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EXHIBIT 10.52
LOAN AND SECURITY AGREEMENT
BY AND AMONG
MIDWAY HOME ENTERTAINMENT INC.,
AND
MIDWAY AMUSEMENT GAMES, LLC
AS BORROWERS,
AND
MIDWAY GAMES INC.,
MIDWAY GAMES WEST INC.,
MIDWAY INTERACTIVE INC.,
MIDWAY SALES COMPANY, LLC
AND
MIDWAY HOME STUDIOS INC.,
AS U.S. CREDIT PARTIES,
THE LENDERS THAT ARE SIGNATORIES HERETO
AS THE LENDERS,
AND
▇▇▇▇▇ FARGO FOOTHILL, INC.
AS THE ARRANGER AND ADMINISTRATIVE AGENT, AND UK SECURITY TRUSTEE
DATED AS OF MARCH 3, 2004
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TABLE OF CONTENTS
1. DEFINITIONS AND CONSTRUCTION. .........................................................................1
1.1. Definitions. .................................................................................1
1.2. Accounting Terms. ...........................................................................30
1.3. Code. .......................................................................................30
1.4. Construction.................................................................................30
1.5. Schedules and Exhibits.......................................................................31
2. LOAN AND TERMS OF PAYMENT. ...........................................................................31
2.1. Revolver Advances. ..........................................................................31
2.2. Term Loan....................................................................................32
2.3. Borrowing Procedures and Settlements.........................................................32
2.4. Payments.....................................................................................39
2.5. Overadvances; Mandatory Prepayment...........................................................42
2.6. Interest Rates and Letter of Credit Fee: Rates, Payments, and Calculations. ................42
2.7. Cash Management. ............................................................................44
2.8. Crediting Payments; Float Charge.............................................................45
2.9. Designated Account...........................................................................46
2.10. Maintenance of Loan Account; Statements of Obligations.......................................46
2.11. Fees.........................................................................................46
2.12. Letters of Credit............................................................................47
2.13. LIBOR Option.................................................................................50
2.14. Capital Requirements.........................................................................53
2.15. Joint and Several Liability of Borrowers.....................................................53
3. CONDITIONS; TERM OF AGREEMENT.........................................................................56
3.1. Conditions Precedent to the Initial Extension of Credit......................................56
3.2. Conditions Subsequent to the Initial Extension of Credit.....................................59
3.3. Conditions Precedent to all Extensions of Credit.............................................60
3.4. Term.........................................................................................60
3.5. Effect of Termination........................................................................60
3.6. Early Termination by Borrowers...............................................................61
4. CREATION OF SECURITY INTEREST.........................................................................61
4.1. Grant of Security Interest...................................................................61
4.2. Negotiable Collateral........................................................................62
4.3. Collection of Accounts, General Intangibles, and Negotiable Collateral.......................62
4.4. Filing of Financing Statements; Commercial Tort Claims; Delivery of Additional
Documentation Required.......................................................................62
4.5. Power of Attorney............................................................................63
4.6. Right to Inspect.............................................................................63
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4.7. Control Agreements...........................................................................64
5. REPRESENTATIONS AND WARRANTIES........................................................................64
5.1. No Encumbrances..............................................................................64
5.2. Eligible Accounts............................................................................65
5.3. Intentionally Omitted........................................................................65
5.4. Equipment....................................................................................65
5.5. Location of Inventory and Equipment..........................................................65
5.6. Inventory Records............................................................................65
5.7. State of Incorporation; Location of Chief Executive Office; FEIN; Organizational ID
Number; Commercial Tort Claims...............................................................65
5.8. Due Organization and Qualification; Subsidiaries.............................................66
5.9. Due Authorization; No Conflict...............................................................66
5.10. Litigation...................................................................................67
5.11. No Material Adverse Change...................................................................67
5.12. Fraudulent Transfer..........................................................................68
5.13. Employee Benefits............................................................................68
5.14. Environmental Condition......................................................................68
5.15. Brokerage Fees...............................................................................68
5.16. Intellectual Property........................................................................68
5.17. Leases.......................................................................................69
5.18. DDAs.........................................................................................69
5.19. Complete Disclosure..........................................................................69
5.20. Indebtedness.................................................................................69
6. AFFIRMATIVE COVENANTS.................................................................................69
6.1. Accounting System............................................................................70
6.2. Collateral Reporting.........................................................................70
6.3. Financial Statements, Reports, Certificates..................................................72
6.4. Intentionally Omitted........................................................................75
6.5. Returns......................................................................................75
6.6. Maintenance of Properties....................................................................75
6.7. Taxes........................................................................................75
6.8. Insurance....................................................................................75
6.9. Location of Inventory and Equipment..........................................................76
6.10. Compliance with Laws.........................................................................76
6.11. Leases.......................................................................................77
6.12. Existence....................................................................................77
6.13. Environmental................................................................................77
6.14. Disclosure Updates...........................................................................77
6.15. Formation of Subsidiaries....................................................................77
6.16. [Intentionally Omitted]......................................................................78
6.17. Registration of Intellectual Property........................................................78
6.18. Mortal Kombat Intellectual Property..........................................................78
6.19. Canadian Operations..........................................................................78
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7. NEGATIVE COVENANTS....................................................................................79
7.1. Indebtedness.................................................................................79
7.2. Liens........................................................................................80
7.3. Restrictions on Fundamental Changes..........................................................80
7.4. Disposal of Assets...........................................................................80
7.5. Change Name..................................................................................80
7.6. Nature of Business...........................................................................81
7.7. Prepayments and Amendments...................................................................81
7.8. Change of Control............................................................................81
7.9. Consignments.................................................................................81
7.10. Distributions................................................................................81
7.11. Accounting Methods...........................................................................81
7.12. Investments..................................................................................82
7.13. Transactions with Affiliates.................................................................82
7.14. Suspension...................................................................................82
7.15. Compensation.................................................................................82
7.16. Use of Proceeds..............................................................................83
7.17. Inventory and Equipment with Bailees.........................................................83
7.18. Financial Covenants..........................................................................83
7.19. Subsidiaries.................................................................................84
7.20. Copyrights...................................................................................84
7.21. Excluded Inventory...........................................................................85
8. EVENTS OF DEFAULT.....................................................................................85
9. THE LENDER GROUP'S RIGHTS AND REMEDIES................................................................87
9.1. Rights and Remedies..........................................................................87
9.2. Remedies Cumulative..........................................................................89
10. TAXES AND EXPENSES....................................................................................89
11. WAIVERS; INDEMNIFICATION..............................................................................90
11.1. Demand; Protest; etc.........................................................................90
11.2. The Lender Group's Liability for Grantor Collateral..........................................90
11.3. Indemnification..............................................................................90
12. NOTICES...............................................................................................91
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER............................................................92
14. ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS............................................................93
14.1. Assignments and Participations...............................................................93
14.2. Successors...................................................................................96
15. AMENDMENTS; WAIVERS...................................................................................96
15.1. Amendments and Waivers.......................................................................96
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15.2. Replacement of Holdout Lender................................................................97
15.3. No Waivers; Cumulative Remedies..............................................................98
16. AGENT; THE LENDER GROUP...............................................................................98
16.1. Appointment and Authorization of Agent.......................................................98
16.2. Delegation of Duties.........................................................................99
16.3. Liability of Agent...........................................................................99
16.4. Reliance by Agent............................................................................99
16.5. Notice of Default or Event of Default.......................................................100
16.6. Credit Decision.............................................................................100
16.7. Costs and Expenses; Indemnification.........................................................101
16.8. Agent in Individual Capacity................................................................102
16.9. Successor Agent.............................................................................102
16.10. Lender in Individual Capacity...............................................................102
16.11. Withholding Taxes...........................................................................103
16.12. Collateral Matters..........................................................................105
16.13. Restrictions on Actions by Lenders; Sharing of Payments.....................................106
16.14. Agency for Perfection.......................................................................106
16.15. Payments by Agent to the Lenders............................................................106
16.16. Concerning the Collateral and Related Loan Documents........................................107
16.17. Field Audits and Examination Reports; Confidentiality; Disclaimers by Lenders; Other
Reports and Information.....................................................................107
16.18. Several Obligations; No Liability...........................................................108
16.19. Legal Representation of Agent...............................................................108
16.20. Agent as UK Security Trustee................................................................108
17. GENERAL PROVISIONS...................................................................................109
17.1. Effectiveness...............................................................................109
17.2. Section Headings............................................................................109
17.3. Interpretation..............................................................................110
17.4. Severability of Provisions..................................................................110
17.5. Amendments in Writing.......................................................................110
17.6. Counterparts; Telefacsimile Execution.......................................................110
17.7. Revival and Reinstatement of Obligations....................................................110
17.8. Confidentiality.............................................................................111
17.9. Integration.................................................................................111
17.10. Midway as Agent for Borrowers...............................................................112
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LIST OF EXHIBITS AND SCHEDULES
Exhibit A-1 Form of Assignment and Acceptance
Exhibit C-1 Form of Compliance Certificate
Exhibit L-1 Form of LIBOR Notice
Schedule A-1 Agent's Accounts
Schedule C-1 Commitments
Schedule D-1 Designated Accounts
Schedule I-1 Investment Account
Schedule P-1 Permitted Liens
Schedule R-1 Real Property Collateral
Schedule 2.7(a) Cash Management Banks
Schedule 5.4 List of Vehicles
Schedule 5.5 Locations of Inventory and Equipment
Schedule 5.7(a) States of Organization
Schedule 5.7(b) Chief Executive Office
Schedule 5.7(c) ▇▇▇▇▇
Schedule 5.7(d) Commercial Tort Claims
Schedule 5.8(b) Capitalization of Companies
Schedule 5.8(c) Capitalization of Parent's Subsidiaries
Schedule 5.8(d) Subscriptions, Options, Warrants or Calls
Schedule 5.10 Litigation
Schedule 5.14 Environmental Matters
Schedule 5.16 Intellectual Property
Schedule 5.18 Deposit Accounts and Securities Accounts
Schedule 5.20 Permitted Indebtedness
Schedule 7.13 Transactions with Affiliates
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LOAN AND SECURITY AGREEMENT
THIS
LOAN AND SECURITY AGREEMENT (this "AGREEMENT"), is entered
into as of March 3, 2004, by and among, on the one hand, the lenders identified
on the signature pages hereof (such lenders, together with their respective
successors and permitted assigns, are referred to hereinafter each individually
as a "LENDER" and collectively as the "LENDERS"), ▇▇▇▇▇ FARGO FOOTHILL, INC., a
California corporation, as the arranger and administrative agent for the Lenders
("AGENT") and as UK Security Trustee, and, on the other hand, MIDWAY HOME
ENTERTAINMENT INC., a Delaware corporation ("MIDWAY"), MIDWAY AMUSEMENT GAMES,
LLC, a Delaware limited liability company ("MAG"; Midway and MAG are referred to
hereinafter each individually as a "BORROWER", and individually and
collectively, jointly and severally, as the "BORROWERS"),
MIDWAY GAMES INC., a
Delaware corporation ("PARENT"), MIDWAY GAMES WEST INC., a California
corporation ("MGW"), MIDWAY INTERACTIVE INC., a Delaware corporation ("MI"),
MIDWAY SALES COMPANY, LLC, a Delaware limited liability company ("MSC"), and
MIDWAY HOME STUDIOS INC., a Delaware corporation ("MHS"; Parent, MGW, MI, MSC
and MHS, together with any Target acquired by a Borrower in connection with a
Permitted Acquisition, are referred to hereinafter each individually as a "U.S.
CREDIT PARTY" and individually and collectively, jointly and severally, as the
"U.S. CREDIT PARTIES").
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION.
1.1. DEFINITIONS.
As used in this Agreement, the following terms shall have the
following definitions:
"ACCOUNT" means an account (as that term is defined in the Code),
and any and all supporting obligations in respect thereof.
"ACCOUNT DEBTOR" means any Person who is obligated under, with
respect to, or on account of, an Account, chattel paper, or a General
Intangible.
"ACH TRANSACTIONS" means any cash management or related services
(including the Automated Clearing House processing of electronic funds transfers
through the direct Federal Reserve Fedline system) provided by a Bank Product
Provider for the account of Parent or its Subsidiaries.
"ADDITIONAL DOCUMENTS" has the meaning set forth in SECTION
4.4(c).
"ADDITIONAL PREFERRED STOCK" means the 1,250 shares of Series D
Convertible Preferred Stock, par value $0.01 per share, of Parent having a
stated value of $10,000 per share that may be issued by Parent after the Closing
Date pursuant to that certain Securities
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Purchase Agreement dated May 16, 2003 among Parent and the investors listed on
the Schedule of Buyers attached thereto, as amended by the Amendment and
Exchange Agreements dated October 14, 2003 between Parent and each Buyer.
"ADMINISTRATIVE BORROWER" has the meaning set forth in SECTION
17.10.
"ADVANCES" has the meaning set forth in SECTION 2.1(a).
"AFFILIATE" means, as applied to any Person, any other Person
who, directly or indirectly through one or more intermediaries, 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 7.13 hereof: (a) any Person which owns directly or indirectly 10% or
more of the Stock having ordinary voting power for the election of directors or
other members of the governing body of a Person or 10% 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 or joint venture in which a Person is a
partner or joint venturer shall be deemed an Affiliate of such Person.
"AGENT" means WFF, in its capacity as arranger and administrative
agent hereunder, and any successor thereto.
"AGENT ADVANCES" has the meaning set forth in SECTION 2.3(e)(i).
"AGENT-RELATED PERSONS" means Agent, together with its
Affiliates, officers, directors, employees, attorneys, and agents.
"AGENT'S ACCOUNT" means the Deposit Account of Agent identified
on SCHEDULE A-1.
"AGENT'S LIENS" means the Liens granted by a Company to Agent
under this Agreement or the other Loan Documents.
"AGREEMENT" has the meaning set forth in the preamble to this
Agreement.
"APPLICABLE COLLECTION RULE PERIOD" means, for any date of
determination in any month, (i)120 days, if such date of determination is in the
month of March 2004, (ii) 150 days, if such date of determination is in the
month of April 2004,.(iii) 180 days, if such date of determination is in the
month of May 2004, (iv) 180 days, if such date of determination is in the month
of June 2004, (v) 180 days, if such date of determination is in the month of
July 2004, (vi) 150 days, if such date of determination is in the month of
August 2004, (vii) 150 days, if such date of determination is in the month of
September 2004, (viii) 150 days, if such date of determination is in the month
of October 2004, (ix) 150 days, if such date of determination is in the month of
November 2004, (x) 120 days, if such date of determination
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is in the month of December 2004 and (xi) such number of days as is agreed to by
Borrowers and Required Lenders based upon the Projections most recently
delivered to Agent pursuant to Section 6.3(c) and approved by Required Lenders
or if Borrowers and Required Lenders cannot agree, the number of days shall be
150.
"APPLICABLE MARGIN" means, from the date hereof to, but not
including, the first date of adjustment provided for below, the percentages set
forth below (on a per annum basis) with respect to Advances that are LIBOR Rate
Loans and Base Rate Loans:
Base Rate Loans 1.00%
LIBOR Rate Loans 3.50%
Commencing with the delivery of the audited financial statements required to be
delivered pursuant to SECTION 6.3(b) for the fiscal year ending December 31,
2004, the percentages described in this definition of "Applicable Margin" will
be adjusted (effective prospectively) on the first day of the month following
delivery to Agent of the audited financial statements corresponding to the end
of a fiscal year required to be delivered pursuant to SECTION 6.3(b) by
reference to EBITDA for such fiscal year, in accordance with the following:
APPLICABLE MARGIN APPLICABLE MARGIN FOR
EBITDA FOR BASE RATE LOANS LIBOR RATE LOANS
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Greater than $12,000,000 0.50% 3.00%
Equal to or lesser than
$12,000,000 but greater than $8,000,000 1.00% 3.50%
Equal to or lesser than $8,000,000 1.50% 4.00%
PROVIDED, that if Borrowers fail to deliver the relevant financial statements
required to be delivered pursuant to SECTION 6.3(b) of this Agreement on or
before the due date thereof, the Applicable Margin shall be the highest
Applicable Margin set forth above until the actual delivery of such financial
statements, at which time the Applicable Margin shall adjust as set forth above
(effective prospectively).
"APPLICABLE PREPAYMENT PREMIUM" means, as of any date of
determination, an amount equal to (a) during the period from and after the date
of the execution and delivery of this Agreement up to the date that is the first
anniversary of the Closing Date, 4.0% TIMES the Maximum Revolver Amount, (b)
during the period from and including the date that is the first anniversary of
the Closing Date up to the date that is the second anniversary of the Closing
Date, 3.0% TIMES the Maximum Revolver Amount, (c) during the period from and
including the date that is the second anniversary of the Closing Date up to the
date that is the third anniversary of the Closing Date, 3.0% TIMES the Maximum
Revolver Amount, (d) during the period from and including the date that is
the third anniversary of the Closing Date up to the date that is the fourth
anniversary of the Closing Date, 2.0% TIMES the Maximum Revolver Amount, and (e)
during the period from and including the date that is
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the fourth anniversary of the Closing Date up to but not including the Maturity
Date, 1.0% TIMES the Maximum Revolver Amount,; PROVIDED, HOWEVER, that the
Applicable Prepayment Premium shall equal zero if, at any time, the Obligations
are Paid In Full with the proceeds of loans made to Borrowers by ▇▇▇▇▇ Fargo or
an Affiliate of ▇▇▇▇▇ Fargo and provided further that the Applicable Prepayment
Premium shall be reduced by 50% if, at any time, the Obligations are Paid In
Full with the proceeds of a private placement or public offering of subordinated
debt or equity, or a sale of all or substantially all of the assets or stock of
the Companies, taken as a whole.
"ASSIGNEE" has the meaning set forth in SECTION 14.1(a).
"ASSIGNMENT AND ACCEPTANCE" means an Assignment and Acceptance
Agreement substantially in the form of EXHIBIT A-1.
"AUTHORIZED PERSON" means any officer or employee of
Administrative Borrower.
"AVAILABILITY" means, as of any date of determination, the amount
that Borrowers are entitled to borrow as Advances hereunder (after giving effect
to all then outstanding Obligations (other than Bank Product Obligations) and
all sublimits and reserves then applicable hereunder).
"BANK PRODUCT" means any financial accommodation extended to
Parent or its Subsidiaries by a Bank Product Provider (other than pursuant to
this Agreement) including: (a) credit cards, (b) credit card processing
services, (c) debit cards, (d) purchase cards, (e) ACH Transactions, (f) cash
management, including controlled disbursement, accounts or services, or (g)
transactions under Hedge Agreements.
"BANK PRODUCT AGREEMENTS" means those agreements entered into
from time to time by Parent or its Subsidiaries with a Bank Product Provider in
connection with the obtaining of any of the Bank Products.
"BANK PRODUCT OBLIGATIONS" means all obligations, liabilities,
contingent reimbursement obligations, fees, and expenses owing by Parent or its
Subsidiaries to any Bank Product Provider pursuant to or evidenced by the Bank
Product Agreements and irrespective of whether for the payment of money, whether
direct or indirect, absolute or contingent, due or to become due, now existing
or hereafter arising, and including all such amounts that Parent or its
Subsidiaries are obligated to reimburse to Agent or any member of the Lender
Group as a result of Agent or such member of the Lender Group purchasing
participations from, or executing indemnities or reimbursement obligations to, a
Bank Product Provider with respect to the Bank Products provided by such Bank
Product Provider to Parent or its Subsidiaries.
"BANK PRODUCT PROVIDER" means ▇▇▇▇▇ Fargo or any of its
Affiliates.
"BANK PRODUCT RESERVE" means, as of any date of determination,
the amount of reserves that Agent has established (based upon the Bank Product
Providers' reasonable
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determination of the credit exposure in respect of then extant Bank Products) in
respect of Bank Products then provided or outstanding.
"BANKRUPTCY CODE" means title 11 of the United States Code, as
applicable and as in effect from time to time, and in respect of the UK Company,
UK Insolvency Laws.
"BASE LIBOR RATE" means the rate per annum, determined by Agent
in accordance with its customary procedures, and utilizing Bloomberg Reporting
Service or, if Bloomberg Reporting Service is unavailable, such other electronic
or other quotation sources as it considers appropriate (rounded upwards, if
necessary, to the next 1/100%), to be the rate at which Dollar deposits (for
delivery on the first day of the requested Interest Period) are offered to major
banks in the London interbank market 2 Business Days prior to the commencement
of the requested Interest Period, for a term and in an amount comparable to the
Interest Period and the amount of the LIBOR Rate Loan requested (whether as an
initial LIBOR Rate Loan or as a continuation of an extant LIBOR Rate Loan or as
a conversion of a Base Rate Loan to a LIBOR Rate Loan) by Administrative
Borrower in accordance with this Agreement, which determination shall be
conclusive in the absence of manifest error.
"BASE RATE" means, the rate of interest announced, from time to
time, within ▇▇▇▇▇ Fargo at its principal office in San Francisco as its "prime
rate", with the understanding that the "prime rate" is one of ▇▇▇▇▇ Fargo's base
rates (not necessarily the lowest of such rates) and serves as the basis upon
which effective rates of interest are calculated for those loans making
reference thereto and is evidenced by the recording thereof after its
announcement in such internal publications as ▇▇▇▇▇ Fargo may designate.
"BASE RATE LOAN" means the portion of the Advances or the Term
Loan that bears interest at a rate determined by reference to the Base Rate.
"BASE RATE MARGIN" means the Applicable Margin pertaining to Base
Rate Loans as set forth in the definition of Applicable Margin.
"BENEFIT PLAN" means a "defined benefit plan" (as defined in
Section 3(35) of ERISA or equivalent legislation in Canada or the United
Kingdom) for which any Company or ERISA Affiliate of any Company has been an
"employer" (as defined in Section 3(5) of ERISA or equivalent legislation under
Canadian law or United Kingdom law) within the past six years.
"BOARD OF DIRECTORS" means the board of directors (or comparable
managers) of Parent or any committee thereof duly authorized to act on behalf of
the board of directors (or comparable managers).
"BOAT YARD PROPERTY" means ▇▇▇ ▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇ and
the River Subdivision, Chicago,
Illinois (a portion of ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇).
"BOOKS" means all of Companies' and its Subsidiaries' now owned
or hereafter acquired books and records (including all of their Records
indicating, summarizing, or evidencing their assets (including the Collateral)
or liabilities, all of Companies' and its
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Subsidiaries' Records relating to their business operations or financial
condition, and all of their goods or General Intangibles related to such
information).
"BORROWER" and "BORROWERS" have the respective meanings set forth
in the preamble to this Agreement.
"BORROWING" means a borrowing hereunder consisting of Advances
(or term loans, in the case of the Term Loan) made on the same day by the
Lenders (or Agent on behalf thereof), or by Swing Lender in the case of a Swing
Loan, or by Agent in the case of an Agent Advance, in each case, to
Administrative Borrower.
"BORROWING BASE" means, as of any date of determination, the
result of:
(a) THE LESSER OF
(i) 85% of the amount of Eligible Accounts, LESS the
amount, if any, of the Dilution Reserve, and
(ii) an amount equal to Collections with respect to
Accounts of Grantors for the immediately preceding Applicable Collection
Rule Period LESS the then outstanding amount of the Term Loan, MINUS
(b) the sum of (i) the Bank Product Reserve, and (ii) the
aggregate amount of reserves, if any, established by Agent under SECTION 2.1(b).
"BUSINESS DAY" means any day that is not a Saturday, Sunday, or
other day on which banks are authorized or required to close in the state of
Massachusetts,
Illinois or California, except that, if a determination of a
Business Day shall relate to a LIBOR Rate Loan, the term "Business Day" also
shall exclude any day on which banks are closed for dealings in Dollar deposits
in the London interbank market.
"CANADIAN COMPANY" means Midway Games Canada Corp., a Nova Scotia
corporation.
"CANADIAN GUARANTY" means a general continuing guaranty to be
executed and delivered by Canadian Company in favor of Agent, for the benefit of
the Lender Group and the Bank Product Providers, in form and substance
satisfactory to Agent in accordance with SECTION 6.19.
"CANADIAN SECURITY AGREEMENT" means a security agreement to be
executed and delivered by Canadian Company in favor of Agent, in form and
substance satisfactory to Agent in accordance with SECTION 6.19.
"CAPITAL EXPENDITURES" means, with respect to any Person for any
period, the sum of (a) 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,
and (b) to the extent not covered by clause (a), the
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aggregate of all expenditures by such Person and its Subsidiaries during such
period to acquire by purchase or otherwise the business or capitalized assets
of, or the Capital Stock of, any other Person.
"CAPITAL LEASE" means a lease that is required to be capitalized
for financial reporting purposes in accordance with GAAP.
"CAPITALIZED LEASE OBLIGATION" means that portion of the
obligations under a Capital Lease that is required to be capitalized in
accordance with GAAP.
"CASH EQUIVALENTS" means (a) marketable direct obligations issued
or unconditionally guarantied 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 one year from the date of acquisition thereof, (b)
marketable direct obligations issued by any state of the United States or any
political subdivision of any such state or any public instrumentality thereof
maturing within one year from the date of acquisition thereof and, at the time
of acquisition, having one of the two highest ratings obtainable from either
Standard & Poor's Rating Group ("S&P") or ▇▇▇▇▇'▇ 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 or
bankers' acceptances maturing within one year from the date of acquisition
thereof issued by any bank organized under the laws of the United States or any
state thereof having at the date of acquisition thereof combined capital and
surplus of not less than $250,000,000, (e) demand Deposit Accounts maintained
with any bank organized under the laws of the United States or any state thereof
so long as the amount maintained with any individual bank is less than or equal
to $100,000 and is insured by the Federal Deposit Insurance Corporation, and (f)
Investments in money market funds substantially all of whose assets are invested
in the types of assets described in clauses (a) through (e) above.
"CASH MANAGEMENT ACCOUNT" has the meaning set forth in SECTION
2.7(a).
"CASH MANAGEMENT AGREEMENTS" means those certain cash management
agreements, in form and substance satisfactory to Agent, each of which is among
a Company, Agent, and one of the Cash Management Banks.
"CASH MANAGEMENT BANK" has the meaning set forth in SECTION
2.7(a).
"CHANGE OF CONTROL" means that (a) any "person" or "group"
(within the meaning of Sections 13(d) and 14(d) of the Exchange Act), other than
Permitted Holders, becomes the beneficial owner (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of 35%, or more, of the Stock of
Parent having the right to vote for the election of members of the Board of
Directors, or (b) a majority of the members of the Board of Directors do not
constitute Continuing Directors, or (c) Parent ceases to own, directly or
indirectly, and control 100% of the outstanding Stock of each of its
Subsidiaries extant as of the Closing Date.
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"CLOSING DATE" means the date of the making of the initial
Advance (or other extension of credit) hereunder or the date on which Agent
sends Administrative Borrower a written notice that each of the conditions
precedent set forth in SECTION 3.1 either have been satisfied or have been
waived.
"CLOSING DATE BUSINESS PLAN" means the set of Projections of
Companies for the three year period following the Closing Date (on a year by
year basis, and for the one year period following the Closing Date, on a month
by month basis), in form and substance (including as to scope and underlying
assumptions) satisfactory to Agent.
"CODE" means the
Illinois Uniform Commercial Code as in effect
from time to time.
"COLLATERAL" means all assets and interests in assets and
proceeds thereof now owned or hereafter acquired by Companies in or upon which a
Lien is granted under any of the Loan Documents.
"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 Companies' Books, Equipment or, Inventory, in each case,
in form and substance satisfactory to Agent.
"COLLECTIONS" means ALL cash, checks, notes, instruments, and
other items of payment (including insurance proceeds, proceeds of cash sales,
rental proceeds, and tax refunds).
"COMMERCIAL TORT CLAIM ASSIGNMENTS" has the meaning set forth in
SECTION 4.4(b).
"COMMITMENT" means, with respect to each Lender, its Revolver
Commitment, its Term Loan Commitment, or its Total Commitment, as the context
requires, and, with respect to all Lenders, their Revolver Commitments, their
Term Loan Commitments, or their Total Commitments, as the context requires, in
each case as such Dollar amounts are set forth beside such Lender's name under
the applicable heading on SCHEDULE C-1 or in the Assignment and Acceptance
pursuant to which such Lender became a Lender hereunder in accordance with the
provisions of SECTION 14.1.
"COMPANY" means each Borrower and each U.S. Credit Party.
"COMPLIANCE CERTIFICATE" means a certificate substantially in the
form of EXHIBIT C-1 delivered by the chief financial officer of Parent to Agent.
"CONTINUING DIRECTOR" means (a) any member of the Board of
Directors who was a director (or comparable manager) of Parent 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 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
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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 Parent and whose initial assumption of office resulted
from such contest or the settlement thereof.
"CONTROL AGREEMENT" means a control agreement, in form and
substance satisfactory to Agent, executed and delivered by a Company, Agent, and
the applicable securities intermediary (with respect to a Securities Account) or
a bank (with respect to a Deposit Account).
"COPYRIGHT MORTGAGE" means a copyright mortgage executed and
delivered by each of Midway, MAG, MGW and Agent, the form and substance of which
is satisfactory to Agent.
"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.
"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.
"DEFAULTING LENDER" means any Lender that fails to make any
Advance (or other extension of credit) that it is required to make hereunder on
the date that it is required to do so hereunder.
"DEFAULTING LENDER RATE" means (a) for the first 3 days from and
after the date the relevant payment is due, the Base Rate, and (b) thereafter,
the interest rate then applicable to Advances that are Base Rate Loans
(inclusive of the Base Rate Margin applicable thereto).
"DEPOSIT ACCOUNT" means any deposit account (as that term is
defined in the Code).
"DESIGNATED ACCOUNT" means the Deposit Account of Administrative
Borrower identified on SCHEDULE D-1.
"DESIGNATED ACCOUNT BANK" has the meaning ascribed thereto on
SCHEDULE D-1.
"DEVELOPMENT KITS" means the hardware, software, firmware,
documentation or intellectual property licensed, sold or otherwise transferred
to Companies by Sony Computer Entertainment America Inc. (or its Affiliates),
Microsoft Corporation (or its Affiliates), Nintendo Co., Ltd (or its Affiliates)
or Nintendo America Inc. (or its Affiliates) for use in the development of
videogames for platform manufactured by the foregoing entities.
"DILUTION" means, as of any date of determination (which date
shall be no less frequently then quarterly), a percentage, based upon the
experience of the immediately prior 12 months, that is the result of dividing
the Dollar amount of (a) bad debt write-downs, discounts, advertising
allowances, credits, or other dilutive items with respect to Midway's
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Accounts during such period, by (b) Midway's ▇▇▇▇▇▇▇▇ with respect to Accounts
during such period.
"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 most recently
determined by Agent is in excess of 5%.
"DISBURSEMENT LETTER" means an instructional letter executed and
delivered by Administrative Borrower to Agent regarding the extensions of credit
to be made on the Closing Date, the form and substance of which is satisfactory
to Agent.
"DOLLARS" or "$" means United States dollars.
"EBITDA" means, with respect to any fiscal period, the
consolidated net earnings (or loss) of Parent and its Subsidiaries (excluding
Subsidiaries that are not Companies), minus extraordinary gains and interest
income, plus interest expense, income taxes, and depreciation and amortization
for such period, as determined in accordance with GAAP.
"ELIGIBLE ACCOUNTS" means those Accounts created by Midway in the
ordinary course of its business, that arise out of its 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 Agent in Agent's Permitted Discretion to address the results of any
audit performed by Agent from time to time after the Closing Date. In
determining the amount to be included, Eligible Accounts shall be calculated net
of customer deposits and unapplied cash. Eligible Accounts shall not include the
following:
(a) Accounts that the Account Debtor has failed to pay within
(i) 90 days of original invoice date in the case of each Account Debtor other
than Electronics Boutique and Gamestop, Inc. or (ii) 120 days in the case of
Electronics Boutique and Gamestop, Inc. (unless Agent determines in its
Permitted Discretion that the creditworthiness of such Account Debtors has
deteriorated) or Accounts with selling terms of more than 60 days in the case of
each Account Debtor; provided that the portion of the Accounts of Electronics
Boutique and Gamestop subject to (ii) above and unpaid more than 90 days after
the invoice date that may be considered Eligible Accounts shall not exceed
$250,000 in the case of each such Person,
(b) Accounts owed by an Account Debtor (or its Affiliates) where
50% or more of all Accounts owed by that Account Debtor (or its Affiliates) are
deemed ineligible under clause (a) above; provided that for the purposes of this
subsection (b) only, Affiliate shall not include any Persons that are Affiliates
of such Account Debtor solely as a result of (i) having one or more common
directors with such Account Debtor or (ii) Summer Redstone and/or National
Amusement Inc. owning more than 10% but less than 50% of stock of such Persons,
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(c) Accounts with respect to which the Account Debtor is an
Affiliate of any Company or an employee or agent of any Company or any Affiliate
of any Company, provided however that, notwithstanding the foregoing, Accounts
owing by Blockbuster Inc. or another Account Debtor that is an Affiliate of
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ or National Amusements, Inc. shall not be excluded as Eligible
Accounts under this clause (c), provided (i) such Accounts are upon fair and
reasonable terms, that are no less favorable to Midway than would be obtained in
an arm's length transaction with a non-Affiliate (ii) the credit analysis and
standards applied to such Account Debtor by Midway is the same as that applied
by Midway to Account Debtors that are non-Affiliates and the credit extended to
such Account Debtor is not more favorable to such Account Debtor than that
extended to Account Debtors that are non-Affiliates, and (iii) and ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ is not a director or officer of Parent or Midway and does not otherwise
exercise management control over Parent or Midway,
(d) Accounts arising in a transaction wherein goods are placed
on consignment or are sold pursuant to a guarantied sale, a sale or return, a
sale on approval, a ▇▇▇▇ and hold, or any other terms by reason of which the
payment by the Account Debtor may be conditional, provided that, by way of
clarification, the Companies' price protection policies, applied in a manner
consistent with past practices, shall not constitute a guaranteed sale, a sale
or return, a sale on approval or a ▇▇▇▇ and hold for purpose of this
subsection (d),
(e) Accounts that are not payable in Dollars,
(f) Accounts with respect to which the Account Debtor either (i)
does not maintain its chief executive office in the United States or Ontario,
Canada, or (ii) is not organized under the laws of the United States, any state
thereof or Ontario, Canada, 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 (y) the Account is supported by an irrevocable
letter of credit satisfactory to Agent (as to form, substance, and issuer or
domestic confirming bank) that has been delivered to Agent and is directly
drawable by Agent, or (z) the Account is covered by credit insurance in form,
substance, and amount, and by an insurer, satisfactory to Agent,
(g) 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 Midway has
complied, to the reasonable satisfaction of Agent, with the Assignment of Claims
Act, 31 USC Section 3727), or (ii) any state of the United States,
(h) Accounts with respect to which the Account Debtor is a
creditor of any Company, 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,
(i) Accounts with respect to an Account Debtor whose total
obligations owing to Midway exceed (i) 10% in the case of each Account Debtor
other than WalMart, Electronics Boutique and Gamestop, Inc. and (ii) 15% in the
case of WalMart, Electronics
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Boutique or Gamestop, Inc. (such percentages, as applied to a particular Account
Debtor, being subject to reduction by Agent in its Permitted Discretion if the
creditworthiness of such Account Debtor deteriorates), of all Eligible Accounts,
to the extent of the obligations owing by such Account Debtor in excess of such
percentage; PROVIDED, HOWEVER, that, in each case, the amount of Eligible
Accounts that are excluded because they exceed the foregoing percentage shall be
determined by Agent based on all of the otherwise Eligible Accounts prior to
giving effect to any eliminations based upon the foregoing concentration limit,
(j) 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 Midway has received notice of an imminent Insolvency Proceeding or a
material impairment of the financial condition of such Account Debtor,
(k) Commencing 30 days after the Closing Date, Accounts with
respect to which the Account Debtor is located in a state or jurisdiction (e.g.,
New Jersey, Minnesota, and West Virginia) that requires, as a condition to
access to the courts of such jurisdiction, that a creditor qualify to transact
business, file a business activities report or other report or form, or take one
or more other actions, unless Midway has so qualified, filed such reports or
forms, or taken such actions (and, in each case, paid any required fees or other
charges), except to the extent that Midway may qualify subsequently as a foreign
entity authorized to transact business in such state or jurisdiction and gain
access to such courts, without incurring any cost or penalty viewed by Agent to
be significant in amount, and such later qualification cures any access to such
courts to enforce payment of such Account,
(l) Accounts, the collection of which, Agent, in its Permitted
Discretion, believes to be doubtful by reason of the Account Debtor's financial
condition,
(m) Accounts that are not subject to a valid and perfected first
priority Agent's Lien,
(n) Accounts with respect to which (i) the goods giving rise to
such Account have not been shipped and billed to the Account Debtor, or (ii) the
services giving rise to such Account have not been performed and billed to the
Account Debtor, or
(o) Accounts that represent the right to receive progress
payments or other advance ▇▇▇▇▇▇▇▇ that are due prior to the completion of
performance by Midway of the subject contract for goods or services.
"ELIGIBLE TRANSFEREE" means (a) a commercial bank organized under
the laws of the United States, or any state thereof, and having total assets in
excess of $250,000,000, (b) a commercial bank organized under the laws of any
other country which is a member of the Organization for Economic Cooperation and
Development or a political subdivision of any such country and which has total
assets in excess of $250,000,000, provided that such bank is acting through a
branch or agency located in the United States, (c) a finance company, insurance
company, or other financial institution or fund that is engaged in making,
purchasing, or otherwise investing in commercial loans in the ordinary course of
its
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business and having (together with its Affiliates) total assets in excess of
$250,000,000, (d) any Affiliate (other than individuals) of a Lender, (e) so
long as no Event of Default has occurred and is continuing, any other Person
approved by Agent and Administrative Borrower (which approval of Administrative
Borrower shall not be unreasonably, withheld, delayed, or conditioned), and (f)
during the continuation of an Event of Default, any other Person approved by
Agent.
"ENVIRONMENTAL ACTIONS" means any complaint, summons, citation,
notice, directive, order, claim, litigation, investigation, judicial or
administrative proceeding, judgment, letter, or other communication from any
Governmental Authority, or any third party involving violations of Environmental
Laws or releases of Hazardous Materials from (a) any assets, properties, or
businesses of any Company, any Subsidiary of a Company, 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
Company, any Subsidiary of a Company, 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, to the extent binding on any
Company or any Subsidiary of a Company, relating to the environment, human
health, employee health and safety, or Hazardous Materials, including CERCLA;
RCRA; the Federal Water Pollution Control Act, 33 USC Section 1251 ET SEQ.; the
Toxic Substances Control Act, 15 USC Section 2601 ET SEQ.; the Clean Air Act, 42
USC Section 7401 ET SEQ.; the Safe Drinking Water Act, 42 USC Section 3803 ET
SEQ.; the Oil Pollution Act of 1990, 33 USC Section 2701 ET SEQ.; the Emergency
Planning and the Community Right-to-Know Act of 1986, 42 USC Section 11001 ET
SEQ.; the Hazardous Material Transportation Act, 49 USC Section 1801 ET SEQ.;
and the Occupational Safety and Health Act, 29 USC Section 651 ET SEQ. (to the
extent it regulates occupational exposure to Hazardous Materials); any state and
local or foreign counterparts or equivalents, in each case as amended from time
to time.
"ENVIRONMENTAL LIABILITIES AND COSTS" means all liabilities,
monetary obligations, Remedial Actions, losses, damages, punitive damages,
consequential damages, treble 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 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 and Costs.
"EQUIPMENT" means equipment (as that term is defined in the
Code), and includes machinery, machine tools, motors, furniture, furnishings,
fixtures, vehicles (including motor vehicles), computer hardware, tools, parts,
and goods (other than consumer
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goods, farm products, or Inventory), wherever located, including all
attachments, accessories, accessions, replacements, substitutions, additions,
and improvements to any of the foregoing.
"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 a
Company or a Subsidiary of a Company 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 a Company or a Subsidiary of a Company 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 a Company or a Subsidiary of a Company is a member under
IRC Section 414(m), or (d) solely for purposes of Section 302 of ERISA and
Section 412 of the IRC, any Person subject to ERISA that is a party to an
arrangement with a Company or a Subsidiary of a Company and whose employees are
aggregated with the employees of a Company or a Subsidiary of a Company under
IRC Section 414(o).
"EVENT OF DEFAULT" has the meaning set forth in SECTION 8.
"EXCESS AVAILABILITY" means, as of any date of determination, the
amount equal to Availability MINUS the aggregate amount, if any, of all trade
payables of Companies and their Subsidiaries aged in excess of their historical
levels with respect thereto and all book overdrafts of Companies and their
Subsidiaries in excess of their historical practices with respect thereto, in
each case as determined by Agent in its Permitted Discretion.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as in
effect from time to time.
"EXCLUDED INVENTORY" means Inventory created utilizing an
intellectual property license to the extent such license contains a term that is
effective and enforceable under applicable law that permits the licensor to
terminate such license in the event a security interest is granted by the
licensee in such inventory without the consent of the licensor (unless the
consent of such licensor has been obtained).
"EXISTING LENDER" means Bank of America, N.A..
"FEE LETTER" means that certain fee letter, dated as of even date
herewith, between Borrowers and Agent, in form and substance satisfactory to
Agent.
"FEIN" means Federal Employer Identification Number.
"FUNDING DATE" means the date on which a Borrowing occurs.
"FUNDING LOSSES" has the meaning set forth in SECTION
2.13(b)(ii).
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"GAAP" means generally accepted accounting principles as in
effect from time to time in the United States, consistently applied.
"GENERAL INTANGIBLES" means general intangibles (as that term is
defined in the Code), including payment intangibles, contract rights, rights to
payment, rights arising under common law, statutes, or regulations, choses or
things in action, goodwill, patents, trade names, trade secrets, trademarks,
servicemarks, copyrights, blueprints, drawings, 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, infringement claims,
computer programs, information contained on computer disks or tapes, software,
literature, reports, catalogs, insurance premium rebates, tax refunds, and tax
refund claims, and any and all supporting obligations in respect thereof, and
any other personal property other than Accounts, Deposit Accounts, goods,
Investment Property, and Negotiable Collateral.
"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 (including the federal
government of Canada and the United Kingdom), state, provincial, local, or other
governmental or administrative body, instrumentality, department, or agency or
any court, tribunal, administrative hearing body, arbitration panel, commission,
or other similar dispute-resolving panel or body.
"GRANTOR" means each Borrower and each U.S. Credit Party.
"GRANTOR COLLATERAL" means all of each Grantor's now owned or
hereafter acquired right, title, and interest in and to each of the following:
(a) all of its Accounts,
(b) all of its Books,
(c) all of its commercial tort claims,
(d) all of its Deposit Accounts,
(e) all of its Equipment,
(f) all of its General Intangibles,
(g) all of its Inventory except Excluded Inventory,
(h) all of its Investment Property (including all of its
securities and Securities Accounts),
(i) all of its Negotiable Collateral,
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(j) money or other assets of such Grantor that now or hereafter
come into the possession, custody, or control of any member of the Lender Group,
and
(k) the proceeds and products, whether tangible or intangible,
of any of the foregoing, including proceeds of insurance covering any or all of
the foregoing, and any and all Accounts, Books, Deposit Accounts, Equipment,
General Intangibles, Inventory, Investment Property, Negotiable Collateral, Real
Property, money, or other tangible or intangible property resulting from the
sale, exchange, collection, or other disposition of any of the foregoing, or any
portion thereof or interest therein, and the proceeds thereof.
"GUARANTY" means that certain general continuing guaranty
executed and delivered by each U.S. Credit Party in favor of Agent, for the
benefit of the Lender Group and the Bank Product Providers, in form and
substance satisfactory to Agent.
"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.
"HEDGE AGREEMENT" means any and all agreements, or documents now
existing or hereafter entered into by Parent or its Subsidiaries that provide
for an interest rate, credit, commodity or equity swap, cap, floor, collar,
forward foreign exchange transaction, currency swap, cross currency rate swap,
currency option, or any combination of, or option with respect to, these or
similar transactions, for the purpose of hedging Parent's or its Subsidiaries'
exposure to fluctuations in interest or exchange rates, loan, credit exchange,
security or currency valuations or commodity prices.
"HOLDOUT LENDER" has the meaning set forth in SECTION 15.2(a).
"INACTIVE COMPANY" means Midway Games Sales Corporation, a
Barbados corporation, Midway/Nintendo Inc., a Delaware corporation, Midway Games
(Europe) GmbH, a German limited liability company and K.K. Midway Games, a
Japanese company.
"INDEBTEDNESS" means (a) all obligations for borrowed money, (b)
all obligations evidenced by bonds, debentures, notes, or other similar
instruments and all reimbursement or other obligations in respect of letters of
credit, bankers acceptances, interest rate swaps, or other financial products,
(c) all obligations as a lessee under Capital Leases, (d) all obligations or
liabilities of others secured by a Lien on any asset of a Person or its
Subsidiaries, irrespective of whether such obligation or liability is assumed,
(e) all
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obligations 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 owing under Hedge
Agreements, and (g) any obligation guarantying or intended to guaranty (whether
directly or indirectly guarantied, endorsed, co-made, discounted, or sold with
recourse) any obligation of any other Person that constitutes Indebtedness under
any of clauses (a) through (f) above.
"INDEMNIFIED LIABILITIES" has the meaning set forth in SECTION
11.3.
"INDEMNIFIED PERSON" has the meaning set forth in SECTION 11.3.
"INITIAL PREFERRED STOCK" means the 3,500 shares of the Series D
Convertible Preferred Stock, par value $0.01 per shares of Parent, having a
stated value of $10,000 per share issued and outstanding as of the Closing Date.
"INSOLVENCY PROCEEDING" means any proceeding commenced by or
against any Person under any provision of the Bankruptcy Code or under any other
state, provincial or federal bankruptcy or insolvency law, assignments for the
benefit of creditors, formal or informal moratoria, compositions, extensions
generally with creditors, or proceedings seeking reorganization, arrangement, or
other similar relief.
"INTERCOMPANY SUBORDINATION AGREEMENT" means a subordination
agreement executed and delivered by Companies and each of their Subsidiaries and
Agent, the form and substance of which is satisfactory to Agent.
"INTEREST PERIOD" means, with respect to each LIBOR Rate Loan, a
period commencing on the date of the making of such LIBOR Rate Loan (or the
continuation of a LIBOR Rate Loan or the conversion of a Base Rate Loan to a
LIBOR Rate Loan) and ending 1, 2, or 3 months thereafter; PROVIDED, HOWEVER,
that (a) if any Interest Period would end on a day that is not a Business Day,
such Interest Period shall be extended (subject to clauses (c)-(e) below) to the
next succeeding Business Day, (b) interest shall accrue at the applicable rate
based upon the LIBOR Rate from and including the first day of each Interest
Period to, but excluding, the day on which any Interest Period expires, (c) any
Interest Period that would end on a day that is not a Business Day shall be
extended to the next succeeding Business Day unless such Business Day falls in
another calendar month, in which case such Interest Period shall end on the next
preceding Business Day, (d) with respect to an Interest Period that begins on
the last Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such Interest
Period), the Interest Period shall end on the last Business Day of the calendar
month that is 1, 2, or 3 months after the date on which the Interest Period
began, as applicable, and (e) Borrowers (or Administrative Borrower on behalf
thereof) may not elect an Interest Period which will end after the Maturity
Date.
"INVENTORY" means inventory (as that term is defined in the
Code).
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"INVESTMENT" means, with respect to any Person, any investment by
such Person in any other Person (including Affiliates) in the form of loans,
guaranties, advances, or capital contributions (excluding (a) commission,
travel, and similar advances to officers and employees of such Person made in
the ordinary course of business, and (b) BONA FIDE Accounts arising in the
ordinary course of business consistent with past practice), purchases or other
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 ACCOUNT" means the Securities Account of
Administrative Borrower at ▇▇▇▇▇ Fargo Brokerage Services identified on SCHEDULE
I-1.
"INVESTMENT PROPERTY" means investment property (as that term is
defined in the Code), and any and all supporting obligations in respect thereof.
"IRC" means the Internal Revenue Code of 1986, as in effect from
time to time.
"ISSUING LENDER" means WFF or any other Lender that, at the
request of Administrative Borrower and with the consent of Agent, agrees, in
such Lender's sole discretion, to become an Issuing Lender for the purpose of
issuing L/Cs or L/C Undertakings pursuant to SECTION 2.12.
"L/C" has the meaning set forth in SECTION 2.12(a).
"L/C DISBURSEMENT" means a payment made by the Issuing Lender
pursuant to a Letter of Credit.
"L/C UNDERTAKING" has the meaning set forth in SECTION 2.12(a).
"LENDER" and "LENDERS" have the respective meanings set forth in
the preamble to this Agreement, and shall include any other Person made a party
to this Agreement in accordance with the provisions of SECTION 14.1.
"LENDER GROUP" means, individually and collectively, each of the
Lenders (including the Issuing Lender), Agent and UK Security Trustee.
"LENDER GROUP EXPENSES" means all (a) costs or expenses
(including taxes, and insurance premiums) required to be paid by a Company under
any of the Loan Documents that are paid, advanced, or incurred by the Lender
Group, (b) fees or charges paid or incurred by Agent in connection with the
Lender Group's transactions with Companies, including, fees or charges for
photocopying, notarization, couriers and messengers, telecommunication, public
record searches (including tax lien, litigation, and UCC 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
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amount of any limitation) contained in this Agreement, real estate surveys, real
estate title policies and endorsements, and environmental audits, (c) costs and
expenses incurred by Agent in the disbursement of funds to or for the account of
Borrowers or other members of the Lender Group (by wire transfer or otherwise),
(d) charges paid or incurred by Agent resulting from the dishonor of checks, (e)
reasonable costs and expenses paid or incurred by the Lender Group to correct
any default or enforce any provision of the Loan Documents, or 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) audit fees and
expenses of Agent related to audit examinations of the Books to the extent of
the fees and charges (and up to the amount of any limitation) contained in this
Agreement, (g) reasonable costs and expenses of third party claims or any other
suit paid or incurred by the Lender Group in enforcing or defending the Loan
Documents or in connection with the transactions contemplated by the Loan
Documents or the Lender Group's relationship with any Company, (h) Agent's and
each Lender's reasonable costs and expenses (including attorneys fees) incurred
in advising, structuring, drafting, reviewing, administering, syndicating, or
amending the Loan Documents, and (i) Agent's and each Lender's reasonable costs
and expenses (including attorneys, accountants, consultants, and other advisors
fees and expenses) incurred in terminating, enforcing (including attorneys,
accountants, consultants, and other advisors fees and expenses incurred in
connection with a "workout," a "restructuring," or an Insolvency Proceeding
concerning any Company 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.
"LENDER-RELATED PERSON" means, with respect to any Lender, such
Lender, together with such Lender's Affiliates, officers, directors, employees,
attorneys, and agents.
"LETTER OF CREDIT" means an L/C or an L/C Undertaking, as the
context requires.
"LETTER OF CREDIT USAGE" means, as of any date of determination,
the aggregate undrawn amount of all outstanding Letters of Credit.
"LIBOR DEADLINE" has the meaning set forth in SECTION 2.13(b)(i).
"LIBOR NOTICE" means a written notice in the form of EXHIBIT L-1.
"LIBOR RATE" means, for each Interest Period for each LIBOR Rate
Loan, the rate per annum determined by Agent (rounded upwards, if necessary, to
the next 1/100%) by DIVIDING (a) the Base LIBOR Rate for such Interest Period,
BY (b) 100% MINUS the Reserve Percentage. The LIBOR Rate shall be adjusted on
and as of the effective day of any change in the Reserve Percentage.
"LIBOR RATE LOAN" means each portion of an Advance that bears
interest at a rate determined by reference to the LIBOR Rate.
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"LIBOR RATE MARGIN" means the Applicable Margin pertaining to
LIBOR Rate Loans as set forth in the definition of Applicable Margin.
"LIEN" means any interest in an asset securing an obligation owed
to, or a claim by, any Person other than the owner of the asset, irrespective of
whether (a) such interest is based on the common law, statute, or contract, (b)
such interest is recorded or perfected, and (c) such interest is contingent upon
the occurrence of some future event or events or the existence of some future
circumstance or circumstances. Without limiting the generality of the foregoing,
the term "Lien" includes the lien or security interest (whether legal or
equitable) arising from a mortgage, deed of trust, encumbrance, pledge,
hypothecation, assignment, deposit arrangement, security agreement, conditional
sale or trust receipt, or from a lease, consignment, or bailment for security
purposes and also includes reservations, exceptions, encroachments, easements,
rights-of-way, covenants, conditions, restrictions, leases, and other title
exceptions and encumbrances affecting Real Property.
"LOAN ACCOUNT" has the meaning set forth in SECTION 2.10.
"LOAN DOCUMENTS" means this Agreement, the Bank Product
Agreements, the Cash Management Agreements, the Control Agreements, the
Copyright Mortgages, the Disbursement Letter, the Fee Letter, the Intercompany
Subordination Agreement, the Letters of Credit, the Mortgages, the Officers'
Certificate, the Patent Mortgages, the Stock Pledge Agreements, the Trademark
Security Agreements, the U.S. Credit Party Guaranty, any note or notes executed
by a Borrower in connection with this Agreement and payable to a member of the
Lender Group, and any other agreement entered into, now or in the future, by a
Company and the Lender Group in connection with this Agreement.
"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 Companies, taken as a whole, (b) a
material impairment of a Company's ability to perform its obligations under the
Loan Documents to which it is a party or of the Lender Group's ability to
enforce the Obligations or realize upon the Collateral, or (c) a material
impairment of the enforceability or priority of the Agent's Liens or the UK
Security Trustee's Liens with respect to the Collateral as a result of an action
or failure to act on the part of a Company.
"MATERIAL VIDEOGAME" means any videogame title sold by a Company
that generated revenues for the most recent calendar quarter in excess of 10% of
all consolidated revenues of Companies for such calendar quarter; provided that
for purposes of SECTION 8.9 "Material Videogame" shall mean any videogame sku
sold by a Company that generated revenues for the most recent calendar quarter
in excess of 10% of all consolidated revenues of Companies for such calendar
quarter.
"MATURITY DATE" has the meaning set forth in SECTION 3.4.
"MAXIMUM REVOLVER AMOUNT" means $15,000,000.
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"MGM LITIGATION" means the lawsuit styled as METRO-▇▇▇▇▇▇▇-▇▇▇▇▇
STUDIOS, INC. ET AL. V. MIDWAY GAMES, INC., CV 01-09512 TJH (JTLx) (C.D. Cal.)
and any related proceedings, including all appeals and investigations, whether
ongoing, commenced or completed, in connection with or resulting from such legal
proceedings.
"MIDWAY ENTERPRISE VALUE" means, at any time, an amount equal to
the enterprise asset sale value of the Companies, as most recently determined by
a qualified appraisal company selected by Agent pursuant to a valuation
methodology acceptable to Agent. The initial Midway Enterprise Value is
$86,000,000, based on the enterprise valuation prepared by ▇▇▇▇▇ ▇▇▇▇▇▇ LLC
dated February 14, 2003.
"MORTAL KOMBAT FRANCHISE" means the "Mortal Kombat: Deadly
Alliance," and "Mortal Kombat: Deception" videogames each of them created for
use on Sony's PlayStation 2 computer entertainment system, Microsoft's Xbox and
Nintendo's GameCube and Game Boy Advance.
"MORTGAGES" means, individually and collectively, one or more
mortgages, deeds of trust, or deeds to secure debt, executed and delivered by a
Company in favor of Agent, in form and substance satisfactory to Agent, that
encumber the Real Property Collateral and the related improvements thereto.
"NEGOTIABLE COLLATERAL" means letters of credit, letter of credit
rights, instruments, promissory notes, drafts, documents, and chattel paper
(including electronic chattel paper and tangible chattel paper), and any and all
supporting obligations in respect thereof.
"OBLIGATIONS" means (a) all loans (including the Term Loan),
Advances, debts, principal, interest (including any interest that, but for the
commencement of an Insolvency Proceeding, would have accrued), contingent
reimbursement obligations with respect to outstanding Letters of Credit,
premiums, liabilities (including all amounts charged to Borrowers' Loan Account
pursuant hereto), obligations (including indemnification obligations), fees
(including the fees provided for in the Fee Letter), charges, costs, Lender
Group Expenses (including any fees or expenses that, but for the commencement of
an Insolvency Proceeding, would have accrued), lease payments, guaranties,
covenants, and duties of any kind and description owing by Companies to the
Lender Group pursuant to or evidenced by the 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 Lender Group Expenses that
Companies are required to pay or reimburse by the Loan Documents, by law, or
otherwise, and (b) all Bank Product Obligations. Any reference in this Agreement
or in the Loan Documents to the Obligations shall include all extensions,
modifications, renewals, or alterations thereof, both prior and subsequent to
any Insolvency Proceeding.
"OFFICERS' CERTIFICATE" means the representations and warranties
of officers form submitted by Agent to Administrative Borrower, together with
Companies' completed
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responses to the inquiries set forth therein, the form and substance of such
responses to be satisfactory to Agent.
"ORIGINATING LENDER" has the meaning set forth in SECTION
14.1(e).
"OVERADVANCE" has the meaning set forth in SECTION 2.5.
"PAID IN FULL" means (i) the Revolver Commitment shall have been
terminated, (ii) all principal of the Advances and the Term Loan, interest
thereon and all other Obligations shall have been paid in full in cash or
otherwise satisfied in a manner acceptable to Agent and the Lenders in their
sole discretion (including, providing cash collateral (in an amount determined
by Agent as sufficient to satisfy the reasonably estimated credit exposure) to
be held by Agent for the benefit of the Bank Product Providers with respect to
the then extant Bank Products Obligations) and (iii) the Agent shall have
received cash collateral (or, at the Agent's option, a letter of credit issued
for the account of the relevant Borrower and at such Borrower's expense, in form
and substance reasonably satisfactory to the Agent, by an issuer reasonably
acceptable to the Agent and payable to the Agent as beneficiary) in such amounts
as the Agent determines are reasonably necessary to secure the Agent and the
Lenders from loss, cost, damage or expense, including reasonable attorneys' fees
and expenses, in connection with any contingent obligations and any Letters of
Credit and checks or other payments provisionally credited to the obligations
and/or as to which the Agent or any Lender has not yet received final payment in
full and in cash. All Letters of Credit shall be cash collateralized (or
supported by a letter of credit as described in the preceding sentence) by an
amount equal to one hundred five percent (105%) of the amount of the Letters of
Credit then existing.
"PARENT" has the meaning set forth in the preamble to this
Agreement.
"PARTICIPANT" has the meaning set forth in SECTION 14.1(e).
"PATENT MORTGAGE" means a patent mortgage executed and delivered
by MAG, Parent and Agent, the form and substance of which is satisfactory to
Agent.
"PERMITTED ACQUISITION" means each of two permitted acquisitions
of the Stock of a Person (such Person, the "TARGET") by a Borrower, Parent or a
wholly-owned Subsidiary of Parent formed to acquire the Target (so long as such
wholly-owned Subsidiary is merged with and into the Target upon consummation of
the Permitted Acquisition) in which (a) the closing of such acquisition occurs
prior to December 31, 2004, (b) the Target is incorporated or otherwise
organized in the United States, located in the United States and its business
consists of developing videogames for Companies, (c) immediately before and
after giving effect to such Stock acquisition, no Default or Event of Default
exists (and, with respect to the financial covenants included in SECTION 7.18,
Agent has been provided with calculations showing compliance with such financial
covenants on a pro forma basis as of the most recent month end for which
financial statements have been delivered, after giving effect to such Stock
acquisition), (d) Agent shall have received projections from Companies
reflecting such acquisition, which projections shall be in form and substance
satisfactory to Agent, (e) the
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aggregate consideration to be paid in connection with such Stock acquisition
does not exceed $5,000,000, all of which shall be paid in common stock of
Parent, (f) the acquisition is consensual and has been approved by the board of
directors of the Target, (g) prior to such acquisition, Agent shall have
received a description of such acquisition and such due diligence as is
customarily required by Agent (including engaging third parties to review the
transaction) and the results of such due diligence shall be satisfactory to
Required Lenders, (h) at least 1 day prior to the consummation of such Stock
acquisition, Agent has received substantially completed drafts of the material
documentation to be executed in connection with such acquisition, (i) consents
have been obtained in favor of Agent and Lenders to the collateral assignment of
rights and indemnities under the material acquisition documents, (j) Agent shall
have received a perfected, first-priority Lien in all of the assets of the
Target and the Target shall have executed and delivered a joinder to this
Agreement and the Guaranty and be a "U.S. Credit Party", "Grantor" or "Company"
hereunder, (k) any contingent liabilities (other than those set forth in (m)
below) or Indebtedness retained by Target in excess of $600,000 shall have been
approved by Agent and Required Lenders, (l) any employment agreements entered
into in connection with such acquisition shall only compensate employees for
future services provided to the Target and shall not constitute "disguised
consideration" for the acquisition and (m) continuing obligations of the Target
to its employees under the Target's royalty compensation plan shall not exceed
the amount of royalties Midway would have been contractually obligated to pay
the Target following the date of the acquisition in respect of games developed
by the Target prior to the date of the acquisition plus any royalties the Target
receives from third parties after the acquisition.
"PERMITTED DISCRETION" means a determination made in the exercise
of reasonable (from the perspective of a secured asset-based lender) business
judgment.
"PERMITTED DISPOSITIONS" means (a) sales or other dispositions of
Equipment that is substantially worn, damaged, or obsolete in the ordinary
course of business, (b) sales of Inventory to buyers in the ordinary course of
business, (c) the use or transfer of money or Cash Equivalents in a manner that
is not prohibited by the terms of this Agreement or the other Loan Documents,
and (d) the Sale Leaseback Transaction.
"PERMITTED HOLDERS" means ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and National Amusements, Inc. and any entities owned or
controlled, directly or indirectly, by any of them.
"PERMITTED INVESTMENTS" means (a) Investments in cash and Cash
Equivalents, (b) Investments in negotiable instruments for collection, (c)
advances made in connection with purchases of goods or services in the ordinary
course of business, (d) Investments received in settlement of amounts due to a
Company effected in the ordinary course of business or owing to a Company as a
result of Insolvency Proceedings involving an Account Debtor or upon the
foreclosure or enforcement of any Lien in favor of a Company, (e) acquisition of
Stock of a Target in connection with a Permitted Acquisition, (f) capital
contribution (not to exceed $1,000 in cash plus common stock of Parent
sufficient to pay purchase price of the applicable Permitted Acquisition) to a
wholly owned Subsidiary of Midway formed to acquire the Stock of a Target (so
long as such wholly owned Subsidiary is
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merged into such Target upon consummation of such Permitted Acquisition), (g)
loans among the Companies, (h) Investments in UK Company so long as the net
additional amount of such Investments made from and after the date hereof does
not exceed $500,000 at any time during the period from the Closing Date through
May 31, 2004, or $350,000 at any time thereafter and (i) Investments in the
Investment Account.
"PERMITTED LIENS" means (a) Liens held by Agent, (b) Liens for
unpaid taxes that either (i) are not yet delinquent, or (ii) do not constitute
an Event of Default hereunder and are the subject of Permitted Protests, (c)
Liens set forth on SCHEDULE P-1, (d) the interests of lessors under operating
leases, (e) 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 such Lien attaches only to the asset purchased
or acquired and the proceeds thereof, (f) Liens arising by operation of law in
favor of warehousemen, landlords, carriers, mechanics, materialmen, laborers, or
suppliers, incurred in the ordinary course of Companies' business and not in
connection with the borrowing of money, and which Liens either (i) are for sums
not yet delinquent, or (ii) are the subject of Permitted Protests, (g) Liens
arising from deposits made in connection with obtaining worker's compensation or
other unemployment insurance, (h) Liens or deposits to secure performance of
bids, tenders, or leases incurred in the ordinary course of business and not in
connection with the borrowing of money, (i) Liens granted as security for surety
or appeal bonds in connection with obtaining such bonds in the ordinary course
of business, (j) Liens resulting from any judgment or award that is not an Event
of Default hereunder, (k) with respect to any Real Property, easements, rights
of way, and zoning restrictions that do not materially interfere with or impair
the use or operation thereof, (l) Liens existing on the date a Permitted
Acquisition is consummated (and not incurred in connection with such Permitted
Acquisition) on Equipment of a Target securing Indebtedness of a Target to the
extent such Indebtedness is permitted in connection with such Permitted
Acquisition, and (m) landlord liens related to leases acquired in connection
with a Permitted Acquisition to the extent such Liens only cover Equipment
located on such leased premises.
"PERMITTED PROTEST" means the right of any Company 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, United Kingdom
or Canadian federal tax lien), or rental payment, provided that (a) a reserve
with respect to such obligation is established on the Books in such amount as is
required under GAAP, (b) any such protest is instituted promptly and prosecuted
diligently on behalf of such Company, as applicable, in good faith, and (c)
Agent is satisfied that, while any such protest is pending, there will be no
impairment of the enforceability, validity, or priority of any of the Agent's
Liens.
"PERMITTED PURCHASE MONEY INDEBTEDNESS" means, as of any date of
determination, Purchase Money Indebtedness in an aggregate amount outstanding at
any one time not in excess of $200,000.
"PERSON" means natural persons, corporations, limited liability
companies, limited partnerships, general partnerships, limited liability
partnerships, joint ventures, trusts,
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land trusts, business trusts, or other organizations, irrespective of whether
they are legal entities, and governments and agencies and political subdivisions
thereof.
"PLATFORM LICENSE" means each of those certain Confidential
License Agreement for Nintendo GameCube (Western Hemisphere), dated February 19,
2002, between Midway and Nintendo of America Inc., License Agreement for the
Nintendo GameCube System (EEA, Australia & New Zealand), dated April 25, 2003,
between UK Company and Nintendo Co. Ltd., Licensed Publisher Agreement, dated
April 1, 2000, between Midway and Sony Computer Entertainment America, Inc.,
Licensed Publisher Agreement, dated November 14, 2000, between UK Company and
Sony Computer Entertainment Europe Limited, Xbox Publisher License Agreement,
dated October 30, 2000, between Midway and Microsoft Licensing Inc., each as
amended, modified or supplemented from time to time.
"PPSA" means the Personal Property Security Act of the applicable
Canadian province or provinces.
"PREFERRED STOCK" means the Initial Preferred Stock and the
Additional Preferred Stock.
"PROJECTIONS" means Parent's forecasted (a) balance sheets, (b)
profit and loss statements, and (c) cash flow statements, all prepared on a
consistent basis with Parent's historical financial statements, together with
appropriate supporting details and a statement of underlying assumptions.
"PRO RATA SHARE" means, as of any date of determination:
(a) with respect to a Lender's obligation to make Advances and
receive payments of principal, interest, fees, costs, and expenses with respect
thereto, (i) prior to the Revolver Commitments being terminated or reduced to
zero, the percentage obtained by dividing (y) such Lender's Revolver Commitment,
by (z) the aggregate Revolver Commitments of all Lenders, and (ii) from and
after the time that the Revolver Commitments have been terminated or reduced to
zero, the percentage obtained by dividing (y) the aggregate outstanding
principal amount of such Lender's Advances by (z) the aggregate outstanding
principal amount of all Advances,
(b) with respect to a Lender's obligation to participate in
Letters of Credit, to reimburse the Issuing Lender, and to receive payments of
fees with respect thereto, (i) prior to the Revolver Commitments being
terminated or reduced to zero, the percentage obtained by dividing (y) such
Lender's Revolver Commitment, by (z) the aggregate Revolver Commitments of all
Lenders, and (ii) from and after the time that the Revolver Commitments have
been terminated or reduced to zero, the percentage obtained by dividing (y) the
aggregate outstanding principal amount of such Lender's Advances by (z) the
aggregate outstanding principal amount of all Advances,
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(c) with respect to a Lender's obligation to make the Term Loan
and receive payments of interest, fees, and principal with respect thereto, (i)
prior to the making of the Term Loan, the percentage obtained by dividing (y)
such Lender's Term Loan Commitment, by (z) the aggregate amount of all Lenders'
Term Loan Commitments, and (ii) from and after the making of the Term Loan, the
percentage obtained by dividing (y) the principal amount of such Lender's
portion of the Term Loan by (z) the principal amount of the Term Loan, and
(d) with respect to all other matters as to a particular Lender
(including the indemnification obligations arising under SECTION 16.7), the
percentage obtained by dividing (i) such Lender's Revolver Commitment plus the
outstanding principal amount of such Lender's portion of the Term Loan, by (ii)
the aggregate amount of Revolver Commitments of all Lenders plus the outstanding
principal amount of the Term Loan; PROVIDED, HOWEVER, that in the event the
Revolver Commitments have been terminated or reduced to zero, Pro Rata Share
under this clause shall be the percentage obtained by dividing (A) the
outstanding principal amount of such Lender's Advances plus such Lender's
ratable portion of the Risk Participation Liability with respect to outstanding
Letters of Credit plus the outstanding principal amount of such Lender's portion
of the Term Loan, by (B) the outstanding principal amount of all Advances plus
the aggregate amount of the Risk Participation Liability with respect to
outstanding Letters of Credit plus the outstanding principal amount of the Term
Loan.
"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 Grantors that is in Deposit
Accounts (including the Investment Account) or in Securities Accounts, or any
combination thereof, and which such Deposit Account (including the Investment
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; provided however, that for the purposes of this
definition the term Deposit Accounts shall not include the Designated Account or
any other operating or disbursement account of Grantors.
"REAL PROPERTY" means any estates or interests in real property
now owned or hereafter acquired by any Company and the improvements thereto.
"REAL PROPERTY COLLATERAL" means the parcel or parcels of Real
Property identified on SCHEDULE R-1 and any Real Property hereafter acquired by
a Company.
"RECORD" means information that is inscribed on a tangible medium
or which is stored in an electronic or other medium and is retrievable in
perceivable form.
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"Redemption Date" means the "Maturity Date" as defined in that
certain Certificate of Designation, dated October 10, 2004, of the Series D
Convertible Preferred Stock of Parent.
"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) perform any pre-remedial studies,
investigations, or post-remedial operation and maintenance activities, or (d)
conduct any other actions authorized by 42 USC Section 9601.
"REPLACEMENT LENDER" has the meaning set forth in SECTION
15.2(a).
"REPORT" has the meaning set forth in SECTION 16.17.
"REQUIRED AVAILABILITY" means that the sum of (a) Excess
Availability, PLUS (b) Qualified Cash that is in the Investment Account exceeds
$40,000,000.
"REQUIRED LENDERS" means, at any time, Lenders whose aggregate
Pro Rata Shares (calculated under clause (d) of the definition of Pro Rata
Shares) equal or exceed 66?%.
"RESERVE PERCENTAGE" means, on any day, for any Lender, the
maximum percentage prescribed by the Board of Governors of the Federal Reserve
System (or any successor Governmental Authority) for determining the reserve
requirements (including any basic, supplemental, marginal, or emergency
reserves) that are in effect on such date with respect to eurocurrency funding
(currently referred to as "eurocurrency liabilities") of that Lender, but so
long as such Lender is not required or directed under applicable regulations to
maintain such reserves, the Reserve Percentage shall be zero.
"REVOLVER COMMITMENT" means, with respect to each Lender, its
Revolver Commitment, and, with respect to all Lenders, their Revolver
Commitments, in each case as such Dollar amounts are set forth beside such
Lender's name under the applicable heading on SCHEDULE C-1 or in the Assignment
and Acceptance pursuant to which such Lender became a Lender hereunder in
accordance with the provisions of SECTION 14.1.
"REVOLVER USAGE" means, as of any date of determination, the sum
of (a) the then extant amount of outstanding Advances, PLUS (b) the then extant
amount of the Letter of Credit Usage.
"RISK PARTICIPATION LIABILITY" means, as to each Letter of
Credit, all reimbursement obligations of Borrowers to the Issuing Lender with
respect to an L/C Undertaking, consisting of (a) the amount available to be
drawn or which may become available to be drawn, (b) all amounts that have been
paid by the Issuing Lender to the Underlying Issuer to the extent not reimbursed
by Borrowers, whether by the making of an
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Advance or otherwise, and (c) all accrued and unpaid interest, fees, and
expenses payable with respect thereto.
"SALE LEASEBACK TRANSACTION" means the sale of the Real Property
commonly known as ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ in an arm's length transaction to a Person that is not an
Affiliate of any Company on terms and conditions satisfactory to Required
Lenders in connection with the sale-leaseback of such Real Property so long as
(i) no Event of Default exists, (ii) 100% of the proceeds are paid to Agent's
Account to be applied as provided in SECTION 2.4(b), (iii) the terms of the
lease of such Real Property are reasonably satisfactory to Agent, and (iv) Agent
receives a Collateral Access Agreement with respect to such Real Property.
"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.
"SETTLEMENT" has the meaning set forth in SECTION 2.3(f)(i).
"SETTLEMENT DATE" has the meaning set forth in SECTION 2.3(f)(i).
"SOLVENT" means, with respect to any Person on a particular date,
that, at fair valuations, the sum of such Person's assets is greater than all of
such Person's debts.
"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 in Rule 3a11-1 of the
General Rules and Regulations promulgated by the SEC under the Exchange Act).
"STOCK PLEDGE AGREEMENT" means a stock pledge agreement, in form
and substance satisfactory to Agent, executed and delivered by each Company that
owns Stock of a Subsidiary of Parent, including the UK Stock Pledge Agreement.
"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.
"SWING LENDER" means WFF or any other Lender that, at the request
of Administrative Borrower and with the consent of Agent agrees, in such
Lender's sole discretion, to become the Swing Lender under SECTION 2.3(d).
"SWING LOAN" has the meaning set forth in SECTION 2.3(d)(i).
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"TAXES" has the meaning set forth in SECTION 16.11.
"TERM LOAN" has the meaning set forth in SECTION 2.2.
"TERM LOAN AMOUNT" means $15,000,000.
"TERM LOAN COMMITMENT" means, with respect to each Lender, its
Term Loan Commitment, and, with respect to all Lenders, their Term Loan
Commitments, in each case as such Dollar amounts are set forth beside such
Lender's name under the applicable heading on SCHEDULE C-1 or in the Assignment
and Acceptance pursuant to which such Lender became a Lender hereunder in
accordance with the provisions of SECTION 14.1.
"TERM LOAN MARGIN" means 6.00 percentage points.
"TERMINATION LETTER" means a letter, in form and substance
satisfactory to Agent, from Existing Lender to Agent confirming the repayment in
full all of the obligations of Companies owing to Existing Lender and the
release of all of the Liens existing in favor of Existing Lender in and to the
assets of Companies.
"TOTAL COMMITMENT" means, with respect to each Lender, its Total
Commitment, and, with respect to all Lenders, their Total Commitments, in each
case as such Dollar amounts are set forth beside such Lender's name under the
applicable heading on SCHEDULE C-1 attached hereto or on the signature page of
the Assignment and Acceptance pursuant to which such Lender became a Lender
hereunder in accordance with the provisions of SECTION 14.1.
"TRADEMARK SECURITY AGREEMENT" means a trademark security
agreement executed and delivered by each of Midway, MAG and MGW and Agent, the
form and substance of which is satisfactory to Agent.
"TRANSITION ACCOUNTS" means those three lockbox accounts, account
numbers 91253, 99214 and 96916, at Existing Lender.
"UCC FILING AUTHORIZATION LETTER" means a letter duly executed by
each Grantor authorizing Agent to file appropriate financing statements on Form
UCC-1 without the signature of such Grantor, as applicable, in such office or
offices as may be necessary or, in the opinion of Agent, desirable to perfect
the security interests purported to be created by the Loan Documents.
"UK COMPANY" means Midway Games Limited, an English limited
liability private company, registered with company number 03801663.
"UK INSOLVENCY LAWS" means the Insolvency ▇▇▇ ▇▇▇▇ of England and
Wales, as now and hereafter in effect, any successor to such statute and any
rules and regulations issued thereunder.
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"UK STOCK PLEDGE AGREEMENT" means the syndicated equitable
mortgage over securities executed by Midway on or about the date of this
Agreement in favor of the UK Security Trustee, for the benefit of the Lender
Group, by which Midway has granted to the UK Security Trustee as security for
the Obligations, a Lien on 100% of the Stock of UK Company.
"UK SECURITY TRUSTEE" means WFF in its capacity as security
trustee of the security created by the UK Stock Pledge Agreement and any
successor entity in that capacity.
"UNDERLYING ISSUER" means a third Person which is the beneficiary
of an L/C Undertaking and which has issued a letter of credit at the request of
the Issuing Lender for the benefit of Borrowers.
"UNDERLYING LETTER OF CREDIT" means a letter of credit that has
been issued by an Underlying Issuer.
"UNITED STATES" means the United States of America.
"U.S. CREDIT PARTY GUARANTY" means that certain general
continuing Guaranty executed and delivered by U.S. Credit Parties in favor of
Agent, for the benefit of the Lender Group and the Bank Product Providers, in
form and substance satisfactory to Agent.
"VOIDABLE TRANSFER" has the meaning set forth in SECTION 17.7.
"▇▇▇▇▇ FARGO" means ▇▇▇▇▇ Fargo Bank, National Association, a
national banking association.
"WFF" means ▇▇▇▇▇ Fargo Foothill, Inc., a California corporation.
1.2. ACCOUNTING TERMS.
All accounting terms not specifically defined herein shall be
construed in accordance with GAAP. When used herein, the term "financial
statements" shall include the notes and schedules thereto. Whenever the term
"Companies" or the term "Parent" is used in respect of a financial covenant or a
related definition, it shall be understood to mean Parent and its Subsidiaries
on a consolidated basis unless the context clearly requires otherwise.
1.3. 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.
1.4. 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
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include the plural, the term "including" is 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 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 the other Loan Documents 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). Any
reference herein to the repayment in full of the Obligations shall mean the
repayment in full in cash of all Obligations other than contingent
indemnification Obligations and other than any Bank Product Obligations that, at
such time, are allowed by the applicable Bank Product Provider to remain
outstanding and are not required to be repaid or cash collateralized pursuant to
the provisions of this Agreement. 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 the other Loan Documents shall be satisfied by
the transmission of a Record.
1.5. SCHEDULES AND EXHIBITS.
All of the schedules and exhibits attached to this Agreement
shall be deemed incorporated herein by reference.
2. LOAN AND TERMS OF PAYMENT.
2.1. REVOLVER ADVANCES.
(a) Subject to the terms and conditions of this Agreement, and
during the term of this Agreement, each Lender with a Revolver Commitment agrees
(severally, not jointly or jointly and severally) to make advances ("ADVANCES")
to Borrowers in an amount at any one time outstanding not to exceed such
Lender's Pro Rata Share of an amount equal to THE LESSER OF (i) the Maximum
Revolver Amount LESS the Letter of Credit Usage, or (ii) the Borrowing Base LESS
the Letter of Credit Usage.
(b) Anything to the contrary in this SECTION 2.1
notwithstanding, Agent shall have the right to establish reserves in such
amounts, and with respect to such matters, as Agent in its Permitted Discretion
shall deem necessary or appropriate, against the Borrowing Base, including
reserves with respect to (i) sums that Companies are required to pay (such as
taxes, assessments, insurance premiums, or, in the case of leased assets, rents
or other amounts payable under such leases) and has failed to pay under any
Section of this Agreement or any other Loan Document, (ii) allowances for price
protection, returns and discounts, (iii) accrued royalty payments owed to
licensors, (iv) allowances for litigation expenses of the Companies, and (v)
amounts owing by Companies to any Person to the extent secured by a Lien on, or
trust over, any of the Collateral (other than any existing
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Permitted Lien set forth on SCHEDULE P-1 which is specifically identified
thereon as entitled to have priority over the Agent's Liens), which Lien or
trust, in the Permitted Discretion of Agent likely would have a priority
superior to the Agent's Liens (such as Liens or trusts in favor of landlords,
warehousemen, carriers, mechanics, materialmen, laborers, or suppliers, or Liens
or trusts for AD VALOREM, excise, sales, or other taxes where given priority
under applicable law) in and to such item of the Collateral.
(c) The Lenders with Revolver Commitments shall have no
obligation to make additional Advances hereunder to the extent such additional
Advances would cause the Revolver Usage to exceed the Maximum Revolver Amount.
(d) 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.
2.2. TERM LOAN.
Subject to the terms and conditions of this Agreement, on the
Closing Date each Lender with a Term Loan Commitment agrees (severally, not
jointly or jointly and severally) to make term loans (collectively, the "TERM
LOAN") to Borrowers in an amount equal to such Lender's Pro Rata Share of the
Term Loan Amount. The Term Loan shall be repaid in 54 equal consecutive monthly
installments each in the amount of $277,777.78, on the first day of each
calendar month commencing August 1, 2004 and ending on February 1, 2009, with a
final installment on the Maturity Date of the then unpaid balance of the Term
Loan. Borrowers shall also make mandatory prepayments of principal of the Term
Loan (to be applied to the remaining installments in the inverse order of their
maturities) such that the sum of the outstanding principal balance of the Term
Loan shall not exceed 25% of the Midway Enterprise Value. In addition to the
foregoing, Borrowers may make optional prepayments of the Term Loan (to be
applied to the remaining installments in the inverse order of their maturities).
The outstanding unpaid principal balance and all accrued and unpaid interest
under the Term Loan shall be due and payable on the date of termination of this
Agreement, whether by its terms, by prepayment, or by acceleration. All amounts
outstanding under the Term Loan shall constitute Obligations.
2.3. BORROWING PROCEDURES AND SETTLEMENTS.
(a) PROCEDURE FOR BORROWING. Each Borrowing shall be made by an
irrevocable written request by an Authorized Person delivered to Agent (which
notice must be received by Agent no later than 10:00 a.m. (California time) on
the Business Day prior to the date 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; PROVIDED, HOWEVER, that in the case of a request for
Swing Loan in an amount of $3,000,000, or less, such notice will be timely
received if it is received by Agent no later than 10:00 a.m. (California time)
on the Business Day that is the requested Funding Date). At Agent's election, in
lieu of delivering the above-described written request, any Authorized Person
may give Agent telephonic notice of such request by the required time. In such
circumstances, Borrowers agree that any such
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telephonic notice will be confirmed in writing within 24 hours of the giving of
such notice and the failure to provide such written confirmation shall not
affect the validity of the request.
(b) AGENT'S ELECTION. Promptly after receipt of a request for a
Borrowing pursuant to SECTION 2.3(a), Agent shall elect, in its discretion, (i)
to have the terms of SECTION 2.3(c) apply to such requested Borrowing, or (ii)
if the Borrowing is for an Advance, to request Swing Lender to make a Swing Loan
pursuant to the terms of SECTION 2.3(e) in the amount of the requested
Borrowing; PROVIDED, HOWEVER, that if Swing Lender declines in its sole
discretion to make a Swing Loan pursuant to SECTION 2.3(d), Agent shall elect to
have the terms of SECTION 2.3(c) apply to such requested Borrowing.
(c) MAKING OF LOANS.
(i) In the event that Agent shall elect to have the terms
of this SECTION 2.3(c) apply to a requested Borrowing as described in
SECTION 2.3(b), then promptly after receipt of a request for a Borrowing
pursuant to SECTION 2.3(a), Agent shall notify the Lenders, not later than
1:00 p.m. (California time) on the Business Day immediately preceding the
Funding Date applicable thereto, by telecopy, telephone, or other similar
form of transmission, of the requested Borrowing. Each Lender shall make
the amount of such Lender's Pro Rata Share of the requested Borrowing
available to Agent in immediately available funds, to Agent's Account, not
later than 10:00 a.m. (California time) on the Funding Date applicable
thereto. After Agent's receipt of the proceeds of such Advances (or the
Term Loan, as applicable), Agent shall make the proceeds thereof available
to Administrative Borrower on the applicable Funding Date by transferring
immediately available funds equal to such proceeds received by Agent to
Administrative Borrower's Designated Account; PROVIDED, HOWEVER, that,
subject to the provisions of SECTION 2.3(i), Agent shall not request any
Lender to make, and no Lender shall have the obligation to make, any
Advance (or its portion of the Term Loan) if Agent shall have actual
knowledge that (1) one or more of the applicable conditions precedent set
forth in SECTION 3 will not be satisfied on the requested Funding Date for
the applicable Borrowing unless such condition has been waived, or (2) the
requested Borrowing would exceed the Availability on such Funding Date.
(ii) Unless Agent receives notice from a Lender on or
prior to the Closing Date or, with respect to any Borrowing after the
Closing Date, prior to 9:00 a.m. (California time) on the date of such
Borrowing, that such Lender will not make available as and when required
hereunder to Agent for the account of Borrowers the amount of that Lender's
Pro Rata Share of the Borrowing, Agent may assume that each Lender has made
or will make such amount available to Agent in immediately available funds
on the Funding Date and Agent may (but shall not be so required), in
reliance upon such assumption, make available to Borrowers on such date a
corresponding amount. If and to the extent any Lender shall not have made
its full amount available to Agent in immediately available funds and Agent
in such circumstances has made available to Borrowers such amount, that
Lender shall on the Business Day following such Funding Date make such
amount available to Agent,
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together with interest at the Defaulting Lender Rate for each day during
such period. A notice submitted by Agent to any Lender with respect to
amounts owing under this subsection shall be conclusive, absent manifest
error. If such amount is so made available, such payment to Agent shall
constitute such Lender's Advance (or portion of the Term Loan, as
applicable) on the date of Borrowing for all purposes of this Agreement. If
such amount is not made available to Agent on the Business Day following
the Funding Date, Agent will notify Administrative Borrower of such failure
to fund and, upon demand by Agent, Borrowers shall pay such amount to Agent
for Agent's account, together with interest thereon for each day elapsed
since the date of such Borrowing, at a rate per annum equal to the interest
rate applicable at the time to the Advances (or portion of the Term Loan,
as applicable) composing such Borrowing. The failure of any Lender to make
any Advance (or portion of the Term Loan, as applicable) on any Funding
Date shall not relieve any other Lender of any obligation hereunder to make
an Advance (or portion of the Term Loan, as applicable) on such Funding
Date, but no Lender shall be responsible for the failure of any other
Lender to make the Advance to be made by such other Lender on any Funding
Date.
(iii) Agent shall not be obligated to transfer to a
Defaulting Lender any payments made by Borrowers to Agent for the
Defaulting Lender's benefit, and, in the absence of such transfer to the
Defaulting Lender, Agent shall transfer any such payments to each other
non-Defaulting Lender member of the Lender Group ratably in accordance with
their Commitments (but only to the extent that such Defaulting Lender's
Advance was funded by the other members of the Lender Group) or, if so
directed by Administrative Borrower and if no Default or Event of Default
had occurred and is continuing (and to the extent such Defaulting Lender's
Advance was not funded by the Lender Group), retain same to be re-advanced
to Borrowers as if such Defaulting Lender had made Advances to Borrowers.
Subject to the foregoing, Agent may hold and, in its Permitted Discretion,
re-lend to Borrowers for the account of such Defaulting Lender the amount
of all such payments received and retained by Agent for the account of such
Defaulting Lender. Solely for the purposes of voting or consenting to
matters with respect to the Loan Documents, such Defaulting Lender shall be
deemed not to be a "Lender" and such Lender's Commitment shall be deemed to
be zero. This Section shall remain effective with respect to such Lender
until (x) the Obligations under this Agreement shall have been declared or
shall have become immediately due and payable, (y) the non-Defaulting
Lenders, Agent, and Administrative Borrower shall have waived such
Defaulting Lender's default in writing, or (z) the Defaulting Lender makes
its Pro Rata Share of the applicable Advance and pays to Agent all amounts
owing by Defaulting Lender in respect thereof. The operation of this
Section shall not be construed to increase or otherwise affect the
Commitment of any Lender, to relieve or excuse the performance by such
Defaulting Lender or any other Lender of its duties and obligations
hereunder, or to relieve or excuse the performance by Borrowers of their
duties and obligations hereunder to Agent or to the Lenders other than such
Defaulting Lender. Any such failure to fund by any Defaulting Lender shall
constitute a material breach by such
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Defaulting Lender of this Agreement and shall entitle Administrative
Borrower at its option, upon written notice to Agent, to arrange for a
substitute Lender to assume the Commitment of such Defaulting Lender, such
substitute Lender to be acceptable to Agent. In connection with the
arrangement of such a substitute Lender, the Defaulting Lender shall have
no right to refuse to be replaced hereunder, and agrees to execute and
deliver a completed form of Assignment and Acceptance in favor of the
substitute Lender (and agrees that it shall be deemed to have executed and
delivered such document if it fails to do so) subject only to being repaid
its share of the outstanding Obligations (other than Bank Product
Obligations, but including an assumption of its Pro Rata Share of the Risk
Participation Liability) without any premium or penalty of any kind
whatsoever; PROVIDED HOWEVER, that any such assumption of the Commitment of
such Defaulting Lender shall not be deemed to constitute a waiver of any of
the Lender Groups' or Borrowers' rights or remedies against any such
Defaulting Lender arising out of or in relation to such failure to fund.
(d) MAKING OF SWING LOANS.
(i) In the event Agent shall elect, with the consent of
Swing Lender, as a Lender, to have the terms of this SECTION 2.3(d) apply
to a requested Borrowing as described in SECTION 2.3(b), Swing Lender as a
Lender shall make such Advance in the amount of such Borrowing (any such
Advance made solely by Swing Lender as a Lender pursuant to this SECTION
2.3(d) being referred to as a "SWING LOAN" and such Advances being referred
to collectively as "SWING LOANS") available to Borrowers on the Funding
Date applicable thereto by transferring immediately available funds to
Administrative Borrower's Designated Account. Each Swing Loan shall be
deemed to be an Advance hereunder and shall be subject to all the terms and
conditions applicable to other Advances, except that no such Swing Loan
shall be eligible to be a LIBOR Rate Loan and all payments on any Swing
Loan shall be payable to Swing Lender as a Lender solely for its own
account (and for the account of the holder of any participation interest
with respect to such Swing Loan). Subject to the provisions of SECTION
2.3(i), Agent shall not request Swing Lender as a Lender to make, and Swing
Lender as a Lender shall not make, any Swing Loan if Agent has actual
knowledge that (i) one or more of the applicable conditions precedent set
forth in SECTION 3 will not be satisfied on the requested Funding Date for
the applicable Borrowing unless such condition has been waived, or (ii) the
requested Borrowing would exceed the Availability on such Funding Date.
Swing Lender as a Lender shall not otherwise be required to determine
whether the applicable conditions precedent set forth in SECTION 3 have
been satisfied on the Funding Date applicable thereto prior to making, in
its sole discretion, any Swing Loan.
(ii) The Swing Loans shall be secured by the Agent's
Liens, constitute Obligations hereunder, and bear interest at the rate
applicable from time to time to Advances that are Base Rate Loans.
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(e) AGENT ADVANCES.
(i) Agent hereby is authorized by Borrowers and the
Lenders, from time to time in Agent's sole discretion, (1) after the
occurrence and during the continuance of a Default or an Event of Default,
or (2) at any time that any of the other applicable conditions precedent
set forth in SECTION 3 have not been satisfied, to make Advances to
Borrowers on behalf of the Lenders that Agent, in its Permitted Discretion
deems necessary or desirable (A) to preserve or protect the Collateral, or
any portion thereof, (B) to enhance the likelihood of repayment of the
Obligations (other than the Bank Product Obligations), or (C) to pay any
other amount chargeable to Borrowers pursuant to the terms of this
Agreement, including Lender Group Expenses and the costs, fees, and
expenses described in SECTION 10 (any of the Advances described in this
SECTION 2.3(e) shall be referred to as "AGENT ADVANCES"). Each Agent
Advance shall be deemed to be an Advance hereunder, except that no such
Agent Advance shall be eligible to be a LIBOR Rate Loan and all payments
thereon shall be payable to Agent solely for its own account.
(ii) The Agent Advances shall be repayable on demand,
secured by the Agent's Liens granted to Agent under the Loan Documents,
constitute Obligations hereunder, and bear interest at the rate applicable
from time to time to Advances that are Base Rate Loans.
(f) SETTLEMENT. It is agreed that each Lender's funded portion
of the Advances is intended by the Lenders to equal, at all times, such Lender's
Pro Rata Share of the outstanding Advances. Such agreement notwithstanding,
Agent, Swing Lender, and the other Lenders agree (which agreement shall not be
for the benefit of or enforceable by Borrowers) that in order to facilitate the
administration of this Agreement and the other Loan Documents, settlement among
them as to the Advances, the Swing Loans, and the Agent Advances shall take
place on a periodic basis in accordance with the following provisions:
(i) Agent shall request settlement ("SETTLEMENT") with
the Lenders on a weekly basis, or on a more frequent basis if so determined
by Agent, (1) on behalf of Swing Lender, with respect to each outstanding
Swing Loan, (2) for itself, with respect to each Agent Advance, and (3)
with respect to Companies' Collections received, as to each by notifying
the Lenders by telecopy, telephone, or other similar form of transmission,
of such requested Settlement, no later than 2:00 p.m. (California time) on
the Business Day immediately prior to the date of such requested Settlement
(the date of such requested Settlement being the "SETTLEMENT DATE"). Such
notice of a Settlement Date shall include a summary statement of the amount
of outstanding Advances, Swing Loans, and Agent Advances for the period
since the prior Settlement Date. Subject to the terms and conditions
contained herein (including SECTION 2.3(c)(iii)): (y) if a Lender's balance
of the Advances (including Swing Loans and Agent Advances) exceeds such
Lender's Pro Rata Share of the Advances (including Swing Loans and Agent
Advances) as of a Settlement Date, then Agent shall, by no later than 12:00
p.m. (California time) on the Settlement Date, transfer in immediately
available funds to a Deposit Account of such Lender (as such Lender
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may designate), an amount such that each such Lender shall, upon receipt of
such amount, have as of the Settlement Date, its Pro Rata Share of the
Advances (including Swing Loans and Agent Advances), and (z) if a Lender's
balance of the Advances (including Swing Loans and Agent Advances) is less
than such Lender's Pro Rata Share of the Advances (including Swing Loans
and Agent Advances) as of a Settlement Date, such Lender shall no later
than 12:00 p.m. (California time) on the Settlement Date transfer in
immediately available funds to the Agent's Account, an amount such that
each such Lender shall, upon transfer of such amount, have as of the
Settlement Date, its Pro Rata Share of the Advances (including Swing Loans
and Agent Advances). Such amounts made available to Agent under clause (z)
of the immediately preceding sentence shall be applied against the amounts
of the applicable Swing Loans or Agent Advances and, together with the
portion of such Swing Loans or Agent Advances representing Swing Lender's
Pro Rata Share thereof, shall constitute Advances of such Lenders. If any
such amount is not made available to Agent by any Lender on the Settlement
Date applicable thereto to the extent required by the terms hereof, Agent
shall be entitled to recover for its account such amount on demand from
such Lender together with interest thereon at the Defaulting Lender Rate.
(ii) In determining whether a Lender's balance of the
Advances, Swing Loans, and Agent Advances is less than, equal to, or
greater than such Lender's Pro Rata Share of the Advances, Swing Loans, and
Agent Advances as of a Settlement Date, Agent shall, as part of the
relevant Settlement, apply to such balance the portion of payments actually
received in good funds by Agent with respect to principal, interest, fees
payable by Borrowers and allocable to the Lenders hereunder, and proceeds
of Collateral. To the extent that a net amount is owed to any such Lender
after such application, such net amount shall be distributed by Agent to
that Lender as part of such next Settlement.
(iii) Between Settlement Dates, Agent, to the extent no
Agent Advances or Swing Loans are outstanding, may pay over to Swing Lender
any payments received by Agent, that in accordance with the terms of this
Agreement would be applied to the reduction of the Advances, for
application to Swing Lender's Pro Rata Share of the Advances. If, as of any
Settlement Date, Collections of Companies received since the then
immediately preceding Settlement Date have been applied to Swing Lender's
Pro Rata Share of the Advances other than to Swing Loans, as provided for
in the previous sentence, Swing Lender shall pay to Agent for the accounts
of the Lenders, and Agent shall pay to the Lenders, to be applied to the
outstanding Advances of such Lenders, an amount such that each Lender
shall, upon receipt of such amount, have, as of such Settlement Date, its
Pro Rata Share of the Advances. During the period between Settlement Dates,
Swing Lender with respect to Swing Loans, Agent with respect to Agent
Advances, and each Lender (subject to the effect of letter agreements
between Agent and individual Lenders) with respect to the Advances other
than Swing Loans and Agent Advances, shall be entitled to
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interest at the applicable rate or rates payable under this Agreement on
the daily amount of funds employed by Swing Lender, Agent, or the Lenders,
as applicable.
(g) NOTATION. Agent shall record on its books the principal
amount of the Advances (or portion of the Term Loan, as applicable) owing to
each Lender, including the Swing Loans owing to Swing Lender, and Agent Advances
owing to Agent, and the interests therein of each Lender, from time to time and
such records shall, absent manifest error, conclusively be presumed to be
correct and accurate. In addition, each Lender is authorized, at such Lender's
option, to note the date and amount of each payment or prepayment of principal
of such Lender's Advances in its books and records, including computer records.
(h) LENDERS' FAILURE TO PERFORM. All Advances (other than Swing
Loans and Agent Advances) shall be made by the Lenders contemporaneously and in
accordance with their Pro Rata Shares. It is understood that (i) no Lender shall
be responsible for any failure by any other Lender to perform its obligation to
make any Advance (or other extension of credit) hereunder, nor shall any
Commitment of any Lender be increased or decreased as a result of any failure by
any other Lender to perform its obligations hereunder, and (ii) no failure by
any Lender to perform its obligations hereunder shall excuse any other Lender
from its obligations hereunder.
(i) OPTIONAL OVERADVANCES. Any contrary provision of this
Agreement notwithstanding, the Lenders hereby authorize Agent or Swing Lender,
as applicable, and Agent or Swing Lender, as applicable, may, but is not
obligated to, knowingly and intentionally, continue to make Advances (including
Swing Loans) to Borrowers notwithstanding that an Overadvance exists or thereby
would be created, so long as (i) after giving effect to such Advances, the
outstanding Revolver Usage does not exceed the Borrowing Base by more than the
lesser of 10% of the Borrowing Base or $1,500,000, (ii) after giving effect to
such Advances, the outstanding Revolver Usage (except for and excluding amounts
charged to the Loan Account for interest, fees, or Lender Group Expenses) does
not exceed the Maximum Revolver Amount, and (iii) at the time of the making of
any such Advance, Agent does not believe, in good faith, that the Overadvance
created by such Advance will be outstanding for more than 90 days. The foregoing
provisions are for the exclusive benefit of Agent, Swing Lender, and the Lenders
and are not intended to benefit Companies in any way. The Advances and Swing
Loans, as applicable, that are made pursuant to this SECTION 2.3(i) shall be
subject to the same terms and conditions as any other Advance or Swing Loan, as
applicable, except that they shall not be eligible for the LIBOR Option and the
rate of interest applicable thereto shall be the rate applicable to Advances
that are Base Rate Loans under SECTION 2.6(c) hereof without regard to the
presence or absence of a Default or Event of Default.
(A) In the event Agent obtains actual knowledge that
the Revolver Usage exceeds the amounts permitted by the preceding
paragraph, regardless of the amount of, or reason for, such
excess, Agent shall notify the Lenders as soon as practicable
(and prior to making any (or any additional) intentional
Overadvances (except for and excluding amounts charged to the
Loan Account for interest, fees, or Lender Group Expenses) unless
Agent
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determines that prior notice would result in imminent harm to the
Collateral or its value), and the Lenders with Revolver
Commitments thereupon shall, together with Agent, jointly
determine the terms of arrangements that shall be implemented
with Borrowers intended to reduce, within a reasonable time, the
outstanding principal amount of the Advances to Borrowers to an
amount permitted by the preceding paragraph. In the event Agent
or any Lender disagrees over the terms of reduction or repayment
of any Overadvance, the terms of reduction or repayment thereof
shall be implemented according to the determination of the
Required Lenders.
(B) Each Lender with a Revolver Commitment shall be
obligated to settle with Agent as provided in SECTION 2.3(f) for
the amount of such Lender's Pro Rata Share of any unintentional
Overadvances by Agent reported to such Lender, any intentional
Overadvances made as permitted under this SECTION 2.3(i), and any
Overadvances resulting from the charging to the Loan Account of
interest, fees, or Lender Group Expenses.
2.4. PAYMENTS.
(a) PAYMENTS BY BORROWERS.
(i) Except as otherwise expressly provided herein, all
payments by Borrowers shall be made to Agent's Account for the account of
the Lender Group and shall be made in immediately available funds, no later
than 11:00 a.m. (California time) on the date specified herein. Any payment
received by Agent later than 11:00 a.m. (California time), shall be deemed
to have been received on the following Business Day and any applicable
interest or fee shall continue to accrue until such following Business Day.
(ii) Unless Agent receives notice from Administrative
Borrower prior to the date on which any payment is due to the Lenders that
Borrowers will not make such payment in full as and when required, Agent
may assume that Borrowers have made (or will make) such payment in full to
Agent on such date in immediately available funds and Agent may (but shall
not be so required), in reliance upon such assumption, distribute to each
Lender on such due date an amount equal to the amount then due such Lender.
If and to the extent Borrowers do not make such payment in full to Agent on
the date when due, each Lender severally shall repay to Agent on demand
such amount distributed to such Lender, together with interest thereon at
the Defaulting Lender Rate for each day from the date such amount is
distributed to such Lender until the date repaid.
(b) APPORTIONMENT AND APPLICATION.
(i) Except as otherwise provided with respect to
Defaulting Lenders and except as otherwise provided in the Loan Documents
(including letter agreements between Agent and individual Lenders),
aggregate principal and interest
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payments shall be apportioned ratably among the Lenders (according to the
unpaid principal balance of the Obligations to which such payments relate
held by each Lender) and payments of fees and expenses (other than fees or
expenses that are for Agent's separate account, after giving effect to any
letter agreements between Agent and individual Lenders) shall be
apportioned ratably among the Lenders having a Pro Rata Share of the type
of Commitment or Obligation to which a particular fee relates. Except as
provided in SECTION 2.2 of this Agreement with respect to prepayments of
the Term Loan, payments shall be remitted to Agent and all such payments,
and all proceeds of Collateral received by Agent in accordance with Section
2.8, shall be applied as follows (such application shall be no later than
the first Business Day after receipt thereof in accordance with Section
2.8):
(A) FIRST, to pay any Lender Group Expenses then due
to Agent under the Loan Documents, until paid in full,
(B) SECOND, to pay any Lender Group Expenses then
due to the Lenders under the Loan Documents, on a ratable basis,
until paid in full,
(C) THIRD, to pay any fees then due to Agent (for
its separate accounts, after giving effect to any letter
agreements between Agent and the individual Lenders) under the
Loan Documents until paid in full,
(D) FOURTH, to pay any fees then due to any or all
of the Lenders (after giving effect to any letter agreements
between Agent and individual Lenders) under the Loan Documents,
on a ratable basis, until paid in full,
(E) FIFTH, to pay interest due in respect of all
Agent Advances, until paid in full,
(F) SIXTH, ratably to pay interest due in respect of
the Advances (other than Agent Advances), the Swing Loans, and
the Term Loan until paid in full,
(G) SEVENTH, to pay the principal of all Agent
Advances until paid in full,
(H) EIGHTH, ratably to pay all principal amounts
then due and payable (other than as a result of an acceleration
thereof) with respect to the Term Loan until paid in full,
(I) NINTH, to pay the principal of all Swing Loans
until paid in full,
(J) TENTH, so long as no Event of Default has
occurred and is continuing, and at Agent's election (which
election Agent agrees will not be made if an Overadvance would be
created thereby), to pay amounts then due
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and owing by Parent or its Subsidiaries in respect of Bank
Products, until paid in full,
(K) ELEVENTH, so long as no Event of Default has
occurred and is continuing, to pay the principal of all Advances
until paid in full,
(L) TWELFTH, if an Event of Default has occurred and
is continuing, ratably (i) to pay the principal of all Advances
until paid in full, (ii) to Agent, to be held by Agent, for the
ratable benefit of Issuing Lender and those Lenders having a
Revolver Commitment, as cash collateral in an amount up to 105%
of the then extant Letter of Credit Usage until paid in full, and
(iii) to Agent, to be held by Agent, for the benefit of the Bank
Product Providers, as cash collateral in an amount up to the
amount of the Bank Product Reserve established prior to the
occurrence of, and not in contemplation of, the subject Event of
Default until Parent or its Subsidiaries obligations in respect
of the then extant Bank Products have been paid in full or the
cash collateral amount has been exhausted,
(M) THIRTEENTH, if an Event of Default has occurred
and is continuing, to pay the outstanding principal balance of
the Term Loan (in the inverse order of the maturity of the
installments due thereunder) until the Term Loan is paid in full,
(N) FOURTEENTH, if an Event of Default has occurred
and is continuing, to pay any other Obligations (including the
provision of amounts to Agent, to be held by Agent, for the
benefit of the Bank Product Providers, as cash collateral in an
amount up to the amount determined by Agent in its Permitted
Discretion as the amount necessary to secure Parent or its
Subsidiaries obligations in respect of the then extant Bank
Products), and
(O) FIFTEENTH, to Borrowers (to be wired to the
Investment Account) or such other Person entitled thereto under
applicable law.
(ii) Agent promptly shall distribute to each Lender,
pursuant to the applicable wire instructions received from each Lender in
writing, such funds as it may be entitled to receive, subject to a
Settlement delay as provided in SECTION 2.3(f).
(iii) In each instance, so long as no Event of Default has
occurred and is continuing, this SECTION 2.4(b) shall not be deemed to
apply to any payment by Borrowers specified by Borrowers to be for the
payment of specific Obligations then due and payable (or prepayable) under
any provision of this Agreement.
(iv) For purposes of the foregoing, "paid in full" means
payment of all applicable amounts owing under the Loan Documents, including
related loan fees, service fees, professional fees, interest (and
specifically including interest accrued after the commencement of any
Insolvency Proceeding), default interest, interest on
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interest, and expense reimbursements, whether or not any of the foregoing
would be or is allowed or disallowed in whole or in part in any Insolvency
Proceeding.
(v) In the event of a direct conflict between the
priority provisions of this SECTION 2.4 and other provisions contained in
any other Loan Document, it is the intention of the parties hereto that
such priority provisions in such documents shall be read together and
construed, to the fullest extent possible, to be in concert with each
other. In the event of any actual, irreconcilable conflict that cannot be
resolved as aforesaid, the terms and provisions of this SECTION 2.4 shall
control and govern.
2.5. OVERADVANCES; MANDATORY PREPAYMENT.
(a) If, at any time or for any reason, the amount of Obligations
(other than Bank Product Obligations) owed by Borrowers to the Lender Group
pursuant to SECTION 2.1 or SECTION 2.12 is greater than either the Dollar or
percentage limitations set forth in SECTION 2.1 or SECTION 2.12, as applicable
(an "OVERADVANCE"), Borrowers immediately shall pay to Agent, in cash, the
amount of such excess, which amount shall be used by Agent to reduce the
Obligations in accordance with the priorities set forth in SECTION 2.4(b). In
addition, Borrowers hereby promise to pay the Obligations (including principal,
interest, fees, costs, and expenses) in Dollars in full as and when due and
payable under the terms of this Agreement and the other Loan Documents.
(b) If on the Business Day prior to a Redemption Date it is
reasonably anticipated that Parent will pay any cash in connection with the
redemption of the Preferred Stock on such Redemption Date, and it is reasonably
anticipated by Agent that after giving effect to such redemption the sum (as
projected by Agent) of Qualified Cash plus Excess Availability will not exceed
$25,000,000, Borrowers will be required to make a mandatory prepayment such that
the Term Loan, Revolving Loan and other Obligations (including the Applicable
Prepayment Premium) are Paid In Full, at which time the Loan Agreement shall be
terminated.
2.6. INTEREST RATES AND LETTER OF CREDIT FEE: RATES, PAYMENTS, AND
CALCULATIONS.
(a) INTEREST RATES. Except as provided in clause (c) below, all
Obligations (except for undrawn Letters of Credit and except for Bank Product
Obligations) that have been charged to the Loan Account pursuant to the terms
hereof shall bear interest on the Daily Balance thereof as follows (i) if the
relevant Obligation is an Advance that is a LIBOR Rate Loan, at a per annum rate
equal to the LIBOR Rate plus the LIBOR Rate Margin, (ii) if the relevant
Obligation is a portion of the Term Loan, at a per annum rate equal to the Base
Rate plus the Term Loan Margin, and (iii) otherwise, at a per annum rate equal
to the Base Rate plus the Base Rate Margin.
The foregoing notwithstanding, at no time shall any portion of
the Obligations (other than Bank Product Obligations) bear interest on the Daily
Balance thereof at a per
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annum rate less than 6%. To the extent that interest accrued hereunder at the
rate set forth herein would be less than the foregoing minimum daily rate, the
interest rate chargeable hereunder for such day automatically shall be deemed
increased to the minimum rate.
(b) LETTER OF CREDIT FEE. Borrowers shall pay Agent (for the
ratable benefit of the Lenders with a Revolver Commitment, subject to any letter
agreement between Agent and individual Lenders), a Letter of Credit fee (in
addition to the charges, commissions, fees, and costs set forth in SECTION
2.12(e)) which shall accrue at a rate equal to 4.50% per annum times the Daily
Balance of the undrawn amount of all outstanding Letters of Credit.
(c) DEFAULT RATE. Upon the occurrence and during the
continuation of an Event of Default (and at the election of Agent or the
Required Lenders),
(i) all Obligations (except for undrawn Letters of Credit
and except for Bank Product Obligations) 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 2 percentage points above the
per annum rate otherwise applicable hereunder, and
(ii) the Letter of Credit fee provided for above shall be
increased to 2 percentage points above the per annum rate otherwise
applicable hereunder.
(d) PAYMENT. Except as provided to the contrary in SECTION
2.12(a) and SECTION 2.13(a), interest, Letter of Credit fees, and all other fees
payable hereunder shall be due and payable, in arrears, on the first day of each
month at any time that Obligations or Commitments are outstanding. Borrowers
hereby authorize Agent, from time to time, without prior notice to Borrowers, to
charge such interest and fees, all Lender Group Expenses (as and when incurred),
the charges, commissions, fees, and costs provided for in SECTION 2.12(e) (as
and when accrued or incurred), the fees and costs provided for in SECTION 2.11
(as and when accrued or incurred), and all other payments as and when due and
payable under any Loan Document (including the amounts due and payable with
respect to the Term Loan and including any amounts due and payable to the Bank
Product Providers in respect of Bank Products up to the amount of the then
extant Bank Product Reserve) to Borrowers' Loan Account, which amounts
thereafter shall constitute Advances hereunder and shall accrue interest at the
rate then applicable to Advances hereunder. Any interest not paid when due shall
be compounded by being charged to Borrowers' Loan Account and shall thereafter
constitute Advances hereunder and shall accrue interest at the rate then
applicable to Advances that are Base Rate Loans hereunder.
(e) COMPUTATION. All interest and fees chargeable under the Loan
Documents shall be computed on the basis of a 360 day year for the actual number
of days elapsed. In the event the Base Rate is changed from time to time
hereafter, the rates of interest hereunder based upon the Base Rate
automatically and immediately shall be increased or decreased by an amount equal
to such change in the Base Rate.
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(f) 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 the Lender Group, 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, IPSO
FACTO, as of the date of this Agreement, Borrowers are and shall be liable only
for the payment of such maximum as 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. CASH MANAGEMENT.
(a) Grantors shall (i) establish and maintain cash management
services of a type and on terms satisfactory to Agent at one or more of the
banks set forth on SCHEDULE 2.7(a) (each a "CASH MANAGEMENT BANK"), and shall
request in writing and otherwise take such reasonable steps to ensure that all
of their Account Debtors forward payment of the amounts owed by them directly to
such Cash Management Bank, and (ii) 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 Cash Management Bank) into a bank account in Agent's name
(a "Cash Management Account") at one of the Cash Management Banks.
(b) Each Cash Management Bank shall establish and maintain Cash
Management Agreements with Agent and Grantors, in form and substance acceptable
to Agent. Each such Cash Management Agreement shall provide, among other things,
that (i) all items of payment deposited in such Cash Management Account and
proceeds thereof are held by such Cash Management Bank agent or
bailee-in-possession for Agent, (ii) the Cash Management Bank has no rights of
setoff or recoupment or any other claim against the applicable Cash Management
Account, other than for payment of its service fees and other charges directly
related to the administration of such Cash Management Account and for returned
checks or other items of payment, and (iii) it immediately will forward by daily
sweep all amounts in the applicable Cash Management Account to the Agent's
Account. Prior to the entrance into Cash Management Agreements related to the
Transition Accounts pursuant to SECTION 3.2(f), all amounts in the Transition
Accounts will be swept daily into the Agent's Account.
(c) So long as no Default or Event of Default has occurred and
is continuing, Administrative Borrower may amend SCHEDULE 2.7(a) to add or
replace a Cash Management Account Bank or Cash Management Account; PROVIDED,
HOWEVER, that (i) such prospective Cash Management Bank shall be satisfactory to
Agent and Agent shall have consented in writing in advance to the opening of
such Cash Management Account with the prospective Cash Management Bank, and (ii)
prior to the time of the opening of such Cash Management Account, the applicable
Company, and such prospective Cash Management
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Bank shall have executed and delivered to Agent a Cash Management Agreement. The
applicable Company shall close any of their Cash Management Accounts (and
establish replacement cash management accounts in accordance with the foregoing
sentence) promptly and in any event within 30 days of notice from Agent that the
creditworthiness of any Cash Management Bank is no longer acceptable in Agent's
reasonable judgment, or as promptly as practicable and in any event within 60
days of notice from Agent that the operating performance, funds transfer, or
availability procedures or performance of the Cash Management Bank with respect
to Cash Management Accounts or Agent's liability under any Cash Management
Agreement with such Cash Management Bank is no longer acceptable in Agent's
reasonable judgment.
(d) The Cash Management Accounts shall be cash collateral
accounts, with all cash, checks and similar items of payment in such accounts
securing payment of the Obligations, and in which each Company hereby grants a
Lien to Agent. Notwithstanding anything contained herein to the contrary, WFF is
the only Cash Management Bank permitted to be used by a Company without the
prior written consent of Agent (except that Borrowers may maintain their
Designated Account, Transition Accounts (subject to SECTION 3.2(b)) and other
operating accounts with Existing Lender).
2.8. CREDITING PAYMENTS; FLOAT CHARGE.
The receipt of any payment item by Agent (whether from transfers
to Agent by the Cash Management Banks pursuant to the Cash Management Agreements
or otherwise) shall not be considered a payment on account unless such payment
item is a wire transfer of immediately available federal funds made to the
Agent's Account or unless and until such payment item is honored when presented
for payment. Should any payment item not be honored when presented for payment,
then Borrowers shall be deemed not to have made such payment and interest shall
be calculated accordingly. Anything to the contrary contained herein
notwithstanding, any payment item shall be deemed received by Agent only if it
is received into the Agent's Account on a Business Day on or before 11:00 a.m.
(California time). If any payment item is received into the Agent's Account on a
non-Business Day or after 11:00 a.m. (California time) on a Business Day, it
shall be deemed to have been received by Agent as of the opening of business on
the immediately following Business Day. For purposes of calculating
Availability, Borrowers shall receive credit for Collections at such time as
Agent has received immediately available funds into the Agent's Account with
respect to such Collections. From and after the Closing Date, Agent shall be
entitled to charge Borrowers for 3 Business Days of 'clearance' or 'float' at
the rate then applicable under SECTION 2.6 to Advances that are Base Rate Loans
on all Collections that are received by Companies (regardless of whether
forwarded by the Cash Management Banks to Agent). This across-the-board 3
Business Day clearance or float charge on all Collections of Companies 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 effect of such clearance or float
charge being the equivalent of charging interest on such Collections through the
completion of a period ending 3 Business Days after the receipt thereof. The
parties acknowledge and agree that the
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economic benefit of the foregoing provisions of this SECTION 2.8 shall be for
the exclusive benefit of Agent.
2.9. DESIGNATED ACCOUNT.
Agent is authorized to make the Advances and the Term Loan, and
Issuing Lender is authorized to issue the Letters of Credit, under this
Agreement based upon telephonic or other instructions received from anyone
purporting to be an Authorized Person, or without instructions if pursuant to
SECTION 2.6(d). Administrative Borrower agrees to establish and maintain the
Designated Account with the Designated Account Bank for the purpose of receiving
the proceeds of the Advances requested by Borrowers and made by Agent or the
Lenders hereunder. Unless otherwise agreed by Agent and Administrative Borrower,
any Advance, Agent Advance, or Swing Loan requested by Borrowers and made by
Agent or the Lenders hereunder shall be made to the Designated Account.
2.10. MAINTENANCE OF LOAN ACCOUNT; STATEMENTS OF OBLIGATIONS.
Agent shall maintain an account on its books in the name of
Borrowers (the "LOAN ACCOUNT") on which Borrowers will be charged with the Term
Loan, all Advances (including Agent Advances and Swing Loans) made by Agent,
Swing Lender, or the Lenders to Borrowers or for Borrowers' account, the Letters
of Credit issued by Issuing Lender for Borrowers' account, and with all other
payment Obligations hereunder or under the other Loan Documents (except for Bank
Product Obligations), including, accrued interest, fees and expenses, and Lender
Group Expenses. In accordance with SECTION 2.8, the Loan Account will be
credited with all payments received by Agent from Borrowers or for Borrowers'
account, including all amounts received in the Agent's Account from any Cash
Management Bank. Agent shall render statements regarding the Loan Account to
Administrative Borrower, including principal, interest, fees, and including an
itemization of all charges and expenses constituting Lender Group Expenses
owing, and such statements, absent manifest error, shall be conclusively
presumed to be correct and accurate and constitute an account stated between
Borrowers and the Lender Group unless, within 30 days after receipt thereof by
Administrative Borrower, Administrative Borrower shall deliver to Agent written
objection thereto describing the error or errors contained in any such
statements.
2.11. FEES.
Borrowers shall pay to Agent the following fees and charges,
which fees and charges shall be non-refundable when paid (irrespective of
whether this Agreement is terminated thereafter) and shall be apportioned among
the Lenders in accordance with the terms of letter agreements between Agent and
individual Lenders:
(a) UNUSED LINE FEE. On the first day of each month during the
term of this Agreement, an unused line fee in the amount equal to 0.50% per
annum times the result of (i) the Maximum Revolver Amount, less (ii) the sum of
(A) the average Daily Balance of Advances that were outstanding during the
immediately preceding month, plus (B) the
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average Daily Balance of the Letter of Credit Usage during the immediately
preceding month,
(b) FEE LETTER FEES. As and when due and payable under the terms
of the Fee Letter, the fees set forth in the Fee Letter, and
(c) AUDIT, APPRAISAL, AND VALUATION CHARGES. Audit, appraisal,
and valuation fees and charges as follows (i) a fee of $850 per day, per
auditor, plus out-of-pocket expenses for each financial audit of any Company
performed by personnel employed by Agent, (ii) if implemented, a fee of $850 per
day, per applicable individual, plus out-of-pocket expenses for each financial
audit of Companies and for the establishment of electronic collateral reporting
systems, and (iii) the actual charges paid or incurred by Agent if it elects to
employ the services of one or more third Persons to perform financial audits of
Companies, to establish electronic collateral reporting systems, to appraise the
Collateral and subject to SECTION 4.6 obtain the Midway Enterprise Value, or any
portion thereof, or to assess any Company's business valuation.
2.12. LETTERS OF CREDIT.
(a) Subject to the terms and conditions of this Agreement, the
Issuing Lender agrees to issue letters of credit for the account of Borrowers
(each, an "L/C") or to purchase participations or execute indemnities or
reimbursement obligations (each such undertaking, an "L/C UNDERTAKING") with
respect to letters of credit issued by an Underlying Issuer (as of the Closing
Date, the prospective Underlying Issuer is to be ▇▇▇▇▇ Fargo) for the account of
Borrowers. To request the issuance of an L/C or an L/C Undertaking (or the
amendment, renewal, or extension of an outstanding L/C or L/C Undertaking),
Administrative Borrower shall hand deliver or telecopy (or transmit by
electronic communication, if arrangements for doing so have been approved by the
Issuing Lender) to the Issuing Lender and Agent (reasonably in advance of the
requested date of issuance, amendment, renewal, or extension) a notice
requesting the issuance of an L/C or L/C Undertaking, or identifying the L/C or
L/C Undertaking to be amended, renewed, or extended, the date of issuance,
amendment, renewal, or extension, the date on which such L/C or L/C Undertaking
is to expire, the amount of such L/C or L/C Undertaking, the name and address of
the beneficiary thereof (or of the Underlying Letter of Credit, as applicable),
and such other information as shall be necessary to prepare, amend, renew, or
extend such L/C or L/C Undertaking. If requested by the Issuing Lender,
Administrative Borrower also shall be an applicant under the application with
respect to any Underlying Letter of Credit that is to be the subject of an L/C
Undertaking. The Issuing Lender shall have no obligation to issue a Letter of
Credit if any of the following would result after giving effect to the requested
Letter of Credit:
(i) the Letter of Credit Usage would exceed the Borrowing
Base LESS the then extant amount of outstanding Advances, or
(ii) the Letter of Credit Usage would exceed $5,000,000,
or
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(iii) the Letter of Credit Usage would exceed the Maximum
Revolver Amount LESS the then extant amount of outstanding Advances.
Borrowers and the Lender Group acknowledge and agree that certain
Underlying Letters of Credit may be issued to support letters of credit that
already are outstanding as of the Closing Date. Each Letter of Credit (and
corresponding Underlying Letter of Credit) shall be in form and substance
acceptable to the Issuing Lender (in the exercise of its Permitted Discretion),
including the requirement that the amounts payable thereunder must be payable in
Dollars. If Issuing Lender is obligated to advance funds under a Letter of
Credit, Borrowers immediately shall reimburse such L/C Disbursement to Issuing
Lender by paying to Agent an amount equal to such L/C Disbursement not later
than 11:00 a.m., California time, on the date that such L/C Disbursement is
made, if Administrative Borrower shall have received written or telephonic
notice of such L/C Disbursement prior to 10:00 a.m., California time, on such
date, or, if such notice has not been received by Administrative Borrower prior
to such time on such date, then not later than 11:00 a.m., California time, on
(i) the Business Day that Administrative Borrower receives such notice, if such
notice is received prior to 10:00 a.m., California time, on the date of receipt,
and, in the absence of such reimbursement, the L/C Disbursement immediately and
automatically shall be deemed to be an Advance hereunder and, thereafter, shall
bear interest at the rate then applicable to Advances that are Base Rate Loans
under SECTION 2.6. To the extent an L/C Disbursement is deemed to be an Advance
hereunder, Borrowers' obligation to reimburse such L/C Disbursement shall be
discharged and replaced by the resulting Advance. Promptly following receipt by
Agent of any payment from Borrowers pursuant to this paragraph, Agent shall
distribute such payment to the Issuing Lender or, to the extent that Lenders
have made payments pursuant to SECTION 2.12(c) to reimburse the Issuing Lender,
then to such Lenders and the Issuing Lender as their interest may appear.
(b) Promptly following receipt of a notice of L/C Disbursement
pursuant to SECTION 2.12(a), each Lender with a Revolver Commitment agrees to
fund its Pro Rata Share of any Advance deemed made pursuant to the foregoing
subsection on the same terms and conditions as if Borrowers had requested such
Advance and Agent shall promptly pay to Issuing Lender the amounts so received
by it from the Lenders. By the issuance of a Letter of Credit (or an amendment
to a Letter of Credit increasing the amount thereof) and without any further
action on the part of the Issuing Lender or the Lenders with Revolver
Commitment, the Issuing Lender shall be deemed to have granted to each Lender
with a Revolver Commitment, and each Lender with a Revolver Commitment shall be
deemed to have purchased, a participation in each Letter of Credit, in an amount
equal to its Pro Rata Share of the Risk Participation Liability of such Letter
of Credit, and each such Lender agrees to pay to Agent, for the account of the
Issuing Lender, such Lender's Pro Rata Share of any payments made by the Issuing
Lender under such Letter of Credit. In consideration and in furtherance of the
foregoing, each Lender with a Revolver Commitment hereby absolutely and
unconditionally agrees to pay to Agent, for the account of the Issuing Lender,
such Lender's Pro Rata Share of each L/C Disbursement made by the Issuing Lender
and not reimbursed by Borrowers on the date due as provided in clause (a) of
this Section, or of any reimbursement payment required to be refunded to
Borrowers for any reason. Each Lender
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with a Revolver Commitment acknowledges and agrees that its obligation to
deliver to Agent, for the account of the Issuing Lender, an amount equal to its
respective Pro Rata Share of each L/C Disbursement made by the Issuing Lender
pursuant to this SECTION 2.12(b) shall be absolute and unconditional and such
remittance shall be made notwithstanding the occurrence or continuation of an
Event of Default or Default or the failure to satisfy any condition set forth in
SECTION 3 hereof. If any such Lender fails to make available to Agent the amount
of such Lender's Pro Rata Share of each L/C Disbursement made by the Issuing
Lender in respect of such Letter of Credit as provided in this Section, such
Lender shall be deemed to be a Defaulting Lender and Agent (for the account of
the Issuing Lender) shall be entitled to recover such amount on demand from such
Lender together with interest thereon at the Defaulting Lender Rate until paid
in full.
(c) Each Borrower hereby agrees to indemnify, save, defend, and
hold the Lender Group harmless from any loss, cost, expense, or liability, and
reasonable attorneys fees incurred by the Lender Group arising out of or in
connection with any Letter of Credit; PROVIDED, HOWEVER, that no Borrower shall
be obligated hereunder to indemnify for any loss, cost, expense, or liability to
the extent that it is caused by the gross negligence or willful misconduct of
the Issuing Lender or any other member of the Lender Group. Each Borrower agrees
to be bound by the Underlying Issuer's regulations and interpretations of any
Underlying Letter of Credit or by Issuing Lender's interpretations of any L/C
issued by Issuing Lender to or for such Borrower's account, even though this
interpretation may be different from such Borrower's own, and each Borrower
understands and agrees that the Lender Group shall not be liable for any error,
negligence, or mistake, whether of omission or commission, in following
Borrowers' instructions or those contained in the Letter of Credit or any
modifications, amendments, or supplements thereto. Each Borrower understands
that the L/C Undertakings may require Issuing Lender to indemnify the Underlying
Issuer for certain costs or liabilities arising out of claims by Borrowers
against such Underlying Issuer. Each Borrower hereby agrees to indemnify, save,
defend, and hold the Lender Group harmless with respect to any loss, cost,
expense (including reasonable attorneys fees), or liability incurred by the
Lender Group under any L/C Undertaking as a result of the Lender Group's
indemnification of any Underlying Issuer; PROVIDED, HOWEVER, that no Borrower
shall be obligated hereunder to indemnify for any loss, cost, expense, or
liability to the extent that it is caused by the gross negligence or willful
misconduct of the Issuing Lender or any other member of the Lender Group.
(d) Each Borrower hereby authorizes and directs any Underlying
Issuer to deliver to the Issuing Lender all instruments, documents, and other
writings and property received by such Underlying Issuer pursuant to such
Underlying Letter of Credit and to accept and rely upon the Issuing Lender's
instructions with respect to all matters arising in connection with such
Underlying Letter of Credit and the related application.
(e) Any and all charges, commissions, fees, and costs incurred
by the Issuing Lender relating to Underlying Letters of Credit shall be Lender
Group Expenses for purposes of this Agreement and immediately shall be
reimbursable by Borrowers to Agent for the account of the Issuing Lender; it
being acknowledged and agreed by each Borrower that, as of the Closing Date, the
issuance fee imposed by the prospective Underlying Issuer is
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..825% per annum times the face amount of each Underlying Letter of Credit, that
such issuance charge may be changed from time to time, and that the Underlying
Issuer also imposes a schedule of charges for amendments, extensions, drawings,
and renewals.
(f) If by reason of (i) any change after the Closing Date 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 the
Underlying Issuer or the Lender Group 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
hereunder, or
(ii) there shall be imposed on the Underlying Issuer or
the Lender Group any other condition regarding any Underlying Letter of
Credit or any Letter of Credit issued pursuant hereto;
and the result of the foregoing is to increase, directly or indirectly, the cost
to the Lender Group of issuing, making, guarantying, or maintaining any Letter
of Credit or to reduce the amount receivable in respect thereof by the Lender
Group, then, and in any such case, Agent may, at any time within a reasonable
period after the additional cost is incurred or the amount received is reduced,
notify Administrative Borrower, and Borrowers shall pay on demand such amounts
as Agent may specify to be necessary to compensate the Lender Group 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 Base Rate Loans hereunder. The determination by Agent of any
amount due pursuant to this Section, 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.
2.13. LIBOR OPTION.
(a) INTEREST AND INTEREST PAYMENT DATES. In lieu of having
interest charged at the rate based upon the Base Rate, Borrowers shall have the
option (the "LIBOR OPTION") to have interest on all or a portion of the Advances
be charged at a rate of interest based upon the LIBOR Rate. Interest on LIBOR
Rate Loans shall be payable on the earliest of (i) the last day of the Interest
Period applicable thereto, (ii) the occurrence of an Event of Default in
consequence of which the Required Lenders or Agent on behalf thereof have
elected to accelerate the maturity of all or any portion of the Obligations, or
(iii) termination of this Agreement pursuant to the terms hereof. On the last
day of each applicable Interest Period, unless Administrative Borrower properly
has exercised the LIBOR Option with respect thereto, the interest rate
applicable to such LIBOR Rate Loan automatically shall convert to the rate of
interest then applicable to Base Rate Loans of the same type hereunder. At any
time that an Event of Default has occurred and is continuing, Borrowers no
longer shall have the option to request that Advances bear interest at the LIBOR
Rate and Agent
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shall have the right to convert the interest rate on all outstanding LIBOR Rate
Loans to the rate then applicable to Base Rate Loans hereunder.
(b) LIBOR ELECTION.
(i) Administrative Borrower may, at any time and from
time to time, so long as no Event of Default has occurred and is
continuing, elect to exercise the LIBOR Option by notifying Agent prior to
11:00 a.m. (California time) at least 3 Business Days prior to the
commencement of the proposed Interest Period (the "LIBOR DEADLINE"). Notice
of Administrative Borrower's election of the LIBOR Option for a permitted
portion of the Advances and an Interest Period pursuant to this Section
shall be made by delivery to Agent of a LIBOR Notice received by Agent
before the LIBOR Deadline, or by telephonic notice received by Agent before
the LIBOR Deadline (to be confirmed by delivery to Agent of a LIBOR Notice
received by Agent prior to 5:00 p.m. (California time) on the same day).
Promptly upon its receipt of each such LIBOR Notice, Agent shall provide a
copy thereof to each of the Lenders having a Revolver Commitment.
(ii) Each LIBOR Notice shall be irrevocable and binding on
Borrowers. In connection with each LIBOR Rate Loan, each Borrower shall
indemnify, defend, and hold Agent and the Lenders harmless against any
loss, cost, or expense incurred by Agent or any Lender as a result of (a)
the payment of any principal of any LIBOR Rate Loan other than on the last
day of an Interest Period applicable thereto (including as a result of an
Event of Default), (b) the conversion of any LIBOR Rate Loan other than on
the last day of the Interest Period applicable thereto, or (c) the failure
to borrow, convert, continue or prepay any LIBOR Rate Loan on the date
specified in any LIBOR Notice delivered pursuant hereto (such losses,
costs, and expenses, collectively, "FUNDING LOSSES"). Funding Losses shall,
with respect to Agent or any Lender, be deemed to equal the amount
determined by Agent or such Lender to be the excess, if any, of (i) the
amount of interest that would have accrued on the principal amount of such
LIBOR Rate Loan had such event not occurred, at the LIBOR Rate that would
have been applicable thereto, for the period from the date of such event to
the last day of the then current Interest Period therefor (or, in the case
of a failure to borrow, convert or continue, for the period that would have
been the Interest Period therefor), MINUS (ii) the amount of interest that
would accrue on such principal amount for such period at the interest rate
which Agent or such Lender would be offered were it to be offered, at the
commencement of such period, Dollar deposits of a comparable amount and
period in the London interbank market. A certificate of Agent or a Lender
delivered to Administrative Borrower setting forth any amount or amounts
that Agent or such Lender is entitled to receive pursuant to this SECTION
2.13 shall be conclusive absent manifest error.
(iii) Borrowers shall have not more than 5 LIBOR Rate Loans
in effect at any given time. Borrowers only may exercise the LIBOR Option
for LIBOR Rate Loans of at least $1,000,000 and integral multiples of
$500,000 in excess thereof.
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(c) PREPAYMENTS. Borrowers may prepay LIBOR Rate Loans at any
time; PROVIDED, HOWEVER, that in the event that LIBOR Rate Loans are prepaid on
any date that is not the last day of the Interest Period applicable thereto,
including as a result of any automatic prepayment through the required
application by Agent of proceeds of Borrowers' and their Subsidiaries'
Collections in accordance with SECTION 2.4(b) or for any other reason, including
early termination of the term of this Agreement or acceleration of all or any
portion of the Obligations pursuant to the terms hereof, each Borrower shall
indemnify, defend, and hold Agent and the Lenders and their Participants
harmless against any and all Funding Losses in accordance with clause (b) above.
(d) SPECIAL PROVISIONS APPLICABLE TO LIBOR RATE.
(i) The LIBOR Rate may be adjusted by Agent with respect
to any Lender on a prospective basis to take into account any additional or
increased costs to such Lender of maintaining or obtaining any eurodollar
deposits or increased costs due to changes in applicable law occurring
subsequent to the commencement of the then applicable Interest Period,
including changes in tax laws (except changes of general applicability in
corporate income tax laws) and changes in the reserve requirements imposed
by the Board of Governors of the Federal Reserve System (or any successor),
excluding the Reserve Percentage, which additional or increased costs would
increase the cost of funding loans bearing interest at the LIBOR Rate. In
any such event, the affected Lender shall give Administrative Borrower and
Agent notice of such a determination and adjustment and Agent promptly
shall transmit the notice to each other Lender and, upon its receipt of the
notice from the affected Lender, Administrative Borrower may, by notice to
such affected Lender (y) require such Lender to furnish to Administrative
Borrower a statement setting forth the basis for adjusting such LIBOR Rate
and the method for determining the amount of such adjustment, or (z) repay
the LIBOR Rate Loans with respect to which such adjustment is made
(together with any amounts due under clause (b)(ii) above).
(ii) In the event that any change in market conditions or
any law, regulation, treaty, or directive, or any change therein or in the
interpretation of application thereof, shall at any time after the date
hereof, in the reasonable opinion of any Lender, make it unlawful or
impractical for such Lender to fund or maintain LIBOR Advances or to
continue such funding or maintaining, or to determine or charge interest
rates at the LIBOR Rate, such Lender shall give notice of such changed
circumstances to Agent and Administrative Borrower and Agent promptly shall
transmit the notice to each other Lender and (y) in the case of any LIBOR
Rate Loans of such Lender that are outstanding, the date specified in such
Lender's notice shall be deemed to be the last day of the Interest Period
of such LIBOR Rate Loans, and interest upon the LIBOR Rate Loans of such
Lender thereafter shall accrue interest at the rate then applicable to Base
Rate Loans, and (z) Borrowers shall not be entitled to elect the LIBOR
Option until such Lender determines that it would no longer be unlawful or
impractical to do so.
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(e) NO REQUIREMENT OF MATCHED FUNDING. Anything to the contrary
contained herein notwithstanding, neither Agent, nor any Lender, nor any of
their Participants, is required actually to acquire eurodollar deposits to fund
or otherwise match fund any Obligation as to which interest accrues at the LIBOR
Rate. The provisions of this Section shall apply as if each Lender or its
Participants had match funded any Obligation as to which interest is accruing at
the LIBOR Rate by acquiring eurodollar deposits for each Interest Period in the
amount of the LIBOR Rate Loans.
2.14. CAPITAL REQUIREMENTS.
If, after the date hereof, any Lender determines that (i) the
adoption of or change in any law, rule, regulation or guideline regarding
capital requirements for banks or bank holding companies, or any change in the
interpretation or application thereof by any Governmental Authority charged with
the administration thereof, or (ii) compliance by such 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 such Lender's or such holding company's capital
as a consequence of such Lender's Commitments hereunder to a level below that
which such Lender or such holding company could have achieved but for such
adoption, change, or compliance (taking into consideration such 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
such Lender to be material, then such Lender may notify Administrative Borrower
and Agent thereof. Following receipt of such notice, Borrowers agree to pay such
Lender on demand the amount of such reduction of return of capital as and when
such reduction is determined, payable within 90 days after presentation by such
Lender of a statement in the amount and setting forth in reasonable detail such
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, such Lender may use any reasonable averaging and
attribution methods.
2.15. JOINT AND SEVERAL LIABILITY OF BORROWERS.
(a) Each Borrower is accepting joint and several liability
hereunder and under the other Loan Documents in consideration of the financial
accommodations to be provided by the Agent and the Lenders under this Agreement,
for the mutual benefit, directly and indirectly, of each Borrower and in
consideration of the undertakings of the other Borrowers to accept joint and
several liability for the Obligations.
(b) Each Borrower, jointly and severally, hereby irrevocably and
unconditionally accepts, not merely as a surety but also as a co-debtor, joint
and several liability with the other Borrowers, with respect to the payment and
performance of all of the Obligations (including, without limitation, any
Obligations arising under this SECTION 2.15), it being the intention of the
parties hereto that all the Obligations shall be the joint and several
obligations of each Borrower without preferences or distinction among them.
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(c) If and to the extent that any of Borrowers shall fail to
make any payment with respect to any of the Obligations as and when due or to
perform any of the Obligations in accordance with the terms thereof, then in
each such event the other Borrowers will make such payment with respect to, or
perform, such Obligation.
(d) The Obligations of each Borrower under the provisions of
this SECTION 2.15 constitute the absolute and unconditional, full recourse
Obligations of each Borrower enforceable against each such Borrower to the full
extent of its properties and assets, irrespective of the validity, regularity or
enforceability of this Agreement or any other circumstances whatsoever.
(e) Except as otherwise expressly provided in this Agreement,
each Borrower hereby waives notice of acceptance of its joint and several
liability, notice of any Advances or Letters of Credit issued under or pursuant
to this Agreement, notice of the occurrence of any Default, Event of Default, or
of any demand for any payment under this Agreement, notice of any action at any
time taken or omitted by Agent or Lenders under or in respect of any of the
Obligations, any requirement of diligence or to mitigate damages and, generally,
to the extent permitted by applicable law, all demands, notices and other
formalities of every kind in connection with this Agreement (except as otherwise
provided in this Agreement). Each Borrower hereby assents to, and waives notice
of, any extension or postponement of the time for the payment of any of the
Obligations, the acceptance of any payment of any of the Obligations, the
acceptance of any partial payment thereon, any waiver, consent or other action
or acquiescence by Agent or Lenders at any time or times in respect of any
default by any Borrower in the performance or satisfaction of any term,
covenant, condition or provision of this Agreement, any and all other
indulgences whatsoever by Agent or Lenders in respect of any of the Obligations,
and the taking, addition, substitution or release, in whole or in part, at any
time or times, of any security for any of the Obligations or the addition,
substitution or release, in whole or in part, of any Borrower. Without limiting
the generality of the foregoing, each Borrower assents to any other action or
delay in acting or failure to act on the part of any Agent or Lender with
respect to the failure by any Borrower to comply with any of its respective
Obligations, including, without limitation, any failure strictly or diligently
to assert any right or to pursue any remedy or to comply fully with applicable
laws or regulations thereunder, which might, but for the provisions of this
SECTION 2.15 afford grounds for terminating, discharging or relieving any
Borrower, in whole or in part, from any of its Obligations under this SECTION
2.15, it being the intention of each Borrower that, so long as any of the
Obligations hereunder remain unsatisfied, the Obligations of such Borrower under
this SECTION 2.15 shall not be discharged except by performance and then only to
the extent of such performance. The Obligations of each Borrower under this
SECTION 2.15 shall not be diminished or rendered unenforceable by any winding
up, reorganization, arrangement, liquidation, reconstruction or similar
proceeding with respect to any Borrower or any Agent or Lender. The joint and
several liability of the Borrower hereunder shall continue in full force and
effect notwithstanding any absorption, merger, amalgamation or any other change
whatsoever in the name, constitution or place of formation of any of the
Borrower or any Agent or Lender.
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(f) Each Borrower represents and warrants to Agent and Lenders
that such Borrower is currently informed of the financial condition of Borrowers
and of all other circumstances which a diligent inquiry would reveal and which
bear upon the risk of nonpayment of the Obligations. Each Borrower further
represents and warrants to Agent and Lenders that such Borrower has read and
understands the terms and conditions of the Loan Documents. Each Borrower hereby
covenants that such Borrower will continue to keep informed of Borrowers'
financial condition, the financial condition of other guarantors, if any, and of
all other circumstances which bear upon the risk of nonpayment or nonperformance
of the Obligations.
(g) The provisions of this SECTION 2.15 are made for the benefit
of the Agent, the Lenders and their respective successors and assigns, and may
be enforced by it or them from time to time against any or all of the Borrowers
as often as occasion therefor may arise and without requirement on the part of
any such Agent, Lender, successor or assign first to marshal any of its or their
claims or to exercise any of its or their rights against any of the other
Borrowers or to exhaust any remedies available to it or them against any of the
other Borrowers or to resort to any other source or means of obtaining payment
of any of the Obligations hereunder or to elect any other remedy. The provisions
of this SECTION 2.15 shall remain in effect until all of the Obligations shall
have been Paid In Full or otherwise fully satisfied. If at any time, any
payment, or any part thereof, made in respect of any of the Obligations, is
rescinded or must otherwise be restored or returned by any Agent or Lender upon
the insolvency, bankruptcy or reorganization of any of the Borrowers, or
otherwise, the provisions of this SECTION 2.15 will forthwith be reinstated in
effect, as though such payment had not been made.
(h) Each Borrower hereby agrees that it will not enforce any of
its rights of contribution or subrogation against the other Borrowers with
respect to any liability incurred by it hereunder or under any of the other Loan
Documents, any payments made by it to the Agent or the Lenders 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 any
Agent or Lender hereunder or under any other Loan Documents 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 of the Obligations until the Obligations are Paid In Full 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 before any payment or distribution of any
character, whether in cash, securities or other property, shall be made to any
other Borrower therefor.
(i) Each Borrower hereby agrees that, after the occurrence and
during the continuance of any Default or Event of Default, the payment of any
amounts due with respect to the indebtedness owing by any Borrower to any other
Borrower is hereby subordinated to the Obligations until the Obligations are
Paid In Full. Each Borrower hereby agrees that after the occurrence and during
the continuance of any Default or Event of Default, such Borrower will not
demand, ▇▇▇ for or otherwise attempt to collect any
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indebtedness of any other Borrower owing to such Borrower until the Obligations
shall have been Paid In Full. If, notwithstanding the foregoing sentence, such
Borrower shall collect, enforce or receive any amounts in respect of such
indebtedness, such amounts shall be collected, enforced and received by such
Borrower as trustee for the Agent, and such Borrower shall deliver any such
amounts to Agent for application to the Obligations in accordance with SECTION
2.4(b).
(j) Each U.S. Credit Party has guarantied the Obligations
pursuant to the U.S. Credit Party Guaranty.
3. CONDITIONS; TERM OF AGREEMENT.
3.1. CONDITIONS PRECEDENT TO THE INITIAL EXTENSION OF CREDIT.
The obligation of the Lender Group (or any member thereof) to
make the initial Advance (or otherwise to extend any credit provided for
hereunder), is subject to the fulfillment, to the satisfaction of Agent, of each
of the conditions precedent set forth below:
(a) the Closing Date shall occur on or before March 5, 2004;
(b) Agent shall have received a UCC Filing Authorization Letter,
duly executed by each Grantor, together with appropriate financing statements on
Form UCC-1, duly filed in such office or offices as may be necessary or, in the
opinion of Agent, desirable to perfect the Agent's Liens in and to the
Collateral, and Agent shall have received its searches and be satisfied with the
results thereof;
(c) Agent shall have received each of the following documents,
in form and substance satisfactory to Agent, duly executed, and each such
document shall be in full force and effect:
(i) the Cash Management Agreements,
(ii) the Control Agreements,
(iii) the Copyright Mortgages,
(iv) the Disbursement Letter,
(v) the Fee Letter,
(vi) the U.S. Credit Party Guaranty,
(vii) the Intercompany Subordination Agreement,
(viii) the Mortgages,
(ix) the Officers' Certificate,
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(x) the Patent Mortgages,
(xi) the Termination Letter, together with UCC termination
statements and other documentation evidencing the termination by Existing
Lender of its Liens in and to the properties and assets of Borrowers and
their Subsidiaries,
(xii) the Stock Pledge Agreements, together with all
certificates representing the shares of Stock pledged thereunder, as well
as Stock powers with respect thereto endorsed in blank, and
(xiii) the Trademark Security Agreements;
(d) Agent shall have received a certificate from the Secretary
of each Company attesting to the resolutions of such Company's Board of
Directors authorizing its execution, delivery, and performance of this Agreement
and the other Loan Documents to which such Company is a party and authorizing
specific officers of such Company to execute the same;
(e) Agent shall have received copies of each Company's Governing
Documents, as amended, modified, or supplemented to the Closing Date, certified
by the Secretary of such Company;
(f) Agent shall have received a certificate of status with
respect to each Company, dated within 10 days of the Closing Date, such
certificate to be issued by the appropriate officer of the jurisdiction of
organization of such Company, which certificate shall indicate that such Company
is in good standing in such jurisdiction;
(g) Agent shall have received certificates of status with
respect to each Company, 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 Company) in which its failure to
be duly qualified or licensed would constitute a Material Adverse Change, which
certificates shall indicate that such Company is in good standing in such
jurisdictions;
(h) Agent shall have received evidence satisfactory to Agent
that all material copyrights used in videogames sold by any Company have been
registered with the applicable federal filing office;
(i) Agent shall have received a certificate of insurance,
together with the endorsements thereto, as are required by SECTION 6.8, the form
and substance of which shall be satisfactory to Agent;
(j) Agent shall have received a Collateral Access Agreement with
respect to the following locations: Dallas Corporate Center #11, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇ ▇▇, ▇▇▇▇▇;
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(k) Agent shall have received opinions of Companies' counsel in
form and substance satisfactory to Agent;
(l) Agent shall have received satisfactory evidence (including a
certificate of the chief financial officer of Parent) that all tax returns
required to be filed by Companies have been timely filed and all taxes upon
Companies or their properties, assets, income, and franchises (including Real
Property taxes, sales taxes, and payroll taxes) have been paid prior to
delinquency, except such taxes that are the subject of a Permitted Protest;
(m) Borrowers shall have the Required Availability after giving
effect to the initial extensions of credit hereunder and 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;
(n) Agent shall have completed its business, legal, and
collateral due diligence, including (i) a collateral audit and review of
Companies' books and records and verification of Companies' representations and
warranties to the Lender Group, the results of which shall be satisfactory to
Agent, (ii) a review of UCC, tax and other lien searches, the results of which
shall be satisfactory to Agent, and (iii) a legal review of all material
contracts and litigation matters, the results of which shall be satisfactory to
Agent;
(o) Agent shall have received the Midway Enterprise Value and
shall be satisfied with the results thereof,
(p) Agent shall have received Companies' Closing Date Business
Plan;
(q) Borrowers shall have paid all Lender Group Expenses incurred
in connection with the transactions evidenced by this Agreement;
(r) Agent shall have received copies of each of Platform
Licenses covering the North American Market (which may be redacted copies) and
other material contracts, together with a certificate of the Secretary of the
applicable Borrower certifying each such document as being a true, correct, and
complete copy thereof;
(s) Agent shall have received copies of the Certificate of
Designation concerning the Preferred Stock and all other agreements, instruments
and documents concerning any obligations of companies related to the Preferred
Stock, together with a certificate of Secretary of Parent certifying each such
document as being a true, correct and complete copy thereof;
(t) Companies shall have received all licenses, approvals or
evidence of other actions required by any Governmental Authority in connection
with the execution and delivery by Companies of the Loan Document or with the
consummation of the transactions contemplated thereby; and
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(u) 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 Agent.
3.2. CONDITIONS SUBSEQUENT TO THE INITIAL EXTENSION OF CREDIT.
The obligation of the Lender Group (or any member thereof) to continue to
make Advances (or otherwise extend credit hereunder) is subject to the
fulfillment, on or before the date applicable thereto, of each of the conditions
subsequent set forth below (the failure by Companies to so perform or cause to
be performed constituting an Event of Default):
(a) within 30 days of the Closing Date, deliver to Agent
certified copies of the policies of insurance, together with the endorsements
thereto, as are required by SECTION 6.8, the form and substance of which shall
be satisfactory to Agent and its counsel;
(b) within 90 days of the Closing Date, close the Transition
Accounts and all other Securities Accounts and Deposit Accounts (other than the
Designated Account and other disbursement accounts) with Existing Lender and its
Affiliates;
(c) within 30 days of the Closing Date, file a business activity
report in the State of Minnesota;
(d) within 180 days of the Closing Date, Borrower shall (i)
obtain the consent of the City of Chicago to the execution and delivery of a
mortgage of the Boat Yard Property to Agent, which mortgage shall be in form
substantially the same as the other mortgages delivered to Agent, (ii) upon
receipt of such consent, execute and deliver such mortgage to Agent, and (iii)
deliver a title insurance policy to Agent, in form and substance satisfactory to
Agent, insuring the lien of such mortgage;
(e) on or before March 31, 2004, deliver to Agent consolidated
financial statements of Parent and its Subsidiaries for the fiscal year ending
December 31, 2003, audited by Ernst & Young reasonably acceptable to Agent and
certified, without any qualifications, by such accountants to have been prepared
in accordance with GAAP (such audited financial statements to include a balance
sheet, income statement, and statement of cash flow and, if prepared, such
accountants' letter to management);
(f) on or before March 11, 2004, enter into Cash Management
Agreements with respect to the Transition Accounts; and
(g) within 14 days of the Closing Date, deliver UK Company's
books, including its share register, and certificates of UK Company to Agent.
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3.3. CONDITIONS PRECEDENT TO ALL EXTENSIONS OF CREDIT.
The obligation of the Lender Group (or any member thereof) to
make any Advances hereunder at any time (or to extend any other credit
hereunder) shall be subject to the following conditions precedent:
(a) the representations and warranties contained in this
Agreement and the other Loan Documents shall be true and correct in all material
respects 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);
(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) no injunction, writ, restraining order, or other order of
any nature restricting or prohibiting, directly or indirectly, the extending of
such credit shall have been issued and remain in force by any Governmental
Authority against any Borrower, Agent, any Lender, or any of their Affiliates;
and
(d) no Material Adverse Change shall have occurred.
3.4. TERM.
This Agreement shall continue in full force and effect for a term
ending on March 3, 2009 (the "MATURITY DATE"). The foregoing notwithstanding,
the Lender Group, upon the election of the Required Lenders, 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.
3.5. EFFECT OF TERMINATION.
On the date of termination of this Agreement, all Obligations
(including contingent reimbursement obligations of Borrowers with respect to any
outstanding Letters of Credit and including all Bank Products Obligations)
immediately shall become due and payable without notice or demand. No
termination of this Agreement, however, shall relieve or discharge Companies of
their duties, Obligations, or covenants hereunder and the Agent's Liens in the
Collateral shall remain in effect until all Obligations have been Paid In Full
and the Lender Group's obligations to provide additional credit hereunder have
been terminated. When this Agreement has been terminated and all of the
Obligations have been Paid In Full and the Lender Group's obligations to provide
additional credit under the Loan Documents have been terminated irrevocably,
Agent will, at Borrowers' sole expense, execute and deliver any UCC termination
statements, lien releases, mortgage releases, re-assignments of trademarks,
discharges of security interests, and other similar discharge or release
documents (and, if applicable, in recordable form) as are reasonably necessary
to release, as of record, the Agent's Liens and all notices of security
interests and liens previously filed by Agent with respect to the Obligations.
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3.6. EARLY TERMINATION BY BORROWERS.
Borrowers have the option, at any time upon 15 days prior written
notice by Administrative Borrower to Agent, to terminate this Agreement by
paying to Agent the Obligations (including with respect to Letter of Credit
Usage (a) either (i) providing cash collateral to be held by Agent for the
benefit of those Lenders with a Revolver Commitment in an amount equal to 105%
of the then extant Letter of Credit Usage, (ii) providing a letter of credit in
form and substance satisfactory to Agent to be issued to Agent by a financial
institution satisfactory to Agent in an amount equal to 105% of the then extant
Letter of Credit Usage to support such Letter of Credit Usage, or (iii) causing
the original Letters of Credit to be returned to the Issuing Lender, and (b)
providing cash collateral (in an amount determined by Agent as sufficient to
satisfy the reasonably estimated credit exposure) to be held by Agent for the
benefit of the Bank Product Providers with respect to the then extant Bank
Products Obligations), together with the Applicable Prepayment Premium (to be
allocated based upon letter agreements between Agent and individual Lenders). If
Administrative Borrower has sent a notice of termination pursuant to the
provisions of this Section, then the Commitments shall terminate and Borrowers
shall be obligated to cause the Obligations, together with the Applicable
Prepayment Premium, to be Paid in Full on the date set forth as the date of
termination of this Agreement in such notice. In the event of the termination of
this Agreement and repayment of the Obligations at any time prior to the
Maturity Date, for any other reason, including (a) termination upon the election
of the Required Lenders to terminate after the occurrence and during the
continuation of an Event of Default, (b) foreclosure and sale of Collateral, (c)
sale of the Collateral in any Insolvency Proceeding, or (d) restructure,
reorganization or compromise of the Obligations by the confirmation of a plan of
reorganization, or any other plan of compromise, restructure, or arrangement in
any Insolvency Proceeding, then, in view of the impracticability and extreme
difficulty of ascertaining the actual amount of damages to the Lender Group or
profits lost by the Lender Group as a result of such early termination, and by
mutual agreement of the parties as to a reasonable estimation and calculation of
the lost profits or damages of the Lender Group, Borrowers shall pay the
Applicable Prepayment Premium to Agent (to be allocated based upon letter
agreements between Agent and individual Lenders), measured as of the date of
such termination.
4. CREATION OF SECURITY INTEREST.
4.1. GRANT OF SECURITY INTEREST.
Each Grantor hereby grants to Agent, for the benefit of the
Lender Group and the Bank Product Providers, a continuing security interest in
all of its right, title, and interest in all currently existing and hereafter
acquired or arising Grantor Collateral in order to secure prompt repayment of
any and all of the Obligations in accordance with the terms and conditions of
the Loan Documents and in order to secure prompt performance by Grantors of each
of their covenants and duties under the Loan Documents. The Agent's Liens in and
to the Grantor Collateral shall attach to all Grantor Collateral without further
act on the part of Agent or Grantors. Anything contained in this Agreement or
any other Loan Document to
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the contrary notwithstanding, except for Permitted Dispositions, Companies have
no authority, express or implied, to dispose of any item or portion of the
Collateral.
4.2. NEGOTIABLE COLLATERAL.
In the event that any Grantor Collateral, including proceeds, is
evidenced by or consists of Negotiable Collateral, and if and to the extent that
Agent determines that perfection or priority of Agent's security interest is
dependent on or enhanced by possession, the applicable Grantor, immediately upon
the request of Agent, shall endorse and deliver physical possession of such
Negotiable Collateral to Agent.
4.3. COLLECTION OF ACCOUNTS, GENERAL INTANGIBLES, AND NEGOTIABLE
COLLATERAL.
At any time after the occurrence and during the continuation of
an Event of Default, Agent or Agent's designee may (a) notify Account Debtors of
Grantors that the Grantors' Accounts, chattel paper, or General Intangibles have
been assigned to Agent or that Agent has a security interest therein, or (b)
collect the Grantors' Accounts, chattel paper, or General Intangibles directly
and charge the collection costs and expenses to the Loan Account. Each Grantor
agrees that it will hold for the Lender Group any of its or its Subsidiaries'
Collections that it receives and immediately will deliver such Collections to
Agent or a Cash Management Bank in their original form as received by such
Grantor.
4.4. FILING OF FINANCING STATEMENTS; COMMERCIAL TORT CLAIMS; DELIVERY
OF ADDITIONAL DOCUMENTATION REQUIRED.
(a) Grantors authorize Agent to file any financing statement
necessary or desirable to effectuate the transactions contemplated by the Loan
Documents, and any continuation statement or amendment with respect thereto, in
any appropriate filing office without the signature of Grantors where permitted
by applicable law. Grantors hereby ratify the filing of any financing statement
filed without the signature of Grantors prior to the date hereof. Agent shall
provide copies of financing statements filed against any Grantor.
(b) If Grantors acquire any commercial tort claims after the
date hereof, Grantors shall promptly (but in any event within 3 Business Days
after such acquisition) deliver to Agent a written description of such
commercial tort claim and shall deliver a written agreement, in form and
substance satisfactory to Agent, pursuant to which the applicable Grantor shall
pledge and collaterally assign all of its right, title and interest in and to
such commercial tort claim to Agent, as security for the Obligations (a
"COMMERCIAL TORT CLAIM ASSIGNMENT").
(c) At any time upon the request of Agent, Grantors shall
execute or deliver to Agent any and all financing statements, original financing
statements in lieu of continuation statements, fixture filings, security
agreements, pledges, assignments, Commercial Tort Claim Assignments,
endorsements of certificates of title, and all other documents (collectively,
the "ADDITIONAL DOCUMENTS") that Agent may request in its Permitted Discretion,
in form and substance satisfactory to Agent, to create, perfect, and
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continue perfected or to better perfect the Agent's Liens in the assets of
Grantors (whether now owned or hereafter arising or acquired, tangible or
intangible, real or personal), to create and perfect Liens in favor of Agent in
any Real Property acquired after the Closing Date, 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, each Grantor
authorizes Agent to execute any such Additional Documents in the applicable
Grantor's name and authorizes Agent to file such executed Additional Documents
in any appropriate filing office. In addition, on such periodic basis as Agent
shall require, Grantors shall (i) provide Agent with a report of all new
material patentable, copyrightable, or trademarkable materials acquired or
generated by any Grantor during the prior period, (ii) cause all material
patents, copyrights, and trademarks acquired or generated by Grantors that are
not already the subject of a registration with the appropriate filing office (or
an application therefor diligently prosecuted) to be registered with such
appropriate filing office in a manner sufficient to impart constructive notice
of a Grantor's ownership thereof, and (iii) cause to be prepared, executed, and
delivered to Agent supplemental schedules to the applicable Loan Documents to
identify such material patents, copyrights, and trademarks as being subject to
the security interests created thereunder.
4.5. POWER OF ATTORNEY.
Each Grantor hereby irrevocably makes, constitutes, and appoints
Agent (and any of Agent's officers, employees, or agents designated by Agent) as
such Grantor's true and lawful attorney, with power to (a) if such Grantor
refuses to, or fails timely to execute and deliver any of the documents
described in SECTION 4.4, sign the name of such Grantor on any of the documents
described in SECTION 4.4, (b) at any time that an Event of Default has occurred
and is continuing, sign such Grantor's name on any invoice or ▇▇▇▇ of lading
relating to the Grantor Collateral, drafts against Account Debtors, or notices
to Account Debtors, (c) send requests for verification of Grantors' Accounts,
(d) endorse such Grantor's name on any of its payment items (including all of
its Collections and payments from insurers) that may come into the Lender
Group's possession, (e) at any time that an Event of Default has occurred and is
continuing, make, settle, and adjust all claims under such Grantor's policies of
insurance and make all determinations and decisions with respect to such
policies of insurance, and (f) at any time that an Event of Default has occurred
and is continuing, settle and adjust disputes and claims respecting Grantors'
Accounts, chattel paper, or General Intangibles directly with Account Debtors,
for amounts and upon terms that Agent determines to be reasonable, and Agent may
cause to be executed and delivered any documents and releases that Agent
determines to be necessary. The appointment of Agent as each Grantor's attorney,
and each and every one of its rights and powers, being coupled with an interest,
is irrevocable until all of the Obligations have been Paid In Full.
4.6. RIGHT TO INSPECT.
Agent and each Lender (through any of their respective officers,
employees, or agents) shall have the right, from time to time hereafter and upon
reasonable prior notice (unless a Default or Event of Default exists in which
case no notice shall be required), to inspect the Books and make copies or
abstracts thereof and to check, test, and appraise the
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Collateral, or any portion thereof, in order to verify any Company's financial
condition or the amount, quality, value, condition of, or any other matter
relating to, the Collateral. Without limiting the foregoing, Agent shall have
the right to have the Midway Enterprise Value reappraised by a qualified
appraisal company selected by Agent from time to time after the Closing Date for
the purpose of re-determining the Midway Enterprise Value; provided that so long
as no Default or Event of Default exists, the Borrowers shall not be obligated
to reimburse Agent for more than two appraisals in any fiscal year of Parent.
4.7. CONTROL AGREEMENTS.
Grantors agree that they will not transfer assets out of any of
their Deposit Accounts or Securities Accounts; PROVIDED, HOWEVER, that so long
as no Event of Default has occurred and is continuing or would result therefrom,
Grantors may use such assets (and the proceeds thereof) to the extent not
prohibited by this Agreement or the other Loan Documents and, if the transfer is
to another bank or securities intermediary, so long as the applicable Grantor,
Agent, and the substitute bank or securities intermediary have entered into a
Control Agreement. Grantors agree that they will take any or all reasonable
steps that Agent requests in order for Agent to obtain control in accordance
with Sections 9-104, 9-105, 9-106, and 9-107 of the Code with respect to any of
its or their Securities Accounts, Deposit Accounts, electronic chattel paper,
Investment Property, and letter-of-credit rights. No arrangement contemplated
hereby or by any Control Agreement in respect of any Securities Accounts or
other Investment Property shall be modified by Grantors without the prior
written consent of Agent. Upon the occurrence and during the continuance of a
Default or Event of Default, Agent may notify any bank or securities
intermediary to liquidate the applicable Deposit Account or Securities Account
or any related Investment Property maintained or held thereby and remit the
proceeds thereof to the Agent's Account.
5. REPRESENTATIONS AND WARRANTIES.
In order to induce the Lender Group to enter into this Agreement,
each Company makes the following representations and warranties to the Lender
Group which shall be true, correct, and complete, in all material respects, as
of the date hereof, and shall be true, correct, and complete, in all material
respects, as of the Closing Date, and at and 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) and such representations and warranties shall survive the execution and
delivery of this Agreement:
5.1. NO ENCUMBRANCES.
Each Company has good and indefeasible title to their personal
property assets and good and marketable title to their Real Property, in each
case, free and clear of Liens except for Permitted Liens.
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5.2. ELIGIBLE ACCOUNTS.
The Eligible Accounts identified by Administrative Borrower on a
borrowing base report are bona fide existing payment obligations of Account
Debtors created by the sale and delivery of Inventory or the rendition of
services to such Account Debtors in the ordinary course of Midway's business,
owed to Midway net of any known defenses, disputes, offsets, counterclaims, or
rights of return or cancellation (other than defenses, disputes, offsets,
counterclaims, or rights of return or cancellations which in the aggregate for
all Accounts does not exceed $500,000. As to each Account that is identified by
Administrative Borrower as an Eligible Account in a borrowing base report
submitted to Agent, such Account is not excluded as ineligible by virtue of one
or more of the excluding criteria set forth in the definition of Eligible
Accounts.
5.3. INTENTIONALLY OMITTED.
5.4. EQUIPMENT.
All of the Equipment of Companies is used or held for use in
their business and is fit for such purposes. SCHEDULE 5.4 is a list of all owned
vehicles of a Company.
5.5. LOCATION OF INVENTORY AND EQUIPMENT.
Except as disclosed on SCHEDULE 5.5, the Inventory and Equipment
of Companies are not stored with a bailee, warehouseman, or similar party and
are located only at, or in-transit between, the locations identified on SCHEDULE
5.5 (as such Schedule may be updated pursuant to SECTION 6.9).
5.6. INVENTORY RECORDS.
Each Company keeps correct and accurate records itemizing and
describing the type, quality, and quantity of its Inventory and the book value
thereof.
5.7. STATE OF INCORPORATION; LOCATION OF CHIEF EXECUTIVE OFFICE; FEIN;
ORGANIZATIONAL ID NUMBER; COMMERCIAL TORT CLAIMS.
(a) The jurisdiction of organization of each Company is set
forth on SCHEDULE 5.7(a).
(b) The chief executive office of each Company is located at the
address indicated on SCHEDULE 5.7(b) (as such Schedule may be updated pursuant
to SECTION 6.9).
(c) Each Company's FEIN and organizational identification
number, if any, are identified on SCHEDULE 5.7(c).
(d) As of the Closing Date, Companies do not hold any commercial
tort claims, except as set forth on SCHEDULE 5.7(d).
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5.8. DUE ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.
(a) Each Company (other than MSC) is duly organized and existing
and in good standing under the laws of the jurisdiction of its organization and
qualified to do business in any state where the failure to be so qualified
reasonably could be expected to have a Material Adverse Change.
(b) Set forth on SCHEDULE 5.8(b), is a complete and accurate
description of the authorized capital Stock of each Company, 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 5.8(b),
there are no subscriptions, options, warrants, or calls relating to any shares
of each Company's (other than the Parent) capital Stock, including any right of
conversion or exchange under any outstanding security or other instrument.
Except as described on SCHEDULE 5.8(b), no Company 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 5.8(c), is a complete and accurate
list of each Company's direct and indirect Subsidiaries, showing: (i) the
jurisdiction of their organization; (ii) the number of shares of each class of
common and preferred Stock authorized for each of such Subsidiaries; and (iii)
the number and the percentage of the outstanding shares of each such class owned
directly or indirectly by the applicable Company. 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 5.8(d), there are no
subscriptions, options, warrants, or calls relating to any shares of any
Companies' Subsidiaries' capital Stock, including any right of conversion or
exchange under any outstanding security or other instrument. No Company or any
of its respective Subsidiaries is subject to any obligation (contingent or
otherwise) to repurchase or otherwise acquire or retire any shares of any
Companies' Subsidiaries' capital Stock or any security convertible into or
exchangeable for any such capital Stock.
5.9. DUE AUTHORIZATION; NO CONFLICT.
(a) As to each Company, the execution, delivery, and performance
by such Company of this Agreement and the other Loan Documents to which it is a
party have been duly authorized by all necessary action on the part of such
Company.
(b) As to each Company, the execution, delivery, and performance
by such Company of this Agreement and the other Loan Documents to which it is a
party do not and will not (i) violate any provision of federal, national, state,
provincial or local law or regulation applicable to any Company, the Governing
Documents of any Company, or any order, judgment, or decree of any court or
other Governmental Authority binding on any Company, (ii) conflict with, result
in a breach of, or constitute (with due notice or lapse of time or both) a
default under any material contractual obligation of any Company, (iii) result
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in or require the creation or imposition of any Lien of any nature whatsoever
upon any properties or assets of Company, other than Permitted Liens, or (iv)
require any approval of any Company's interestholders or any approval or consent
of any Person under any material contractual obligation of any Company, other
than consents or approvals that have been obtained and that are still in force
and effect.
(c) Other than the filing of financing statements, and the
recordation of the Mortgages, the Copyright Mortgage, the Patent Mortgage and
the Trademark Security Agreement, the execution, delivery, and performance by
each Company of this Agreement and the other Loan Documents to which such
Company is a party do not and will not require any registration with, consent,
or approval of, or notice to, or other action with or by, any Governmental
Authority, other than consents or approvals that have been obtained and that are
still in force and effect.
(d) As to each Company, this Agreement and the other Loan
Documents to which such Company is a party, and all other documents contemplated
hereby and thereby, when executed and delivered by such Company will be the
legally valid and binding obligations of such Company, enforceable against such
Company in accordance with their 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.
(e) The Agent's Liens are validly created, perfected, and first
priority Liens, subject only to Permitted Liens.
5.10. LITIGATION.
Other than those matters disclosed on SCHEDULE 5.10, there are no
actions, suits, or proceedings pending or, to the best knowledge of Companies,
threatened against Companies, except for (a) matters that exist as of the
Closing Date that the Companies have no knowledge of and that could not
reasonably be expected to result in a Material Adverse Change, (b) matters that
are fully covered by insurance (subject to customary deductibles), and (c)
matters arising after the Closing Date that, if decided adversely to Companies,
reasonably could not be expected to result in a Material Adverse Change.
5.11. NO MATERIAL ADVERSE CHANGE.
All financial statements relating to Companies that have been
delivered by Companies to the Lender Group 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, Companies' financial condition as of the date thereof and
results of operations for the period then ended. There has not been a Material
Adverse Change with respect to Companies since the date of the latest financial
statements submitted to the Lender Group on or before the Closing Date.
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5.12. FRAUDULENT TRANSFER.
(a) The Companies taken as a whole are Solvent.
(b) No transfer of property is being made by any Company and no
obligation is being incurred by any Company 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 Companies.
5.13. EMPLOYEE BENEFITS.
None of Companies, nor any of their ERISA Affiliates maintains or
contributes to any Benefit Plan.
5.14. ENVIRONMENTAL CONDITION.
Except as set forth on SCHEDULE 5.14, (a) to Companies'
knowledge, none of Companies' properties or assets has ever been used by
Companies, or by previous owners or operators in the disposal of, or to produce,
store, handle, treat, release, or transport, any Hazardous Materials, where such
production, storage, handling, treatment, release or transport was in violation,
in any material respect, of applicable Environmental Law, (b) to Companies'
knowledge, none of Companies' properties or assets has ever been designated or
identified in any manner pursuant to any environmental protection statute as a
Hazardous Materials disposal site, (c) none of Companies have received notice
that a Lien arising under any Environmental Law has attached to any revenues or
to any Real Property owned or operated by Companies, and (d) none of Companies
have received a summons, citation, notice, or directive from the Environmental
Protection Agency or any other federal or state governmental agency concerning
any action or omission by any Company resulting in the releasing or disposing of
Hazardous Materials into the environment.
5.15. BROKERAGE FEES.
Companies have not utilized the services of any broker or finder
in connection with obtaining financing from the Lender Group under this
Agreement and no brokerage commission or finders fee is payable by Companies in
connection herewith.
5.16. INTELLECTUAL PROPERTY.
Each Company owns, or holds licenses in, all trademarks, trade
names, copyrights, patents, patent rights, and licenses that are necessary to
the conduct of its business as currently conducted. Attached hereto as SCHEDULE
5.16 (as updated within 30 days of the end of each fiscal quarter of Parent) is
a true, correct, and complete listing of all United States registered patents,
patent applications, registered trademarks, trademark applications, copyright
applications, and copyright registrations as to which each Company is the owner.
SCHEDULE 5.16 sets forth all material licenses to which any Company is a party
as licensee or licensor and all licenses affecting a Material Video Game. Except
as set forth on
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SCHEDULE 5.16, all Copyrights, Trademarks and other intellectual property
related to the Mortal Kombat Franchise is owned by MAG.
5.17. LEASES.
Companies enjoy peaceful and undisturbed possession under all
leases material to their business and to which they are parties or under which
they are operating. All of such leases are valid and subsisting and no material
default by Companies exists under any of them.
5.18. DDAS.
Set forth on SCHEDULE 5.18 are all of Companies' Deposit Accounts
and Securities Accounts as of the Closing Date, including, with respect to each
bank or securities intermediary (i) the name and address of such Person, and
(ii) the account numbers of the Deposit Accounts or Securities Accounts
maintained with such Person.
5.19. COMPLETE DISCLOSURE.
All factual information (taken as a whole) furnished by or on
behalf of Companies in writing to Agent or any Lender (including all information
contained in the Schedules hereto or in the other Loan Documents) for purposes
of or in connection with this Agreement, the other Loan Documents or any
transaction contemplated herein or therein is, and all other such factual
information (taken as a whole) hereafter furnished by or on behalf of Companies
in writing to the Agent or any 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. On the Closing
Date, the Closing Date Projections represent, and as of the date on which any
other Projections are delivered to Agent, such additional Projections represent
Companies' good faith best estimate of their future performance for the periods
covered thereby.
5.20. INDEBTEDNESS.
Set forth on SCHEDULE 5.20 is a true and complete list of all
Indebtedness of each Company outstanding immediately prior to the Closing Date
that is to remain outstanding after the Closing Date and such Schedule
accurately reflects the aggregate principal amount of such Indebtedness and the
principal terms thereof.
6. AFFIRMATIVE COVENANTS.
Each Company covenants and agrees that, until termination of all
of the Commitments and payment in full of the Obligations, Companies shall do
all of the following:
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6.1. ACCOUNTING SYSTEM.
Maintain a system of accounting that enables Companies to produce
financial statements in accordance with GAAP and maintain records pertaining to
the Collateral that contain information as from time to time reasonably may be
requested by Agent. Companies also shall keep an inventory reporting system that
shows all additions, sales, claims, returns, and allowances with respect to
their Inventory.
6.2. COLLATERAL REPORTING.
Provide Agent (and if so requested by Agent, with copies for each
Lender) with the following documents at the following times in form satisfactory
to Agent:
Daily (unless (a) a sales journal, collection journal, and credit register since the last
Excess such schedule and a calculation of the Borrowing Base as of such date to be
Availability is calculated by WFF utilizing WFF's electronic reporting system with results
greater forwarded to Administrative Borrower upon completion, and
than $5,000,000 at all
times
during the (b) notice of all claims, offsets, or disputes asserted by Account Debtors with
preceding week, respect to Midway's Accounts.
then weekly)
Weekly (c) a detailed report regarding Companies' cash and Cash Equivalents including
an indication of which amounts constitute Qualified Cash,
(d) "sell through reports" for the week most recently ended, and
(e) "flash sales reports" for the week most recently ended.
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Monthly (not later than (f) a detailed calculation of the Borrowing Base (including detail regarding
15th day of each those Accounts of Midway that are not Eligible Accounts) to be calculated
month) by WFF utilizing WFF's electronic reporting system with results forwarded
to Administrative Borrower upon completion,
(g) a detailed aging, by total, provided in an electronic format, of the
Accounts of Midway, together with a reconciliation to the detailed
calculation of the Borrowing Base previously provided to Agent,
(h) a detailed listing, by vendor, provided in an electronic format, of
Companies' accounts payable and any consolidated book overdraft,
(i) certificate of Midway of all amounts due and owing under the Platform
Licenses (together with , at the request of Agent, proof of such payment),
(j) a calculation of Dilution or data sufficient (in Agent's discretion) for
Agent to calculate Dilution for the month most recently ended to be
calculated by WFF utilizing WFF's electronic reporting system with results
forwarded to Administrative Borrower upon completion,
(k) a "milestone" report for each videogame title,
(l) a report of the average value of Excluded Inventory of Companies (as
calculated for the most recent 6 month period) and the average value of
Inventory of Companies (as calculated for the most recently ended 6 month
period), and
(m) an update of the status of MGM Litigation.
Quarterly (n) a detailed list of each Company's customers, and
(o) a report regarding each Company's accrued, but unpaid, AD VALOREM taxes.
Upon request by Agent (p) copies of invoices in connection with Midway's Accounts, credit memos,
remittance advices, deposit slips, shipping and delivery documents in
connection with Midway's Accounts and, for Inventory and Equipment acquired
by Companies, purchase orders and invoices, and
(q) such other reports as to the Collateral or the financial condition of
Companies, as Agent may request.
In addition, each Company agrees to cooperate fully with Agent to
facilitate and implement a system of electronic collateral reporting in order to
provide electronic reporting of each of the items set forth above.
Administrative Borrower agrees to provide
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Agent with immediate notice of any ruling, filing or material communication
related to the MGM Litigation.
6.3. FINANCIAL STATEMENTS, REPORTS, CERTIFICATES.
Deliver to Agent, with copies to each Lender:
(a) as soon as available, but in any event within 30 days (45
days in the case of a month that is the end of one of Parent's fiscal quarters,
including its fiscal year-end) after the end of each month during each of
Parent's fiscal years,
(i) Parent prepared consolidated balance sheet, income
statement, and statement of cash flow covering Parent's and its
Subsidiaries' operations during such period,
(ii) a certificate of Parent signed by the chief financial
officer of Parent to the effect that:
(A) the financial statements delivered hereunder
have been prepared in accordance with GAAP (except for the lack
of footnotes and being subject to quarterly (or more frequent)
adjustments for reserves for price protection, warranties and
returns consistent with past practices year-end audit
adjustments) and fairly present in all material respects the
financial condition of Parent and its Subsidiaries,
(B) the representations and warranties of Companies
contained in this Agreement and the other Loan Documents are true
and correct in all material respects on and as of the date of
such certificate, as though made on and as of such date (except
to the extent that such representations and warranties relate
solely to an earlier date), and
(C) there does not exist any condition or event that
constitutes a Default or Event of Default (or, to the extent of
any non-compliance, describing such non-compliance as to which he
or she may have knowledge and what action Companies have taken,
are taking, or propose to take with respect thereto), and
(iii) for each month that is the date on which a financial
covenant in SECTION 7.18 is to be tested, a Compliance Certificate
demonstrating, in reasonable detail, compliance at the end of such period
with the applicable financial covenants contained in SECTION 7.18,
(b) as soon as available, but in any event within 90 days after
the end of each of Parent's fiscal years,
(i) consolidated financial statements of Parent and its
Subsidiaries for each such fiscal year, audited by independent certified
public accountants
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reasonably acceptable to Agent and certified, without any qualifications,
by such accountants to have been prepared in accordance with GAAP (such
audited financial statements to include a balance sheet, income statement,
and statement of cash flow and, if prepared, such accountants' letter to
management), and
(ii) a certificate of such accountants addressed to Agent
and the Lenders stating that nothing came to the attention of such
accountants that caused such accountants to believe that the Borrowers
failed to comply with the terms, covenants, provisions or conditions of
SECTION 7.18 insofar as they relate to accounting matters,
(c) as soon as available, but in any event prior to the start of
each of Parent's fiscal years,
(i) copies of Companies' Projections, in form and
substance (including as to scope and underlying assumptions) satisfactory
to Agent, in its discretion, for the forthcoming three years, year by year,
and for the forthcoming fiscal year, month by month, certified by Parent
and signed by the chief financial officer of Parent as being such Parent's
good faith best estimate of the financial performance of Parent and its
Subsidiaries during the period covered thereby,
(ii) a copy of Capital Expenditure budget for the
forthcoming year, which budget shall be in the form and substance
acceptable to Agent, and
(iii) a schedule of the projected release dates for
videogames, which schedule shall include for each videogame, the title of
the game, the release date, projected net sales by unit and projected net
sales by quarter,
(iv) a schedule of (A) the projected revenue by fiscal
quarter generated from the top 5 videogames to be sold by the Companies
during the upcoming fiscal year (or the top 5 videogames and Mortal Kombat
if Mortal Kombat is not in the top 5 videogames by revenue generated) and
(B) the videogame titles comprising 70% of projected total annual revenue
from videogame sales during the upcoming fiscal year,
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(d) as soon as available, but in any event within 30 days after
the end of each of the Parent's fiscal quarters, revised Projections, in form
and substance (including as to scope and underlying assumptions) satisfactory to
Agent, in its discretion, for the current fiscal year, month by month, certified
by Parent and signed by the chief financial officer of Parent as being Parent's
good faith best estimate of the financial performance of Parent and its
Subsidiaries during the period covered thereby, incorporating the actual results
of all prior months of such fiscal year as well as a comparison of actual year
to date results versus the Projections delivered for such fiscal year pursuant
SECTION 6.3(c) hereof.
(e) if and when filed by any Company,
(i) 10-Q quarterly reports, Form 10-K annual reports, and
Form 8-K current reports,
(ii) any other material filings made by any Company with
the SEC,
(iii) copies of Companies' federal income tax returns, and
any amendments thereto, filed with the Internal Revenue Service, and
(iv) any other information that is provided by Parent to
its shareholders generally,
(f) if and when filed by any Company and as requested by Agent,
satisfactory evidence of payment of applicable excise taxes in each jurisdiction
in which (i) any Company conducts business or is required to pay any such excise
tax, (ii) where any Company's failure to pay any such applicable excise tax
would result in a Lien on the properties or assets of such Company, or (iii)
where any Company's failure to pay any such applicable excise tax reasonably
could be expected to result in a Material Adverse Change,
(g) as soon as a Company has knowledge of any event or condition
that constitutes a Default or an Event of Default, notice thereof and a
statement of the curative action that Companies propose to take with respect
thereto,
(h) promptly after the commencement thereof, but in any event
within 5 days after the service of process with respect thereto on any Company,
notice of all actions, suits, or proceedings brought by or against any Company
before any Governmental Authority which, if determined adversely to such
Company, reasonably could be expected to result in a Material Adverse Change,
and
(i) upon the request of Agent, any other report reasonably
requested relating to the financial condition of Companies.
In addition to the financial statements referred to above,
Companies agree to deliver unaudited financial statements prepared on a
consolidating basis and agree that no Subsidiary of Parent will have a fiscal
year different from that of Parent. Companies agree to cooperate with Agent to
allow Agent to consult with their independent certified public accountants if
Agent reasonably requests the right to do so and that, in such connection, their
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independent certified public accountants are authorized to communicate with
Agent and to release to Agent whatever financial information concerning
Companies that Agent reasonably may request.
6.4. INTENTIONALLY OMITTED.
6.5. RETURNS.
Cause returns and allowances as between Companies and their
Account Debtors, to be on no less favorable basis to the Companies than in
accordance with the usual customary practices of Companies, as they exist at the
time of the execution and delivery of this Agreement.
6.6. MAINTENANCE OF PROPERTIES.
Maintain and preserve all of their properties which are necessary
or useful in the proper conduct to their business in good working order and
condition, ordinary wear and tear excepted, and comply at all times with the
provisions of all leases to which it is a party as lessee, so as to prevent any
loss or forfeiture thereof or thereunder.
6.7. TAXES.
Cause all assessments and taxes, whether real, personal, or
otherwise, due or payable by, or imposed, levied, or assessed against Companies,
or any of their respective assets 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.
Companies will make timely payment or deposit of all tax payments and
withholding taxes required of them by applicable laws, including those laws
concerning F.I.C.A., F.U.T.A., state disability, and local, state, provincial
and federal income taxes, and will, upon request, furnish Agent with proof
satisfactory to Agent indicating that the applicable Company has made such
payments or deposits.
6.8. INSURANCE.
(a) At Borrowers' expense, maintain insurance respecting Parent
and its 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. Companies
also shall maintain business interruption, public liability, and product
liability insurance, as well as insurance against larceny, embezzlement, and
criminal misappropriation. All such policies of insurance shall be in such
amounts and with such insurance companies as are reasonably satisfactory to
Agent. Companies shall deliver copies of all such policies to Agent with a
satisfactory lender's loss payable endorsement naming Agent as loss payee as its
interests may appear. Each policy of insurance or endorsement shall contain a
clause requiring the insurer to give not less than 30 days prior written notice
to Agent in the event of cancellation of the policy for any reason whatsoever.
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(b) Administrative Borrower shall give Agent prompt notice of
any loss covered by such insurance. Agent shall have the exclusive right to
adjust any losses claimed under any such insurance policies in excess of
$250,000 (or in any amount after the occurrence and during the continuation of
an Event of Default), without any liability to Companies whatsoever in respect
of such adjustments. Any monies received as payment for any loss under any
insurance policy mentioned above (other than liability insurance policies) or as
payment of any award or compensation for condemnation or taking by eminent
domain, shall be paid over to Agent to be applied at the option of the Required
Lenders either to the prepayment of the Obligations or shall be disbursed to
Administrative Borrower under staged payment terms reasonably satisfactory to
the Required Lenders for application to the cost of repairs, replacements, or
restorations. Any such repairs, replacements, or restorations shall be effected
with reasonable promptness and shall be of a value at least equal to the value
of the items or property destroyed prior to such damage or destruction.
(c) Companies shall not take out separate insurance concurrent
in form or contributing in the event of loss with that required to be maintained
under this SECTION 6.8, unless Agent is included thereon as named insured with
the loss payable to Agent under a lender's loss payable endorsement or its
equivalent. Administrative Borrower immediately shall notify Agent whenever such
separate insurance is taken out, specifying the insurer thereunder and full
particulars as to the policies evidencing the same, and copies of such policies
promptly shall be provided to Agent.
6.9. LOCATION OF INVENTORY AND EQUIPMENT.
Except as set forth on SCHEDULE 5.5, Borrowers' Inventory and
Equipment is located only at the locations identified on SCHEDULE 5.5 and their
chief executive offices are located only at the locations identified on SCHEDULE
5.7(B); PROVIDED, HOWEVER, that Administrative Borrower may amend SCHEDULE 5.5
and SCHEDULE 5.7 so long as such amendment occurs by written notice to Agent not
less than 15 days prior to the date on which such Inventory or Equipment is
moved to such new location or such chief executive office is relocated, so long
as such new location is within the continental United States, and so long as, at
the time of such written notification, the applicable Company provides Agent a
Collateral Access Agreement with respect to any leased or warehouse location
where Borrowers maintain in excess of $500,000 of Inventory.
6.10. COMPLIANCE WITH LAWS.
Comply with the requirements of all applicable laws, rules,
regulations, and orders of any Governmental Authority, including the Fair Labor
Standards Act and the Americans With Disabilities Act (and, in each case, any
Canadian or United Kingdom equivalent, as the case may be, for each jurisdiction
in which such Company conducts business), 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.
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6.11. LEASES.
Pay when due all rents and other amounts payable under any leases
to which any Company is a party or by which any Company's properties and assets
are bound, unless such payments are the subject of a Permitted Protest.
6.12. EXISTENCE.
At all times preserve and keep in full force and effect each
Company's (other than MSC) valid existence and good standing and any rights and
franchises material to their businesses.
6.13. ENVIRONMENTAL.
(a) Keep any property either owned or operated by any Company
free of any Environmental Liens or post bonds or other financial assurances
sufficient to satisfy the obligations or liability evidenced by such
Environmental Liens, (b) comply, in all material respects, with Environmental
Laws and provide to Agent documentation of such compliance which Agent
reasonably requests, (c) promptly notify Agent of any release of a Hazardous
Material of any reportable quantity from or onto property owned or operated by
any Company and take any Remedial Actions required to ▇▇▇▇▇ said release or
otherwise to come into compliance with applicable Environmental Law, and (d)
promptly, but in any event within 5 days of its receipt thereof, provide Agent
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 Company,
(ii) commencement of any Environmental Action or notice that an Environmental
Action will be filed against any Company, and (iii) notice of a violation,
citation, or other administrative order which reasonably could be expected to
result in a Material Adverse Change.
6.14. DISCLOSURE UPDATES.
Promptly and in no event later than 5 Business Days after
obtaining knowledge thereof, notify Agent if any written information, exhibit,
or report furnished to the Lender Group contained 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. The foregoing to the contrary notwithstanding, 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 affect of amending or modifying this
Agreement or any of the Schedules hereto.
6.15. FORMATION OF SUBSIDIARIES.
At the time that any Company forms any direct or indirect
Subsidiary or acquires any direct or indirect Subsidiary (including without
limitation in connection with a Permitted Acquisition) after the Closing Date,
such Company shall (a) cause such new Subsidiary to provide to Agent a joinder
to this Agreement or a guaranty or security
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agreement, together with such other security documents (including Mortgages with
respect to any Real Property of such new Subsidiary), as well as appropriate
UCC-1, PPSA or other financing statements (and with respect to all property
subject to a Mortgage, fixture filings), all in form and substance satisfactory
to Agent (including being sufficient to grant Agent a first priority Lien
(subject to Permitted Liens) in and to the assets of such newly formed or
acquired Subsidiary), (b) provide to Agent a pledge agreement and appropriate
certificates and powers or UCC-1, PPSA or other financing statements,
hypothecating all of the direct or beneficial ownership interest in such new
Subsidiary, in form and substance satisfactory to Agent, (c) provide to Agent an
amendment to SCHEDULES 5.8(B) and (C), in form and substance satisfactory to
Agent and (d) provide to Agent all other documentation, including one or more
opinions of counsel satisfactory to Agent, which in its opinion is appropriate
with respect to the execution and delivery of the applicable documentation
referred to above (including policies of title insurance or other documentation
with respect to all property subject to a Mortgage). Any document, agreement, or
instrument executed or issued pursuant to this SECTION 6.15 shall be a Loan
Document. Nothing contained in this SECTION 6.15 shall constitute a consent by
the Lender Group to the formation or acquisition of a Subsidiary by a Company.
6.16. [INTENTIONALLY OMITTED]
6.17. REGISTRATION OF INTELLECTUAL PROPERTY.
File, within 30 days after any sale, appropriate documents to
cause the software, trademarks and other intellectual property associated with
any videogame (other than intellectual property not material or integral to the
operation or value of such videogame) released by a Company for sale to its
customers to be registered in the appropriate federal filing office.
6.18. MORTAL KOMBAT INTELLECTUAL PROPERTY.
Except as set forth on SCHEDULE 5.16, cause all Copyrights,
Trademarks and other intellectual property related to the Mortal Kombat
Franchise to be owned by MAG.
6.19. CANADIAN OPERATIONS
Prior to making any Investment in, transferring any property to,
or conducting business via, the Canadian Company, the Companies covenant to (a)
cause the Canadian Company to provide to Agent the Canadian Guaranty and the
Canadian Security Agreement, together with such other security documents, as
well as appropriate PPSA financing statements, all in form and substance
satisfactory to Agent (including being sufficient to grant Agent a first
priority Lien (subject to Permitted Liens) in and to the assets of Canadian
Company, (b) to amend this Agreement, in form and substance acceptable to Agent,
to provide for cash management and make the other provisions of this Agreement
applicable to Canadian Company and (c) provide to Agent all other documentation,
including Control Agreements and one or more opinions of counsel satisfactory to
Agent, which in its opinion is appropriate with respect to the execution and
delivery of the applicable documentation
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referred to above. Any document, agreement, or instrument executed or issued
pursuant to this SECTION 6.19 shall be a Loan Document.
7. NEGATIVE COVENANTS.
Each Company covenants and agrees that, until termination of all
of the Commitments and payment in full of the Obligations, Companies will not,
and will not permit UK Company to, do any of the following:
7.1. INDEBTEDNESS.
Create, incur, assume, suffer to exist, guaranty, or otherwise
become or remain, directly or indirectly, liable with respect to any
Indebtedness, except:
(a) Indebtedness evidenced by this Agreement and the other Loan
Documents, together with Indebtedness owed to Underlying Issuers with respect to
Underlying Letters of Credit;
(b) Indebtedness set forth on SCHEDULE 5.20;
(c) Permitted Purchase Money Indebtedness;
(d) refinancings, renewals, or extensions of Indebtedness
permitted under clauses (b) and (c) of this SECTION 7.1 (and continuance or
renewal of any Permitted Liens associated therewith) so long as: (i) the terms
and conditions of such refinancings, renewals, or extensions do not, in Agent's
reasonable judgment, materially impair the prospects of repayment of the
Obligations by Companies or materially impair UK Company or Companies'
creditworthiness, (ii) such refinancings, renewals, or extensions do not result
in an increase in the then extant principal amount of, or interest rate with
respect to, the Indebtedness so refinanced, renewed, or extended or add one or
more of the UK Company or Companies as liable with respect thereto if such
additional UK Company or Companies, as applicable, were not liable with respect
to the original Indebtedness, (iii) such refinancings, renewals, or extensions
do not result in a shortening of the average weighted maturity of the
Indebtedness so refinanced, renewed, or extended, nor are they on terms or
conditions, that, taken as a whole, are materially more burdensome or
restrictive to UK Company or the applicable Company, (iv) 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 Indebtedness must be include subordination terms and conditions that
are at least as favorable to the Lender Group as those that were applicable to
the refinanced, renewed, or extended Indebtedness, and (v) 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;
(e) endorsement of instruments or other payment items for
deposit;
(f) Indebtedness composing Permitted Investments;
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(g) Indebtedness of a Target existing on the date of a Permitted
Acquisition is consummated (but not incurred in connection with such Permitted
Acquisition) to the extent such Indebtedness was permitted in connection with
such Permitted Acquisition;
(h) Indebtedness consisting of an obligation of Parent to issue
common stock as the purchase price in connection with a Permitted Acquisition;
and
(i) Lease payment obligations incurred in connection with the
Sale Leaseback Transaction.
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 (including Liens that are replacements of Permitted
Liens to the extent that the original Indebtedness is refinanced, renewed, or
extended under SECTION 7.1(d) and so long as the replacement Liens only encumber
those assets that secured the refinanced, renewed, or extended Indebtedness).
7.3. RESTRICTIONS ON FUNDAMENTAL CHANGES.
(a) Effect any merger, consolidation, reorganization, or
recapitalization, or reclassify its outstanding Stock.
(b) Except for Permitted Acquisitions, acquire all or
substantially all of the business of any Person.
(c) Liquidate, wind up, or dissolve itself (or suffer any
liquidation or dissolution).
(d) Convey, sell, lease, license, assign, transfer, or otherwise
dispose of, in one transaction or a series of transactions, all or any
substantial part of its assets.
7.4. DISPOSAL OF ASSETS.
Other than Permitted Dispositions, convey, sell, lease, license,
assign, transfer, or otherwise dispose of any of the assets of UK Company or any
Company.
7.5. CHANGE NAME.
Change UK Company or any Company's name, FEIN, organizational
identification number, state or nation of organization, or organizational
identity; PROVIDED, HOWEVER, that a Company may change its name upon at least 30
days prior written notice by Administrative Borrower to Agent of such change and
so long as, at the time of such written notification, such Company provides any
financing statements necessary to perfect and continue perfected Agent's Liens.
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7.6. NATURE OF BUSINESS.
Make any change in the principal nature of their business.
7.7. PREPAYMENTS AND AMENDMENTS.
Except in connection with a refinancing permitted by
SECTION 7.1(d),
(a) prepay, redeem, defease, purchase, or otherwise acquire any
Indebtedness of any Company, other than the Obligations in accordance with this
Agreement, or
(b) directly or indirectly, amend, modify, alter, increase, or
change any of the terms or conditions of any agreement, instrument, document,
indenture, or other writing evidencing or concerning Indebtedness permitted
under SECTION 7.1(b) or (c) or the Preferred Stock.
7.8. CHANGE OF CONTROL.
Cause, permit, or suffer, directly or indirectly, any Change of
Control.
7.9. CONSIGNMENTS.
Consign any of their Inventory or sell any of their Inventory on
▇▇▇▇ and hold, sale or return, sale on approval, or other conditional terms of
sale.
7.10. DISTRIBUTIONS.
Other than distributions or declaration and payment of dividends
by UK Company or a Company to another Company, make any distribution or declare
or pay any dividends (in cash or other property, other than common Stock) on, or
purchase, acquire, redeem, or retire any of UK Company's or any Company's Stock,
of any class, whether now or hereafter outstanding; provided that (a) Parent may
pay dividends on its Initial Preferred Stock at the stated rate applicable
thereto in an amount not to exceed $525,000 per calendar quarter and on its
Additional Preferred Stock at the stated rate applicable thereto in an amount
not to exceed $190,000 in any calendar quarter, in each case so long as after
giving effect thereto no Event of Default exists and (b) Parent may redeem the
Preferred Stock on a Redemption Date on or after March 15, 2006 pursuant to the
terms thereof so long as prior to any such redemption, Parent exercises its
option to convert the maximum amount of such Preferred Stock to common stock
(except that Parent shall not be obligated to exercise such right of conversion
and may use such amount of cash as Parent elects in connection with such
redemption so long as after giving effect to such redemption the sum of
Qualified Cash plus Excess Availability exceeds $25,000,000).
7.11. ACCOUNTING METHODS.
Modify or change their fiscal year or their method of accounting
(other than as may be required to conform to GAAP or SEC) or enter into, modify,
or terminate any
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agreement currently existing, or at any time hereafter entered into with any
third party accounting firm or service bureau for the preparation or storage of
UK Company or Companies' accounting records without said accounting firm or
service bureau agreeing to provide Agent information regarding UK Company or
Companies' financial condition.
7.12. INVESTMENTS.
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; PROVIDED, HOWEVER, that
Companies shall not have Permitted Investments (other than in the Cash
Management Accounts) in Deposit Accounts or Securities Accounts in an aggregate
amount in excess of $100,000 outstanding at any one time unless Companies and
the applicable securities intermediary or bank have entered into Control
Agreements or similar arrangements governing such Permitted Investments in order
to perfect (and further establish) the Agent's Liens in such Permitted
Investments. Subject to the foregoing proviso, Companies shall not establish or
maintain any Deposit Account or Securities Account unless Agent shall have
received a Control Agreement in respect of such Deposit Account or Securities
Account.
7.13. TRANSACTIONS WITH AFFILIATES.
Except as set forth in SCHEDULE 7.13, directly or indirectly
enter into or permit to exist any transaction with any Affiliate of UK Company
or any Company except for transactions that are in the ordinary course of
Companies' business, upon fair and reasonable terms, that are fully disclosed to
Agent, and that are no less favorable to UK Company or Companies, as applicable,
than would be obtained in an arm's length transaction with a non-Affiliate.
Without limiting the foregoing, neither UK Company nor any Company shall enter
into any transaction, make an Investment or otherwise transfer any of its
property to any Inactive Company and no Company shall make an Investment or
otherwise transfer any of its property to UK Company (except to the extent such
Investment is a Permitted Investment) or Canadian Company (except to the extent
Canadian Company has executed the Canadian Guaranty and Canadian Security
Agreement and Companies have complied with SECTION 6.19); provided however that
Companies may enter into transactions with Midway/Nintendo Inc. provided that
such a transaction is upon fair and reasonable terms, that are fully disclosed
to Agent, and that are no less favorable to such Company or Midway/Nintendo Inc.
than would be obtained in an arms length transaction with a non-Affiliate not to
exceed $250,000 per year.
7.14. SUSPENSION.
Cease to maintain the home video game business as their principal
business.
7.15. COMPENSATION.
For all time periods after Parent ceases to be a reporting
company under the Securities Exchange Act of 1934, increase the annual fee or
per-meeting fees paid to the
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members of its Board of Directors during any year by more than 15% over the
prior year; pay or accrue total cash compensation, during any year, to its
officers and senior management employees in an aggregate amount in excess of
115% of that paid or accrued in the prior year.
7.16. USE OF PROCEEDS.
Use the proceeds of the Advances and the Term Loan 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 to Existing
Lender, and (ii) to pay transactional fees, costs, and 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, for its lawful and permitted purposes.
7.17. INVENTORY AND EQUIPMENT WITH BAILEES.
Except as set forth on SCHEDULE 5.5, store the Inventory or
Equipment (other than the Development Kits) of Companies at any time now or
hereafter with a bailee, warehouseman, or similar party without Agent's prior
written consent.
7.18. FINANCIAL COVENANTS.
(a) Fail to maintain the sum of Qualified Cash plus Excess
Availability at all times during each month of at least the applicable amount
set forth in the following table for the applicable month set forth opposite
thereto:
APPLICABLE AMOUNT APPLICABLE PERIOD
----------------- -----------------
$ 30,300,000 January 2004
$ 34,400,000 February 2004
$ 29,200,000 March 2004
$ 21,500,000 April 2004
$ 20,000,000 May 2004
$ 23,400,000 June 2004
$ 20,000,000 July 2004
$ 20,000,000 August 2004
$ 17,500,000 September 2004
$ 20,000,000 October 2004
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APPLICABLE AMOUNT APPLICABLE PERIOD
----------------- -----------------
$ 15,000,000 November 2004
$ 20,000,000 December 2004
Such amount as is agreed Each month after December 2004
to by Borrowers and
Required Lenders based
upon the Projections most
recently delivered to
Agent pursuant to Section
6.3(c) and approved by
Required Lenders (but if
not approved by Required
Lenders or if Borrowers
and Required Lenders
cannot agree, the
applicable amount shall
be $20,000,000)
(b) Make:
(i) Capital Expenditures. Capital expenditures in any
fiscal year in excess of the amount set forth in the following table for
the applicable period:
FISCAL YEAR 2005 AND EACH
FISCAL YEAR 2004 SUBSEQUENT FISCAL YEAR
---------------- --------------------------
$ 4,000,000 125% of the capital expenditure
plan delivered pursuant to
Section 6.3 hereof.
7.19. SUBSIDIARIES.
Except in connection with a Permitted Acquisition, establish,
create or acquire any new Subsidiary without Agent's prior written consent.
7.20. COPYRIGHTS.
Register with the applicable federal filing office (a) any works
protectable by copyrights (including the initial versions thereof) or (b) any
changes to copyrights that have already been registered by such Person with the
applicable federal filing office, unless, in each case, Administrative Borrower
shall provide at least 15 days prior written notice to Agent of any such
registration such that Agent may perfect its Lien on such registration.
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7.21. EXCLUDED INVENTORY
Permit the average value of Excluded Inventory of the Companies
(as calculated for the most recently ended 6 month period) to exceed 25% of the
average value of Inventory of the Companies (as calculated for the most recently
ended 6 month period).
8. 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:
8.1 If Companies fail to pay when due and payable or when
declared due and payable, all or any portion of the Obligations (whether of
principal, interest (including any interest which, but for the provisions of the
Bankruptcy Code, would have accrued on such amounts), fees and charges due the
Lender Group, reimbursement of Lender Group Expenses, or other amounts
constituting Obligations);
8.2 If Companies:
(a) fail or neglect to perform, keep, or observe any
term, provision, covenant, or agreement contained in SECTIONS
2.7, 3.2, 4.2, 4.4, 4.6, 6.8, 6.12, 6.15, 6.17, 6.18, 6.19, and
7.1 through 7.21 of this Agreement;
(b) fail or neglect to perform, keep, or observe any
term, provision, covenant, or agreement contained in SECTIONS
4.5, 6.2, 6.3, 6.5, 6.6, 6.7, 6.9, 6.10, 6.11, and 6.14 of this
Agreement and such failure continues for a period of 5 Business
Days; or
(c) fail or neglect to perform, keep, or observe any
other term, provision, covenant, or agreement contained in this
Agreement, or in any of the other Loan Documents (giving effect
to any grace periods, cure periods, or required notices, if any,
expressly provided for in such Loan Documents), in each case,
other than any such term, provision, covenant, or agreement that
is the subject of another provision of this SECTION 8 (in which
event such other provision of this SECTION 8 shall govern), and
such failure continues for a period of 10 Business Days;
PROVIDED THAT, during any period of time that any such failure or neglect
referred to in this paragraph exists, even if such failure or neglect is not yet
an Event of Default, Lender shall be relieved of its obligation to extend credit
hereunder;
8.3 If any material portion of any Company's assets is
attached, seized, subjected to a writ or distress warrant, levied upon, or comes
into the possession of any third Person;
8.4 If an Insolvency Proceeding is commenced by any Company;
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8.5 If an Insolvency Proceeding is commenced against any
Company, and any of the following events occur: (a) the applicable Company
consents to the institution of the Insolvency Proceeding against it, (b) the
petition commencing the Insolvency Proceeding is not timely controverted;
PROVIDED, HOWEVER, that, during the pendency of such period, each member of the
Lender Group shall be relieved of its obligations to extend credit hereunder,
(c) the petition commencing the Insolvency Proceeding is not dismissed within 45
calendar days of the date of the filing thereof; PROVIDED, HOWEVER, that, during
the pendency of such period, each member of the Lender Group shall be relieved
of its obligation to extend credit hereunder, (d) an interim trustee,
administrator, receiver or other similar officer 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, any Company, or (e) an order
for relief shall have been entered therein;
8.6 If any Company is enjoined, restrained, or in any way
prevented by court order from continuing to conduct all or any material part of
its business affairs;
8.7 If a notice of Lien, levy, or assessment is filed of
record with respect to any Company's assets by the United States, Canada or the
UK, or any department, agency, or instrumentality thereof, or by any state,
province, county, municipal, or governmental agency, or if any taxes or debts
owing at any time hereafter to any one or more of such entities becomes a Lien,
whether ▇▇▇▇▇▇ or otherwise, upon any Company's assets and the same is not paid
before such payment is delinquent;
8.8 If a judgment or other claim becomes a Lien or encumbrance
upon any material portion of any Company's properties or assets;
8.9 If any Company is in default under a Platform License with
respect to a Material Videogame or a Platform License with respect to a Material
Videogame is terminated; the licensor under a Platform License does not approve,
or ceases production of, a videogame projected by Companies to be one of the top
five selling games during a year; if any Company is in default under a license
(other than a license not material or integral to the operation or value of a
Material Videogame) associated with a Material Videogame or a license under
which any Company is a party and that is associated with a Material Videogame is
terminated; if there is a default in any material agreement to which any Company
is a party and such default (a) occurs at the final maturity of the obligations
thereunder, or (b) results in a right by the other party thereto, irrespective
of whether exercised, to accelerate the maturity of the applicable Company's
obligations thereunder, or to terminate such agreement;
8.10 If any Company makes any payment on account of
Indebtedness that has been contractually subordinated in right of payment to the
payment of the Obligations, except to the extent such payment is permitted by
the terms of the subordination provisions applicable to such Indebtedness;
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8.11 If any misstatement or misrepresentation in any material
respects exists now or hereafter in any warranty, representation, statement, or
Record made to the Lender Group by any Company, or any officer, employee, agent,
or director of any Company;
8.12 If the obligation of U.S. Credit Parties under the U.S.
Credit Party Guaranty is limited or terminated by operation of law or by a U.S.
Credit Party thereunder;
8.13 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 permitted by the terms hereof or thereof,
first priority Lien on or security interest in the Collateral covered hereby or
thereby; or
8.14 Any provision of any Loan Document shall at any time for
any reason be declared to be null and void, or the validity or enforceability
thereof shall be contested by any Company, or a proceeding shall be commenced by
any Company, or by any Governmental Authority having jurisdiction over any
Company, seeking to establish the invalidity or unenforceability thereof, or any
Company shall deny that it has any liability or obligation purported to be
created under any Loan Document.
9. THE LENDER GROUP'S RIGHTS AND REMEDIES.
9.1. RIGHTS AND REMEDIES.
Upon the occurrence, and during the continuation, of an Event of
Default, the Required Lenders (at their election but without notice of their
election and without demand) may authorize and instruct Agent and, in respect of
the UK Stock Pledge Agreement, the UK Security Trustee to do any one or more of
the following on behalf of the Lender Group (and Agent, acting upon the
instructions of the Required Lenders, shall do the same on behalf of the Lender
Group), all of which are authorized by Companies:
(a) Declare all Obligations, whether evidenced by this
Agreement, by any of the other Loan Documents, or otherwise, immediately due and
payable;
(b) Cease advancing money or extending credit to or for the
benefit of Borrowers under this Agreement, under any of the Loan Documents, or
under any other agreement between Borrowers and the Lender Group;
(c) Terminate this Agreement and any of the other Loan Documents
as to any future liability or obligation of the Lender Group, but without
affecting any of the Agent's Liens in the Collateral and without affecting the
Obligations;
(d) Settle or adjust disputes and claims directly with Grantors'
Account Debtors for amounts and upon terms which Agent considers advisable, and
in such cases, Agent will credit the Loan Account with only the net amounts
received by Agent in payment of such disputed Accounts after deducting all
Lender Group Expenses incurred or expended in connection therewith;
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(e) Cause Grantors to hold all of their returned Inventory for
the Lender Group and segregate all such Inventory from all other assets of
Grantors or in Grantors' possession;
(f) Without notice to or demand upon any Grantor, make such
payments and do such acts as Agent considers necessary or reasonable to protect
its security interests in the Collateral. Each Grantor agrees to assemble the
Collateral if Agent so requires, and to make the Collateral available to Agent
at a place that Agent may designate which is reasonably convenient to both
parties. Each Grantor authorizes Agent to enter the premises where the
Collateral is located, to take and maintain possession of the Collateral, or any
part of it, and to pay, purchase, contest, or compromise any Lien that in
Agent's determination appears to conflict with the Agent's Liens in and to the
Collateral and to pay all expenses incurred in connection therewith and to
charge Borrowers' Loan Account therefor. With respect to any of Grantors' owned
or leased premises, each Grantor hereby grants Agent a license to enter into
possession of such premises and to occupy the same, without charge, in order to
exercise any of the Lender Group's rights or remedies provided herein, at law,
in equity, or otherwise;
(g) Without notice to any Company (such notice being expressly
waived), and without constituting an acceptance of any collateral in full or
partial satisfaction of an obligation (within the meaning of the Code), set off
and apply to the Obligations any and all (i) balances and deposits of any
Company held by the Lender Group (including any amounts received in the Cash
Management Accounts or Collection Accounts), or (ii) Indebtedness at any time
owing to or for the credit or the account of any Company held by the Lender
Group;
(h) Hold, as cash collateral, any and all balances and deposits
of any Company held by the Lender Group, and any amounts received in the Cash
Management Accounts, to secure the full and final repayment of all of the
Obligations;
(i) Ship, reclaim, recover, store, finish, maintain, repair,
prepare for sale, advertise for sale, and sell (in the manner provided for
herein) the Grantor Collateral. Each Grantor hereby grants to Agent a license or
other right to use, without charge, such Grantor's labels, patents, copyrights,
trade secrets, trade names, trademarks, service marks, and advertising matter,
or any property of a similar nature, as it pertains to the Grantor Collateral,
in completing production of, advertising for sale, and selling any Grantor
Collateral and such Grantor's rights under all licenses and all franchise
agreements shall inure to the Lender Group's benefit;
(j) Sell the Grantor Collateral at either a public or private
sale, or both, by way of one or more contracts or transactions, for cash or on
terms, in such manner and at such places (including Grantors' premises) as Agent
determines is commercially reasonable. It is not necessary that the Grantor
Collateral be present at any such sale;
(k) Agent shall give notice of the disposition of the Grantor
Collateral as follows:
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(i) Agent shall give Administrative Borrower (for the
benefit of the applicable Grantor) a notice in writing of the time and
place of public sale, or, if the sale is a private sale or some other
disposition other than a public sale is to be made of the Grantor
Collateral, the time on or after which the private sale or other
disposition is to be made; and
(ii) The notice shall be personally delivered or mailed,
postage prepaid, to Administrative Borrower as provided in SECTION 12, at
least 10 days before the earliest time of disposition set forth in the
notice; no notice needs to be given prior to the disposition of any portion
of the Grantor Collateral that is perishable or threatens to decline
speedily in value or that is of a type customarily sold on a recognized
market;
(l) Agent, on behalf of the Lender Group may credit bid and
purchase at any public sale;
(m) Agent may seek the appointment of a receiver or keeper to
take possession of all or any portion of the Grantor Collateral or to operate
same and, to the maximum extent permitted by law, may seek the appointment of
such a receiver without the requirement of prior notice or a hearing; and
(n) The Lender Group shall have all other rights and remedies
available to it at law or in equity pursuant to any other Loan Documents;
PROVIDED, HOWEVER, that upon the occurrence of any Event of Default described in
SECTION 8.4 or SECTION 8.5, in addition to the remedies set forth above, without
any notice to Grantors or any other Person or any act by the Lender Group, the
Commitments shall automatically terminate and the Obligations then outstanding,
together with all accrued and unpaid interest thereon, and all fees and all
other amounts due under this Agreement and the other Loan Documents, shall
automatically and immediately become due and payable, without presentment,
demand, protest, or notice of any kind, all of which are expressly waived by
Grantors.
9.2. REMEDIES CUMULATIVE.
The rights and remedies of the Lender Group under this Agreement,
the other Loan Documents, and all other agreements shall be cumulative. The
Lender Group shall have all other rights and remedies not inconsistent herewith
as provided under the Code, by law, or in equity. No exercise by the Lender
Group of one right or remedy shall be deemed an election, and no waiver by the
Lender Group of any Event of Default shall be deemed a continuing waiver. No
delay by the Lender Group shall constitute a waiver, election, or acquiescence
by it.
10. TAXES AND EXPENSES.
If any Company fails to pay any monies (whether taxes,
assessments, insurance premiums, or, in the case of leased properties or assets,
rents or other amounts payable under such leases) due to third Persons, or fails
to make any deposits or furnish any
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required proof of payment or deposit, all as required under the terms of this
Agreement, then, Agent, in its sole discretion and without prior notice to any
Company, may do any or all of the following: (a) make payment of the same or any
part thereof, (b) set up such reserves in Borrowers' Loan Account as Agent deems
necessary to protect the Lender Group from the exposure created by such failure,
or (c) in the case of the failure to comply with SECTION 6.8 hereof, obtain and
maintain insurance policies of the type described in SECTION 6.8 and take any
action with respect to such policies as Agent deems prudent. Any such amounts
paid by Agent shall constitute Lender Group Expenses and any such payments shall
not constitute an agreement by the Lender Group to make similar payments in the
future or a waiver by the Lender Group of any Event of Default under this
Agreement. Agent need not inquire as to, or contest the validity of, any such
expense, tax, or Lien and the receipt of the usual official notice for the
payment thereof shall be conclusive evidence that the same was validly due and
owing.
11. WAIVERS; INDEMNIFICATION.
11.1. DEMAND; PROTEST; ETC.
To the fullest extent permitted by law and except as otherwise
provided in the Loan Documents, each Company 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 guaranties at any time held by the
Lender Group on which any such Company may in any way be liable.
11.2. THE LENDER GROUP'S LIABILITY FOR GRANTOR COLLATERAL.
Each Grantor hereby agrees that: (a) so long as the Lender Group
complies with its obligations, if any, under the Code, including Section 9-603
and those sections enumerated in Section 9-602 of the Code, Agent shall not in
any way or manner be liable or responsible for: (i) the safekeeping of the
Grantor 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 Grantor
Collateral shall be borne by Grantors.
11.3. INDEMNIFICATION.
Each Company shall pay, indemnify, defend, and hold the
Agent-Related Persons, the Lender-Related Persons, and each Participant (each,
an "INDEMNIFIED PERSON") harmless (to the fullest extent permitted by law) from
and against any and all claims, demands, suits, actions, investigations,
proceedings, and damages, and all reasonable attorneys fees and disbursements
and other costs and expenses actually incurred in connection therewith (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, delivery, enforcement,
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performance, or administration (including any restructuring 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 Companies'
compliance with the terms of the Loan Documents, and (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 (all the
foregoing, collectively, the "INDEMNIFIED LIABILITIES"). The foregoing to the
contrary notwithstanding, Companies shall have no 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. 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
Companies were required to indemnify the Indemnified Person receiving such
payment, the Indemnified Person making such payment is entitled to be
indemnified and reimbursed by Companies 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 ACT OR OMISSION OF SUCH INDEMNIFIED PERSON OR OF ANY
OTHER PERSON.
12. NOTICES.
Unless otherwise provided in this Agreement, all notices or
demands by Companies or Agent to the other 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 registered or certified mail
(postage prepaid, return receipt requested), overnight courier, electronic mail
(at such email addresses as Administrative Borrower or Agent, as applicable, may
designate to each other in accordance herewith), or telefacsimile to Companies
in care of Administrative Borrower or to Agent, as the case may be, at its
address set forth below:
If to Borrower: MIDWAY HOME ENTERTAINMENT INC.
C/O
MIDWAY GAMES INC.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Chief Financial Officer and
General Counsel
Fax No. ▇▇▇-▇▇▇-▇▇▇▇
with copies to: Shack ▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇ P.C.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Fax No. ▇▇▇-▇▇▇-▇▇▇▇
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If to Agent or UK ▇▇▇▇▇ FARGO FOOTHILL, INC.
Security Trustee: ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Business Finance Manager
Fax No. ▇▇▇-▇▇▇-▇▇▇▇
▇▇▇▇▇ FARGO FOOTHILL, INC.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Business Finance Manager
Fax No. ▇▇▇-▇▇▇-▇▇▇▇
with copies to: GOLDBERG, KOHN, BELL, BLACK,
▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, LTD.
▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
Fax No. ▇▇▇-▇▇▇-▇▇▇▇
Agent and Companies may change the address at which they are to
receive notices hereunder, by notice in writing in the foregoing manner given to
the other party. All notices or demands sent in accordance with this SECTION 12,
other than notices by Agent in connection with enforcement rights against the
Grantor Collateral under the provisions of the Code, shall be deemed received on
the earlier of the date of actual receipt or 3 Business Days after the deposit
thereof in the mail. Each Grantor acknowledges and agrees that notices sent by
the Lender Group in connection with the exercise of enforcement rights against
Grantor Collateral under the provisions of the Code shall be deemed sent when
deposited in the mail or personally delivered, or, where permitted by law,
transmitted by telefacsimile or any other method set forth above.
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 SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF
ILLINOIS.
(b) THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN
CONNECTION WITH THIS AGREEMENT AND
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THE OTHER LOAN DOCUMENTS SHALL BE TRIED AND LITIGATED ONLY IN THE STATE AND
FEDERAL COURTS LOCATED IN THE COUNTY OF ▇▇▇▇, STATE OF
ILLINOIS, PROVIDED,
HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY GRANTOR COLLATERAL OR
OTHER PROPERTY MAY BE BROUGHT, AT AGENT'S OPTION, IN THE COURTS OF ANY
JURISDICTION WHERE AGENT ELECTS TO BRING SUCH ACTION OR WHERE SUCH GRANTOR
COLLATERAL OR OTHER PROPERTY MAY BE FOUND. COMPANIES AND THE LENDER GROUP WAIVE,
TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH 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).
COMPANIES AND THE LENDER GROUP HEREBY WAIVE THEIR RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION 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. COMPANIES AND THE LENDER GROUP REPRESENT THAT
EACH HAS REVIEWED THIS WAIVER AND EACH 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.
14. ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS.
14.1. ASSIGNMENTS AND PARTICIPATIONS.
(a) Any Lender may assign and delegate to one or more assignees
(each an "ASSIGNEE") that are Eligible Transferees all, or any ratable part of
all, of the Obligations, the Commitments and the other rights and obligations of
such Lender hereunder and under the other Loan Documents, in a minimum amount of
$5,000,000; PROVIDED, HOWEVER, that Companies and Agent may continue to deal
solely and directly with such Lender in connection with the interest so assigned
to an Assignee until (i) written notice of such assignment, together with
payment instructions, addresses, and related information with respect to the
Assignee, have been given to Administrative Borrower and Agent by such Lender
and the Assignee, (ii) such Lender and its Assignee have delivered to
Administrative Borrower and Agent an Assignment and Acceptance, and (iii) the
assignor Lender or Assignee has paid to Agent for Agent's separate account a
processing fee in the amount of $5,000. Anything contained herein to the
contrary notwithstanding, the payment of any fees shall not be required and the
Assignee need not be an Eligible Transferee if such assignment is in connection
with any merger, consolidation, sale, transfer, or other disposition of all or
any substantial portion of the business or loan portfolio of the assigning
Lender.
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(b) From and after the date that Agent notifies the assignor
Lender (with a copy to Administrative Borrower) that it has received an executed
Assignment and Acceptance and payment of the above-referenced processing fee,
(i) the Assignee thereunder shall be a party hereto and, to the extent that
rights and obligations hereunder have been assigned to it pursuant to such
Assignment and Acceptance, shall have the rights and obligations of a Lender
under the Loan Documents, and (ii) the assignor Lender shall, to the extent that
rights and obligations hereunder and under the other Loan Documents have been
assigned by it pursuant to such Assignment and Acceptance, relinquish its rights
(except with respect to SECTION 11.3 hereof) and be released from any future
obligations under this Agreement (and in the case of an Assignment and
Acceptance covering all or the remaining portion of an assigning Lender's rights
and obligations under this Agreement and the other Loan Documents, such Lender
shall cease to be a party hereto and thereto), and such assignment shall effect
a novation between Companies and the Assignee; PROVIDED, HOWEVER, that nothing
contained herein shall release any assigning Lender from obligations that
survive the termination of this Agreement, including such assigning Lender's
obligations under ARTICLE 16 and SECTION 17.8 of this Agreement.
(c) By executing and delivering an Assignment and Acceptance,
the assigning Lender thereunder and the Assignee thereunder confirm to and agree
with each other and the other parties hereto as follows: (1) other than as
provided in such Assignment and Acceptance, such assigning Lender makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement or any other Loan Document furnished
pursuant hereto, (2) such assigning Lender makes no representation or warranty
and assumes no responsibility with respect to the financial condition of
Companies or the performance or observance by Companies of any of their
obligations under this Agreement or any other Loan Document furnished pursuant
hereto, (3) such Assignee confirms that it has received a copy of this
Agreement, together with such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such
Assignment and Acceptance, (4) such Assignee will, independently and without
reliance upon Agent, such assigning Lender or any other Lender, and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement, (5) such Assignee appoints and authorizes Agent to take such
actions and to exercise such powers under this Agreement as are delegated to
Agent, by the terms hereof, together with such powers as are reasonably
incidental thereto, and (6) such Assignee agrees that it will perform all of the
obligations which by the terms of this Agreement are required to be performed by
it as a Lender.
(d) Immediately upon Agent's receipt of the required processing
fee payment and the fully executed Assignment and Acceptance, this Agreement
shall be deemed to be amended to the extent, but only to the extent, necessary
to reflect the addition of the Assignee and the resulting adjustment of the
Commitments arising therefrom. The Commitment allocated to each Assignee shall
reduce such Commitments of the assigning Lender PRO TANTO.
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(e) Any Lender may at any time, with the written consent of
Agent, sell to one or more commercial banks, financial institutions, or other
Persons not Affiliates of such Lender (a "PARTICIPANT") participating interests
in its Obligations, the Commitment, and the other rights and interests of that
Lender (the "ORIGINATING LENDER") hereunder and under the other Loan Documents
(provided that no written consent of Agent shall be required in connection with
any sale of any such participating interests by a Lender to an Eligible
Transferee); PROVIDED, HOWEVER, that (i) the Originating Lender shall remain a
"Lender" for all purposes of this Agreement and the other Loan Documents and the
Participant receiving the participating interest in the Obligations, the
Commitments, and the other rights and interests of the Originating Lender
hereunder shall not constitute a "Lender" hereunder or under the other Loan
Documents and the Originating Lender's obligations under this Agreement shall
remain unchanged, (ii) the Originating Lender shall remain solely responsible
for the performance of such obligations, (iii) Companies, Agent, and the Lenders
shall continue to deal solely and directly with the Originating Lender in
connection with the Originating Lender's rights and obligations under this
Agreement and the other Loan Documents, (iv) no Lender shall transfer or grant
any participating interest under which the Participant has the right to approve
any amendment to, or any consent or waiver with respect to, this Agreement or
any other Loan Document (or enter into any agreement not to consent to any
particular action or otherwise attempt to circumvent this provision), except to
the extent such amendment to, or consent or waiver with respect to this
Agreement or of any other Loan Document would (A) extend the final maturity date
of the Obligations hereunder in which such Participant is participating, (B)
reduce the interest rate applicable to the Obligations hereunder in which such
Participant is participating, (C) release all or substantially all of the
Collateral or guaranties (except to the extent expressly provided herein or in
any of the Loan Documents) supporting the Obligations hereunder in which such
Participant is participating, (D) postpone the payment of, or reduce the amount
of, the interest or fees payable to such Participant through such Lender, or (E)
change the amount or due dates of scheduled principal repayments or prepayments
or premiums; and (v) all amounts payable by Companies hereunder shall be
determined as if such Lender had not sold such participation; except that, if
amounts outstanding under this Agreement are due and unpaid, or shall have been
declared or shall have become due and payable upon the occurrence of an Event of
Default, each Participant shall be deemed to have the right of set-off in
respect of its participating interest in amounts owing under this Agreement to
the same extent as if the amount of its participating interest were owing
directly to it as a Lender under this Agreement. The rights of any Participant
only shall be derivative through the Originating Lender with whom such
Participant participates and no Participant shall have any rights under this
Agreement or the other Loan Documents or any direct rights as to the other
Lenders, Agent, Companies, the Collections of Companies, the Collateral, or
otherwise in respect of the Obligations. No Participant shall have the right to
participate directly in the making of decisions by the Lenders among themselves.
(f) In connection with any such assignment or participation or
proposed assignment or participation, a Lender may, subject to the provisions of
SECTION 17.8, disclose all documents and information which it now or hereafter
may have relating to Companies and their respective businesses.
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(g) Any other provision in this Agreement notwithstanding, any
Lender may at any time create a security interest in, or pledge, all or any
portion of its rights under and interest in this Agreement in favor of any
Federal Reserve Bank in accordance with Regulation A of the Federal Reserve Bank
or U.S. Treasury Regulation 31 CFR Section 203.24, and such Federal Reserve Bank
may enforce such pledge or security interest in any manner permitted under
applicable law.
14.2. SUCCESSORS.
This Agreement shall bind and inure to the benefit of the
respective successors and assigns of each of the parties; PROVIDED, HOWEVER,
that Companies may not assign this Agreement or any rights or duties hereunder
without the Lenders' prior written consent and any prohibited assignment shall
be absolutely void AB INITIO. No consent to assignment by the Lenders shall
release any Company from its Obligations. A Lender may assign this Agreement and
the other Loan Documents and its rights and duties hereunder and thereunder
pursuant to SECTION 14.1 hereof and, except as expressly required pursuant to
SECTION 14.1 hereof, no consent or approval by any Company is required in
connection with any such assignment.
15. AMENDMENTS; WAIVERS.
15.1. AMENDMENTS AND WAIVERS.
No amendment or waiver of any provision of this Agreement or any
other Loan Document, and no consent with respect to any departure by Companies
therefrom, shall be effective unless the same shall be in writing and signed by
the Required Lenders (or by Agent at the written request of the Required
Lenders) and Administrative Borrower (on behalf of all Companies) and then any
such waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given; PROVIDED, HOWEVER, that no such waiver,
amendment, or consent shall, unless in writing and signed by all of the Lenders
affected thereby and Administrative Borrower (on behalf of all Companies) and
acknowledged by Agent, do any of the following:
(a) increase or extend any Commitment of any Lender,
(b) postpone or delay any date fixed by this Agreement or any
other Loan Document for any payment of principal, interest, fees, or other
amounts due hereunder or under any other Loan Document,
(c) reduce the principal of, or the rate of interest on, any
loan or other extension of credit hereunder, or reduce any fees or other amounts
payable hereunder or under any other Loan Document,
(d) change the percentage of the Commitments that is required to
take any action hereunder,
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(e) amend or modify this Section or any provision of the
Agreement providing for consent or other action by all Lenders,
(f) release Collateral other than as permitted by SECTION 16.12,
(g) change the definition of "Required Lenders" or "Pro Rata
Share",
(h) contractually subordinate any of the Agent's Liens,
(i) release any Company from any obligation for the payment of
money, or
(j) change the definition of Borrowing Base or the definitions
of Eligible Accounts, Maximum Revolver Amount, Term Loan Amount, or change
SECTION 2.1(b); or
(k) amend any of the provisions of SECTION 16.
and, PROVIDED FURTHER, HOWEVER, that no amendment, waiver or consent shall,
unless in writing and signed by Agent, Issuing Lender, or Swing Lender, affect
the rights or duties of Agent, Issuing Lender, or Swing Lender, as applicable,
under this Agreement or any other Loan Document. The foregoing notwithstanding,
any amendment, modification, waiver, consent, termination, or release of, or
with respect to, any provision of this Agreement or any other Loan Document that
relates only to the relationship of the Lender Group among themselves, and that
does not affect the rights or obligations of Companies, shall not require
consent by or the agreement of Companies.
15.2. REPLACEMENT OF HOLDOUT LENDER.
If any action to be taken by the Lender Group or Agent hereunder
requires the unanimous consent, authorization, or agreement of all Lenders, and
a Lender ("Holdout Lender") fails to give its consent, authorization, or
agreement, then Agent, upon at least 5 Business Days prior irrevocable notice to
the Holdout Lender, may permanently replace the Holdout Lender with one or more
substitute Lenders (each, a "Replacement Lender"), and the Holdout Lender shall
have no right to refuse to be replaced hereunder. Such notice to replace the
Holdout Lender shall specify an effective date for such replacement, which date
shall not be later than 15 Business Days after the date such notice is given.
Prior to the effective date of such replacement, the Holdout
Lender and each Replacement Lender shall execute and deliver an Assignment and
Acceptance Agreement, subject only to the Holdout Lender being repaid its share
of the outstanding Obligations (including an assumption of its Pro Rata Share of
the Risk Participation Liability) without any premium or penalty of any kind
whatsoever. If the Holdout Lender shall refuse or fail to execute and deliver
any such Assignment and Acceptance prior to the effective date of such
replacement, the Holdout Lender shall be deemed to have executed and delivered
such Assignment and Acceptance. The replacement of any Holdout Lender shall be
made in accordance with the terms of SECTION 14.1. Until such time as the
Replacement Lenders shall have acquired all of the Obligations, the Commitments,
and the other rights and obligations of the Holdout Lender hereunder and under
the other Loan Documents, the Holdout Lender
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shall remain obligated to make the Holdout Lender's Pro Rata Share of Advances
and to purchase a participation in each Letter of Credit, in an amount equal to
its Pro Rata Share of the Risk Participation Liability of such Letter of Credit.
15.3. NO WAIVERS; CUMULATIVE REMEDIES.
No failure by Agent or any Lender to exercise any right, remedy,
or option under this Agreement or, any other Loan Document, or delay by Agent or
any Lender in exercising the same, will operate as a waiver thereof. No waiver
by Agent or any Lender will be effective unless it is in writing, and then only
to the extent specifically stated. No waiver by Agent or any Lender on any
occasion shall affect or diminish Agent's and each Lender's rights thereafter to
require strict performance by Companies of any provision of this Agreement.
Agent's and each Lender's rights under this Agreement and the other Loan
Documents will be cumulative and not exclusive of any other right or remedy that
Agent or any Lender may have.
16. AGENT; THE LENDER GROUP.
16.1. APPOINTMENT AND AUTHORIZATION OF AGENT.
Each Lender hereby designates and appoints WFF as its
representative under this Agreement and the other Loan Documents and each Lender
hereby irrevocably authorizes Agent to execute and deliver each of the other
Loan Documents on its behalf and to take such other action on its behalf under
the provisions of this Agreement and each other Loan Document and to exercise
such powers and perform such duties as are expressly delegated to Agent by the
terms of this Agreement or any other Loan Document, together with such powers as
are reasonably incidental thereto. Agent agrees to act as such on the express
conditions contained in this SECTION 16. The provisions of this SECTION 16
(other than the proviso to SECTION 16.11(d)) are solely for the benefit of
Agent, and the Lenders, and Companies shall have no rights as a third party
beneficiary of any of the provisions contained herein. Any provision to the
contrary contained elsewhere in this Agreement or in any other Loan Document
notwithstanding, Agent shall not have any duties or responsibilities, except
those expressly set forth herein, nor shall Agent have or be deemed to have any
fiduciary relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Loan Document or otherwise exist against Agent; it being
expressly understood and agreed that the use of the word "Agent" is for
convenience only, that WFF is merely the representative of the Lenders, and only
has the contractual duties set forth herein. Except as expressly otherwise
provided in this Agreement, Agent shall have and may use its sole discretion
with respect to exercising or refraining from exercising any discretionary
rights or taking or refraining from taking any actions that Agent expressly is
entitled to take or assert under or pursuant to this Agreement and the other
Loan Documents. Without limiting the generality of the foregoing, or of any
other provision of the Loan Documents that provides rights or powers to Agent,
Lenders agree that Agent shall have the right to exercise the following powers
as long as this Agreement remains in effect: (a) maintain, in accordance with
its customary business practices, ledgers and records reflecting the status of
the Obligations, the Collateral, the Collections of Companies, and related
matters, (b) execute or file any and all financing or similar statements or
notices, amendments, renewals, supplements, documents, instruments, proofs of
claim, notices and other written agreements with respect to the Loan Documents,
(c) make Advances, for itself or on behalf of Lenders as provided in the Loan
Documents, (d) exclusively receive, apply, and distribute the Collections of
Companies as provided in the Loan Documents, (e) open and maintain such bank
accounts and cash management accounts as Agent deems necessary and appropriate
in accordance with the Loan Documents for the foregoing purposes with respect to
the Collateral and the Collections of Companies, (f) perform, exercise, and
enforce any and all other rights and remedies of the Lender Group with respect
to Companies, the Obligations, the Collateral, the
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Collections of Companies, or otherwise related to any of same as provided in the
Loan Documents, and (g) incur and pay such Lender Group Expenses as Agent may
deem necessary or appropriate for the performance and fulfillment of its
functions and powers pursuant to the Loan Documents.
16.2. DELEGATION OF DUTIES.
Agent may execute any of its duties under this Agreement or any
other Loan Document by or through agents, employees or attorneys-in-fact and
shall be entitled to advice of counsel concerning all matters pertaining to such
duties. Agent shall not be responsible for the negligence or misconduct of any
agent or attorney-in-fact that it selects as long as such selection was made
without gross negligence or willful misconduct.
16.3. LIABILITY OF AGENT.
None of the Agent-Related Persons shall (i) be liable for any
action taken or omitted to be taken by any of them under or in connection with
this Agreement or any other Loan Document or the transactions contemplated
hereby (except for its own gross negligence or willful misconduct), or (ii) be
responsible in any manner to any of the Lenders for any recital, statement,
representation or warranty made by any Company or Affiliate of any Company, or
any officer or director thereof, contained in this Agreement or in any other
Loan Document, or in any certificate, report, statement or other document
referred to or provided for in, or received by Agent under or in connection
with, this Agreement or any other Loan Document, or the validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or any other Loan
Document, or for any failure of any Company or any other party to any Loan
Document to perform its obligations hereunder or thereunder. No Agent-Related
Person shall be under any obligation to any Lender to ascertain or to inquire as
to the observance or performance of any of the agreements contained in, or
conditions of, this Agreement or any other Loan Document, or to inspect the
Books or properties of Companies or the books or records or properties of any of
Companies' Affiliates.
16.4. RELIANCE BY AGENT.
Agent shall be entitled to rely, and shall be fully protected in
relying, upon any writing, resolution, notice, consent, certificate, affidavit,
letter, telegram, facsimile, telex or telephone message, statement or other
document or conversation believed by it to be genuine
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and correct and to have been signed, sent, or made by the proper Person or
Persons, and upon advice and statements of legal counsel (including counsel to
Companies or counsel to any Lender), independent accountants and other experts
selected by Agent. Agent shall be fully justified in failing or refusing to take
any action under this Agreement or any other Loan Document unless Agent shall
first receive such advice or concurrence of the Lenders as it deems appropriate
and until such instructions are received, Agent shall act, or refrain from
acting, as it deems advisable. If Agent so requests, it shall first be
indemnified to its reasonable satisfaction by the Lenders against any and all
liability and expense that may be incurred by it by reason of taking or
continuing to take any such action. Agent shall in all cases be fully protected
in acting, or in refraining from acting, under this Agreement or any other Loan
Document in accordance with a request or consent of the requisite Lenders and
such request and any action taken or failure to act pursuant thereto shall be
binding upon all of the Lenders.
16.5. NOTICE OF DEFAULT OR EVENT OF DEFAULT.
Agent shall not be deemed to have knowledge or notice of the
occurrence of any Default or Event of Default, except with respect to defaults
in the payment of principal, interest, fees, and expenses required to be paid to
Agent for the account of the Lenders and, except with respect to Events of
Default of which Agent has actual knowledge, unless Agent shall have received
written notice from a Lender or Administrative Borrower referring to this
Agreement, describing such Default or Event of Default, and stating that such
notice is a "notice of default." Agent promptly will notify the Lenders of its
receipt of any such notice or of any Event of Default of which Agent has actual
knowledge. If any Lender obtains actual knowledge of any Event of Default, such
Lender promptly shall notify the other Lenders and Agent of such Event of
Default. Each Lender shall be solely responsible for giving any notices to its
Participants, if any. Subject to SECTION 16.4, Agent shall take such action with
respect to such Default or Event of Default as may be requested by the Required
Lenders in accordance with SECTION 9; PROVIDED, HOWEVER, that unless and until
Agent has received any such request, Agent may (but shall not be obligated to)
take such action, or refrain from taking such action, with respect to such
Default or Event of Default as it shall deem advisable.
16.6. CREDIT DECISION.
Each Lender acknowledges that none of the Agent-Related Persons
has made any representation or warranty to it, and that no act by Agent
hereinafter taken, including any review of the affairs of Companies or
Affiliates, shall be deemed to constitute any representation or warranty by any
Agent-Related Person to any Lender. Each Lender represents to Agent that it has,
independently and without reliance upon any Agent-Related Person and based on
such documents and information as it has deemed appropriate, made its own
appraisal of and investigation into the business, prospects, operations,
property, financial and other condition and creditworthiness of Companies and
any other Person party to a Loan Document, and all applicable bank regulatory
laws relating to the transactions contemplated hereby, and made its own decision
to enter into this Agreement and to extend credit to Companies. Each Lender also
represents that it will, independently and without
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reliance upon any Agent-Related Person and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit analysis, appraisals and decisions in taking or not taking action under
this Agreement and the other Loan Documents, and to make such investigations as
it deems necessary to inform itself as to the business, prospects, operations,
property, financial and other condition and creditworthiness of Companies and
any other Person party to a Loan Document. Except for notices, reports, and
other documents expressly herein required to be furnished to the Lenders by
Agent, Agent shall not have any duty or responsibility to provide any Lender
with any credit or other information concerning the business, prospects,
operations, property, financial and other condition or creditworthiness of
Companies and any other Person party to a Loan Document that may come into the
possession of any of the Agent-Related Persons.
16.7. COSTS AND EXPENSES; INDEMNIFICATION.
Agent may incur and pay Lender Group Expenses to the extent Agent
reasonably deems necessary or appropriate for the performance and fulfillment of
its functions, powers, and obligations pursuant to the Loan Documents, including
court costs, attorneys fees and expenses, fees and expenses of financial
accountants, advisors, consultants, and appraisers, costs of collection by
outside collection agencies, auctioneer fees and expenses, and costs of security
guards or insurance premiums paid to maintain the Collateral, whether or not
Companies are obligated to reimburse Agent or Lenders for such expenses pursuant
to the Loan Agreement or otherwise. Agent is authorized and directed to deduct
and retain sufficient amounts from the Collections of Companies received by
Agent to reimburse Agent for such out-of-pocket costs and expenses prior to the
distribution of any amounts to Lenders. In the event Agent is not reimbursed for
such costs and expenses from the Collections of Companies received by Agent,
each Lender hereby agrees that it is and shall be obligated to pay to or
reimburse Agent for the amount of such Lender's Pro Rata Share thereof. Whether
or not the transactions contemplated hereby are consummated, the Lenders shall
indemnify upon demand the Agent-Related Persons (to the extent not reimbursed by
or on behalf of Companies and without limiting the obligation of Companies to do
so), according to their Pro Rata Shares, from and against any and all
Indemnified Liabilities; PROVIDED, HOWEVER, that no Lender shall be liable for
the payment to any Agent-Related Person of any portion of such Indemnified
Liabilities resulting solely from such Person's gross negligence or willful
misconduct nor shall any Lender be liable for the obligations of any Defaulting
Lender in failing to make an Advance or other extension of credit hereunder.
Without limitation of the foregoing, each Lender shall reimburse Agent upon
demand for such Lender's Pro Rata Share of any costs or out-of-pocket expenses
(including attorneys, accountants, advisors, and consultants fees and expenses)
incurred by Agent in connection with the preparation, execution, delivery,
administration, modification, amendment, or enforcement (whether through
negotiations, legal proceedings or otherwise) of, or legal advice in respect of
rights or responsibilities under, this Agreement, any other Loan Document, or
any document contemplated by or referred to herein, to the extent that Agent is
not reimbursed for such expenses by or on behalf of Companies. The undertaking
in this Section shall survive the payment of all Obligations hereunder and the
resignation or replacement of Agent.
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16.8. AGENT IN INDIVIDUAL CAPACITY.
WFF and its Affiliates may make loans to, issue letters of credit
for the account of, accept deposits from, acquire equity interests in, and
generally engage in any kind of banking, trust, financial advisory,
underwriting, or other business with Companies and Affiliates and any other
Person party to any Loan Documents as though WFF were not Agent hereunder, and,
in each case, without notice to or consent of the other members of the Lender
Group. The other members of the Lender Group acknowledge that, pursuant to such
activities, WFF or its Affiliates may receive information regarding Companies or
their Affiliates and any other Person party to any Loan Documents that is
subject to confidentiality obligations in favor of Companies or such other
Person and that prohibit the disclosure of such information to the Lenders, and
the Lenders acknowledge that, in such circumstances (and in the absence of a
waiver of such confidentiality obligations, which waiver Agent will use its
reasonable best efforts to obtain), Agent shall not be under any obligation to
provide such information to them. The terms "Lender" and "Lenders" include WFF
in its individual capacity.
16.9. SUCCESSOR AGENT.
Agent may resign as Agent upon 45 days notice to the Lenders. If
Agent resigns under this Agreement, the Required Lenders shall appoint a
successor Agent for the Lenders. If no successor Agent is appointed prior to the
effective date of the resignation of Agent, Agent may appoint, after consulting
with the Lenders, a successor Agent. If Agent has materially breached or failed
to perform any material provision of this Agreement or of applicable law, the
Required Lenders may agree in writing to remove and replace Agent with a
successor Agent from among the Lenders. In any such event, upon the acceptance
of its appointment as successor Agent hereunder, such successor Agent shall
succeed to all the rights, powers, and duties of the retiring Agent and the term
"Agent" shall mean such successor Agent and the retiring Agent's appointment,
powers, and duties as Agent shall be terminated. After any retiring Agent's
resignation hereunder as Agent, the provisions of this SECTION 16 shall inure to
its benefit as to any actions taken or omitted to be taken by it while it was
Agent under this Agreement. If no successor Agent has accepted appointment as
Agent by the date which is 45 days following a retiring Agent's notice of
resignation, the retiring Agent's resignation shall nevertheless thereupon
become effective and the Lenders shall perform all of the duties of Agent
hereunder until such time, if any, as the Lenders appoint a successor Agent as
provided for above.
16.10. LENDER IN INDIVIDUAL CAPACITY.
Any Lender and its respective Affiliates may make loans to, issue
letters of credit for the account of, accept deposits from, acquire equity
interests in and generally engage in any kind of banking, trust, financial
advisory, underwriting or other business with Companies and Affiliates and any
other Person (other than the Lender Group) party to any Loan Documents as though
such Lender were not a Lender hereunder without notice to or consent of the
other members of the Lender Group. The other members of the Lender Group
acknowledge that, pursuant to such activities, such Lender and its respective
Affiliates may
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receive information regarding Companies or their Affiliates and any other Person
party to any Loan Documents that is subject to confidentiality obligations in
favor of Companies or such other Person and that prohibit the disclosure of such
information to the Lenders, and the Lenders acknowledge that, in such
circumstances (and in the absence of a waiver of such confidentiality
obligations, which waiver such Lender will use its reasonable best efforts to
obtain), such Lender shall not be under any obligation to provide such
information to them. With respect to the Swing Loans and Agent Advances, Swing
Lender shall have the same rights and powers under this Agreement as any other
Lender and may exercise the same as though it were not the sub-agent of the
Agent.
16.11. WITHHOLDING TAXES.
(a) If any Lender is a "foreign person" within the meaning of
the IRC and such Lender claims exemption from, or a reduction of, U.S.
withholding tax under Sections 1441 or 1442 of the IRC, such Lender agrees with
and in favor of Agent and Companies, to deliver to Agent and Administrative
Borrower:
(i) if such Lender claims an exemption from withholding
tax pursuant to its portfolio interest exception, (A) a statement of the
Lender, signed under penalty of perjury, that it is not a (I) a "bank" as
described in Section 881(c)(3)(A) of the IRC, (II) a 10% shareholder of a
Company (within the meaning of Section 871(h)(3)(B) of the IRC), or (iii) a
controlled foreign corporation related to a Company within the meaning of
Section 864(d)(4) of the IRC, and (B) a properly completed and executed IRS
Form W-8BEN, before the first payment of any interest under this Agreement
and at any other time reasonably requested by Agent or Administrative
Borrower;
(ii) if such Lender claims an exemption from, or a
reduction of, withholding tax under a United States tax treaty, properly
completed and executed IRS Form W-8BEN before the first payment of any
interest under this Agreement and at any other time reasonably requested by
Agent or Administrative Borrower;
(iii) if such Lender claims that interest paid under this
Agreement is exempt from United States withholding tax because it is
effectively connected with a United States trade or business of such
Lender, two properly completed and executed copies of IRS Form W-8ECI
before the first payment of any interest is due under this Agreement and at
any other time reasonably requested by Agent or Administrative Borrower;
(iv) such other form or forms as may be required under the
IRC or other laws of the United States as a condition to exemption from, or
reduction of, United States withholding tax.
Such Lender agrees promptly to notify Agent and Administrative Borrower of any
change in circumstances which would modify or render invalid any claimed
exemption or reduction. Agent is not a "foreign person" with in the meaning of
the IRC.
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(b) If any Lender claims exemption from, or reduction of,
withholding tax under a United States tax treaty by providing IRS Form W-8BEN
and such Lender sells, assigns, grants a participation in, or otherwise
transfers all or part of the Obligations of Companies to such Lender, such
Lender agrees to notify Agent of the percentage amount in which it is no longer
the beneficial owner of Obligations of Companies to such Lender. To the extent
of such percentage amount, Agent will treat such Lender's IRS Form W-8BEN as no
longer valid.
(c) If any Lender is entitled to a reduction in the applicable
withholding tax, Agent may withhold from any interest payment to such Lender an
amount equivalent to the applicable withholding tax after taking into account
such reduction. If the forms or other documentation required by subsection (a)
of this Section are not delivered to Agent, then Agent may withhold from any
interest payment to such Lender not providing such forms or other documentation
an amount equivalent to the applicable withholding tax.
(d) If the IRS or any other Governmental Authority of the United
States or other jurisdiction asserts a claim that Agent did not properly
withhold tax from amounts paid to or for the account of any Lender (because the
appropriate form was not delivered, was not properly executed, or because such
Lender failed to notify Agent of a change in circumstances which rendered the
exemption from, or reduction of, withholding tax ineffective, or for any other
reason) such Lender shall indemnify and hold Agent harmless for all amounts
paid, directly or indirectly, by Agent as tax or otherwise, including penalties
and interest, and including any taxes imposed by any jurisdiction on the amounts
payable to Agent under this Section, together with all costs and expenses
(including attorneys fees and expenses). The obligation of the Lenders under
this subsection shall survive the payment of all Obligations and the resignation
or replacement of Agent.
(e) All payments made by Companies hereunder or under any note
or other Loan Document will be made without setoff, counterclaim, or other
defense, except as required by applicable law other than for Taxes (as defined
below). All such payments will be made free and clear of, and without deduction
or withholding for, any present or future taxes, levies, imposts, duties, fees,
assessments or other charges of whatever nature now or hereafter imposed by any
jurisdiction (other than the United States) or by any political subdivision or
taxing authority thereof or therein (other than of the United States) with
respect to such payments (but excluding, any tax imposed by any jurisdiction or
by any political subdivision or taxing authority thereof or therein (i) measured
by or based on the net income or net profits of a Lender, or (ii) to the extent
that such tax results from a change in the circumstances of the Lender,
including a change in the residence, place of organization, or principal place
of business of the Lender, or a change in the branch or lending office of the
Lender participating in the transactions set forth herein) and all interest,
penalties or similar liabilities with respect thereto (all such non-excluded
taxes, levies, imposts, duties, fees, assessments or other charges being
referred to collectively as "Taxes"). If any Taxes are so levied or imposed,
each Company agrees to pay the full amount of such Taxes, and such additional
amounts as may be necessary so that every payment of all amounts due under this
Agreement or under any note, including any amount paid pursuant to this SECTION
16.11(e) after withholding or deduction for or on account of any Taxes, will not
be less than the
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amount provided for herein; PROVIDED, HOWEVER, that Companies shall not be
required to increase any such amounts payable to Agent or any Lender (i) that is
not organized under the laws of the United States, if such Person fails to
comply with the other requirements of this SECTION 16.11, or (ii) if the
increase in such amount payable results from Agent's or such Lender's own
willful misconduct or gross negligence. Companies will furnish to Agent as
promptly as possible after the date the payment of any Taxes is due pursuant to
applicable law certified copies of tax receipts evidencing such payment by
Companies.
16.12. COLLATERAL MATTERS.
(a) The Lenders hereby irrevocably authorize Agent, at its
option and in its sole discretion, to release any Lien on any Collateral (i)
upon the termination of the Commitments and payment and satisfaction in full by
Companies of all Obligations, (ii) constituting property being sold or disposed
of if a release is required or desirable in connection therewith and if
Administrative Borrower certifies to Agent that the sale or disposition is
permitted under SECTION 7.4 of this Agreement or the other Loan Documents (and
Agent may rely conclusively on any such certificate, without further inquiry),
(iii) constituting property in which no Company owned any interest at the time
the Agent's Lien was granted nor at any time thereafter, or (iv) constituting
property leased to a Company under a lease that has expired or is terminated in
a transaction permitted under this Agreement. Except as provided above, Agent
will not execute and deliver a release of any Lien on any Collateral without the
prior written authorization of (y) if the release is of all or substantially all
of the Collateral, all of the Lenders, or (z) otherwise, the Required Lenders.
Upon request by Agent or Administrative Borrower at any time, the Lenders will
confirm in writing Agent's authority to release any such Liens on particular
types or items of Collateral pursuant to this SECTION 16.12; PROVIDED, HOWEVER,
that (1) Agent shall not be required to execute any document necessary to
evidence such release on terms that, in Agent's opinion, would expose Agent to
liability or create any obligation or entail any consequence other than the
release of such Lien without recourse, representation, or warranty, and (2) such
release shall not in any manner discharge, affect, or impair the Obligations or
any Liens (other than those expressly being released) upon (or obligations of
Companies in respect of) all interests retained by Companies, including, the
proceeds of any sale, all of which shall continue to constitute part of the
Collateral.
(b) Agent shall have no obligation whatsoever to any of the
Lenders to assure that the Collateral exists or is owned by Companies or is
cared for, protected, or insured or has been encumbered, or that the Agent's
Liens have been properly or sufficiently or lawfully created, perfected,
protected, or enforced or are entitled to any particular priority, or to
exercise at all or in any particular manner or under any duty of care,
disclosure or fidelity, or to continue exercising, any of the rights,
authorities and powers granted or available to Agent pursuant to any of the Loan
Documents, it being understood and agreed that in respect of the Collateral, or
any act, omission, or event related thereto, subject to the terms and conditions
contained herein, Agent may act in any manner it may deem appropriate, in its
sole discretion given Agent's own interest in the Collateral in its capacity as
one of the Lenders and that Agent shall have no other duty or liability
whatsoever to any Lender as to any of the foregoing, except as otherwise
provided herein.
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16.13. RESTRICTIONS ON ACTIONS BY LENDERS; SHARING OF PAYMENTS.
(a) Each of the Lenders agrees that it shall not, without the
express written consent of Agent, and that it shall, to the extent it is
lawfully entitled to do so, upon the written request of Agent, set off against
the Obligations, any amounts owing by such Lender to Companies or any deposit
accounts of Companies now or hereafter maintained with such Lender. Each of the
Lenders further agrees that it shall not, unless specifically requested to do so
in writing by Agent, take or cause to be taken any action, including, the
commencement of any legal or equitable proceedings, to foreclose any Lien on, or
otherwise enforce any security interest in, any of the Collateral.
(b) If, at any time or times any Lender shall receive (i) by
payment, foreclosure, setoff, or otherwise, any proceeds of Collateral or any
payments with respect to the Obligations, except for any such proceeds or
payments received by such Lender from Agent pursuant to the terms of this
Agreement, or (ii) payments from Agent in excess of such Lender's ratable
portion of all such distributions by Agent, such Lender promptly shall (1) turn
the same over to Agent, in kind, and with such endorsements as may be required
to negotiate the same to Agent, or in immediately available funds, as
applicable, for the account of all of the Lenders and for application to the
Obligations in accordance with the applicable provisions of this Agreement, or
(2) purchase, without recourse or warranty, an undivided interest and
participation in the Obligations owed to the other Lenders so that such excess
payment received shall be applied ratably as among the Lenders in accordance
with their Pro Rata Shares; PROVIDED, HOWEVER, that to the extent that such
excess payment received by the purchasing party is thereafter recovered from it,
those purchases of participations shall be rescinded in whole or in part, as
applicable, and the applicable portion of the purchase price paid therefor shall
be returned to such purchasing party, but without interest except to the extent
that such purchasing party is required to pay interest in connection with the
recovery of the excess payment.
16.14. AGENCY FOR PERFECTION.
Agent hereby appoints each other Lender as its agent (and each
Lender hereby accepts such appointment) for the purpose of perfecting the
Agent's Liens in assets which, in accordance with Article 9 of the Code can be
perfected only by possession or control. Should any Lender obtain possession or
control of any such Collateral, such Lender shall notify Agent thereof, and,
promptly upon Agent's request therefor shall deliver possession or control of
such Collateral to Agent or in accordance with Agent's instructions.
16.15. PAYMENTS BY AGENT TO THE LENDERS.
All payments to be made by Agent to the Lenders shall be made by
bank wire transfer of immediately available funds pursuant to such wire transfer
instructions as each party may designate for itself by written notice to Agent.
Concurrently with each such payment, Agent shall identify whether such payment
(or any portion thereof) represents principal, premium, or interest of the
Obligations.
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16.16. CONCERNING THE COLLATERAL AND RELATED LOAN DOCUMENTS.
Each member of the Lender Group authorizes and directs Agent to
enter into this Agreement and the other Loan Documents. Each member of the
Lender Group agrees that any action taken by Agent in accordance with the terms
of this Agreement or the other Loan Documents relating to the Collateral and the
exercise by Agent of its powers set forth therein or herein, together with such
other powers that are reasonably incidental thereto, shall be binding upon all
of the Lenders.
16.17. FIELD AUDITS AND EXAMINATION REPORTS; CONFIDENTIALITY;
DISCLAIMERS BY LENDERS; OTHER REPORTS AND INFORMATION.
By becoming a party to this Agreement, each Lender:
(a) is deemed to have requested that Agent furnish such Lender,
promptly after it becomes available, a copy of each field audit or examination
report (each a "REPORT" and collectively, "REPORTS") prepared by Agent, and
Agent shall so furnish each Lender with such Reports,
(b) expressly agrees and acknowledges that Agent does not (i)
make any representation or warranty as to the accuracy of any Report, and (ii)
shall not be liable for any information contained in any Report,
(c) expressly agrees and acknowledges that the Reports are not
comprehensive audits or examinations, that Agent or other party performing any
audit or examination will inspect only specific information regarding Companies
and will rely significantly upon the Books, as well as on representations of
Companies' personnel,
(d) agrees to keep all Reports and other material, non-public
information regarding Companies and their operations, assets, and existing and
contemplated business plans in a confidential manner in accordance with SECTION
17.8, and
(e) without limiting the generality of any other indemnification
provision contained in this Agreement, agrees: (i) to hold Agent and any such
other Lender preparing a Report harmless from any action the indemnifying Lender
may take or fail to take or any conclusion the indemnifying Lender may reach or
draw from any Report in connection with any loans or other credit accommodations
that the indemnifying Lender has made or may make to Borrowers, or the
indemnifying Lender's participation in, or the indemnifying Lender's purchase
of, a loan or loans of Borrowers; and (ii) to pay and protect, and indemnify,
defend and hold Agent, and any such other Lender preparing a Report harmless
from and against, the claims, actions, proceedings, damages, costs, expenses,
and other amounts (including, attorneys fees and costs) incurred by Agent and
any such other Lender preparing a Report as the direct or indirect result of any
third parties who might obtain all or part of any Report through the
indemnifying Lender.
In addition to the foregoing: (x) any Lender may from time to time request of
Agent in writing that Agent provide to such Lender a copy of any report or
document provided by
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Companies to Agent that has not been contemporaneously provided by Companies to
such Lender, and, upon receipt of such request, Agent shall provide a copy of
same to such Lender, (y) to the extent that Agent is entitled, under any
provision of the Loan Documents, to request additional reports or information
from Companies, any Lender may, from time to time, reasonably request Agent to
exercise such right as specified in such Lender's notice to Agent, whereupon
Agent promptly shall request of Administrative Borrower the additional reports
or information reasonably specified by such Lender, and, upon receipt thereof
from Administrative Borrower, Agent promptly shall provide a copy of same to
such Lender, and (z) any time that Agent renders to Administrative Borrower a
statement regarding the Loan Account, Agent shall send a copy of such statement
to each Lender.
16.18. SEVERAL OBLIGATIONS; NO LIABILITY.
Notwithstanding that certain of the Loan Documents now or
hereafter may have been or will be executed only by or in favor of Agent in its
capacity as such, and not by or in favor of the Lenders, any and all obligations
on the part of Agent (if any) to make any credit available hereunder shall
constitute the several (and not joint) obligations of the respective Lenders on
a ratable basis, according to their respective Commitments, to make an amount of
such credit not to exceed, in principal amount, at any one time outstanding, the
amount of their respective Commitments. Nothing contained herein shall confer
upon any Lender any interest in, or subject any Lender to any liability for, or
in respect of, the business, assets, profits, losses, or liabilities of any
other Lender. Each Lender shall be solely responsible for notifying its
Participants of any matters relating to the Loan Documents to the extent any
such notice may be required, and no Lender shall have any obligation, duty, or
liability to any Participant of any other Lender. Except as provided in SECTION
16.7, no member of the Lender Group shall have any liability for the acts or any
other member of the Lender Group. No Lender shall be responsible to any Borrower
or any other Person for any failure by any other Lender to fulfill its
obligations to make credit available hereunder, nor to advance for it or on its
behalf in connection with its Commitment, nor to take any other action on its
behalf hereunder or in connection with the financing contemplated herein.
16.19. LEGAL REPRESENTATION OF AGENT.
In connection with the negotiation, drafting, and execution of
this Agreement and the other Loan Documents, or in connection with future legal
representation relating to loan administration, amendments, modifications,
waivers, or enforcement of remedies, Goldberg, Kohn, Bell, Black, ▇▇▇▇▇▇▇▇▇▇ &
▇▇▇▇▇▇, Ltd. ("GK") only has represented and only shall represent WFF in its
capacity as Agent and as a Lender. Each other Lender hereby acknowledges that GK
does not represent it in connection with any such matters.
16.20. AGENT AS UK SECURITY TRUSTEE
(a) In this Agreement, any rights and remedies exercisable by,
any documents to be delivered to, or any other indemnities or obligations in
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favor of Agent shall be, as the case may be, exercisable by, delivered to, or be
indemnities or other obligations in favor of Agent (or any other Person acting
in such capacity) in its capacity as UK Security Trustee to the extent that the
rights, remedies, deliveries, indemnities or other obligations relate to the UK
Stock Pledge Agreement or the security thereby created. Any obligations of Agent
(or any other Person acting in such capacity) in this Agreement shall be
obligations of the Agent in its capacity as UK Security Trustee to the extent
that the obligations related to the UK Stock Pledge Agreement or the security
thereby created. Additionally, in its capacity as UK Security Trustee, the Agent
(or any other Person acting in such capacity) shall have (i) all the rights,
remedies and benefits in favor of Agent contained in the provisions of the whole
of this Section 16; (ii) all the powers of an absolute owner of the security
constituted by the UK Stock Pledge Agreement and (iii) all the rights, remedies
and powers granted to it and be subject to all the obligations and duties owed
by it under the UK Stock Pledge Agreement.
(b) Each Lender and Agent hereby appoint UK Security Trustee to
act as its trustee under and in relation to the UK Stock Pledge Agreement and to
hold the assets subject to the security thereby created as trustee for Agent and
Lenders on the trusts and other terms contained in the UK Stock Pledge Agreement
and Agent and each Lender hereby irrevocably authorize the UK Security Trustee
to exercise such rights, remedies, powers and discretions as are specifically
delegated to UK Security Trustee by the terms of the UK Stock Pledge Agreement
together with all such rights, remedies, powers and discretions as are
reasonably incidental thereto.
(c) Any reference in this Agreement to Liens stated to be in
favor of Agent shall be construed so as to include a reference to Liens granted
in favor of UK Security Trustee.
(d) The Lenders agree that at any time that the UK Security
Trustee shall be a Person other than Agent, such other Person shall have the
rights, remedies, benefits and powers granted to the Agent in its capacity as UK
Security Trustee in this Agreement.
17. GENERAL PROVISIONS.
17.1. EFFECTIVENESS.
This Agreement shall be binding and deemed effective when
executed by Companies, Agent, and each Lender whose signature is provided for on
the signature pages hereof.
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.
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17.3. INTERPRETATION.
Neither this Agreement nor any uncertainty or ambiguity herein
shall be construed or resolved against the Lender Group or Companies, 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. AMENDMENTS IN WRITING.
This Agreement only can be amended by a writing in accordance
with SECTION 15.1.
17.6. COUNTERPARTS; TELEFACSIMILE 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 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 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. The foregoing shall apply
to each other Loan Document MUTATIS MUTANDIS.
17.7. REVIVAL AND REINSTATEMENT OF OBLIGATIONS.
If the incurrence or payment of the Obligations by any Company or
the transfer to the Lender Group of any property should for any reason
subsequently be 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 (collectively, a
"VOIDABLE TRANSFER"), and if the Lender Group 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 the Lender Group is required or elects to repay or restore,
and as to all reasonable costs, expenses, and attorneys fees of the Lender Group
related thereto, the liability of Companies automatically shall be revived,
reinstated, and restored and shall exist as though such Voidable Transfer had
never been made.
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17.8. CONFIDENTIALITY.
The Agent, the UK Security Trustee and the Lenders each
individually (and not jointly or jointly and severally) agree that material,
non-public information regarding Companies, their operations, assets, and
existing and contemplated business plans shall be treated by Agent, UK Security
Trustee and the Lenders in a confidential manner, and shall not be disclosed by
Agent, the UK Security Trustee and the Lenders to Persons who are not parties to
this Agreement, except: (a) to attorneys for and other advisors, accountants,
auditors, and consultants to any member of the Lender Group, (b) to Subsidiaries
and Affiliates of any member of the Lender Group (including the Bank Product
Providers), provided that any such Subsidiary or Affiliate shall have agreed to
receive such information hereunder subject to the terms of this SECTION 17.8,
(c) as may be required by statute, decision, or judicial or administrative
order, rule, or regulation, (d) as may be agreed to in advance by Parent or its
Subsidiaries or as required by any Governmental Authority pursuant to any
subpoena or other legal process, (e) as to any such information that is or
becomes generally available to the public (other than as a result of prohibited
disclosure by Agent, UK Security Trustee or the Lenders), (f) in connection with
any assignment, prospective assignment, sale, prospective sale, participation or
prospective participations, or pledge or prospective pledge of any Lender's
interest under this Agreement, provided that any such assignee, prospective
assignee, purchaser, prospective purchaser, participant, prospective
participant, pledgee, or prospective pledgee shall have agreed in writing to
receive such information hereunder subject to the terms of this Section, and (g)
in connection with any 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. The provisions of this SECTION 17.8 shall survive the
payment in full of the Obligations. Anything contained herein or in any other
Loan Document to the contrary notwithstanding, the obligations of
confidentiality contained herein and therein, as they relate to the transactions
contemplated hereby, shall not apply to the federal tax structure or federal tax
treatment of such transactions, and each party hereto (and any employee,
representative, or agent of any party hereto) may disclose to any and all
Persons, without limitation of any kind, the federal tax structure and federal
tax treatment of such transactions (including all written materials related to
such tax structure and tax treatment). The preceding sentence is intended to
cause the transactions contemplated hereby to not be treated as having been
offered under conditions of confidentiality for purposes of Section
1.6011-4(b)(3) (or any successor provision) of the Treasury Regulations
promulgated under Section 6011 of the IRC, and shall be construed in a manner
consistent with such purpose. In addition, each party hereto acknowledges that
it has no proprietary or exclusive rights to the tax structure of the
transactions contemplated hereby or any tax matter or tax idea related thereto.
17.9. 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.
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17.10. MIDWAY AS AGENT FOR BORROWERS.
Each Borrower hereby irrevocably appoints Midway as the borrowing
agent and attorney-in-fact for all Borrowers (the "ADMINISTRATIVE BORROWER")
which appointment shall remain in full force and effect unless and until Agent
shall have received prior written notice signed by each Borrower that such
appointment has been revoked and that another Borrower has been appointed
Administrative Borrower. Each Borrower hereby irrevocably appoints and
authorizes the Administrative Borrower (i) to provide Agent with all notices
with respect to Advances and Letters of Credit obtained for the benefit of any
Borrower and all other notices and instructions under this Agreement and (ii) to
take such action as the Administrative Borrower deems appropriate on its behalf
to obtain Advances and Letters of Credit and to exercise such other powers as
are reasonably incidental thereto to carry out the purposes of this Agreement.
It is understood that the handling of the Loan Account and Collateral of
Borrowers in a combined fashion, as more fully set forth herein, is done solely
as an accommodation to Borrowers in order to utilize the collective borrowing
powers of Borrowers in the most efficient and economical manner and at their
request, and that Lender Group shall not incur liability to any Borrower as a
result hereof. Each Borrower expects to derive benefit, directly or indirectly,
from the handling of the Loan Account and the Collateral in a combined fashion
since the successful operation of each Borrower is dependent on the continued
successful performance of the integrated group. To induce the Lender Group to do
so, and in consideration thereof, each Borrower hereby jointly and severally
agrees to indemnify each member of the Lender Group and hold each member of the
Lender Group harmless against any and all liability, expense, loss or claim of
damage or injury, made against the Lender Group by any Borrower or by any third
party whosoever, arising from or incurred by reason of (a) the handling of the
Loan Account and Collateral of Borrowers as herein provided, (b) the Lender
Group's relying on any instructions of the Administrative Borrower, or (c) any
other action taken by the Lender Group hereunder or under the other Loan
Documents, except that Borrowers will have no liability to the relevant
Agent-Related Person or Lender-Related Person under this SECTION 17.9 with
respect to any liability that has been finally determined by a court of
competent jurisdiction to have resulted solely from the gross negligence or
willful misconduct of such Agent-Related Person or Lender-Related Person, as the
case may be.
[Signature page to follow.]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered as of the date first above written.
MIDWAY HOME ENTERTAINMENT INC.,
a Delaware corporation
MIDWAY AMUSEMENT GAMES, LLC,
a Delaware limited liability company
MIDWAY GAMES INC.,
a Delaware corporation
MIDWAY GAMES WEST INC.,
a California corporation
MIDWAY INTERACTIVE INC.,
a Delaware corporation
MIDWAY SALES COMPANY, LLC,
a Delaware limited liability company
MIDWAY HOME STUDIOS INC.,
a Delaware corporation
Each By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Executive Vice President - Finance,
Treasurer and Chief Financial Officer
▇▇▇▇▇ FARGO FOOTHILL, INC.,
a California corporation, as Agent, as
UK Security Trustee and as a Lender
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President
LIST OF EXHIBITS AND SCHEDULES
Exhibit A-1 Form of Assignment and Acceptance
Exhibit C-1 Form of Compliance Certificate
Exhibit L-1 Form of LIBOR Notice
Schedule A-1 Agent's Accounts
Schedule C-1 Commitments
Schedule D-1 Designated Accounts
Schedule I-1 Investment Account
Schedule P-1 Permitted Liens
Schedule R-1 Real Property Collateral
Schedule 2.7(a) Cash Management Banks
Schedule 5.4 List of Vehicles
Schedule 5.5 Locations of Inventory and Equipment
Schedule 5.7(a) States of Organization
Schedule 5.7(b) Chief Executive Office
Schedule 5.7(c) ▇▇▇▇▇
Schedule 5.7(d) Commercial Tort Claims
Schedule 5.8(b) Capitalization of Companies
Schedule 5.8(c) Capitalization of Parent's Subsidiaries
Schedule 5.8(d) Subscriptions, Options, Warrants or Calls
Schedule 5.10 Litigation
Schedule 5.14 Environmental Matters
Schedule 5.16 Intellectual Property
Schedule 5.18 Deposit Accounts and Securities Accounts
Schedule 5.20 Permitted Indebtedness
Schedule 7.13 Transactions with Affiliates