrower, or an employee or agent of such Borrower or of any Affiliate of such Borrower;

 

(e)           Accounts arising in a transaction wherein Goods are placed on consignment or are sold pursuant to a guaranteed sale, a sale or return, a sale on approval, or any other terms by reason of which the payment by the Account Debtor may be conditional or contingent;

 

(f)            Accounts that are not payable in Dollars;

 

(g)           Accounts with respect to which the Account Debtor either (i) does not maintain its chief executive office in the United States or Canada (excluding the Province of Quebec), or (ii) is not organized under the laws of the United States or any state thereof or Canada (excluding the Province of Quebec), or (iii) is the government of any foreign country or sovereign state, or of any state, province, municipality, or other political subdivision thereof, or of any department, agency, public corporation, or other instrumentality thereof, unless (x) the Account is supported by an irrevocable letter of credit reasonably satisfactory to Lender (as to form, substance, and issuer or domestic confirming bank) that has been delivered to Lender and is directly drawable by Lender, (y) the Account is covered by credit insurance in form, substance, and amount, and by an insurer, reasonably satisfactory to Lender, or (z) the Account is guaranteed pursuant to an approved working capital guarantee from the Export-Import Bank of the United States in favor of Lender and acceptable to Lender in all respects;

 

(h)           Accounts with respect to which the Account Debtor is either (i) the United States or any department, agency, or instrumentality of the United States (exclusive, however, of Accounts with respect to which such Borrower has complied, to the reasonable satisfaction of Lender, with the Assignment of Claims Act, 31 USC §3727), or (ii) any state of the United States;

 

(i)            Accounts with respect to which the Account Debtor (other than AT&T Services, Inc.) is a creditor of such Borrower, has or has asserted a right of setoff, or has disputed its obligation to pay all or any portion of the Account, to the extent of such claim, right of setoff, or dispute;

 

(j)            That portion of Accounts which reflect a reasonable reserve for warranty claims or returns or amounts which are owed to account debtors, including those for rebates, allowances, co-op advertising, new store allowances or other deductions;

 

(k)           Accounts owing by a single Account Debtor or group of Affiliated Account Debtors (other than AT&T Services, Inc., [*] and T-Mobile USA, Inc.) whose total obligations owing to Borrower exceed twenty percent (20%) of the aggregate amount of all otherwise Eligible Accounts, such Accounts owing by AT&T Services, Inc. which exceed fifty percent (50%) of the aggregate amount of all otherwise Eligible Accounts, such Accounts owing by [*] or T-Mobile USA, Inc. which exceed thirty-five

 

Schedule 1.1 - 9

 

percent (35%) of the aggregate amount of all otherwise Eligible Accounts, and the accounts owing by AT&T Services, Inc., [*] and T-Mobile USA which, combined, exceed eighty-five percent (85%) of the aggregate amount of all otherwise Eligible Accounts (but the portion of the Accounts not in excess of the foregoing applicable percentages may be deemed Eligible Accounts), such percentages being subject to reduction if the creditworthiness of such Account Debtor deteriorates;

 

(l)            Accounts with respect to which the Account Debtor is subject to an Insolvency Proceeding, is not Solvent, has gone out of business, or as to which such Borrower has received notice of an imminent Insolvency Proceeding or a material impairment of the financial condition of such Account Debtor;

 

(m)          Accounts, the collection of which, Lender, in its Permitted Discretion, believes to be doubtful by reason of the Account Debtor’s financial condition;

 

(n)           Accounts representing credit card sales or “C.O.D.” sales;

 

(o)           Accounts that are not subject to a valid and perfected first priority Lien in favor of Lender or that are subject to any other Lien, unless such other Lien is a Permitted Lien and the holder of such Permitted Lien has entered into an intercreditor agreement with Lender reasonably acceptable to Lender;

 

(p)           Accounts that consist of progress billings (such that the obligation of the Account Debtors with respect to such Accounts is conditioned upon such Borrower’s satisfactory completion of any further performance under the agreement giving rise thereto) or retainage invoices;

 

(q)           Accounts with respect to which the Account Debtor is a Sanctioned Person or Sanctioned Entity;

 

(r)            that portion of Accounts which represent finance charges, service charges, sales taxes or excise taxes;

 

(s)            that portion of Accounts which has been restructured, extended, amended or otherwise modified;

 

(t)            bill and hold invoices, except those with respect to which Lender shall have received an agreement in writing from the Account Debtor, in form and substance satisfactory to Lender, confirming the unconditional obligation of the Account Debtor to take the Goods related thereto and pay such invoice, so long as such Accounts satisfy all other criteria for Eligible Accounts hereunder;

 

(u)           Accounts which have not been invoiced;

 

(v)           Accounts constituting (i) Proceeds of copyrightable material unless such copyrightable material shall have been registered with the United States Copyright Office, or (ii) Proceeds of patentable inventions unless such patentable inventions have been registered with the United States Patent and Trademark Office; and

 

Schedule 1.1 - 10

 

(w)          Accounts or that portion of Accounts otherwise deemed ineligible by Lender in its Permitted Discretion.

 

Any Accounts which are not Eligible Accounts shall nonetheless constitute Collateral.

 

“Environmental Action” means any written complaint, summons, citation, notice, directive, order, claim, litigation, investigation, judicial or administrative proceeding, judgment, letter, or other written communication from any Governmental Authority, or any third party involving violations of Environmental Laws or releases of Hazardous Materials (a) from any assets, properties, or businesses of any Loan Party, any Subsidiary of a Loan Party, or any of their predecessors in interest, (b) from adjoining properties or businesses, or (c) from or onto any facilities which received Hazardous Materials generated by any Loan Party, any Subsidiary of a Loan Party, or any of their predecessors in interest.

 

“Environmental Law” means any applicable federal, state, provincial, foreign or local statute, law, rule, regulation, ordinance, code, binding and enforceable guideline, binding and enforceable written policy, or rule of common law now or hereafter in effect and in each case as amended, or any judicial or administrative interpretation thereof, including any judicial or administrative order, consent decree or judgment, in each case, to the extent binding on any Loan Party or any of its Subsidiaries, relating to the environment, the effect of the environment on employee health, or Hazardous Materials, in each case as amended from time to time.

 

“Environmental Liabilities” means all liabilities, monetary obligations, losses, damages, costs and expenses (including all reasonable fees, disbursements and expenses of counsel, experts, or consultants, and costs of investigation and feasibility studies), fines, penalties, sanctions, and interest incurred as a result of any claim or demand, or Remedial Action required, by any Governmental Authority or any third party, and which relate to any Environmental Action.

 

“Environmental Lien” means any Lien in favor of any Governmental Authority for Environmental Liabilities.

 

“Equipment” means equipment (as that term is defined in the Code).

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and any successor statute thereto.

 

“ERISA Affiliate” means (a) any Person subject to ERISA whose employees are treated as employed by the same employer as the employees of any Loan Party or its Subsidiaries under IRC Section 414(b), (b) any trade or business subject to ERISA whose employees are treated as employed by the same employer as the employees of any Loan Party or its Subsidiaries under IRC Section 414(c), (c) solely for purposes of Section 302 of ERISA and Section 412 of the IRC, any organization subject to ERISA that is a member of an affiliated service group of which any Loan Party or any of its Subsidiaries is a member under IRC Section 414(m), or (d) solely for purposes of Section 302 of ERISA and Section 412 and 430 of the IRC, any Person subject to ERISA that is a party to an arrangement with any Loan Party or any of its 

 

Schedule 1.1 - 11

 

Subsidiaries and whose employees are aggregated with the employees of a Loan Party or its Subsidiaries under IRC Section 414(o).

 

“Event of Default” has the meaning specified therefor in Section 9 of this Agreement.

 

“Excess Availability” means, as of any date of determination, the amount equal to Availability minus the aggregate amount, if any, of all trade payables and other obligations of each Borrower and its Subsidiaries aged in excess of 60 days beyond their terms as of the end of the immediately preceding month, and all book overdrafts and fees of each Borrower and its Subsidiaries, in each case as determined by Lender in its Permitted Discretion.

 

“Exchange Act” means the Securities Exchange Act of 1934, as in effect from time to time.

 

“Existing Lender” means UMB Bank Colorado, N.A.

 

“FATCA” means the Foreign Account Tax Compliance Act, Sections 1471 through 1474 of the Code, as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with) and any current or future regulations or official interpretations thereof.

 

“Fixed Charges” means, with respect to any fiscal period and with respect to a Borrower determined on a consolidated basis in accordance with GAAP, the sum, without duplication, of (a) cash Interest Expense paid during such period (other than interest paid-in-kind, amortization of financing fees, and other non-cash Interest Expense), (b) principal payments paid in cash in respect of Indebtedness paid during such period, including cash payments with respect to Capital Leases, but excluding principal payments made with respect to the Revolving Credit Facility (c) all management, consulting, and monitoring fees paid during such period, and (d) all Restricted Junior Payments (other than Pass-Through Tax Liabilities) and other distributions paid in cash during such period.

 

“Fixed Charge Coverage Ratio” means, with respect to Borrowers and their Subsidiaries on a consolidated basis for any period, the ratio of (i) EBITDA for such period, minus (a) Non-Financed Capital Expenditures made (to the extent not already incurred in a prior period) or incurred during such period, (b) cash taxes paid during such period, to the extent greater than zero, and (c) all Restricted Junior Payments consisting of Pass-Through Tax Liabilities to (ii) Fixed Charges for such period.

 

“Fixtures” means fixtures (as that term is defined in the Code).

 

“Funding Date” means the date on which a Borrowing occurs.

 

“FX Exposure Amount” means an amount, determined by Lender in its sole discretion, equal to Borrowers’ and their Subsidiaries’ collective exposure under Hedge Agreements incurred for the purpose of hedging foreign currency risks associated with Borrowers’ and their Subsidiaries’ operations.

 

Schedule 1.1 - 12

 

“GAAP” means generally accepted accounting principles as in effect from time to time in the United States, consistently applied; provided, however, that all calculations relative to liabilities shall be made without giving effect to Statement of Financial Accounting Standards No. 159.

 

“General Intangibles” means general intangibles (as that term is defined in the Code), and includes payment intangibles, contract rights, rights to payment, rights under Hedge Agreements (including the right to receive payment on account of the termination (voluntarily or involuntarily) of any such Hedge Agreements), rights arising under common law, statutes, or regulations, choses or things in action, goodwill, Intellectual Property, Intellectual Property Licenses, purchase orders, customer lists, monies due or recoverable from pension funds, route lists, rights to payment and other rights under any royalty or licensing agreements, including Intellectual Property Licenses, infringement claims, pension plan refunds, pension plan refund claims, insurance premium rebates, tax refunds, and tax refund claims, interests in a partnership or limited liability company which do not constitute a security under Article 8 of the Code, and any other personal property other than Commercial Tort Claims, money, Accounts, Chattel Paper, Deposit Accounts, Goods, Investment Related Property, Negotiable Collateral, and oil, gas, or other minerals before extraction.

 

“Goods” means goods (as that term is defined in the Code).

 

“Governing Documents” means, with respect to any Person, the certificate or articles of incorporation, by-laws, or other organizational documents of such Person.

 

“Governmental Authority” means any federal, state, local, or other governmental or administrative body, instrumentality, board, department, or agency or any court, tribunal, administrative hearing body, arbitration panel, commission, or other similar dispute-resolving panel or body.

 

“Guarantor Payment” has the meaning specified therefor in Section 2.16.

 

“Guarantors” means each Person that becomes a guarantor after the Closing Date pursuant to Section 6.15 of this Agreement, and “Guarantor” means any one of them.

 

“Guaranty” means any guaranty agreement delivered at any time by a Guarantor in favor of Lender in form and substance reasonably satisfactory to Lender.

 

“Hazardous Materials” means (a) substances that are defined or listed in, or otherwise classified pursuant to, any applicable laws or regulations as “hazardous substances,” “hazardous materials,” “hazardous wastes,” “toxic substances,” or any other formulation intended to define, list, or classify substances by reason of deleterious properties such as ignitability, corrosivity, reactivity, carcinogenicity, reproductive toxicity, or “EP toxicity”, (b) oil, petroleum, or petroleum derived substances, natural gas, natural gas liquids, synthetic gas, drilling fluids, produced waters, and other wastes associated with the exploration, development, or production of crude oil, natural gas, or geothermal resources, (c) any flammable substances or explosives or any radioactive materials, and (d) asbestos in any form or electrical equipment that contains any oil or dielectric fluid containing levels of polychlorinated biphenyls in excess of 50 parts per million.

 

Schedule 1.1 - 13

 

“Hedge Agreement” means a “swap agreement” as that term is defined in Section 101(53B)(A) of the Bankruptcy Code.

 

“Hedge Obligations” means any and all obligations or liabilities, whether absolute or contingent, due or to become due, now existing or hereafter arising, of any Borrower or any of its Subsidiaries arising under, owing pursuant to, or existing in respect of Hedge Agreements entered into with Lender or another Bank Product Provider.

 

“Indebtedness” as to any Person means, without duplication, (a) all obligations of such Person for borrowed money, (b) all obligations of such Person evidenced by bonds, debentures, notes, or other similar instruments and all reimbursement or other obligations in respect of letters of credit, bankers acceptances, or other financial products, (c) all obligations of such Person as a lessee under Capital Leases, (d) all obligations or liabilities of others secured by a Lien on any asset of such Person, irrespective of whether such obligation or liability is assumed, (e) all obligations of such Person to pay the deferred purchase price of assets (other than trade payables incurred in the ordinary course of business and repayable in accordance with customary trade practices), (f) all obligations of such Person owing under Hedge Agreements (which amount shall be calculated based on the amount that would be payable by such Person if the Hedge Agreement were terminated on the date of determination), (g) any Prohibited Preferred Stock of such Person, and (h) any obligation of such Person guaranteeing or intended to guarantee (whether directly or indirectly guaranteed, endorsed, co-made, discounted, or sold with recourse) any obligation of any other Person that constitutes Indebtedness under any of clauses (a) through (g) above.  For purposes of this definition, (i) the amount of any Indebtedness represented by a guaranty or other similar instrument shall be the lesser of the principal amount of the obligations guaranteed and still outstanding and the maximum amount for which the guaranteeing Person may be liable pursuant to the terms of the instrument embodying such Indebtedness, and (ii) the amount of any Indebtedness described in clause (d) above shall be the lower of the amount of the obligation and the fair market value of the assets of such Person securing such obligation.

 

“Indemnified Liabilities” has the meaning specified therefor in Section 11.3 of this Agreement.

 

“Indemnified Person” has the meaning specified therefor in Section 11.3 of this Agreement.

 

“Information Certificate”  means the Information Certificate completed and executed by the Loan Parties attached hereto as Exhibit E.

 

“Insolvency Proceeding” means any proceeding commenced by or against any Person under any provision of the Bankruptcy Code or under any other state or federal bankruptcy or insolvency law, assignments for the benefit of creditors, receiverships, formal or informal moratoria, compositions, extensions generally with creditors, or proceedings seeking reorganization, arrangement, or other similar relief.

 

“Intellectual Property” means any and all Patents, Copyrights, Trademarks, trade secrets, know-how, inventions (whether or not patentable), algorithms, software programs 

 

Schedule 1.1 - 14

 

(including source code and object code), processes, product designs, industrial designs, blueprints, drawings, data, customer lists, URLs and domain names, specifications, documentations, reports, catalogs, literature, and any other forms of technology or proprietary information of any kind, including all rights therein and all applications for registration or registrations thereof.

 

 

“Intellectual Property Licenses” means, with respect to any Person (the “Specified Party”), (i) any licenses or other similar rights provided to the Specified Party in or with respect to Intellectual Property owned or controlled by any other Person, and (ii) any licenses or other similar rights provided to any other Person in or with respect to Intellectual Property owned or controlled by the Specified Party, in each case, including (A) any software license agreements (other than license agreements for commercially available off-the-shelf software that is generally available to the public which have been licensed to a Loan Party pursuant to end-user licenses), (B) the license agreements listed on Schedule 5.26(b) to the Information Certificate, and (C) the right to use any of the licenses or other similar rights described in this definition in connection with the enforcement of Lender’s rights under the Loan Documents.

 

“Intercompany Subordination Agreement” means an intercompany subordination agreement, dated as of even date with this Agreement, executed and delivered by a Borrower, each of its Subsidiaries each of the other Loan Parties and Lender, the form and substance of which is reasonably satisfactory to Lender.

 

“Interest Expense” means, for any period, the aggregate of the interest expense of each Borrower for such period, determined on a consolidated basis in accordance with GAAP.

 

“Interest Rate” means an interest rate equal to Daily Three Month LIBOR, which interest rate shall change whenever Daily Three Month LIBOR changes.

 

“Interest Rate Margin” means, as of any date of determination (with respect to any portion of the outstanding Advances on such date), the applicable margin set forth in the following table that corresponds to the most recent Fixed Charge Coverage Ratio calculation delivered to Lender pursuant to Section 6.1 of the Agreement (the “Fixed Charge Coverage Ratio Calculation”); provided, however, that for the period from the Closing Date through the date Lender first receives a Fixed Charge Coverage Ratio Calculation, the Interest Rate Margin shall be at the margin in the row styled “Level I”:

 

	
Level
    	
 
    	
Fixed Charge Coverage Ratio
   Calculation
    	
 
    	
Interest Rate Margin
    	
 
    
	
I
    	
 
    	
If   the Fixed Charge Coverage Ratio is less 1.5:1.0
    	
 
    	
3
    	
%
    
	
II
    	
 
    	
If   the Fixed Charge Coverage Ratio is equal to or greater than 1.5:1.0
    	
 
    	
2.50
    	
%
    

 

Schedule 1.1 - 15

 

Except as set forth in the foregoing proviso, the Interest Rate Margin shall be based upon the most recent Fixed Charge Coverage Ratio Calculation, which will be calculated as of the end of each fiscal month on a trailing twelve (12) month basis.  Except as set forth in the foregoing proviso, the Interest Rate Margin shall be re-determined monthly on the first day of the month following the date of delivery to Lender of the certified calculation of the Fixed Charge Coverage Ratio pursuant to Section 6.1 of the Agreement; provided, however, that if Borrowers fail to provide such certification when such certification is due, the Interest Rate Margin shall be set at the margin in the row styled “Level I” as of the first day of the month following the date on which the certification was required to be delivered until the date on which such certification is delivered, on which date (but not retroactively), without constituting a waiver of any Default or Event of Default occasioned by the failure to timely deliver such certification, the Interest Rate Margin shall be set at the margin based upon the calculations disclosed by such certification.  In the event that the information regarding the Fixed Charge Coverage Ratio contained in any certificate delivered pursuant to Section 6.1 of the Agreement is shown to be inaccurate, and such inaccuracy, if corrected, would have led to the application of a higher Interest Rate Margin for any period than the Interest Rate Margin actually applied for such period, then (i) Borrowers shall immediately deliver to Lender a correct certificate for such period, (ii) the Interest Rate Margin shall be determined as if the correct Interest Rate Margin (as set forth in the table above) were applicable for such period, and (iii) Borrowers shall immediately deliver to Lender full payment in respect of the accrued additional interest as a result of such increased Interest Rate Margin for such period, which payment shall be promptly applied by Lender to the affected Obligations.

 

“Inventory” means inventory (as that term is defined in the Code).

 

“Investment” means, with respect to any Person, any investment by such Person in any other Person (including Affiliates) in the form of loans, guarantees, advances, capital contributions (excluding (a) commission, travel, and similar advances to officers and employees of such Person made in the ordinary course of business not to exceed $25,000 in the aggregate during any fiscal year of Borrowers, and (b) bona fide Accounts arising in the ordinary course of business), or acquisitions of Indebtedness, Stock, or all or substantially all of the assets of such other Person (or of any division or business line of such other Person), and any other items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP.

 

“Investment Related Property” means (i) any and all investment property (as that term is defined in the Code), and (ii) any and all of the following (regardless of whether classified as investment property under the Code): all Pledged Interests, Pledged Operating Agreements, and Pledged Partnership Agreements.

 

“IRC” means the Internal Revenue Code of 1986, as in effect from time to time.

 

“ISP98” means the International Standby Practices (1998 Revision, effective January 1, 1999), International Chamber of Commerce Publication No. 590.

 

“Lender” has the meaning specified therefor in the preamble to this Agreement and its successors and assigns.

 

Schedule 1.1 - 16

 

“Lender Expenses” means all (a) reasonable costs or expenses (including taxes, and insurance premiums) required to be paid by any Loan Party or any of its Subsidiaries under any of the Loan Documents that are paid, advanced, or incurred by Lender, (b) reasonable out-of-pocket fees or charges paid or incurred by Lender in connection with Lender’s transactions with any Loan Party or any of its Subsidiaries under any of the Loan Documents, including fees or charges for photocopying, notarization, couriers and messengers, telecommunication, public record searches (including tax lien, judgment lien, litigation, bankruptcy and Code searches and including searches with the patent and trademark office, the copyright office, or the department of motor vehicles), filing, recording, publication, appraisal (including periodic collateral appraisals or business valuations to the extent of the fees and charges (and up to the amount of any limitation contained in this Agreement)), real estate surveys, real estate title insurance policies and endorsements, and environmental audits, (c) Lender’s customary fees and charges (as adjusted from time to time) with respect to the disbursement of funds (or the receipt of funds) to or for the account of Borrowers (whether by wire transfer or otherwise), together with any out of pocket costs and expenses incurred in connection therewith, (d) out-of-pocket charges paid or incurred by Lender resulting from the dishonor of checks payable by or to any Loan Party, (e) reasonable out-of-pocket costs and expenses paid or incurred by Lender to correct any default or enforce any provision of the Loan Documents, or during the continuance of an Event of Default, in gaining possession of, maintaining, handling, preserving, storing, shipping, selling, preparing for sale, or advertising to sell the Collateral, or any portion thereof, irrespective of whether a sale is consummated, (f) fees and expenses to initiate electronic reporting by Borrowers to Lender, (g) reasonable out-of-pocket examination fees and expenses (including reasonable travel, meals, and lodging) of Lender related to any inspections or examinations to the extent of the fees and charges (and up to the amount of any limitation) contained in this Agreement; provided that so long as no Event of Default has occurred and is continuing, Borrowers shall not be responsible for Lender Expenses with respect to more than 4 inspections or examinations per calendar year, (h) reasonable out-of-pocket costs and expenses of third party claims or any other suit paid or incurred by Lender in enforcing or defending the Loan Documents or in connection with the transactions contemplated by the Loan Documents or Lender’s relationship with any Loan Party or any of its Subsidiaries, (i) Lender’s reasonable costs and expenses (including reasonable attorneys fees) incurred in advising, structuring, drafting, reviewing, administering (including reasonable travel, meals, and lodging), or amending the Loan Documents, (j) Lender’s reasonable costs and expenses (including reasonable attorneys, accountants, consultants, and other advisors fees and expenses) incurred in terminating, enforcing (including reasonable attorneys, accountants, consultants, and other advisors fees and expenses incurred in connection with a “workout,” a “restructuring,” or an Insolvency Proceeding concerning any Loan Party or any of its Subsidiaries or in exercising rights or remedies under the Loan Documents), or defending the Loan Documents, irrespective of whether suit is brought, or in taking any Remedial Action concerning the Collateral, and (k) usage charges, charges, fees, costs and expenses for amendments, renewals, extensions, transfers, or drawings from time to time imposed by Lender in respect of Letters of Credit and out-of-pocket charges, fees, costs and expenses paid or incurred by Lender in connection with the issuance, amendment, renewal, extension, or transfer of, or drawing under, any Letter of Credit or any demand for payment thereunder.

 

“Lender-Related Persons” means Lender, together with its Affiliates, officers, directors, employees, attorneys, and agents.

 

Schedule 1.1 - 17

 

“Lender Representatives” has the meaning specified therefor in Section 17.8(a) of this Agreement.

 

“Lender’s Liens” mean the Liens granted by Borrowers and their Subsidiaries to Lender under the Loan Documents.

 

“Letter of Credit” means a letter of credit (as that term is defined in the Code) issued by Lender.

 

“Letter of Credit Agreements” means a Letter of Credit Application, together with any and all related letter of credit agreements pursuant to which Lender agrees to issue, amend, or extend a Letter of Credit, or pursuant to which Borrowers agree to reimburse Lender for all Letter of Credit Disbursements, each such application and related agreement to be in the form specified by Lender from time to time.

 

“Letter of Credit Application” means an application requesting Lender to issue, amend, or extend a Letter of Credit, each such application to be in the form specified by Lender from time to time.

 

“Letter of Credit Collateralization” means either (a) providing cash collateral (pursuant to documentation reasonably satisfactory to Lender, including provisions that specify that the Letter of Credit fee and all usage charges set forth in this Agreement and the Letter of Credit Agreements will continue to accrue while the Letters of Credit are outstanding) to be held by Lender for the benefit of Lender in an amount equal to 110% of the then existing Letter of Credit Usage, (b) delivering to Lender the original of each Letter of Credit, together with documentation executed by all beneficiaries under each Letter of Credit in form and substance acceptable to Lender terminating all of such beneficiaries’ rights under such Letters of Credit, or (c) providing Lender with a standby letter of credit, in form and substance reasonably satisfactory to Lender, from a commercial bank acceptable to Lender (in its sole discretion) in an amount equal to 110% of the then existing Letter of Credit Usage (it being understood that the Letter of Credit fee and all usage charges set forth in this Agreement will continue to accrue while the Letters of Credit are outstanding and that any such fees that accrue must be an amount that can be drawn under any such standby letter of credit).

 

“Letter of Credit Disbursement” means a payment made by Lender pursuant to a Letter of Credit.

 

“Letter of Credit Usage” means, as of any date of determination, the sum of (i) the aggregate undrawn amount of all outstanding Letters of Credit, and (ii) the aggregate amount of outstanding reimbursement obligations with respect to Letters of Credit which remain unreimbursed or which have not been paid through an Advance under the Revolving Credit Facility.

 

“Lien” means any mortgage, deed of trust, pledge, hypothecation, assignment, charge, deposit arrangement, encumbrance, easement, lien (statutory or other), security interest, or other security arrangement and any other preference, priority, or preferential arrangement of any kind or nature whatsoever, including any conditional sale contract or other title retention 

 

Schedule 1.1 - 18

 

agreement, the interest of a lessor under a Capital Lease and any synthetic or other financing lease having substantially the same economic effect as any of the foregoing.

 

“Loan Account” has the meaning specified therefor in Section 2.8 of this Agreement.

 

“Loan Documents” means this Agreement, any Borrowing Base Certificate, the Control Agreements, the Cash Management Documents, any Guaranty, the Intercompany Subordination Agreement, the Letters of Credit, the Mortgages, the Patent and Trademark Security Agreement, any note or notes executed by any Borrower in connection with this Agreement and payable to Lender, any Letter of Credit Applications and other Letter of Credit Agreements entered into by any Borrower in connection with this Agreement, and any other instrument or agreement entered into, now or in the future, by any Loan Party or any of its Subsidiaries and Lender in connection with this Agreement, but specifically excluding all Hedge Agreements.

 

“Loan Management Service” means Lender’s proprietary automated loan management program currently known as “Loan Manager” and any successor service or product of Lender which performs similar services.

 

“Loan Party” means any Borrower and any Guarantor.

 

“Lockbox” means “Lockbox” as defined and described in the Cash Management Documents.

 

“Margin Stock” as defined in Regulation U of the Board of Governors of the Federal Reserve System as in effect from time to time.

 

“Material Adverse Change” means (a) a material adverse change in the business, prospects, operations, results of operations, assets, liabilities or condition (financial or otherwise) of the Borrowers and their Subsidiaries taken as a whole, (b) a material impairment of Borrowers’ and their Subsidiaries’ ability to perform their obligations under the Loan Documents to which it is a party or of Lender’s ability to enforce the Obligations or realize upon the Collateral, (c) a material impairment of the enforceability or priority of Lender’s Liens with respect to the Collateral as a result of an action or failure to act on the part of any Borrower or its Subsidiaries, or (d) any claim against any Borrower or its Subsidiaries or threat of litigation which if determined adversely to any Borrower or any of its Subsidiaries, would result in the occurrence of an event described in clauses (a), (b) or (c) above.

 

“Material Contract” means (i) with respect to contracts and agreements with customers of the Loan Parties or any of their Subsidiaries (“Customer Agreements”), (A) each Customer Agreement with the five largest customers of the Loan Parties (measured in terms of revenue generated pursuant to such Customer Agreements) and (B) such other Customer Agreements that, together with the Customer Agreements described in clause (A) of this definition, represent at least 90% of the aggregate revenue of the Loan Parties, (ii) each contract or agreement (other than Customer Agreements) to which a Loan Party or Subsidiary of a Loan Party is a party involving aggregate consideration payable to or by such Loan Party or such Subsidiary of $300,000 or more (other than purchase orders in the ordinary course of the 

 

Schedule 1.1 - 19

 

business of such Loan Party or such Subsidiary), and (iii) with respect to any Person, all other contracts or agreements, the loss of which could reasonably be expected to result in a Material Adverse Change.

 

“Maturity Date” has the meaning specified therefor in Section 2.9 of this Agreement.

 

“Maximum Credit” means $20,000,000.

 

“Maximum Revolver Amount” means $10,000,000; provided that, if no Default or Event of Default shall have occurred and be continuing, such amount shall be increased in minimum increments of $2,500,000 each, up to the Maximum Credit, by Borrowers delivering to Lender a written request indicating the amount to which Borrowers direct Lender to increase the Maximum Revolver Amount, effective 5 Business Days thereafter and upon payment of the applicable Origination Fee.  For purposes of clarity, the term “Maximum Revolver Amount” shall mean the Maximum Revolver Amount as in effect from time to time, decreased by permanent reductions in such amount made in accordance with Section 2.11 of this Agreement.

 

“Moody’s” has the meaning specified therefor in the definition of Cash Equivalents.

 

“Mortgages” means, individually and collectively, one or more mortgages, deeds of trust, or deeds to secure debt, executed and delivered by a Loan Party or its Subsidiaries in favor of Lender, in form and substance reasonably satisfactory to Lender, that encumber the Real Property Collateral.

 

“Negotiable Collateral” means letters of credit, letter-of-credit rights, instruments, promissory notes, drafts and documents (as each such term is defined in the Code).

 

“Non-Financed Capital Expenditures” means Capital Expenditures not financed by the seller of the capital asset, by a third party lender or by means of any extension of credit by Lender other than by means of an Advance under the Revolving Credit Facility.

 

“Obligations” means (a) all loans (including the Advances), debts, principal, interest (including any interest that accrues after the commencement of an Insolvency Proceeding, regardless of whether allowed or allowable in whole or in part as a claim in any such Insolvency Proceeding), reimbursement or indemnification obligations with respect to Letters of Credit (irrespective of whether contingent), premiums, liabilities (including all amounts charged to the Loan Account pursuant to this Agreement), obligations (including indemnification obligations), fees, Lender Expenses (including any fees or expenses that accrue after the commencement of an Insolvency Proceeding, regardless of whether allowed or allowable in whole or in part as a claim in any such Insolvency Proceeding), guaranties, and all covenants and duties of any other kind and description owing by any Loan Party pursuant to or evidenced by this Agreement or any of the other Loan Documents 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, and including all interest not paid when due and all other expenses or other amounts that any Borrower or any other Loan Party is required to pay or reimburse by the Loan Documents or by law or otherwise in connection with the Loan Documents, and (b) all Bank

 

Schedule 1.1 - 20

 

Product Obligations.  Any reference in this Agreement or in the Loan Documents to the Obligations shall include all or any portion thereof and any extensions, modifications, renewals, or alterations thereof, both prior and subsequent to any Insolvency Proceeding.

 

“OFAC” means The Office of Foreign Assets Control of the U.S. Department of the Treasury.

 

“Overadvance Amount” has the meaning specified therefor in Section 2.4(f) of this Agreement

 

“Parent” means StarTek, Inc.

 

“Pass-Through Tax Liabilities” means the amount of state and federal income tax paid or to be paid by the owner of any Stock in a Borrower on taxable income earned by a Borrower and attributable to such owner of Stock as a result of such Borrower’s “pass-through” tax status, assuming the highest marginal income tax rate for federal and state (for the state or states in which any owner of Stock is liable for income taxes with respect to such income) income tax purposes, after taking into account any deduction for state income taxes in calculating the federal income tax liability and all other deductions, credits, deferrals and other reductions available to such owners of Stock from or through such Borrower.

 

“Patents” means patents and patent applications, including (i) the patents and patent applications listed on Schedule 5.26(b) to the Information Certificate, (ii) all continuations, divisionals, continuations-in-part, re-examinations, reissues, and renewals thereof and improvements thereon, (iii) all income, royalties, damages and payments now and hereafter due or payable under and with respect thereto, including payments under all licenses entered into in connection therewith and damages and payments for past, present, or future infringements thereof, (iv) the right to sue for past, present, and future infringements thereof, and (v) all of each Loan Party’s rights corresponding thereto throughout the world.

 

“Patent and Trademark Security Agreement” means each Patent and Trademark Security Agreement executed and delivered by the applicable Loan Party, in form and substance acceptable to Lender.

 

“Patriot Act” has the meaning specified therefor in Section 5.18 of Exhibit D to this Agreement.

 

“Pension Plan” means a pension plan (as defined in Section 3(2) of ERISA) maintained for employees of any Borrower or any of its Subsidiaries or any ERISA Affiliate and covered by Title IV of ERISA.

 

“Permitted Discretion” means a determination made in the exercise of the good faith judgment of Lender.

 

“Permitted Dispositions” means:

 

(a)           sales, abandonment, or other dispositions of Equipment that is substantially worn, damaged, or obsolete in the ordinary course of business;

 

Schedule 1.1 - 21

 

(b)           sales of Inventory to buyers in the ordinary course of business;

 

(c)           the granting of Permitted Liens;

 

(d)           the making of a Restricted Junior Payment that is expressly permitted to be made pursuant to this Agreement; and

 

(e)           the making of a Permitted Investment.

 

“Permitted Indebtedness” means:

 

(a)           Indebtedness evidenced by this Agreement or the other Loan Documents;

 

(b)           Indebtedness set forth on Schedule 5.19 to the Information Certificate and any Refinancing Indebtedness in respect of such Indebtedness;

 

(c)           Permitted Purchase Money Indebtedness and any Refinancing Indebtedness in respect of such Indebtedness;

 

(d)           endorsement of instruments or other payment items for deposit;

 

(e)           the incurrence by any Borrower or its Subsidiaries of Indebtedness under Hedge Agreements that are incurred for the bona fide purpose of hedging the interest rate, commodity, or foreign currency risks associated with such Borrower’s and its Subsidiaries’ operations and not for speculative purposes;

 

(f)            Indebtedness incurred in respect of Bank Products other than pursuant to Hedge Agreements; and

 

(g)           Indebtedness constituting Permitted Investments.

 

“Permitted Intercompany Advances” means loans made by (a) a Loan Party to another Loan Party other than Parent, (b) a Subsidiary of a Loan Party which is not a Loan Party to another Subsidiary of a Loan Party which is not a Loan Party, (c) a Subsidiary of a Loan Party which is not a Loan Party to a Loan Party, so long as the parties thereto are party to the Intercompany Subordination Agreement.

 

“Permitted Investments” means:

 

(a)           Investments in cash and Cash Equivalents;

 

(b)           Investments in negotiable instruments deposited or to be deposited for collection in the ordinary course of business;

 

(c)           advances made in connection with purchases of Goods or services in the ordinary course of business;

 

(d)           Investments owned by any Loan Party or any of its Subsidiaries on the Closing Date and set forth on Schedule P-1;

 

Schedule 1.1 - 22

 

(e)           Permitted Intercompany Advances; and

 

(f)              Investments resulting from entering into (i) Bank Product Agreements, or (ii) agreements relative to Indebtedness that is permitted under clause (g) of the definition of Permitted Indebtedness.

 

As to all of the foregoing (a) through (f) Lender shall have a first priority perfected Lien.

 

“Permitted Liens” means

 

(a)           Liens granted to, or for the benefit of, Lender to secure the Obligations;

 

(b)           Liens for unpaid taxes, assessments, or other governmental charges or levies that either (i) are not yet delinquent, or (ii) do not have priority over Lender’s Liens and the underlying taxes, assessments, or charges or levies are the subject of Permitted Protests;

 

(c)           judgment Liens arising solely as a result of the existence of judgments, orders, or awards that do not constitute an Event of Default under Section 9.3 of this Agreement;

 

(d)           Liens set forth on Schedule P-2; provided, however, that to qualify as a Permitted Lien, any such Lien described on Schedule P-2 shall only secure the Indebtedness that it secures on the Closing Date and any Refinancing Indebtedness in respect thereof;

 

(e)           the interests of lessors under operating leases and non-exclusive licensors under license agreements;

 

(f)            purchase money Liens or the interests of lessors under Capital Leases to the extent that such Liens or interests secure Permitted Purchase Money Indebtedness and so long as (i) such Lien attaches only to the asset purchased or acquired and the proceeds thereof, and (ii) such Lien only secures the Indebtedness that was incurred to acquire the asset purchased or acquired or any Refinancing Indebtedness in respect thereof; and

 

(g)           Liens that are replacements of Permitted Liens to the extent that the original Indebtedness is the subject of permitted Refinancing Indebtedness and so long as the replacement Liens only encumber those assets that secured the original Indebtedness.

 

“Permitted Preferred Stock” means and refers to any Preferred Stock issued by a Borrower (and not by one or more of its Subsidiaries) that is not Prohibited Preferred Stock.

 

“Permitted Protest” means the right of any Borrower or any other Loan Party or any of their respective Subsidiaries to protest any Lien (other than any Lien that secures the Obligations), taxes (other than payroll taxes or taxes that are the subject of a United States federal tax lien), or rental payment, provided that (a) a reserve with respect to such obligation is established on such Borrower’s, Subsidiary’s or Loan Party’s books and records in such amount as is required under GAAP, (b) any such protest is instituted promptly and prosecuted diligently by such Borrower, Subsidiary or Loan Party, as applicable, in good faith, and (c) Lender is satisfied that, while any such protest is pending, there will be no impairment of the enforceability, validity, or priority of any of Lender’s Liens.

 

Schedule 1.1 - 23

 

“Permitted Purchase Money Indebtedness” means, as of any date of determination, Purchase Money Indebtedness incurred after the Closing Date in an aggregate principal amount outstanding at any one time not in excess of $250,000.

 

“Person” means natural persons, corporations, limited liability companies, limited partnerships, general partnerships, limited liability partnerships, joint ventures, trusts, land trusts, business trusts, or other organizations, irrespective of whether they are legal entities, and governments and agencies and political subdivisions thereof.

 

“Plan” means an employee benefit plan (as defined in Section 3(3) of ERISA) maintained for employees of any Borrower or any of its Subsidiaries or any ERISA Affiliate.

 

“Pledged Companies” means StarTek USA, Inc., together with each other non-CFC Person, all or a portion of whose Stock is acquired or otherwise owned by a Borrower after the Closing Date.

 

“Pledged Interests” means all of each Borrower’s right, title and interest in and to all of the Stock now owned or hereafter acquired by such Borrower, regardless of class or designation, in each of the Pledged Companies, and all substitutions therefor and replacements thereof, all proceeds thereof and all rights relating thereto, also including any certificates representing the Stock, the right to receive any certificates representing any of the Stock, all warrants, options, share appreciation rights and other rights, contractual or otherwise, in respect thereof and the right to receive all dividends, distributions of income, profits, surplus, or other compensation by way of income or liquidating distributions, in cash or in kind, and all cash, instruments, and other property from time to time received, receivable, or otherwise distributed in respect of or in addition to, in substitution of, on account of, or in exchange for any or all of the foregoing.

 

“Pledged Interests Addendum” means a Pledged Interests Addendum substantially in the form of Exhibit F.

 

“Pledged Operating Agreements” means all of each Borrower’s rights, powers, and remedies under the limited liability Borrower operating agreements of each of the Pledged Companies that are limited liability companies.

 

“Pledged Partnership Agreements” means all of each Borrower’s rights, powers, and remedies under the partnership agreements of each of the Pledged Companies that are partnerships.

 

“Preferred Stock” means, as applied to the Stock of any Person, the Stock of any class or classes (however designated) that is preferred with respect to the payment of dividends, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such Person, over shares of Stock of any other class of such Person.

 

“Prime Rate” means at any time the rate of interest most recently announced by Lender at its principal office as its Prime Rate, with the understanding that the Prime Rate is one of Lender’s base rates, and serves as the basis upon which effective rates of interest are calculated for those loans making reference to it, and is evidenced by its recording in such

 

Schedule 1.1 - 24

 

internal publication or publications as Lender may designate.  Each change in the rate of interest shall become effective on the date each Prime Rate change is announced by Lender.

 

“Proceeds” has the meaning specified therefor in the definition of “Collateral” set forth in Schedule 1.1.

 

“Prohibited Preferred Stock” means any Preferred Stock that by its terms is mandatorily redeemable or subject to any other payment obligation (including any obligation to pay dividends, other than dividends of shares of Preferred Stock of the same class and series payable in kind or dividends of shares of common stock) on or before a date that is less than 1 year after the Maturity Date, or, on or before the date that is less than 1 year after the Maturity Date, is redeemable at the option of the holder thereof for cash or assets or securities (other than distributions in kind of shares of Preferred Stock of the same class and series or of shares of common stock).

 

“Projections” means each Borrower’s forecasted (a) balance sheets, (b) profit and loss statements, (c) Availability projections, and (d) cash flow statements, all prepared on a basis consistent with such Borrower’s historical financial statements, together with appropriate supporting details and a statement of underlying assumptions.

 

“Protective Advance” has the meaning specified therefor in Section 2.3(d).

 

“PTO” means the United States Patent and Trademark Office.

 

“Purchase Money Indebtedness” means Indebtedness (other than the Obligations, but including Capitalized Lease Obligations), incurred at the time of, or within 20 days after, the acquisition of any fixed assets for the purpose of financing all or any part of the acquisition cost thereof.

 

“Qualified Cash” means, as of any date of determination, the amount of unrestricted cash and Cash Equivalents of each Borrower and its Subsidiaries that is in Deposit Accounts or in Securities Accounts, or any combination thereof, and which such Deposit Account or Securities Account is the subject of a Control Agreement and is maintained by a branch office of the bank or securities intermediary located within the United States.

 

“Real Property” means any estates or interests in real property now owned or hereafter acquired by a Loan Party and the improvements thereto.

 

“Real Property Collateral” means the Real Property identified on Schedule R-1 and any Real Property hereafter acquired by any Loan Party.

 

“Record” means information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form.

 

“Refinancing Indebtedness” means refinancings, renewals, or extensions of Indebtedness so long as:

 

Schedule 1.1 - 25

 

(a)           such refinancings, renewals, or extensions do not result in an increase in the principal amount of the Indebtedness so refinanced, renewed, or extended, other than by the amount of premiums paid thereon and the fees and expenses incurred in connection therewith and by the amount of unfunded commitments with respect thereto,

 

(b)           such refinancings, renewals, or extensions do not result in a shortening of the average weighted maturity (measured as of the refinancing, renewal, or extension) of the Indebtedness so refinanced, renewed, or extended, nor are they on terms or conditions that, taken as a whole, are or could reasonably be expected to be materially adverse to the interests of Lender,

 

(c)           if the Indebtedness that is refinanced, renewed, or extended was subordinated in right of payment to the Obligations, then the terms and conditions of the refinancing, renewal, or extension must include subordination terms and conditions that are at least as favorable to Lender as those that were applicable to the refinanced, renewed, or extended Indebtedness, and

 

(d)           the Indebtedness that is refinanced, renewed, or extended is not recourse to any Person that is liable on account of the Obligations other than those Persons which were obligated with respect to the Indebtedness that was refinanced, renewed, or extended.

 

“Remedial Action” means all actions taken to (a) clean up, remove, remediate, contain, treat, monitor, assess, evaluate, or in any way address Hazardous Materials in the indoor or outdoor environment, (b) prevent or minimize a release or threatened release of Hazardous Materials so they do not migrate or endanger or threaten to endanger public health or welfare or the indoor or outdoor environment, (c) restore or reclaim natural resources or the environment, (d) perform any pre-remedial studies, investigations, or post-remedial operation and maintenance activities, or (e) conduct any other actions with respect to Hazardous Materials required by Environmental Laws.

 

“Reserves” means, as of any date of determination, the sum of (a) an amount or percent of a specified item or category of items that Lender establishes from time to time in its Permitted Discretion to reduce Availability under the Borrowing Base or the Maximum Revolver Amount to reflect (i) such matters, events, conditions, contingencies or risks which affect or which may reasonably be expected to affect the assets, business or prospects of a Borrower, any other Loan Party or the Collateral or its value or the enforceability, perfection or priority of Lender’s security interest in the Collateral, or (ii) Lender’s judgment that any collateral report or financial information relating to a Borrower or any other Loan Party delivered to Lender is incomplete, inaccurate or misleading in any material respect, plus (b) the Dilution Reserve and the Bank Product Reserve Amount.

 

“Restricted Junior Payment” means (a) declaration or payment of any dividend or the making any other payment or distribution on account of Stock issued by any Loan Party (including any payment in connection with any merger or consolidation involving any Loan Party) or to the direct or indirect holders of Stock issued by any Loan Party in their capacity as such (other than dividends or distributions payable in Stock (other than Prohibited Preferred Stock) issued by any Loan Party), or (b) any purchase, redemption, or other acquisition or 

 

Schedule 1.1 - 26

 

retirement for value (including in connection with any merger or consolidation involving any Loan Party) of any Stock issued by any Loan Party.

“Revolver Usage” means, as of any date of determination, the sum of (a) the amount of outstanding Advances, plus (b) the amount of the Letter of Credit Usage.

 

“Revolving Credit Facility” means the revolving line of credit facility described in Section 2.1 pursuant to which Lender provides Advances to Borrowers and issues Letters of Credit for the account of Borrowers.

 

“Sanctioned Entity” means (a) a country or a government of a country, (b) an agency of the government of a country, (c) an organization directly or indirectly controlled by a country or its government, (d) a Person resident in or determined to be resident in a country, in each case, that is subject to a country sanctions program administered and enforced by OFAC.

 

“Sanctioned Person” means a person named on the list of Specially Designated Nationals maintained by OFAC.

 

“S&P” has the meaning specified therefor in the definition of Cash Equivalents.

 

“SEC” means the United States Securities and Exchange Commission and any successor thereto.

 

“Securities Account” means a securities account (as that term is defined in the Code).

 

“Securities Act” means the Securities Act of 1933, as amended from time to time, and any successor statute.

 

“Security Interest” has the meaning specified therefor in Section 3.1 of this Agreement.

 

“Solvent” means, with respect to any Person on a particular date, that, (i) at fair valuations, the sum of such Person’s assets (and including as assets for this purpose all rights of subrogation, contribution or indemnification arising pursuant to any guarantees given by such Person) is greater than all of such Person’s debts and including subordinated and contingent liabilities computed at the amount which, such Person has a reasonable basis to believe, represents an amount which can reasonably be expected to become an actual or matured liability (and including as to contingent liabilities arising pursuant to any guarantee the face amount of such liability as reduced to reflect the probability of it becoming a matured liability); and (ii) such Person is able to pay its debts as they mature and has (and has a reasonable basis to believe it will continue to have) sufficient capital (and not unreasonably small capital) to carry on its business consistent with its practices as of the date hereof.

 

“Stock” means all shares, options, warrants, interests, participations, or other equivalents (regardless of how designated) of or in a Person, whether voting or nonvoting, including common stock, preferred stock, or any other “equity security” (as such term is defined 

 

Schedule 1.1 - 27

 

in Rule 3a11-1 of the General Rules and Regulations promulgated by the SEC under the Exchange Act).

 

“Subsidiary” of a Person means a corporation, partnership, limited liability company, or other entity in which that Person directly or indirectly owns or controls the shares of Stock having ordinary voting power to elect a majority of the board of directors (or appoint other comparable managers) of such corporation, partnership, limited liability company, or other entity.

 

“Supporting Obligations” means supporting obligations (as such term is defined in the Code), and includes letters of credit and guaranties issued in support of Accounts, Chattel Paper, documents, General Intangibles, instruments or Investment Related Property.

 

“Taxes” means any taxes, levies, imposts, duties, fees, assessments or other charges of whatever nature now or hereafter imposed by any jurisdiction or by any political subdivision or taxing authority thereof or therein with respect to such payments and all interest, penalties or similar liabilities with respect thereto; provided, however, that Taxes shall exclude any tax imposed on the net income or net profits of Lender (including any branch profits taxes), in each case imposed by the jurisdiction (or by any political subdivision or taxing authority thereof in which Lender is organized or the jurisdiction (or by any political subdivision or taxing authority thereof) in which Lender’s principal office is located in each case as a result of a present or former connection between Lender and the jurisdiction or taxing authority imposing the tax (other than any such connection arising solely from Lender having executed, delivered or performed its obligations or received payment under, or enforced its rights or remedies under, this Agreement or any other Loan Document).

 

“Termination Date” has the meaning specified therefor in Section 2.9 of this Agreement.

 

“Trademarks” means any and all trademarks, trade names, registered trademarks, trademark applications, service marks, registered service marks and service mark applications, including (i) the trade names, registered trademarks, trademark applications, registered service marks and service mark applications listed on Schedule 5.26(b) to the Information Certificate, (ii) all renewals thereof, (iii) all income, royalties, damages and payments now and hereafter due or payable under and with respect thereto, including payments under all licenses entered into in connection therewith and damages and payments for past or future infringements or dilutions thereof, (iv) the right to sue for past, present and future infringements and dilutions thereof, (v) the goodwill of each Loan Party’s business symbolized by the foregoing or connected therewith, and (vi) all of each Loan Party’s rights corresponding thereto throughout the world.

 

“Transition Expense Estimate” means an estimate of expenses lender would incur if Accounts were collected by a Person other than Borrowers in such amount established by Lender in its sole discretion.

 

“Uniform Customs” means the Uniform Customs and Practice for Documentary Credits (2007 Revision), effective July, 2007 International Chamber of Commerce Publication No. 600 (or such later version thereof as may be in effect at the time of issuance).

 

Schedule 1.1 - 28

 

“United States” means the United States of America.

 

“Unused Amount” has the meaning specified therefor in Schedule 2.12 of this Agreement.

 

“URL” means “uniform resource locator,” an internet web address.

 

“Value” means, as determined by Lender in good faith, with respect to Inventory, the lower of (a) cost computed on a first-in first-out basis in accordance with GAAP or (b) market value, provided that for purposes of the calculation of the Borrowing Base, (i) the Value of the Inventory shall not include:  (A) the portion of the value of Inventory equal to the profit earned by any Affiliate on the sale thereof to any Borrower or (B) write-ups or write-downs in value with respect to currency exchange rates and (ii) notwithstanding anything to the contrary contained herein, the cost of the Inventory shall be computed in the same manner and consistent with the most recent appraisal of the Inventory received and accepted by Lender, if any.

 

“Voidable Transfer” has the meaning specified therefor in Section 17.7 of this Agreement.

 

b.     Accounting Terms.  All accounting terms not specifically defined herein shall be construed in accordance with GAAP; provided, however, that if any Borrower notifies Lender that such Borrower requests an amendment to any provision hereof to eliminate the effect of any change in accounting principles required by the promulgation of any rule, regulation, pronouncement or opinion by the Financial Accounting Standards Board of the American Institute of Certified Public Accountants (or successor thereto or any agency with similar functions) (an “Accounting Change”) occurring after the Closing Date, or in the application thereof (or if Lender notifies any Borrower that Lender requests an amendment to any provision hereof for such purpose), regardless of whether any such notice is given before or after such Accounting Change or in the application thereof, then Lender and Borrowers agree that they will negotiate in good faith amendments to the provisions of this Agreement that are directly affected by such Accounting Change with the intent of having the respective positions of Lender and each Borrower after such Accounting Change conform as nearly as possible to their respective positions as of the date of this Agreement and, until any such amendments have been agreed upon, the provisions in this Agreement shall be calculated as if no such Accounting Change had occurred.  Whenever used herein, the term “financial statements” shall include the footnotes and schedules thereto.  Whenever the term “Borrower” is used in respect of a financial covenant or a related definition, it shall be understood to mean Borrowers and their respective Subsidiaries on a consolidated basis, unless the context clearly requires otherwise.

 

c.     Code.  Any terms used in this Agreement that are defined in the Code shall be construed and defined as set forth in the Code unless otherwise defined herein.

 

d.     Construction.  Unless the context of this Agreement or any other Loan Document clearly requires otherwise, references to the plural include the singular, references to the singular include the plural, the terms “includes” and “including” are not limiting, and the term “or” has, except where otherwise indicated, the inclusive meaning represented by the phrase “and/or.”  The words “hereof,” “herein,” “hereby,” “hereunder,” and similar terms in this Agreement or any other 

 

Schedule 1.1 - 29

 

Loan Document refer to this Agreement or such other Loan Document, as the case may be, as a whole and not to any particular provision of this Agreement or such other Loan Document, as the case may be.  Section, subsection, clause, schedule, and exhibit references herein are to this Agreement unless otherwise specified.  Any reference in this Agreement or in any other Loan Document to any agreement, instrument, or document shall include all alterations, amendments, changes, extensions, modifications, renewals, replacements, substitutions, joinders, and supplements, thereto and thereof, as applicable (subject to any restrictions on such alterations, amendments, changes, extensions, modifications, renewals, replacements, substitutions, joinders, and supplements set forth herein).  The words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts, and contract rights.  Any reference herein or in any other Loan Document to the satisfaction, repayment, or payment in full of the Obligations shall mean the repayment in full in cash or immediately available funds (or, (i) in the case of contingent reimbursement obligations with respect to Letters of Credit, providing Letter of Credit Collateralization, and (ii) in the case of obligations with respect to Bank Products (other than Hedge Obligations), providing Bank Product Collateralization) of all of the Obligations (including the payment of any Lender Expenses that have accrued irrespective of whether demand has been made therefor and the payment of any termination amount then applicable (or which would or could become applicable as a result of the repayment of the other Obligations) under Hedge Agreements) other than unasserted contingent indemnification Obligations.  Any reference herein to any Person shall be construed to include such Person’s successors and assigns.  Any requirement of a writing contained herein or in any other Loan Document shall be satisfied by the transmission of a Record.  References herein to any statute or any provision thereof include such statute or provision (and all rules, regulations and interpretations thereunder) as amended, revised, re-enacted, and/or consolidated from time to time and any successor statute thereto.

 

e.     Schedules and Exhibits.  All of the schedules and exhibits attached to this Agreement shall be deemed incorporated herein by reference.

 

Schedule 1.1 - 30

 

Schedule 2.12

 

TO CREDIT AND SECURITY AGREEMENT

 

FEES

 

Borrowers shall pay to Lender each of the following fees:

 

On the Closing Date:

 

Origination Fee. A one-time origination fee of $50,000, which shall be fully earned and payable upon the execution of this Agreement, plus an origination fee of one-half of one percent (0.50%) of the amount of any increase in the Maximum Revolver Amount after the Closing Date, which shall be fully earned and payable at the time such increase becomes effective.

 

Monthly:

 

(a)                          Unused Fee. An unused line fee of three-tenths of one percent (0.30%) per annum of the daily average of the Maximum Revolver Amount reduced by outstanding Advances and Letter of Credit Usage (the “Unused Amount”), from the date of this Agreement to and including the Termination Date, which unused line fee shall be payable monthly in arrears on the first day of each month and on the Termination Date.

 

(b)                          Collateral Monitoring Fee.  A fee at the rates established from time to time by Lender as its Collateral monitoring fees (which fees are currently $500 per month), due and payable monthly in advance  on the first day of the month and on the Termination Date.

 

(c)                           Cash Management Fees. Service fees to Lender for Cash Management Services provided pursuant to the Cash Management Documents,  Bank Product Agreements or any other agreement entered into by the parties, in the amount prescribed in Lender’s current service fee schedule.

 

(d)                          Letter of Credit Fees.  A Letter of Credit fee (in addition to the charges, commissions, fees, and costs set forth in Section 2.13(e)) which shall accrue at a rate equal to 3% per annum times the Daily Balance of the undrawn amount of all outstanding Letters of Credit, due and payable monthly in arrears on the first day of each month and on the Termination Date.  All fees upon the occurrence of any other activity with respect to any Letter of Credit (including, without limitation, the issuance, transfer, amendment, extension or cancellation of any Letter of Credit and honoring of draws under any Letter of Credit) determined in accordance with Lender’s standard fees and charges then in effect for such activity.

 

(e)                           Minimum Interest Charge.  None.

 

Annually:

 

(a)                                 Facility Fee.  None.

 

Schedule 2.12 - 1

 

Other:

 

(a)                                 Collateral Exam Reimbursement.  Lender’s costs and expenses in connection with any collateral exams, audits or inspections conducted by or on behalf of Lender at the current rates established from time to time by Lender as its fee for collateral exams, audits or inspections (which fees are currently $1,000 per day per collateral examiner), together with all actual out-of-pocket costs and expenses incurred in conducting any collateral exam, audit, or inspection; but Borrowers shall not, with the exception of fees, costs, and expenses for collateral exams, audits and inspections incurred following the occurrence of an Event of Default, be required to reimburse Lender to the extent that the fees, costs and expenses for the initial pre-loan collateral exam, audit and inspection exceeds $10,000 and each subsequent collateral exam, audit and inspection exceeds $7,500.

 

(b)                                 Overadvance Fee. Borrowers shall pay a $500 Overadvance fee for each day that an Overadvance Amount exists which was not agreed to by Lender in a Record prior to its occurrence; provided that Lender’s acceptance of the payment of such fees shall not constitute either consent to the Overadvance Amount or waiver of any resulting Event of Default.  Borrowers shall pay additional Overadvance fees and interest in such amounts and on such terms as Lender in its sole discretion may consider appropriate for any Overadvance Amount to which Lender has specifically consented in a Record prior to its occurrence.

 

(c)                                  Termination and Reduction Fees. If (i) Lender terminates the Revolving Credit Facility after the occurrence of an Event of Default, or (ii) Borrowers terminate the Revolving Credit Facility on a date prior to the Maturity Date, or (iii) Borrowers and Lender agree to reduce the Maximum Revolver Amount, then Borrowers shall pay Lender as liquidated damages a termination or reduction fee in an amount equal to a percentage of the Maximum Credit in the case of a termination of the Revolving Credit Facility or a percentage of the amount of reduction of the Maximum Revolver Amount in the case of a reduction in the Maximum Revolver Amount, as the case may be, calculated as follows: (A) one percent (1.00%) if the termination or reduction occurs on or before the first anniversary of the first Advance; and (B) one-half of one percent (0.50%) if the termination or reduction occurs after the first anniversary of the first Advance.  If, with the consent of Lender (which consent may be withheld by Lender in its sole discretion), the Revolving Credit Facility is transferred to another Subsidiary or operating division of Lender at least 18 months after the date of the first Advance, such transfer shall not be deemed a termination or reduction resulting in the payment of termination or reduction fees provided that Borrowers agree, at the time of transfer, to the payment of comparable fees in an amount not less than that set forth in this Agreement in the event that any credit facilities extended after such transfer are thereafter terminated early, reduced or prepaid.

 

Schedule 2.12 - 2

 

Schedule 6.1

 

TO CREDIT AND SECURITY AGREEMENT

 

FINANCIAL STATEMENTS; REPORTS; CERTIFICATES

 

Deliver to Lender, each of the financial statements, reports, or other items set forth below at the following times in form satisfactory to Lender:

 

	
as soon as available, but in any event   within 20 days after the end of each month
    	
 
    	
(a)      an   unaudited consolidated and consolidating balance sheet, income statement,   statement of cash flow, and statement of shareholder’s equity covering each   Borrower’s and its Subsidiaries operations during such period and compared to   the prior period and plan, together with a corresponding discussion and   analysis of results from management; and

 

(b)      a   Compliance Certificate along with the underlying calculations, including the   calculations to arrive at EBITDA and Fixed Charge Coverage Ratio, to the   extent applicable.
    
	
 
    	
 
    	
 
    
	
as soon as available, but in any event   within 120 days after the end of each fiscal year
    	
 
    	
(a)      consolidated   and consolidating financial statements of each Borrower and its Subsidiaries   for each such fiscal year, audited by independent certified public   accountants reasonably acceptable to Lender and certified, without any   (A) “going concern” or like qualification or exception,   (B) qualification or exception as to the scope of such audit, or   (C) qualification which relates to the treatment or classification of   any item and which, as a condition to the removal of such qualification,   would require an adjustment to such item), by such accountants to have been   prepared in accordance with GAAP (such audited financial statements to   include a balance sheet, income statement, statement of cash flow, and   statement of shareholder’s equity and, if prepared, such accountants’ letter   to management); and

 

(b)      a   Compliance Certificate along with the underlying calculations, including the   calculations to arrive at  EBITDA and   Fixed Charge Coverage Ratio, to the extent applicable.
    
	
 
    	
 
    	
 
    
	
as soon as available, but in any event   within 10 days before the start of each of Borrowers’ fiscal years
    	
 
    	
(a)      copies   of Borrowers’ Projections, in form and substance (including as to scope and   underlying assumptions) satisfactory to Lender, in its Permitted Discretion,   for the forthcoming fiscal year, on a quarterly basis, certified by the chief   financial officer of each such Borrower as being such officer’s good faith   estimate of the financial performance of such Borrower during the period   covered thereby.
    
	
 
    	
 
    	
 
    
	
if and when filed by any Borrower
    	
 
    	
(a)      Form 10-Q   quarterly reports, Form 10-K annual reports, and Form 8-K current   reports;
    

 

Schedule 6.1 - 1

 

	
 
    	
 
    	
(b)      any   other filings made by any Borrower with the SEC; and

 

(c)       any   other information that is provided by any Borrower to its shareholders   generally.
    

 

Schedule 6.1 - 2

 

Schedule 6.2

 

TO CREDIT AND SECURITY AGREEMENT

 

COLLATERAL REPORTING

 

Provide Lender with each of the documents set forth below at the following times in form and substance satisfactory to Lender:

 

	
On the first Business Day of each month or   more frequently if Lender requests
    	
 
    	
(a)   a   Borrowing Base Certificate;

 

(b)   an   Account roll-forward with supporting details supplied from sales journals,   collection journals, credit registers and any other records;

 

(c)   notice   of all claims, offsets, or disputes asserted by Account Debtors with respect   to each Borrower’s and its Subsidiaries’ Accounts; and

 

(d)   copies   of invoices together with corresponding supporting documentation with respect   to invoices and credit memos in excess of an amount determined in the sole   discretion of Lender from time to time.
    
	
 
    	
 
    	
 
    
	
On the first Business Day of each   week or more frequently if Lender requests
    	
 
    	
(a)   None.
    
	
 
    	
 
    	
 
    
	
Monthly (no later than the 15th day   of each month) or more frequently if Lender requests
    	
 
    	
(a)   a monthly Account roll-forward, in a format   acceptable to Lender in its discretion;

 

(b)   a detailed aging of each Borrower’s   Accounts, together with a reconciliation to the monthly Account roll-forward   and supporting documentation for any reconciling items noted (delivered   electronically in an acceptable format, if a Borrower has implemented   electronic reporting);

 

(c)   a detailed calculation of those Accounts   that are not eligible for the Borrowing Base;

 

(d)   a summary aging, by vendor, of each   Borrower’s and its Subsidiaries’ accounts payable (delivered electronically   in an acceptable format, if a Borrower has implemented electronic reporting);   and

 

(e)   a detailed report regarding each Borrower’s   and its Subsidiaries’ cash and Cash Equivalents, including an indication of   which amounts constitute Qualified Cash.
    
	
 
    	
 
    	
 
    
	
Monthly (no later than the 15th day of
    	
 
    	
(a)   a reconciliation of Accounts aging, trade   accounts payable aging of each Borrower to the general ledger and the monthly   financial statements,
    

 

Schedule 6.2 - 1

 

	
each month) or more frequently if   Lender requests
    	
 
    	
including any book   reserves related to each category.
    
	
 
    	
 
    	
 
    
	
Quarterly
    	
 
    	
(a)   a report regarding each Borrower’s and its   Subsidiaries’ accrued, but unpaid, ad   valorem taxes.
    
	
 
    	
 
    	
 
    
	
Annually, or more frequently, if   requested by Lender
    	
 
    	
(a)   a detailed list of each Borrower’s and its   Subsidiaries’ customers, with address and contact information.
    
	
 
    	
 
    	
 
    
	
Upon request by Lender
    	
 
    	
(a)   such other reports as to   the Collateral or the financial condition of each Borrower and its   Subsidiaries, as Lender may reasonably request.
    

 

Schedule 6.1 - 2

 

EXHIBIT A

 

TO CREDIT AND SECURITY AGREEMENT

 

FORM OF COMPLIANCE CERTIFICATE

 

[on Borrower’s letterhead]

 

	
To:
    	
Wells Fargo Bank, National Association
    	
 
    
	
 
    	
MAC 7300-210
    	
 
    
	
 
    	
1740 Broadway
    	
 
    
	
 
    	
Denver, CO 80274
    	
 
    
	
 
    	
Attn: Timothy P. Ulrich
    	
 
    
	
 
    	
 
    	
 
    
	
Re:
    	
Compliance Certificate   dated                        ,   20    
    	
 
    

 

Ladies and Gentlemen:

 

Reference is made to that certain Credit and Security Agreement (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”) dated as of February 28, 2012, by and among WELLS FARGO BANK, NATIONAL ASSOCIATION, (“Lender”), and STARTEK, INC. and STARTEK USA, INC. (the “Borrowers”).  Capitalized terms used in this Compliance Certificate have the meanings set forth in the Credit Agreement unless specifically defined herein.

 

Pursuant to Schedule 6.1 of the Credit Agreement, the undersigned chief financial officer of each of StarTek, Inc. and StarTek USA, Inc. hereby certifies that:

 

1.             The financial information of each Borrower and its Subsidiaries furnished to Lender pursuant to Section 6.1 of the Credit Agreement has been prepared in accordance with GAAP (except for year-end adjustments and the lack of footnotes), and fairly presents in all material respects the financial condition of each Borrower and its Subsidiaries.

 

2.             Such officer has reviewed the terms of the Credit Agreement and has made, or caused to be made under his/her supervision, a review in reasonable detail of the transactions and condition of each Borrower and its Subsidiaries during the accounting period covered by the financial statements delivered pursuant to Schedule 6.1 of the Credit Agreement.

 

3.             Such review has not disclosed the existence on and as of the date hereof, and the undersigned does not have knowledge of the existence as of the date hereof, of any event or condition that constitutes a Default or Event of Default.

 

4.             The representations and warranties of each Borrower and its Subsidiaries set forth in the Credit Agreement and the other Loan Documents are true and correct in all material respects on and as of the date hereof (except to the extent they relate to a specified date).

 

5.             Each Borrower and its Subsidiaries are in compliance with the applicable covenants contained in Section 8 of the Credit Agreement as demonstrated on Schedule 1 hereof.

 

Exhibit A - 1

 

IN WITNESS WHEREOF, this Compliance Certificate is executed by the undersigned this            day of                               , 201    .

 

 

	
 
    	
STARTEK, INC.
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
Chief Financial Officer
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
STARTEK USA, INC.
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
Chief Financial Officer
    
				

 

Exhibit A - 2

 

SCHEDULE 1 TO COMPLIANCE CERTIFICATE

 

Financial Covenants

 

1.             Minimum Adjusted EBITDA.

 

Borrowers’ and their Subsidiaries’ Adjusted EBITDA, measured on a month-end basis, for the [    ] month period ending                   , 2012 is $                      , which [does/does not] satisfy the minimum Adjusted EBITDA requirement set forth in Section 8 of the Credit Agreement for the corresponding period.

 

2.             Non-Financed Capital Expenditures.

 

Borrowers’ and their Subsidiaries Capital Expenditures for fiscal year 2012 were $                             as of last day of the month of                      , 2012, which [is/is not] an amount less than or equal to, but not greater than, the amount set forth in Section 8 of the Credit Agreement for the corresponding period.

 

Exhibit A - Schedule 1 - 1

 

EXHIBIT B

 

TO CREDIT AND SECURITY AGREEMENT

 

CONDITIONS PRECEDENT

 

THE OBLIGATION OF LENDER TO MAKE ITS INITIAL EXTENSION OF CREDIT PROVIDED FOR IN THIS AGREEMENT IS SUBJECT TO THE FULFILLMENT, TO THE SATISFACTION OF LENDER, OF EACH OF THE FOLLOWING CONDITIONS PRECEDENT:

 

(a)                                 the Closing Date shall occur on or before February 29, 2012;

 

(b)                                 Lender shall have received an email or a letter duly executed by each Borrower authorizing Lender to file appropriate financing statements in such office or offices as may be necessary or, in the opinion of Lender, desirable to perfect the security interests to be created by the Loan Documents;

 

(c)                                  Lender shall have received evidence that appropriate financing statements have been duly filed in such office or offices as may be necessary or, in the opinion of Lender, desirable to perfect Lender’s Liens in and to the Collateral, and Lender shall have received searches reflecting the filing of all such financing statements;

 

(d)                                 Lender shall have received each of the following documents, in form and substance satisfactory to Lender, duly executed, and each such document shall be in full force and effect:

 

(i)                                     this Agreement and the other Loan Documents (except as set forth on Exhibit C);

 

(ii)                                  a disbursement letter executed and delivered by each Borrower to Lender regarding the extensions of credit to be made on the Closing Date, the form and substance of which is satisfactory to Lender,

 

(iii)                               the Intercompany Subordination Agreement, and

 

(iv)                              a letter, in form and substance satisfactory to Lender, from Existing Lender to Lender respecting the amount necessary to repay in full all of the obligations of the Borrowers and their Subsidiaries owing to Existing Lender and obtain a release of all of the Liens existing in favor of Existing Lender in and to the assets of Loan Parties and their Subsidiaries;

 

(e)                                  Lender shall have received a certificate from the Secretary of each Loan Party (i) attesting to the resolutions of such Loan Party’s Board of Directors authorizing its execution, delivery, and performance of this Agreement and the other Loan Documents to which such Loan Party is a party, (ii) authorizing specific officers of such Loan Party to execute the 

 

Exhibit B - 1

 

same, and (iii) attesting to the incumbency and signatures of such specific officers of such Loan Party;

 

(f)                                   Lender shall have received copies of each Loan Party’s Governing Documents, as amended, modified, or supplemented to the Closing Date, certified as true, correct and complete by the Secretary of such Loan Party;

 

(g)                                  Lender shall have received a certificate of status with respect to each Loan Party, dated within 10 days of the Closing Date, such certificate to be issued by the appropriate officer of the jurisdiction of organization of such Loan Party, which certificate shall indicate that such Loan Party is in good standing in such jurisdiction;

 

(h)                                 Lender shall have received certificates of status with respect to Borrower StarTek USA, Inc., each dated within 30 days of the Closing Date, such certificates to be issued by the appropriate officer of the jurisdictions (other than the jurisdiction of organization of such Loan Party) in which its failure to be duly qualified or licensed would constitute a Material Adverse Change, which certificates shall indicate that Borrower StarTek USA, Inc. is in good standing in such jurisdictions;

 

(i)                                     Lender shall have received certificates of insurance, together with the binders or endorsements thereto, as are required by Section 6.6, the form and substance of which shall be satisfactory to Lender;

 

(j)                                    Lender shall have received an opinion of each Loan Party’s counsel in form and substance satisfactory to Lender;

 

(k)                                 Borrowers shall have Excess Availability plus cash in depositary accounts located in the United States of at least $10,000,000 after giving effect to (i) the initial extensions of credit hereunder, and (ii) the payment of all fees and expenses required to be paid by Borrowers on the Closing Date under this Agreement or the other Loan Documents;

 

(l)                                     Lender shall have completed its business, legal, and collateral due diligence, including (i) a collateral examination and review of each Borrower’s and its Subsidiaries’ Books and verification of each Loan Party’s representations and warranties to Lender, the results of which must be satisfactory to Lender, and (ii) an inspection of each of the locations where each Loan Party’s and its Subsidiaries’ Inventory is located, the results of which must be satisfactory to Lender;

 

(m)                             Lender shall have completed (i) Patriot Act searches, OFAC/PEP searches and customary individual background checks for each Loan Party, and (ii) OFAC/PEP searches and customary individual background searches for each Borrower’s senior management and key principals, and each other Loan Party, the results of which shall be satisfactory to Lender;

 

(n)                                 Lender shall have received a set of Projections of each Borrower for 2012;

 

(o)                                 Lender shall have received payment or reimbursement for all Lender Expenses incurred in connection with the transactions evidenced by this Agreement;

 

Exhibit B - 2

 

(p)                                 Lender shall have received a completed Standard Flood Hazard Determination Form issued by the Department of Homeland Security Federal Emergency Management Agency with respect to each parcel of Real Property Collateral indicating whether or not such parcel is located in a special flood hazard zone, together with an acceptable flood insurance policy, if required;

 

(q)                                 Each Loan Party and each of its Subsidiaries shall have received all licenses, approvals or evidence of other actions required by any Governmental Authority in connection with the execution and delivery by such Loan Party or its Subsidiaries of the Loan Documents or with the consummation of the transactions contemplated thereby; and

 

(r)                                    all other documents and legal matters in connection with the transactions contemplated by this Agreement shall have been delivered, executed, or recorded and shall be in form and substance satisfactory to Lender; and

 

(s)                                   Lender shall have received final credit approval for the Revolving Credit Facility and the transactions described in this Agreement.

 

Exhibit B - 3

 

EXHIBIT C

 

TO CREDIT AND SECURITY AGREEMENT

 

CONDITIONS SUBSEQUENT

 

THE FAILURE OF BORROWERS TO FULFILL, TO THE SATISFACTION OF LENDER, ANY OF THE FOLLOWING CONDITIONS SUBSEQUENT SHALL CONSTITUTE AN EVENT OF DEFAULT:

 

(a)                                 With 3 days of the Closing Date, Borrowers shall deliver to Lender the original promissory note related to the Revolving Credit Facility, the original stock certificate #60 for 1,000 shares of StarTek USA, Inc. and the original assignment separate from certificate related to stock certificate #60;

 

(b)                                 Within 7 days of the Closing Date, Borrowers shall provide Lender with Control Agreements for all open accounts with Existing Lender;

 

(c)                                  Within 7 days of the Closing Date, Borrowers shall provide Lender with Exhibit B to that certain Multilateral Assistance, Cash Management and Lending Agreement (“Confirmation of Intercompany Balances”) among Borrowers and their Affiliates dated as of January 1, 2011;

 

(d)                                 Within 7 days of the Closing Date, Borrowers shall provide Lender with a lender loss payee endorsement to Borrowers’ commercial property insurance policy in favor of Lender;

 

(e)                                  Within 15 days of the Closing Date, Lender shall have received certificates of status with respect to Borrower StarTek, Inc., each dated within 30 days of the Closing Date, such certificates to be issued by the appropriate officer of the jurisdictions (other than the jurisdiction of organization of such Loan Party) in which its failure to be duly qualified or licensed would constitute a Material Adverse Change, which certificates shall indicate that Borrower StarTek, Inc. is in good standing in such jurisdictions;

 

(f)                                   Within 30 days of the Closing Date, Lender shall have received Collateral Access Agreements with respect to all locations leased by any Borrower;

 

(g)                                  Within 30 days of the Closing Date, Lender shall have received fully-executed Mortgages (in recordable form) to the Real Property Collateral described on Schedule R-1, and any Mortgages of record in favor of Existing Lender or any Person other than Lender shall be released; and

 

(h)                                 Within 75 days of the Closing Date, Borrowers shall provide Lender with the Cash Management Documents.

 

IF BORROWERS FAIL TO FULFILL, TO THE SATISFACTION OF LENDER, ANY OF THE FOLLOWING CONDITIONS SUBSEQUENT, ALL ACCOUNTS AFFECTED BY SUCH FAILURE SHALL CEASE TO BE ELIGIBLE ACCOUNTS:

 

Exhibit C - 1

 

(i)                                     Within 90 days of the Closing Date, Borrowers shall provide Lender with evidence that Parent (and not any of its Subsidiaries) is invoicing all Account Debtors of Parent;

 

(j)                                    Within 90 days of the Closing Date, or within 120 days of the Closing Date with respect to T-Mobile USA, Inc. and [*], Borrowers shall provide Lender with evidence that all Account Debtors of Parent are making payments to Parent’s Collection Account; provided that Lender, upon Parent’s request and in its sole discretion, may extend this deadline up to 30 days with respect to any Account Debtor of Parent;

 

(k)                                 Within 120 days of the Closing Date, Borrowers shall provide Lender with evidence that all parties to Material Contracts (other than Borrowers) have consented to have work performed by Parent or any of its Subsidiaries;

 

(l)                                     Within 180 days of the Closing Date, each of the UCC financing statements of GE Capital, Banc of America Leasing & Capital, LLC, Dell Financial Services, L.P. and Cisco Systems Capital Corporation described on Schedule P-2 shall be amended by a filed UCC-3 amendment in form and substance satisfactory to Lender in its Permitted Discretion; provided, however, that Borrowers shall provide Lender with a schedule of Indebtedness related to such UCC financing statements on or before the Closing Date.

 

Exhibit B - 2

 

EXHIBIT D

 

TO CREDIT AND SECURITY AGREEMENT

 

REPRESENTATIONS AND WARRANTIES

 

5.1                               Due Organization and Qualification; Subsidiaries.

 

(a)                                 Each Loan Party (i) is duly organized and existing and in good standing under the laws of the jurisdiction of its organization, (ii) is qualified to do business in any jurisdiction where the failure to be so qualified could reasonably be expected to result in a Material Adverse Change, and (iii) has all requisite power and authority to own and operate its properties, to carry on its business as now conducted and as proposed to be conducted, to enter into the Loan Documents to which it is a party and to carry out the transactions contemplated thereby.

 

(b)                                 Set forth on Schedule 5.1(b) to the Information Certificate is a complete and accurate description of the authorized capital Stock of each Loan Party (other than Parent), by class, and, as of the Closing Date, a description of the number of shares of each such class that are issued and outstanding.  Other than as described on Schedule 5.1(b) to the Information Certificate, there are no subscriptions, options, warrants, or calls relating to any shares of any Loan Party’s (other than Parent’s) capital Stock, including any right of conversion or exchange under any outstanding security or other instrument.  No Loan Party is subject to any obligation (contingent or otherwise) to repurchase or otherwise acquire or retire any shares of its capital Stock or any security convertible into or exchangeable for any of its capital Stock.

 

(c)                                  Set forth on Schedule 5.1(c) to the Information Certificate (as such Schedule may be updated from time to time to reflect changes resulting from transactions permitted under this Agreement), is a complete and accurate list of the Loan Parties’ direct and indirect Subsidiaries, showing: (i) the number of shares of each class of common and preferred Stock authorized for each of such Subsidiaries, and (ii) the number and the percentage of the outstanding shares of each such class owned directly or indirectly by each Loan Party.  All of the outstanding capital Stock of each such Subsidiary has been validly issued and is fully paid and non-assessable.

 

(d)                                 Except as set forth on Schedule 5.1(c) to the Information Certificate, there are no subscriptions, options, warrants, or calls relating to any shares of any Loan Party’s Subsidiaries’ capital Stock, including any right of conversion or exchange under any outstanding security or other instrument.  No Loan Party’s Subsidiaries are subject to any obligation (contingent or otherwise) to repurchase or otherwise acquire or retire any shares of such Loan Party’s Subsidiaries’ capital Stock or any security convertible into or exchangeable for any such capital Stock.

 

Exhibit D - 1

 

5.2                               Due Authorization; No Conflict.

 

(a)                                 As to each Loan Party, the execution, delivery, and performance by such Loan Party of the Loan Documents to which it is a party have been duly authorized by all necessary action on the part of such Loan Party.

 

(b)                                 As to each Loan Party, the execution, delivery, and performance by such Loan Party of the Loan Documents to which it is a party do not and will not (i) violate any material provision of federal, state, or local law or regulation applicable to any Loan Party or its Subsidiaries, the Governing Documents of any Loan Party or its Subsidiaries, or any order, judgment, or decree of any court or other Governmental Authority binding on any Loan Party or its Subsidiaries, (ii) conflict with, result in a breach of, or constitute (with due notice or lapse of time or both) a default under any Material Contract of any Loan Party or its Subsidiaries except to the extent that any such conflict, breach or default could not individually or in the aggregate reasonably be expected to cause a Material Adverse Change, (iii) result in or require the creation or imposition of any Lien of any nature whatsoever upon any assets of any Loan Party, other than Permitted Liens, or (iv) require any approval of any Loan Party’s interest holders or any approval or consent of any Person under any Material Contract of any Loan Party, other than consents or approvals that have been obtained and that are still in force and effect and except, in the case of Material Contracts, for consents or approvals, the failure to obtain could not individually or in the aggregate reasonably be expected to cause a Material Adverse Change.

 

5.3                               Governmental and Other Consents.  No consent, approval, authorization, or other order or other action by, and no notice to or filing with, any Governmental Authority or any other Person is required (i) for the grant of a Security Interest by such Loan Party in and to the Collateral pursuant to this Agreement or for the execution, delivery, or performance of this Agreement by such Loan Party, or (ii) for the exercise by Lender of the voting or other rights provided for in this Agreement with respect to the Investment Related Property or the remedies in respect of the Collateral pursuant to this Agreement, except as may be required in connection with such disposition of Investment Related Property by laws affecting the offering and sale of securities generally.  No Intellectual Property License of any Loan Party that is necessary to the conduct of such Loan Party’s business requires any consent of any other Person in order for such Loan Party to grant the security interest granted hereunder in such Loan Party’s right, title or interest in or to such Intellectual Property License.

 

5.4                               Binding Obligations.  Each Loan Document has been duly executed and delivered by each Loan Party that is a party thereto and is the legally valid and binding obligation of such Loan Party, enforceable against such Loan Party in accordance with its respective terms, except as enforcement may be limited by equitable principles or by bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or limiting creditors’ rights generally.

 

5.5                               Title to Assets; No Encumbrances.  Each of the Loan Parties and its Subsidiaries has (a) good, sufficient and legal title to (in the case of fee interests in Real Property), (b) valid leasehold interests in (in the case of leasehold interests in real or personal property), and (c) good and marketable title to (in the case of all other personal property), all of their respective assets reflected in their most recent financial statements delivered pursuant to Section 6.1 and most recent collateral reports delivered pursuant to Section 6.2, in each case 

 

Exhibit D - 2

 

except for assets disposed of since the date of such financial statements to the extent permitted hereby.  All of such assets are free and clear of Liens except for Permitted Liens.

 

5.6                               Jurisdiction of Organization; Location of Chief Executive Office; Organizational Identification Number; Commercial Tort Claims.

 

(a)                                 The exact legal name of (within the meaning of Section 9-503 of the Code) and jurisdiction of organization of each Loan Party and each of its Subsidiaries is set forth on Schedule 5.6(a) to the Information Certificate (as such Schedule may be updated from time to time to reflect changes resulting from transactions permitted under this Agreement).

 

(b)                                 The chief executive office of each Loan Party and each of its Subsidiaries is located at the address indicated on Schedule 5.6(b) to the Information Certificate (as such Schedule may be updated from time to time to reflect changes resulting from transactions permitted under this Agreement).

 

(c)                                  Each Loan Party’s and each of its Subsidiaries’ tax identification numbers and organizational identification numbers, if any, are identified on Schedule 5.6(c) to the Information Certificate (as such Schedule may be updated from time to time to reflect changes resulting from transactions permitted under this Agreement).

 

(d)                                 As of the Closing Date, no Loan Party and no Subsidiary of a Loan Party holds any Commercial Tort Claims that exceed $25,000 in amount, except as set forth on Schedule 5.6(d) to the Information Certificate.

 

5.7                               Litigation.

 

(a)                                 There are no actions, suits, or proceedings pending or, to the knowledge of any Loan Party, after due inquiry, threatened in writing against a Loan Party or any of its Subsidiaries that either individually or in the aggregate could reasonably be expected to result in a Material Adverse Change.

 

(b)                                 Schedule 5.7(b) to the Information Certificate sets forth a complete and accurate description, with respect to each of the actions, suits, or proceedings with asserted liabilities in excess of, or that could reasonably be expected to result in liabilities in excess of, $250,000 that, as of the Closing Date, is pending or, to the knowledge of any Loan Party, after due inquiry, threatened against a Loan Party or any of its Subsidiaries, of (i) the parties to such actions, suits, or proceedings, (ii) the nature of the dispute that is the subject of such actions, suits, or proceedings, (iii) the status, as of the Closing Date, with respect to such actions, suits, or proceedings, and (iv) whether any liability of the Loan Parties’ and their Subsidiaries in connection with such actions, suits, or proceedings is covered by insurance.

 

5.8                               Compliance with Laws.  No Loan Party nor any of its Subsidiaries (a) is in violation of any applicable laws, rules, regulations, executive orders, or codes (including Environmental Laws) that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Change, or (b) is subject to or in default with respect to any final judgments, writs, injunctions, decrees, rules or regulations of any court or any federal, state,

 

Exhibit D - 3

 

municipal or other governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Change.

 

5.9          No Material Adverse Change.  All historical financial statements relating to the Loan Parties and their Subsidiaries that have been delivered by Borrowers to Lender have been prepared in accordance with GAAP (except, in the case of unaudited financial statements, for the lack of footnotes and being subject to year-end audit adjustments) and present fairly in all material respects, the Loan Parties’ and their Subsidiaries’ consolidated financial condition as of the date thereof and results of operations for the period then ended.  Since November 30, 2011, no event, circumstance, or change has occurred that has or could reasonably be expected to result in a Material Adverse Change with respect to the Loan Parties and their Subsidiaries.

 

5.10        Fraudulent Transfer.

 

(a)           Each Loan Party is Solvent.

 

(b)           No transfer of property is being made by any Loan Party and no obligation is being incurred by any Loan Party in connection with the transactions contemplated by this Agreement or the other Loan Documents with the intent to hinder, delay, or defraud either present or future creditors of such Loan Party.

 

5.11        Employee Benefits.  No Loan Party, none of their Subsidiaries, nor any of their ERISA Affiliates maintains or contributes to any Benefit Plan.

 

5.12        Environmental Condition.  Except as set forth on Schedule 5.12 to the Information Certificate, (a) to each Loan Party’s knowledge, no Loan Party’s nor any of its Subsidiaries’ properties or assets have ever been used by a Loan Party, its Subsidiaries, or by previous owners or operators in the disposal of, or to produce, store, handle, treat, release, or transport, any Hazardous Materials, where such disposal, production, storage, handling, treatment, release or transport was in violation, in any material respect, of any applicable Environmental Law, (b) to each Loan Party’s knowledge, after due inquiry, no Loan Party’s nor any of its Subsidiaries’ properties or assets have ever been designated or identified in any manner pursuant to any environmental protection statute as a Hazardous Materials disposal site, (c) no Loan Party nor any of its Subsidiaries has received notice that a Lien arising under any Environmental Law has attached to any revenues or to any Real Property owned or real property operated by a Loan Party or its Subsidiaries, and (d) no Loan Party nor any of its Subsidiaries nor any of their respective facilities or operations is subject to any outstanding written order, consent decree, or settlement agreement with any Person relating to any Environmental Law or Environmental Liability that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Change.

 

5.13        Intellectual Property.  Each Loan Party and its Subsidiaries own, or hold licenses in, all trademarks, trade names, copyrights, patents, and licenses that are necessary to the conduct of its business as currently conducted.

 

Exhibit D - 4

 

5.14        Leases.  Each Loan Party and its Subsidiaries enjoy peaceful and undisturbed possession under all leases material to their business and to which they are parties or under which they are operating, and, subject to Permitted Protests, all of such material leases are valid and subsisting and no material default by the applicable Loan Party or its Subsidiaries exists under any of them.

 

5.15        Deposit Accounts and Securities Accounts.  Set forth on Schedule 5.15 to the Information Certificate is a listing of all of the Loan Parties’ and their Subsidiaries’ Deposit Accounts and Securities Accounts, including, with respect to each bank or securities intermediary (a) the name and address of such Person, and (b) the account numbers of the Deposit Accounts or Securities Accounts maintained with such Person.

 

5.16        Complete Disclosure.  All factual information taken as a whole (other than forward-looking information and projections and information of a general economic nature and general information about each Borrower’s industry) furnished by or on behalf of a Loan Party or its Subsidiaries in writing to Lender (including all information contained in the Schedules hereto or in the other Loan Documents) for purposes of or in connection with this Agreement or the other Loan Documents, and all other such factual information taken as a whole (other than forward-looking information and projections and information of a general economic nature and general information about such Borrower’s industry) hereafter furnished by or on behalf of a Loan Party or its Subsidiaries in writing to Lender will be, true and accurate, in all material respects, on the date as of which such information is dated or certified and not incomplete by omitting to state any fact necessary to make such information (taken as a whole) not misleading in any material respect at such time in light of the circumstances under which such information was provided.  The Projections delivered to Lender for the period December 31, 2012 represent, and as of the date on which any other Projections are delivered to Lender, such additional Projections represent, each Borrower’s good faith estimate, on the date such Projections are delivered, of the Loan Parties’ and their Subsidiaries’ future performance for the periods covered thereby based upon assumptions believed by Borrowers to be reasonable at the time of the delivery thereof to Lender.

 

5.17        Material Contracts.  Set forth on Schedule 5.17 to the Information Certificate (as such Schedule may be updated from time to time in accordance herewith) is a reasonably detailed description of the Material Contracts of each Loan Party and its Subsidiaries as of the most recent date on which Borrowers provided their Compliance Certificate pursuant to Section 6.1; provided, however, that any Borrower may amend Schedule 5.17 to the Information Certificate to add additional Material Contracts so long as such amendment occurs by written notice to Lender on the date that such Borrower provides its Compliance Certificate.  Except for matters which, either individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Change, each Material Contract (other than those that have expired at the end of their normal terms) (a) is in full force and effect and is binding upon and enforceable against the applicable Loan Party or its Subsidiary and, to such Borrower’s knowledge, after due inquiry, each other Person that is a party thereto in accordance with its terms, (b) has not been otherwise amended or modified (other than amendments or modifications permitted by Section 7.7(b)), and (c) is not in default due to the action or inaction of the applicable Loan Party or its Subsidiary.

 

Exhibit D - 5

 

5.18        Patriot Act.  To the extent applicable, each Loan Party is in compliance, in all material respects, with the (a) Trading with the Enemy Act, as amended, and each of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) and any other enabling legislation or executive order relating thereto, and (b) Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA Patriot Act of 2001) (the “Patriot Act”).  No part of the proceeds of the loans made hereunder will be used by any Loan Party or any of their Affiliates, directly or indirectly, for any payments to any governmental official or employee, political party, official of a political party, candidate for political office, or anyone else acting in an official capacity, in order to obtain, retain or direct business or obtain any improper advantage, in violation of the United States Foreign Corrupt Practices Act of 1977, as amended.

 

5.19        Indebtedness.  Set forth on Schedule 5.19 to the Information Certificate is a true and complete list of all Indebtedness of each Loan Party and each of its Subsidiaries outstanding immediately prior to the Closing Date that is to remain outstanding immediately after giving effect to the closing hereunder on the Closing Date and such Schedule accurately sets forth the aggregate principal amount of such Indebtedness as of the Closing Date.

 

5.20        Payment of Taxes.  Except as otherwise permitted under Section 6.5, all tax returns and reports of each Loan Party and its Subsidiaries required to be filed by any of them have been timely filed, and all taxes shown on such tax returns to be due and payable and all assessments, fees and other governmental charges upon a Loan Party and its Subsidiaries and upon their respective assets, income, businesses and franchises that are due and payable have been paid when due and payable.  Each Loan Party and each of its Subsidiaries have made adequate provision in accordance with GAAP for all taxes not yet due and payable.  No Borrower knows of any proposed tax assessment against a Loan Party or any of its Subsidiaries that is not being actively contested by such Loan Party or such Subsidiary diligently, in good faith, and by appropriate proceedings; provided such reserves or other appropriate provisions, if any, as shall be required in conformity with GAAP shall have been made or provided therefor.

 

5.21        Margin Stock.  No Loan Party nor any of its Subsidiaries 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.  No part of the proceeds of the loans made to Borrowers will be used to purchase or carry any such Margin Stock or to extend credit to others for the purpose of purchasing or carrying any such margin stock or for any purpose that violates the provisions of Regulation T, U or X of the Board of Governors of the United States Federal Reserve.

 

5.22        Governmental Regulation.  No Loan Party nor any of its Subsidiaries is subject to regulation under the Federal Power Act or the Investment Company Act of 1940 or under any other federal or state statute or regulation which may limit its ability to incur Indebtedness or which may otherwise render all or any portion of the Obligations unenforceable.  No Loan Party nor any of its Subsidiaries is a “registered investment company” or a company “controlled” by a “registered investment company” or a “principal underwriter” of a “registered investment company” as such terms are defined in the Investment Company Act of 1940.

 

Exhibit D - 6

 

5.23        OFAC.  No Loan Party nor any of its Subsidiaries is in violation of any of the country or list based economic and trade sanctions administered and enforced by OFAC.  No Loan Party nor any of its Subsidiaries (a) is a Sanctioned Person or a Sanctioned Entity, (b) has its assets located in Sanctioned Entities, or (c) derives revenues from investments in, or transactions with Sanctioned Persons or Sanctioned Entities.  No proceeds of any loan made hereunder will be used to fund any operations in, finance any investments or activities in, or make any payments to, a Sanctioned Person or a Sanctioned Entity.

 

5.24        Employee and Labor Matters.  There is (a) no unfair labor practice complaint pending or, to the knowledge of Borrowers, threatened against any Loan Party or any of its Subsidiaries before any Governmental Authority and no grievance or arbitration proceeding pending or threatened against any Loan Party or any of its Subsidiaries which arises out of or under any collective bargaining agreement and that could reasonably be expected to result in a material liability, (b) no strike, labor dispute, slowdown, stoppage or similar action or grievance pending or threatened in writing against any Loan Party or any of its Subsidiaries that could reasonably be expected to result in a material liability, or (c) to the knowledge of Borrowers, after due inquiry, no union representation question existing with respect to the employees of any Loan Party or its Subsidiaries and no union organizing activity taking place with respect to any of the employees of any Loan Party or its Subsidiaries.  No Loan Party or any of its Subsidiaries has incurred any liability or obligation under the Worker Adjustment and Retraining Notification Act or similar state law, which remains unpaid or unsatisfied.  The hours worked and payments made to employees of Loan Parties and their Subsidiaries have not been in violation of the Fair Labor Standards Act or any other applicable legal requirements, except to the extent such violations could not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Change.  All material payments due from any Loan Party or its Subsidiaries on account of wages and employee health and welfare insurance and other benefits have been paid or accrued as a liability on the books of such Loan Party, except where the failure to do so could not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Change.

 

5.25        Reserved.

 

5.26        Collateral.

 

(a)           Real Property.  Schedule 5.26(a) to the Information Certificate sets forth all Real Property owned by any of the Loan Parties as of the Closing Date.

 

(b)           Intellectual Property.  (i) As of the Closing Date, Schedule 5.26(b) to the Information Certificate provides a complete and correct list of: (A) all registered Copyrights owned by any Loan Party, all applications for registration of Copyrights owned by any Loan Party, and all other Copyrights owned by any Loan Party and material to the conduct of the business of any Loan Party; (B) all Intellectual Property Licenses entered into by any Loan Party pursuant to which (x) any Loan Party has provided any license or other rights in Intellectual Property owned or controlled by such Loan Party to any other Person or (y) any Person has granted to any Loan Party any license or other rights in Intellectual Property owned or controlled by such Person that is material to the business of such Loan Party, including any Intellectual

 

Exhibit D - 7

 

Property that is incorporated in any Inventory, software, or other product marketed, sold, licensed, or distributed by such Loan Party; (C) all Patents owned by any Loan Party and all applications for Patents owned by any Loan Party; and (D) all registered Trademarks owned by any Loan Party, all applications for registration of Trademarks owned by any Loan Party, and all other Trademarks owned by any Loan Party and material to the conduct of the business of any Loan Party.

 

(ii)           All employees and contractors of each Loan Party who were involved in the creation or development of any Intellectual Property for such Loan Party that is necessary to the business of such Loan Party have signed agreements containing assignment of Intellectual Property rights to such Loan Party and obligations of confidentiality, except to the extent that failure to do so could not reasonably be expected to result in a Material Adverse Change;

 

(iii)          To each Loan Party’s knowledge after reasonable inquiry, no Person has infringed or misappropriated or is currently infringing or misappropriating any Intellectual Property rights owned by such Loan Party, in each case, that either individually or in the aggregate could reasonably be expected to result in a Material Adverse Change;

 

(iv)          To each Loan Party’s knowledge after reasonable inquiry, all registered Copyrights, registered Trademarks, and issued Patents that are owned by such Loan Party and necessary in the conduct of its business are valid, subsisting and enforceable and in compliance with all legal requirements, filings, and payments and other actions that are required to maintain such Intellectual Property in full force and effect; and

 

(v)           Each Loan Party has taken reasonable steps to maintain the confidentiality of and otherwise protect and enforce its rights in all trade secrets owned by such Loan Party that are necessary in the business of such Loan Party.

 

(c)           Valid Security Interest.  This Agreement creates a valid security interest in the Collateral of each Loan Party, to the extent a security interest therein can be created under the Code, securing the payment of the Obligations.  Except to the extent a security interest in the Collateral cannot be perfected by the filing of a financing statement under the Code, all filings and other actions necessary or desirable to perfect and protect such security interest have been duly taken or will have been taken upon the filing of financing statements listing each applicable Loan Party, as a debtor, and Lender for itself and as agent for the Bank Product Providers, as secured party, in the jurisdictions listed next to such Loan Party’s name on Schedule 5.6(a) to the Information Certificate.  Upon the making of such filings, Lender shall have a first priority perfected security interest in the Collateral of each Loan Party to the extent such security interest can be perfected by the filing of a financing statement, subject to Permitted Liens which are purchase money Liens.  Upon filing of the Copyright Security Agreement with the United States Copyright Office, filing of the Patent and Trademark Security Agreement with the PTO, and the filing of appropriate financing statements in the jurisdictions listed on Schedule 5.6(a) to the Information Certificate, all action necessary or desirable to protect and perfect the Security Interest in, to and on each Loan Party’s Patents, Trademarks, or Copyrights has been taken and such perfected Security Interest is enforceable as such as against any and all creditors of and

 

Exhibit D - 8

 

purchasers from any Loan Party.  All action by any Loan Party necessary to protect and perfect such security interest on each item of Collateral has been duly taken.

 

(d)           Pledged Interests. (i) Except for the Security Interest created hereby, each Loan Party is and will at all times be the sole holder of record and the legal and beneficial owner, free and clear of all Liens other than Permitted Liens, of the Pledged Interests owned by such Loan Party and, when acquired by such Loan Party, any Pledged Interests acquired after the Closing Date; (ii) all of the Pledged Interests are duly authorized, validly issued, fully paid and non-assessable and the Pledged Interests constitute or will constitute the percentage of the issued and outstanding Stock of the Pledged Companies of such Loan Party, as supplemented or modified by any Pledged Interests Addendum or any Joinder to this Agreement; (iii) such Loan Party has the right and requisite authority to pledge, the Investment Related Property pledged by such Loan Party to Lender as provided herein; (iv) all actions necessary or desirable to perfect and establish the first priority of, or otherwise protect, Lender’s Liens in the Investment Related Property, and the proceeds thereof, have been duly taken, upon (A) the execution and delivery of this Agreement; (B) the taking of possession by Lender (or its Lender or designee) of any certificates representing the Pledged Interests, together with undated powers (or other documents of transfer acceptable to Lender) endorsed in blank by the applicable Loan Party; (C) the filing of financing statements in the applicable jurisdiction set forth on Schedule 5.6(a) to the Information Certificate for such Loan Party with respect to the Pledged Interests of such Loan Party that are not represented by certificates, and (D) with respect to any Securities Accounts, the delivery of Control Agreements with respect thereto; and (v) each Loan Party has delivered to and deposited with Lender all certificates representing the Pledged Interests owned by such Loan Party to the extent such Pledged Interests are represented by certificates, and undated powers (or other documents of transfer acceptable to Lender) endorsed in blank with respect to such certificates. None of the Pledged Interests owned or held by such Loan Party has been issued or transferred in violation of any securities registration, securities disclosure, or similar laws of any jurisdiction to which such issuance or transfer may be subject.  As to all limited liability company or partnership interests, issued under any Pledged Operating Agreement or Pledged Partnership Agreement, each Borrower hereby represents and warrants that the Pledged Interests issued pursuant to such agreement (A) are not dealt in or traded on securities exchanges or in securities markets, (B) do not constitute investment company securities, and (C) are not held by such Loan Party in a securities account.  In addition, none of the Pledged Operating Agreements, the Pledged Partnership Agreements, or any other agreements governing any of the Pledged Interests issued under any Pledged Operating Agreement or Pledged Partnership Agreement, provide that such Pledged Interests are securities governed by Section 8 of the Uniform Commercial Code as in effect in any relevant jurisdiction.

 

5.27        Eligible Accounts.  As to each Account that is identified by a Borrower as an Eligible Account in a Borrowing Base Certificate submitted to Lender, such Account is (a) a bona fide existing payment obligation of the applicable Account Debtor created by the sale and delivery of Inventory or the rendition of services to such Account Debtor in the ordinary course of such Borrower’s business, (b) owed to such Borrower, and (c) not excluded as ineligible by virtue of one or more of the excluding criteria (other than Lender-discretionary criteria) set forth in the definition of Eligible Accounts.

 

5.28        Reserved.

 

Exhibit D - 9

 

5.29        Locations of Inventory and Equipment.  The Inventory and Equipment (other than vehicles or Equipment out for repair) of the Loan Parties and their Subsidiaries are not stored with a bailee, warehouseman, or similar party and are located only at, or in-transit between or to, the locations identified on Schedule 5.29 to the Information Certificate (as such Schedule may be updated pursuant to Section 6.14).

 

5.30        Inventory Records.  Each Loan Party  keeps correct and accurate records itemizing and describing the type, quality, and quantity of its and its Subsidiaries’ Inventory and the book value thereof.

 

Exhibit D - 10

 

EXHIBIT E

 

TO CREDIT AND SECURITY AGREEMENT

 

INFORMATION CERTIFICATE

OF

STARTEK, INC. AND STARTEK USA, INC.

 

 

Dated: February 28, 2012

 

Wells Fargo Bank, National Association
 MAC 7300-210

1740 Broadway

Denver, CO 80274

 

In connection with certain financing provided or to be provided by Wells Fargo Bank, National Association (“Lender”), each of the undersigned Borrowers (each a “Loan Party”) represents and warrants to Lender the following information about each Loan Party (capitalized terms not specifically defined shall have the meaning set forth in the Agreement):

 

1.                                      Attached as Schedule 5.1(b) is a complete and accurate description of (i) the authorized capital Stock of each Loan Party and its Subsidiaries, by class, and (A) in the case of each Loan Party (other than the Parent) and its subsidiaries, the number of shares issued and outstanding and the names of the owners thereof (including stockholders, members and partners) and their holdings, or (B) in the case of the Parent, the names of the owners and the number of shares held by Persons owning more than 5% of the issued and outstanding shares, all as of the date of this Agreement, (ii) all subscriptions, options, warrants or calls relating to any shares of any Loan Party’s (other than the Parent) or its Subsidiaries’ capital Stock, including any right of conversion or exchange; (iii) each stockholders’ agreement, restrictive agreement, voting agreement or similar agreement relating to any such capital Stock; and (iv) and organization chart of each Loan Party and all Subsidiaries.

 

2.                                      Each Loan Party is affiliated with, or has ownership in, the entities (including Subsidiaries) set forth on Schedule 5.1(c).

 

3.                                      The Loan Parties use the following trade name(s) in the operation of their business (e.g. billing, advertising, etc.):

 

None.

 

4.                                      Each of the Loan Parties is a registered organization of the following type:

 

Corporation

 

Exhibit E - 1

 

5.                                      The exact legal name (within the meaning of Section 9-503 of the Code) of each Loan Party as set forth in its respective certificate of incorporation, organization or formation, or other public organic document, as amended to date is set forth in Schedule 5.5(a).

 

6.                                      Each Loan Party is organized solely under the laws of the State set forth on Schedule 5.6(a).  Each Loan Party is in good standing under those laws and no Loan Party is organized in any other State.

 

7.                                      The chief executive office and mailing address of each Loan Party is located at the address set forth on Schedule 5.6(b) hereto.

 

8.                                      The books and records of each Loan Party pertaining to Accounts, contract rights, Inventory, and other assets are located at the addresses specified on Schedule 5.6(b).

 

9.                                      The identity and Federal Employer Identification Number of each Loan Party and organizational identification number, if any, is set forth on Schedule 5.6(c). (Please Use Form Attached)

 

10.                               No Loan Party has any Commercial Tort Claims, except as set forth on Schedule 5.6(d).

 

11.                               There are no judgments, actions, suits, proceedings or other litigation pending by or against or threatened by or against any Loan Party, any of its Subsidiaries and/or Affiliates or any of its officers or principals, except as set forth on Schedule 5.7(b).

 

12.                               Since its date of organization, the name as set forth in each Loan Party’s organizational documentation filed of record with the applicable state authority has been changed as follows:

 

	
Date
    	
 
    	
Prior Name
    
	
July 17, 1987
    	
 
    	
StarPak, Inc.
    
	
November 17, 1997
    	
 
    	
StarTek USA, Inc.
    

 

13.                               Since the dates of their respective organization, the Loan Parties have made or entered into the following mergers or acquisitions:

 

StarTek USA, Inc.: StarPak International Corp., a Colorado corporation, merged into StarPak Inc., a Colorado corporation, on July 1, 1992.

 

14.                               Each Loan Party’s assets are owned and held free and clear of Liens, mortgages, pledges, security interests, encumbrances or charges except as set forth below:

 

Exhibit E - 2

 

Debtor: StarTek USA, Inc.

 

	
Name and Address
   of Secured Party
    	
 
    	
Description of Collateral
    	
 
    	
File No. of Financing
   Statement/Jurisdiction
    
	
UMB Bank Colorado, N.A.
   1670 Broadway
   Denver, CO 80202
    	
 
    	
All accounts and general intangibles
    	
 
    	
Colorado
   2009F057604
    
	
US Bancorp
   1310 Madrid Street
   Marshall, MN 56258
    	
 
    	
For informational purposes only: 1 C452   AOP2011000343
   [Printer]
    	
 
    	
Colorado
   2009F095185
    
	
U.S. Bancorp Business
   Equipment Finance Group
   1310 Madrid Street
   Marshall, MN 56258
    	
 
    	
For informational purposes only: 1 C452   AOP2011005855
   [Printer]
    	
 
    	
Colorado
   2010F079442
    
	
Wells Fargo Bank, National Association
   1740 Broadway
   MAC: C7300-210
   Denver, CO 80274
    	
 
    	
All Assets
    	
 
    	
Colorado
   20122001462
    
	
UMB Bank Colorado, N.A.
   1670 Broadway
   Denver, CO 80202
    	
 
    	
All accounts and general intangibles.
    	
 
    	
Delaware
   92161369
    

 

Debtor: StarTek, Inc.

 

	
Name and Address
   of Secured Party
    	
 
    	
Description of   Collateral
    	
 
    	
File No. of Financing
   Statement/Jurisdiction
    
	
Wells Fargo Bank, National Association
   1740 Broadway
   MAC: C7300-210
   Denver, CO 80274
    	
 
    	
All Assets
    	
 
    	
Delaware
    20231011
    
	
GE Capital
   P.O. Box 740423
   Atlanta, GA 30374
    	
 
    	
Equipment
    	
 
    	
Delaware  
    22283715
   71433449 Continuation
    
	
Banc of America Leasing & Capital, LLC
   P.O. Box 7023
   Troy, MI 48007-7023
    	
 
    	
Equipment
    	
 
    	
Delaware
   73151882
    
	
Banc of America Leasing & Capital, LLC
   P.O. Box 7023
   Troy, MI 48007-7023
    	
 
    	
Equipment
    	
 
    	
Delaware
   73339578
    
	
Banc of America Leasing & Capital, LLC
   P.O. Box 7023
   Troy, MI 48007-7023
    	
 
    	
Equipment
    	
 
    	
Delaware
   73512943
    

 

Exhibit E - 3

 

	
Banc of America Leasing & Capital, LLC
   P.O. Box 7023
   Troy, MI 48007-7023
    	
 
    	
Equipment
    	
 
    	
Delaware
   73568663
    
	
Banc of America Leasing & Capital, LLC
   P.O. Box 7023
   Troy, MI 48007-7023
    	
 
    	
Equipment
    	
 
    	
Delaware
   73676813
    
	
Banc of America Leasing & Capital, LLC
   P.O. Box 7023
   Troy, MI 48007-7023
    	
 
    	
Equipment
    	
 
    	
Delaware
   73794624
    
	
Banc of America Leasing & Capital, LLC
   P.O. Box 7023
   Troy, MI 48007-7023
    	
 
    	
Equipment
    	
 
    	
Delaware
   73824215
    
	
Banc of America Leasing & Capital, LLC
   P.O. Box 7023
   Troy, MI 48007-7023
    	
 
    	
Equipment
    	
 
    	
Delaware
   74227699
    
	
Banc of America Leasing & Capital, LLC
   P.O. Box 7023
   Troy, MI 48007-7023
    	
 
    	
Equipment
    	
 
    	
Delaware
   74417589
    
	
Leaf Funding Inc.
   1818 Market St., 9th Floor
   Philadelphia, PA 19103

Banc of America Leasing & Capital, LLC
   P.O. Box 7023
   Troy, MI 48007-7023
    	
 
    	
Equipment
    	
 
    	
Delaware
   74430525
   80436798 Amendment
   80472355 Assignment
   80472967 Assignment
   80558021 Assignment
    
	
AT&T Capital Services, Inc.
   2000 W. AT&T Center Dr.
   Hoffman Estates, IL 60192
    	
 
    	
Equipment
    	
 
    	
Delaware
   74490834
    
	
AT&T Capital Services, Inc.
   2000 W. AT&T Center Dr.
   Hoffman Estates, IL 60192
    	
 
    	
Equipment
    	
 
    	
Delaware
   74490842
    
	
AT&T Capital Services, Inc.
   2000 W. AT&T Center Dr.
   Hoffman Estates, IL 60192
    	
 
    	
Equipment
    	
 
    	
Delaware
   74490875
    
	
Bank of America Leasing & Capital, LLC
   P.O. Box 7023
   Troy, MI 48007-7023
    	
 
    	
Equipment
    	
 
    	
Delaware
   74514872
    
	
Bank of America Leasing & Capital, LLC
   P.O. Box 7023
   Troy, MI 48007-7023
    	
 
    	
Equipment
    	
 
    	
Delaware
   74573621
    

 

Exhibit E - 4

 

	
Dell Financial Services, L.P.
   12234 N. IH-35 Bldg. B
   Austin, TX 78753
    	
 
    	
Equipment
    	
 
    	
Delaware
   80799468
    
	
AT&T Capital Services, Inc.
   2000 W. AT&T Center Dr.
   Hoffman Estates, IL 60192
    	
 
    	
Equipment
    	
 
    	
Delaware
   80938264
    
	
AT&T Capital Services, Inc.
   2000 W. AT&T Center Dr.
   Hoffman Estates, IL 60192
    	
 
    	
Equipment
    	
 
    	
Delaware
   80938306
    
	
Banc of America Leasing & Capital, LLC
   P.O. Box 7023
   Troy, MI 48007-7023
    	
 
    	
Equipment
    	
 
    	
Delaware
   80990125
    
	
Banc of America Leasing & Capital, LLC
   P.O. Box 7023
   Troy, MI 48007-7023
    	
 
    	
Equipment
    	
 
    	
Delaware
   81068442
    
	
Banc of America Leasing & Capital, LLC
   P.O. Box 7023
   Troy, MI 48007-7023
    	
 
    	
Equipment
    	
 
    	
Delaware
   81090552
    
	
Banc of America Leasing & Capital, LLC
   P.O. Box 7023
   Troy, MI 48007-7023
    	
 
    	
Equipment
    	
 
    	
Delaware
   81976982
    
	
Banc of America Leasing & Capital, LLC
   P.O. Box 7023
   Troy, MI 48007-7023
    	
 
    	
Equipment
    	
 
    	
Delaware
   82092979
    
	
Banc of America Leasing & Capital, LLC
   P.O. Box 7023
   Troy, MI 48007-7023
    	
 
    	
Equipment
    	
 
    	
Delaware
   82365102
    
	
Banc of America Leasing & Capital, LLC
   P.O. Box 7023
   Troy, MI 48007-7023
    	
 
    	
Equipment
    	
 
    	
Delaware
   82593562
    
	
AT&T Capital Services, Inc.
   2000 W. AT&T Center Dr.
   Hoffman Estates, IL 60192
    	
 
    	
Equipment
    	
 
    	
Delaware
   82966065
    
	
AT&T Capital Services, Inc.
   2000 W. AT&T Center Dr.
   Hoffman Estates, IL 60192
    	
 
    	
Equipment
    	
 
    	
Delaware
   82966123
    
	
Cisco Systems Capital Corporation
   170 W. Tasman Dr., MS SJ13-3
   San Jose, CA 95134
    	
 
    	
Equipment
    	
 
    	
Delaware
   90133675
    
	
UMB Bank Colorado, N.A.
   1670 Broadway
   Denver, CO 80202
    	
 
    	
All accounts and general intangibles.
    	
 
    	
Delaware
   92161369
    

 

Exhibit E - 5

 

	
Bank of America Leasing & Capital, LLC
   231 South LaSalle St., 8th Fl.
   Chicago, IL 60697
    	
 
    	
Equipment
    	
 
    	
Delaware
   03336553
    

 

15.                               Each Loan Party has been and remains in compliance with all environmental laws applicable to its business or operations except as set forth on Schedule 5.12.

 

16.                               The Loan Parties do not have any Deposit Accounts, investment accounts, Securities Accounts or similar accounts with any bank, securities intermediary or other financial institution, except as set forth on Schedule 5.15 for the purposes and of the types indicated therein.

 

17.                               No Loan Party is a party to or bound by a collective bargaining or similar agreement with any union, labor organization or other bargaining agent except as set forth below(indicate date of agreement, parties to agreement, description of employees covered, and date of termination)

 

None.

 

18.                               Set forth on Schedule 5.17 is a reasonably detailed description of each Material Contract of each Loan Party and its Subsidiaries as of the date of the Agreement.

 

19.                               Set forth on Schedule 5.19 is a true and complete list of all Indebtedness of each Loan Party and its Subsidiaries outstanding immediately prior to the Closing Date.

 

20.                               No Loan Party has made any loans or advances or guaranteed or otherwise become liable for the obligations of any others, except as set forth below:

 

None.

 

21.                               No Loan Party has any Chattel Paper (whether tangible or electronic) or instruments as of the date hereof, except as follows:

 

None.

 

22.                               No Loan Party owns or licenses any Trademarks, Patents, Copyrights or other Intellectual Property, and is not a party to any Intellectual Property License except as set forth on Schedule 5.26 (indicate type of Intellectual Property and whether owned or licensed, registration number, date of registration, and, if licensed, the name and address of the licensor), and there are no restrictions in any Intellectual Property License to the agreements contained in the Agreement other than as set forth in Schedule 5.3.

 

23.                               Schedule 5.26(a) sets forth all Real Property owned by each Loan Party.

 

Exhibit E - 6

 

24.                               Schedule 5.26(d) sets forth all motor vehicles owned by each Borrower and other Loan Party as of the Closing date, by model, model year and vehicle identification number.

 

25.                               The Inventory, Equipment and other goods of each Loan Party are located only at the locations set forth on Schedule 5.29.

 

26.                               At the present time, there are no delinquent taxes due (including, but not limited to, all payroll taxes, personal property taxes, real estate taxes or income taxes) except as follows:

 

None.

 

27.                               Schedule 7.15 lists consignments, bill and hold, sale or return, sale on approval or conditional sale arrangements.

 

28.                              Schedule 7.16 lists inventory with a bailee, warehouseman or processor.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

Exhibit E - 7

 

Lender shall be entitled to rely upon the foregoing in all respects and the undersigned is duly authorized to execute and deliver this Information Certificate on behalf of each Loan Party.

 

	
Very truly yours,
    	
 
    
	
 
    	
 
    	
 
    
	
STARTEK,   INC.
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/ Dave M. Gomez
    	
 
    
	
Name:
    	
Dave M. Gomez
    	
 
    
	
Title:
    	
SVP & General Counsel
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
STARTEK   USA, INC.
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/ Dave M. Gomez
    	
 
    
	
Name:
    	
Dave M. Gomez
    	
 
    
	
Title:
    	
SVP & General Counsel
    	
 
    

 

Exhibit E - 8

 

Schedule 5.1(b)

 

TO INFORMATION CERTIFICATE

 

Capitalization of Loan Parties

and Subsidiaries

 

Beneficial Ownership of StarTek, Inc. as of September 30, 2011 — Greater than 5% holders

 

	
 
    	
 
    	
Beneficial
   Ownership of Shares
    	
 
    
	
Name of Beneficial Owner
    	
 
    	
Number of
   Shares
    	
 
    	
Percentage
    	
 
    
	
A. Emmet   Stephenson, Jr.(1) 
    	
 
    	
3,897,127
    	
 
    	
25.54
    	
%
    
	
T. Rowe Price   Associates 
    	
 
    	
1,626,368
    	
 
    	
10.66
    	
%
    
	
Heartland   Advisors, Inc. 
    	
 
    	
1,500,000
    	
 
    	
9.83
    	
%
    
	
Dimensional Fund   Advisors LP 
    	
 
    	
958,386
    	
 
    	
6.28
    	
%
    

 

(1)         Mr. Stephenson co-founded StarTek in 1987 and served as the Chairman of the Board until 2006.

 

Beneficial Ownership of StarTek USA, Inc.

 

	
 
    	
 
    	
Beneficial
   Ownership of Shares
    	
 
    
	
Name of Beneficial Owner
    	
 
    	
Number of
   Shares
    	
 
    	
Percentage
    	
 
    
	
StarTek, Inc.   
    	
 
    	
1,000
    	
 
    	
100
    	
%
    

 

Schedule 5.1(b) - 1

 

	
Loan Party
    	
 
    	
Authorized
   Shares
    	
 
    	
Holder
    	
 
    	
Type of Rights/Stock
    (common/preferred/option/
   class)
    	
 
    	
Number of
   Shares (after
   exercise of
   all rights to
   acquire
   shares)
    	
 
    	
Percent
   Interest
   (on a
   fully
   diluted
   basis)
    
	
StarTek, Inc.
    	
 
    	
32,000,000 authorized shares
    	
 
    	
See chart above.
    	
 
    	
Common Stock
    	
 
    	
n/a
    	
 
    	
n/a
    
	
StarTek USA, Inc.
    	
 
    	
5,000,000 authorized shares; 1,000 issued   shares
    	
 
    	
StarTek, Inc.
    	
 
    	
Common Stock
    	
 
    	
 
    	
 
    	
 
    
	
StarTek Canada Services, Ltd.
    	
 
    	
No limit on authorization; 1000 issued   shares
    	
 
    	
StarTek, Inc.
    	
 
    	
Common Stock
    	
 
    	
 
    	
 
    	
 
    
	
StarTek Honduras, SAdeCV
    	
 
    	
250 authorized shares
    	
 
    	
StarTek, Inc.
    	
 
    	
Common Stock
    	
 
    	
 
    	
 
    	
 
    
	
StarTek International, Limited
    	
 
    	
12,000 authorized shares; 12,000 issued   shares
    	
 
    	
StarTek, Inc.
    	
 
    	
Common Stock
    	
 
    	
 
    	
 
    	
 
    
	
StarTek Philippines, Inc.
    	
 
    	
 
    	
 
    	
StarTek, Inc.
    	
 
    	
Common Stock
    	
 
    	
 
    	
 
    	
 
    

 

Schedule 5.1(b) - 2

 

Organizational Chart

 

 

Schedule 5.1(b) - 1

 

Schedule 5.1(c)

 

TO INFORMATION CERTIFICATE

 

Subsidiaries; Affiliates; Investments

 

Part 1 - Subsidiaries (More than 50% owned by a Loan Party)

 

	
Name
    	
 
    	
Jurisdiction of
   Organization
    	
 
    	
Percentage Owned
    	
 
    
	
StarTek Philippines, Inc.
    	
 
    	
Philippines
    	
 
    	
100
    	
%*
    
	
StarTek USA, Inc.
    	
 
    	
Colorado
    	
 
    	
100
    	
%*
    
	
StarTek Canada Services, Ltd.
    	
 
    	
Saskatchewan
    	
 
    	
100
    	
%*
    
	
StarTek International, Limited (Includes   StarTek Philippines and StarTek Costa Rica Branches)
    	
 
    	
Bermuda
    	
 
    	
100
    	
%*
    
	
StarTek Honduras, SAdeCV
    	
 
    	
Honduras
    	
 
    	
100
    	
%*
    
	
StarTek Philippines, Inc.
    	
 
    	
(Branch)
    	
 
    	
100
    	
%*
    

 

* All subsidiaries are 100% owned other than nominal interests held by employees in order to satisfy the requirements of local jurisdictions of the Philippines and Honduras.

 

Part 2 - Affiliates (Less than 50% Owned by a Loan Party)

 

	
Name
    	
 
    	
Jurisdiction of
   Organization
    	
 
    	
Percentage Owned
    
	
None.
    	
 
    	
 
    	
 
    	
 
    

 

Part 3 - Affiliates (Subject to common ownership with a Loan Party)

 

	
Name
    	
 
    	
Jurisdiction of
   Organization
    	
 
    	
Parent
    	
 
    	
Percentage Owned
    
	
None.
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    

 

Schedule 5.1(c) - 1

 

Part 4 - Shareholders (If widely held, only holders with more than 10%)

 

	
Name
    	
 
    	
Jurisdiction of
   Organization *
    	
 
    	
Percentage Owned
    
	
See 5.1(b).
    	
 
    	
 
    	
 
    	
 
    

 

Schedule 5.1(c) - 2

 

Schedule 5.3

 

TO INFORMATION CERTIFICATE

 

Governmental and Other Consents

 

None.

 

Schedule 5.3 - 1

 

Schedule 5.5(a)

 

TO INFORMATION CERTIFICATE

 

Exact Legal Name

 

	
StarTek, Inc. 
    
	
StarTek USA, Inc.
    

 

Schedule 5.5(a) - 1

 

Schedule 5.6(a)

 

TO INFORMATION CERTIFICATE

 

Jurisdiction of Organization

 

	
Name
    	
 
    	
Jurisdiction of
   Organization *
    
	
StarTek, Inc.
    	
 
    	
Delaware
    
	
StarTek USA, Inc.
    	
 
    	
Colorado
    

 

* If shareholders are individuals, indicate “N/A”

 

Schedule 5.6(a) - 1

 

Schedule 5.6(b)

 

TO INFORMATION CERTIFICATE

 

Locations

 

Part 1 - Chief Executive Office for StarTek, Inc. and StarTek USA, Inc.

 

44 Cook Street

Suite 400

Denver, CO 80206

303-262-4500

 

Part 2 - Location of Books and Records

 

44 Cook Street

Suite 400

Denver, CO 80206

303-262-4500

 

Schedule 5.6(b) - 1

 

Schedule 5.6(c)

 

TO INFORMATION CERTIFICATE

 

Federal Employer Identification Number

 

StarTek, Inc.: [*]

StarTek USA, Inc.: [*]

 

Organizational Identification Number

 

(Please Use Form Attached For Tax Identification Number)

 

	
Name
    	
 
    	
Organizational Identification
   Number
    
	
StarTek, Inc.
    	
 
    	
[*]
    
	
StarTek USA, Inc.
    	
 
    	
[*]
    

 

Schedule 5.6(c) - 1

 

Wells Fargo Capital Finance

Identity Verification and Investigation Consent Form

Key Parties— (Individuals and Non-individuals)

 

As part of its Know Your Customer Policy requirements, Wells Fargo requires its businesses to perform due diligence with regard to key individuals associated with new or existing borrowers.  Key individuals may be a person or non-person (e.g. a corporation or partnership) and are generally defined as: guarantors, shareholders or partners owning 25% or more of the borrower; authorized signers per a borrowing resolution, partnership authorization, or certificate of incumbency; key officers such as the Chairman, CEO, and CFO; and other individuals reasonably identified as such by Wells Fargo.

 

Due diligence always includes verification of the key individual’s identity and a public records background investigation.

 

Due diligence may also include a consumer credit records investigation if so authorized in writing by the individual on the bottom half of this form.

 

The information and consents requested herein are required as part of the due diligence process.

 

Required Information

 

	
Full Name:
    	
 
    	
Tax Id# or Social Security#:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Maiden/Former/Alias Names and Dates Used (20   Years):
    	
 
    	
Previous Address (if at current less than 5   years.):
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
Street and Unit #
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Date of Birth:
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
City
    	
 
    
	
Current Address:
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
State                                                          Zip
    
	
 
    	
Street and Unit #
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
City
    	
 
    	
 
    

 

Identity Verification and Investigation Consent Form - 1

 

 

 

	
 
    	
State                                                                                      Zip
    

 

I hereby certify that the information set forth above is true and correct and I understand it will be used to verify my identity and initiate a background records investigation. You may also obtain information from or share information with subsidiaries and affiliates of Wells Fargo & Company as well as discuss any information which you may receive in connection with such inquiries into my business, personal, financial and law enforcement (to include conviction and probation records) background with senior officers and the board of directors of the Company, without further notice to or consent from me.

 

	
 
    	
 
    	
Date:
    	
 
    
	
(Signature)
    	
 
    	
 
    

 

Consent to Obtaining Consumer Credit Reports and Other Information (Individuals only)

 

In connection with your review of any request for business credit now or hereafter made by Wells Fargo Capital Finance and/or any of its affiliates, I hereby authorize you to check my credit history and to obtain credit consumer reports from credit reporting agencies. As part of this authorization, you may contact my creditors, and I hereby authorize any creditor so contacted to release to you such credit information as you may request.

 

I hereby certify that the information set forth above is true and correct.  This Consent shall remain in effect until revoked in writing delivered to you at the above address.

 

	
 
    	
 
    	
Date:
    	
 
    
	
(Signature)
    	
 
    	
 
    

 

[Informational only; not applicable for  public company loan]

 

 

Identity Verification and Investigation Consent Form - 2

 

Additional Information

 

Additional residential properties in the prior 20 years (City, State, Zip and Dates Owned).

 

	
Previous Address   1:
    	
 
    	
Previous Address 4:
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
City
    	
 
    	
 
    	
City
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
State 
    	
 
    	
 
    	
State 
    
	
Zip
    	
 
    	
Zip
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
Dates Occupied
    	
 
    	
 
    	
Dates Occupied
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Previous Address   2:
    	
 
    	
Previous Address 5:
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
City
    	
 
    	
 
    	
City
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
State 
    	
 
    	
 
    	
State 
    
	
Zip
    	
 
    	
Zip
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
Dates Occupied
    	
 
    	
 
    	
Dates Occupied
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Previous Address   3:
    	
 
    	
Previous Address 6:
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
City
    	
 
    	
 
    	
City
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
State 
    	
 
    	
 
    	
State 
    
	
Zip
    	
 
    	
Zip
    

 

Additional Information - 1

 

	
 
    	
 
    	
 
    
	
 
    	
Dates Occupied
    	
 
    	
 
    	
Dates Occupied
    
					

 

Additional Information - 2

 

Schedule 5.6(d)

 

TO INFORMATION CERTIFICATE

 

Commercial Tort Claims

 

None.

 

Schedule 5.6(d) - 1

 

 

Schedule 5.7(b)

 

TO INFORMATION CERTIFICATE

 

Judgments/ Pending Litigation

 

1.               Erin Miller and Jill Miller et al v. StarTek Services, Inc., Civil Action No. 11-CV-00017-REB-CBS, United States District Court for the District of Colorado.

 

Schedule 5.7(b) - 1

 

Schedule 5.12

 

TO INFORMATION CERTIFICATE

 

Environmental Compliance

 

None.

 

Schedule 5.12 - 1

 

Schedule 5.15

 

TO INFORMATION CERTIFICATE

 

Deposit Accounts; Investment Accounts

 

Part 1 - Deposit Accounts

 

	
Name and Address of Bank
    	
 
    	
Account No.
    	
 
    	
Purpose*
    
	
UMB Bank Colorado, N.A.
    	
 
    	
[*]
    	
 
    	
StarTek USA, Inc. Operating Account
    

 

Part 2 - Investment and Other Accounts

 

None.

 

Schedule 5.15 - 1

 

Schedule 5.17

 

TO INFORMATION CERTIFICATE

 

Material Contracts

 

	
[*]
    	
 
    
	
 
    	
 
    
	
T-Mobile:
    	
 
    
	
MSA (includes 5 SOW’s as Exhibits B-1 - B-5)
    	
 
    
	
Amendment #1 to MSA
    	
 
    
	
 
    	
 
    
	
AT&T:
    	
 
    
	
20070105.006.C (MSA)
    	
 
    
	
[*]
    	
 
    
	
 
    	
 
    
	
VENDOR CONTRACTS:
    	
 
    
	
[*]
    	
 
    

 

Schedule 5.19

 

TO INFORMATION CERTIFICATE

 

Existing Indebtedness

 

Part 1 - Direct Debt

 

	
Name/Address of Payee
    	
 
    	
Balance Due 
    	
 
    	
Nature of Debt
    	
 
    	
Original
   Termination
   Date
    
	
UMB   Bank Colorado, N.A.
    	
 
    	
$0   due on a maximum of $1,062,057.41
    	
 
    	
Mortgage   — 407 S. 2nd Street 
    	
 
    	
n/a
    
	
UMB   Bank Colorado, N.A.
    	
 
    	
$0   due on a maximum of $5,771,688.58
    	
 
    	
Deed   of Trust — 244 Dundee Avenue 
    	
 
    	
n/a
    
	
UMB   Bank Colorado, N.A.
    	
 
    	
$0   due on a maximum of $2,376,200.00
    	
 
    	
Mortgage   — 116 E Randolph Enid OK
    	
 
    	
n/a
    
	
UMB   Bank Colorado, N.A.
    	
 
    	
$0   due on a maximum of $2,656,160.91
    	
 
    	
Deed   of Trust — 1250 H Street
    	
 
    	
n/a
    
	
GE
    	
 
    	
$130   / month
    	
 
    	
Lease
    	
 
    	
4/9/2011
    
	
GE
    	
 
    	
$197.22   / month
    	
 
    	
Lease
    	
 
    	
9/8/2011
    

 

Schedule 5.19 - 1

 

	
Name/Address of Payee
    	
 
    	
Balance Due 
    	
 
    	
Nature of Debt
    	
 
    	
Original
   Termination
   Date
    
	
Bank   of America 
    	
 
    	
$590.43   / month
    	
 
    	
Lease
    	
 
    	
11/15/2011
    
	
Bank   of America 
    	
 
    	
Included   above
    	
 
    	
Lease
    	
 
    	
11/15/2011
    
	
Bank   of America 
    	
 
    	
$272.48   / month
    	
 
    	
Lease
    	
 
    	
11/15/2011
    
	
Bank   of America 
    	
 
    	
$601.64   / month
    	
 
    	
Lease
    	
 
    	
1/15/2012
    
	
Bank   of America 
    	
 
    	
Included   above
    	
 
    	
Lease
    	
 
    	
1/15/2012
    
	
Bank   of America 
    	
 
    	
$265.84   / month
    	
 
    	
Lease
    	
 
    	
12/15/2011
    
	
Bank   of America 
    	
 
    	
$351.84   / month
    	
 
    	
Lease
    	
 
    	
10/15/2011
    
	
Bank   of America 
    	
 
    	
Included   above 
    	
 
    	
Lease
    	
 
    	
10/15/2011
    
	
Bank   of America 
    	
 
    	
$140.55   / month
    	
 
    	
Lease
    	
 
    	
10/15/2011
    
	
Bank   of America 
    	
 
    	
$359.11   / month
    	
 
    	
Lease
    	
 
    	
12/15/2011
    
	
Bank   of America 
    	
 
    	
$291.89   / month
    	
 
    	
Lease
    	
 
    	
4/15/2012
    
	
Bank   of America 
    	
 
    	
$284.62   / month
    	
 
    	
Lease
    	
 
    	
7/15/2012
    
	
Bank   of America 
    	
 
    	
$773.56   / month
    	
 
    	
Lease
    	
 
    	
4/15/2012
    
	
Bank   of America 
    	
 
    	
Included   above
    	
 
    	
Lease
    	
 
    	
4/15/2012
    
	
Bank   of America 
    	
 
    	
Included   above
    	
 
    	
Lease
    	
 
    	
4/15/2012
    
	
Bank   of America 
    	
 
    	
$486.80   / month
    	
 
    	
Lease
    	
 
    	
7/15/2012
    
	
Bank   of America 
    	
 
    	
Included   above 
    	
 
    	
Lease
    	
 
    	
7/15/2012
    
	
Bank   of America 
    	
 
    	
$598.34   / month
    	
 
    	
Lease
    	
 
    	
8/15/2012
    
	
Bank   of America 
    	
 
    	
Included   above
    	
 
    	
Lease
    	
 
    	
8/15/2012
    
	
Bank   of America 
    	
 
    	
$192.63   / month
    	
 
    	
Lease
    	
 
    	
8/15/2012
    
	
Cisco   Systems Capital Corporation
    	
 
    	
$2,031.15   / month
    	
 
    	
Lease
    	
 
    	
12/17/2011
    

 

Part 2 - Guarantees

 

None.

 

Schedule 5.19 - 2

 

Schedule 5.26

 

TO INFORMATION CERTIFICATE

 

Intellectual Property

 

Part 1 — Trademarks Owned

 

	
Trademark
    	
 
    	
Registration
   Number
    	
 
    	
Registration
   Date
    
	

    	
 
    	
3960367
    	
 
    	
May 17, 2011
    
	

    	
 
    	
3960366
    	
 
    	
May 17, 2011
    
	

    	
 
    	
2147580
    	
 
    	
March 31, 1998
    
	

    	
 
    	
2174590
    	
 
    	
July 21, 1998
    

 

Part 2 — Trademarks Licensed

 

None.

 

Part 3 — Patents Owned

 

None.

 

Part 4 — Patents Licensed

 

None.

 

Schedule 5.26 - 1

 

Part 5 — Copyrights Owned

 

None.

 

Part 6 — Copyrights Licensed

 

None.

 

Part 7 — Other License Agreements

 

None.

 

Schedule 5.26 - 2

 

Schedule 5.26(a)

 

TO INFORMATION CERTIFICATE

 

Owned Real Estate

 

1.              116 E. Randolph Ave, Jonesboro [owned by StarTek USA, Inc.]

2.              407 2nd Street, Laramie, WY 82070 [owned by StarTek USA, Inc.]

3.              244 Dundee Ave, Greeley [owned by StarTek, Inc.]

4.              1250 H Street, Greeley [owned by StarTek, Inc.]

5.              100 Innovation Drive, Kingston, ON K7K7E7 [owned by StarTek Canada Services Ltd.]

 

Schedule 5.26(a) - 1

 

Schedule 5.26(d)

 

TO INFORMATION CERTIFICATE

 

Motor Vehicles

 

None.

 

Schedule 5.26(d) - 1

 

Schedule 5.29

 

TO INFORMATION CERTIFICATE

 

Locations of Inventory and Equipment

 

Locations of Inventory, Equipment and Other Assets

 

Decatur, IL

1505 West King Street

Decatur, Illinois 62522

 

Denver, CO

44 Cook Street

4th Floor

Denver, CO 80206

 

Enid, OK

116 East Randolph

Enid, OK 73701

 

Grand Junction, CO —GJ1

630 South 7th Street

Grand Junction, CO 81501

 

Grand Junction, CO — GJ2

2830 North Avenue

Grand Junction, CO 81501

 

Greeley, CO — North

1250 H Street

Greeley, CO 80631

 

Greeley, CO — West

244 Dundee Avenue

Greeley, CO 80634

 

Jonesboro, AR

2908 S. Caraway Road

Jonesboro, AR 72401

 

Schedule 5.29 - 1

 

Lynchburg, VA

801 Lakeside Drive

Lynchburg, VA 24501

 

Mansfield, OH

850 West 4th Street

Mansfield, OH 44906

 

Collinsville, VA

2000 Virginia Ave

Collinsville, VA 24078

 

Littleton, CO

9110 Commerce Center Drive

Littleton, CO 80129

 

Schedule 5.29 - 2

 

Schedule 7.15

 

TO INFORMATION CERTIFICATE

 

Consignment, Bill and Hold, Sale or Return, Sale on Approval or Conditional Sale Arrangements

 

None.

 

Schedule 7-15 - 1

 

Schedule 7.16

 

TO INFORMATION CERTIFICATE

 

Inventory With Bailee, Warehouseman, Processor, etc.

 

None.

 

Schedule 7-16 - 1

 

EXHIBIT F

 

TO CREDIT AND SECURITY AGREEMENT

 

Form of Pledged Interest Addendum

 

PLEDGED INTERESTS ADDENDUM

 

This Pledged Interests Addendum, dated as of [                          ] [      ], 201[    ] (this “Pledged Interests Addendum”), is delivered pursuant to Section 6.12(k) of the Credit and Security Agreement referred to below.  The undersigned hereby agree that this Pledged Interests Addendum may be attached to that certain Credit and Security Agreement, dated as of February 28, 2012 (as amended, restated, supplemented, renewed, extended or otherwise modified from time to time, the “Credit Agreement”), by and among Wells Fargo Bank, National Association (“Lender”), the undersigned, and the other Loan Parties party thereto.  Initially capitalized terms used but not defined herein shall have the meaning ascribed to such terms in the Credit Agreement or, if not defined therein, in the Credit Agreement.  The undersigned hereby agree that the additional interests listed on Schedule I attached hereto shall be and become part of the Pledged Interests pledged by the undersigned to Lender in the Credit Agreement, with the same force and effect as if originally named therein.  Without limiting the generality of the foregoing, the undersigned hereby grant to Lender a security interest in the Pledged Interests described on Schedule I attached hereto to secure all now existing or hereafter arising Obligations.

 

This Pledged Interests Addendum is a Loan Document.  Delivery of an executed counterpart of this Pledged Interests Addendum by facsimile or other electronic method of transmission shall be equally as effective as delivery of an original executed counterpart of this Pledged Interests Addendum.  If any of the undersigned delivers an executed counterpart of this Pledged Interests Addendum by facsimile or other electronic method of transmission, such person shall also deliver an original executed counterpart of this Pledged Interests Addendum but the failure to deliver an original executed counterpart shall not affect the validity, enforceability, and binding effect of this Pledged Interests Addendum.

 

The undersigned hereby certify that the representations and warranties set forth in Section 5 of the Credit Agreement of the undersigned are true and correct in all material respects as to the Pledged Interests listed herein on and as of the date hereof.

 

THE TERMS AND CONDITIONS OF SECTION 13 OF THE CREDIT AGREEMENT ARE HEREBY INCORPORATED BY REFERENCE INTO THIS PLEDGED INTERESTS ADDENDUM.

 

[SIGNATURE PAGE FOLLOWS]

 

Exhibit F-1

 

 

IN WITNESS WHEREOF, the undersigned have caused this Pledged Interests Addendum to be executed and delivered as of the day and year first above written.

 

	
 
    	
[—NAME OF ENTITY—]
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    

 

Exhibit F-2

 

 

SCHEDULE I
 TO
  PLEDGED INTERESTS ADDENDUM

 

Pledged Interests

 

	
Name of Grantor
    	
 
    	
Name of Pledged
   Company
    	
 
    	
Number of
   Shares/Units
    	
 
    	
Class of
   Interests
    	
 
    	
Percentage of
   Class Owned
    	
 
    	
Certificate
   Nos.
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    

 

Schedule-I

 

 

Schedule A-1

 

TO CREDIT AND SECURITY AGREEMENT

 

Collection Account

 

[*]

 

Schedule A-1 - 1

 

Schedule A-2

 

TO CREDIT AND SECURITY AGREEMENT

 

Authorized Person

 

1.              CEO

2.              CFO

3.              Controller

4.              Senior Director of SEC Reporting

 

Schedule A-2 - 1

 

 

Schedule D-1

 

TO CREDIT AND SECURITY AGREEMENT

 

Designated Account

 

[*]

 

Schedule D-1 - 1

 

 

Schedule P-1

 

TO CREDIT AND SECURITY AGREEMENT

 

Permitted Investments

 

NONE

 

Schedule P-1 - 1

 

 

Schedule P-2

 

TO CREDIT AND SECURITY AGREEMENT

 

Permitted Liens

 

Liens attributable to the financing statements in favor of the Secured Parties (excluding Lender and Existing Lender) identified in Exhibit E, Item 14, all of whom are purchase money equipment lenders or equipment lessors, provided any applicable conditions set forth in Exhibit C, Item (g) have been met.

 

Schedule P-2 - 1

 

Schedule R-1

 

TO CREDIT AND SECURITY AGREEMENT

 

Real Property Collateral

 

LOT C, EFTC SUBDIVISION, CITY OF GREELEY, COUNTY OF WELD, STATE OF COLORADO, commonly known as  244 DUNDEE AVENUE, GREELEY, CO  80634.

 

A PART OF TRACT “C” WELD COUNTY BUSINESS PARK P.U.D., A SUBDIVISION WITHIN THE CITY OF GREELEY, COUNTY OF WELD, STATE OF COLORADO, commonly known as  1250 H. STREET, GREELEY, CO  80631.

 

LOTS TWENTY (20) THROUGH TWENTY-THREE (23), BOTH INCLUSIVE, BLOCK TWENTY-EIGHT (28), JONESVILLE ADDITION TO THE CITY OF ENID, OKLAHOMA, ACCORDING TO THE RECORDED PLAT THEREOF, TOGETHER WITH AN UNPLATTED STRIP ADJACENT TO THE SOUTH SIDE THEREOF,  commonly known as  116 E RANDOLPH AVENUE, ENID, OK  73701.

 

THE SOUTH 22 FEET OF LOT 14 AND ALL OF LOTS 15 AND 16, BLOCK 217, CITY OF LARAMIE, FORMERLY THE TOWN OF LARAMIE, ALBANY COUNTY, WYOMING, commonly known as  407 S. 2ND STREET, LARAMIE, WY  82070.

 

Exhibit F-1Exhibit 10.15

 

 

March 6, 2012

 

Behringer Advisors, LLC

15601 Dallas Parkway, Suite 600

Addison, Texas 75001

 

Re:          First Quarter 2012 Asset Management Fees

 

Ladies and Gentlemen:

 

Reference is made to that certain Fifth Amended and Restated Advisory Agreement, dated as of December 29, 2006, as amended (the “Advisory Agreement”), by and between Behringer Harvard REIT I, Inc., a Maryland corporation (the “Company”), and Behringer Advisors, LLC, a Texas limited liability company (the “Advisor”).  Capitalized terms used herein but not defined herein shall have the meanings set forth in the Advisory Agreement.

 

In consideration of the mutual agreements and covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Company and the Advisor hereby agree as follows:

 

1.             First Quarter 2012 Asset Management Fees.  Notwithstanding anything to the contrary contained in the Advisory Agreement, the Advisor, on behalf of itself and its Affiliates, and its and their respective successors and assigns, hereby sets the Company’s obligation to pay the Asset Management Fee to the Advisor at $5,000,000 for the first quarter of 2012.  In doing so, the Advisor waives the Company’s obligation to pay approximately $1.1 million in additional asset management fees that would otherwise become due and payable during the quarter (based on assets held as of January 1, 2012).

 

2.             Ratification; Effect on Advisory Agreement.

 

(a)           Ratification.  The Advisory Agreement, as amended by this letter agreement, shall remain in full force and effect and is hereby ratified and confirmed in all respects.

 

(b)           Effect on the Advisory Agreement.  On and after the date hereof, each reference in the Advisory Agreement to “this Agreement,” “herein,” “hereof,” “hereunder,” or words of similar import shall mean and be a reference to the Advisory Agreement as amended hereby.

 

	

    	

    

 

 

3.             Miscellaneous.

 

(a)           Governing Law; Venue.  This letter agreement and the legal relations between the parties hereto shall be construed and interpreted in accordance with the internal laws of the State of Texas without giving effect to its conflicts of law principles, and venue for any action brought with respect to any claims arising out of this letter agreement shall be brought exclusively in Dallas County, Texas.

 

(b)           Modification.  This letter agreement shall not be changed, modified, or amended, in whole or in part, except by an instrument in writing signed by both parties hereto, or their respective successors or assignees.

 

(c)           Headings.  The titles and headings of the sections and subsections contained in this letter agreement are for convenience only, and they neither form a part of this letter agreement nor are they to be used in the construction or interpretation hereof.

 

(d)           Severability.  The provisions of this letter agreement are independent of and severable from each other, and no provision shall be affected or rendered invalid or unenforceable by virtue of the fact that for any reason any other or others of them may be invalid or unenforceable in whole or in part.

 

(e)           Counterparts.  This letter agreement may be executed in multiple counterparts, each of which shall be deemed to be an original as against any party whose signature appears thereon, and all of which shall together constitute one and the same instrument.  This letter agreement shall become binding when one or more counterparts hereof, individually or taken together, shall bear the signatures of all of the parties reflected hereon as the signatories.  This letter agreement, to the extent signed and delivered by means of electronic mail or a facsimile machine, shall be treated in all manner and respects as an original agreement or instrument and shall be considered to have the same binding legal effect as if it were an original signed version thereof delivered in person.  No party hereto shall raise the use of electronic mail or a facsimile machine to deliver a signature or the fact that any signature was transmitted or communicated through the use of electronic mail or a facsimile machine as a defense to the formation or enforceability of a contract and each party hereto forever waives any such defense.

 

[The remainder of this page intentionally blank]

 

2

 

If the foregoing meets with your approval, please indicate your acceptance of this letter agreement by countersigning a copy of this letter agreement in the space indicated below.

 

	
 
    	
Very   truly yours,
    
	
 
    	
 
    
	
 
    	
BEHRINGER   HARVARD REIT I, INC.
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Scott. W. Fordham
    
	
 
    	
Name:
    	
Scott   W. Fordham
    
	
 
    	
Its:
    	
Chief   Operating and Financial Officer
    

 

 

Acknowledged and agreed, as of

the date first written above:

 

	
BEHRINGER   ADVISORS, LLC
    	
 
    
	
 
    	
 
    
	
By:
    	
Harvard   Property Trust, LLC,
    	
 
    
	
 
    	
its   Manager
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:   
    	
/s/   Robert S. Aisner
    	
 
    
	
 
    	
 
    	
Robert   S. Aisner
    	
 
    
	
 
    	
 
    	
Chief   Executive Officer

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