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EXHIBIT 4.10
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LOAN AND SECURITY AGREEMENT
BY AND AMONG
AUREAL SEMICONDUCTOR INC.
AS BORROWER,
AND
▇▇▇▇▇▇▇ ▇▇▇▇▇ CREDIT PARTNERS L.P.
AND
TRANSAMERICA BUSINESS CREDIT CORPORATION
AS THE LENDERS,
AND
TRANSAMERICA BUSINESS CREDIT CORPORATION
AS AGENT
DATED AS OF JUNE 5, 1998
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TABLE OF CONTENTS
Page(s)
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1. DEFINITIONS AND CONSTRUCTION ............................................... 1
1.1 Definitions .......................................................... 1
1.2 Accounting Terms ..................................................... 21
1.3 Code ................................................................. 21
1.4 Construction ......................................................... 21
1.5 Schedules and Exhibits ............................................... 21
2. LOAN AND TERMS OF PAYMENT .................................................. 22
2.1 Revolving Tranche A Advances ......................................... 22
2.2 Revolving Tranche B Advances ......................................... 22
2.3 Borrowing Procedures and Settlements ................................. 23
2.4 Payments ............................................................. 25
2.5 Overadvances ......................................................... 27
2.6 Interest: Rates, Payments, and Calculations .......................... 27
2.7 Collection of Accounts ............................................... 29
2.8 Crediting Payments; Application of Collections ....................... 30
2.9 Designated Account ................................................... 31
2.10 Maintenance of Loan Account; Statements of Obligations ............... 31
2.11 Fees ................................................................. 31
2.12 Taxes ................................................................ 32
3. CONDITIONS; TERM OF AGREEMENT .............................................. 33
3.1 Conditions Precedent to the Initial Advance .......................... 33
3.2 Conditions Precedent to all Advances ................................. 36
3.3 Conditions Subsequent ................................................ 37
3.4 Term ................................................................. 37
3.5 Effect of Termination ................................................ 37
3.6 Early Termination by Borrower ........................................ 38
3.7 Termination Upon Event of Default .................................... 38
4. CREATION OF SECURITY INTEREST .............................................. 38
4.1 Grants of Security Interests ......................................... 38
4.2 Negotiable Collateral ................................................ 39
4.3 Collection of Accounts, General Intangibles, and Negotiable
Collateral.......................................................... 40
4.4 Delivery of Additional Documentation Required ........................ 40
4.5 Power of Attorney .................................................... 40
4.6 Right to Inspect ..................................................... 41
4.7 Control Agreements ................................................... 41
5. REPRESENTATIONS AND WARRANTIES ............................................. 41
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5.1 No Encumbrances ...................................................... 41
5.2 Eligible Accounts .................................................... 41
5.3 [intentionally omitted] .............................................. 42
5.4 Equipment ............................................................ 42
5.5 Location of Inventory and Equipment .................................. 42
5.6 Inventory Records .................................................... 42
5.7 Location of Chief Executive Office; FEIN ............................. 42
5.8 Due Organization and Qualification; Subsidiaries ..................... 42
5.9 Due Authorization; No Conflict ....................................... 43
5.10 Litigation ........................................................... 44
5.11 No Material Adverse Change ........................................... 44
5.12 No Fraudulent Transfer ............................................... 45
5.13 Employee Benefits .................................................... 45
5.14 Environmental Condition .............................................. 45
5.15 Brokerage Fees ....................................................... 45
5.16 Permits and other Intellectual Property .............................. 46
6. AFFIRMATIVE COVENANTS ...................................................... 46
6.1 Accounting System .................................................... 47
6.2 Collateral Reporting ................................................. 47
6.3 Financial Statements, Reports, Certificates .......................... 47
6.4 Tax Returns .......................................................... 49
6.5 Guarantor Reports .................................................... 49
6.6 Returns .............................................................. 49
6.7 Title to Equipment ................................................... 49
6.8 Maintenance of Equipment ............................................. 49
6.9 Taxes ................................................................ 49
6.10 Insurance ............................................................ 50
6.11 No Setoffs or Counterclaims .......................................... 51
6.12 Location of Inventory and Equipment .................................. 51
6.13 Compliance with Laws ................................................. 51
6.14 Employee Benefits .................................................... 52
6.15 Leases ............................................................... 52
6.16 Broker Commissions ................................................... 53
6.19 Copyright Registrations .............................................. 53
7. NEGATIVE COVENANTS ......................................................... 54
7.1 Indebtedness ......................................................... 54
7.2 Liens ................................................................ 54
7.3 Restrictions on Fundamental Changes .................................. 54
7.4 Disposal of Assets ................................................... 55
7.5 Change Name .......................................................... 55
7.6 Guarantee ............................................................ 55
7.7 Nature of Business ................................................... 55
7.8 Prepayments and Amendments ........................................... 55
7.9 Change of Control .................................................... 56
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7.10 [intentionally omitted] ......................................... 56
7.11 Distributions ................................................... 56
7.12 Accounting Methods .............................................. 56
7.13 Investments ..................................................... 56
7.14 Transactions with Affiliates .................................... 57
7.15 Suspension ...................................................... 57
7.16 [intentionally omitted] ......................................... 57
7.17 Use of Proceeds ................................................. 57
7.18 Change in Location of Chief Executive Office; Inventory and
Equipment with Bailees .......................................... 57
7.19 No Prohibited Transactions Under ERISA .......................... 57
7.20 Financial Covenants ............................................. 58
7.21 Capital Expenditures ............................................ 60
7.22 Securities Accounts ............................................. 60
8. EVENTS OF DEFAULT ..................................................... 61
9. THE LENDER GROUP'S RIGHTS AND REMEDIES ................................ 63
9.1 Rights and Remedies ............................................. 63
9.2 Remedies Cumulative ............................................. 65
10. TAXES AND EXPENSES ..................................................... 65
11. WAIVERS; INDEMNIFICATION ............................................... 66
11.1 Demand; Protest; etc ............................................ 66
11.2 The Lender Group's Liability for Collateral ..................... 66
11.3 Indemnification ................................................. 66
12. NOTICES ................................................................ 67
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER ............................. 68
14. DESTRUCTION OF BORROWER'S DOCUMENTS .................................... 69
15. ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS ............................. 69
15.1 Assignments and Participations .................................. 70
15.2 Successors ...................................................... 72
16. AMENDMENTS; WAIVERS .................................................... 72
16.1 Amendments and Waivers .......................................... 72
16.2 No Waivers; Cumulative Remedies ................................. 74
17. AGENT; THE LENDER GROUP ................................................ 74
17.1 Appointment and Authorization of Agent .......................... 74
17.2 Delegation of Duties ............................................ 75
17.3 Liability of Agent .............................................. 75
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17.4 Reliance by Agent ............................................... 76
17.5 Notice of Potential Default or Event of Default ................. 76
17.6 Credit Decision ................................................. 76
17.7 Costs and Expenses; Indemnification ............................. 77
17.8 Agent in Individual Capacity .................................... 78
17.9 Successor Agent ................................................. 78
17.10 Withholding Tax ................................................. 79
17.11 Collateral Matters .............................................. 80
17.12 Restrictions on Actions by Lenders; Sharing of Payments ......... 81
17.13 Agency for Perfection ........................................... 82
17.14 Payments by Agent to the Lenders ................................ 82
17.15 Concerning the Collateral and Related Loan Documents ............ 82
17.16 Field Audits and Examination Reports; Confidentiality;
Disclaimers by Lenders; Other Reports and Information ........... 83
17.17 Several Obligations; No Liability ............................... 84
18. GENERAL PROVISIONS ..................................................... 85
18.1 Effectiveness ................................................... 85
18.2 Section Headings ................................................ 85
18.3 Interpretation .................................................. 85
18.4 Severability of Provisions ...................................... 85
18.5 Amendments in Writing ........................................... 85
18.6 Counterparts; Telefacsimile Execution ........................... 85
18.7 Revival and Reinstatement of Obligations ........................ 86
18.8 Integration ..................................................... 86
18.9 Certain Damages ................................................. 86
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SCHEDULES AND EXHIBITS
Schedule C-1 Commitments
Schedule N-1 Non-Material Subsidiaries
Schedule P-1 Permitted Liens
Schedule 5.8 Subsidiaries
Schedule 5.10 Litigation
Schedule 5.13 ERISA Benefit Plans
Schedule 5.16 Permits and Intellectual Property
Schedule 6.12 Location of Inventory and Equipment
Schedule 7.1 Permitted Other Indebtedness
Exhibit A-1 Form of Assignment and Acceptance
Exhibit B-1 Business Plan
Exhibit C-1 Form of Compliance Certificate
Exhibit C-2 Form of Copyright Security Agreement
Exhibit P-1 Form of Patent Security Agreement
Exhibit T-1 Form of Trademark Security Agreement
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LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (THIS "AGREEMENT"), is entered into as
of June 5, 1998, among the financial institutions listed on the signature pages
hereof (such financial institutions, together with their respective successors
and assigns, are referred to hereinafter each individually as a "Lender" and
collectively as the "Lenders"), TRANSAMERICA BUSINESS CREDIT CORPORATION, a
Delaware corporation, as agent for the Lenders ("Agent"), with a place of
business located at ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and AUREAL SEMICONDUCTOR INC., a Delaware corporation
("Borrower"), with its chief executive office located at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
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 Debtor" means any Person who is or who may
become obligated under, with respect to, or on account of, an Account, General
Intangible, or Negotiable Collateral.
"Accounts" means all currently existing and hereafter
arising accounts, contract rights, and all other forms of obligations owing to
Borrower arising out of the sale, license, or lease of goods or General
Intangibles or the rendition of services by Borrower, irrespective of whether
earned by performance, and any and all credit insurance, guaranties, or security
therefor.
"Advances" means Tranche A Advances or Tranche B
Advances, as the context requires.
"Affiliate" means, as applied to any Person, any
other Person who directly or indirectly controls, is controlled by, is under
common control with or is a director or officer of such Person. For purposes of
this definition, "control" means the possession, directly or indirectly, of the
power to vote 5% or more of the securities having ordinary voting power for the
election of directors or the direct or indirect power to direct the management
and policies of a Person.
"Agent" means TBCC, solely in its capacity as agent
for the Lenders, and shall include any successor agent.
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"Agent Account" has the meaning set forth in Section
2.7.
"Agent's Liens" means the Liens on the Collateral
granted by Borrower to Agent for the benefit of the Lender Group under this
Agreement and the other Loan Documents.
"Agent-Related Persons" means Agent and any successor
agent, together with their respective Affiliates, and the officers, directors,
employees, counsel, agents, and attorneys-in-fact of such Persons and their
Affiliates.
"Agreement" has the meaning set forth in the preamble
hereto.
"Assignee" has the meaning set forth in Section 15.1.
"Assignment and Acceptance" means an Assignment and
Acceptance in the form of Exhibit A-1 attached hereto.
"Authorized Person" means any officer or other
employee of Borrower.
"Availability" means the sum of the Tranche A
Availability and the Tranche B Availability.
"Average Unused Portion of Maximum Amount" means, as
of any date of determination, (a) the Maximum Amount, less (b) the average Daily
Balance of Advances that were outstanding during the immediately preceding
month.
"Bankruptcy Code" means the United States Bankruptcy
Code (11 U.S.C. Section 101 et seq.), as amended, and any successor statute.
"Benefit Plan" means a "defined benefit plan" (as
defined in Section 3(35) of ERISA) for which Borrower, any Subsidiary of
Borrower, or any ERISA Affiliate has been an "employer" (as defined in Section
3(5) of ERISA) within the past six years.
"Books" means all of Borrower's books and records
including: ledgers; records indicating, summarizing, or evidencing Borrower's
properties or assets (including the Collateral) or liabilities; all information
relating to Borrower's business operations or financial condition; and all
computer programs, disk or tape files, printouts, runs, or other computer
prepared information.
"Borrower" has the meaning set forth in the preamble
to this Agreement.
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"Borrowing" means a borrowing hereunder consisting of
Advances made on the same day by the Lenders, or Agent on behalf thereof, to
Borrower.
"Borrowing Base" has the meaning set forth in Section
2.1(a).
"Business Day" means any day that is not a Saturday,
Sunday, or other day on which national banks are authorized or required to
close.
"Business Plan" means the business plan of Borrower
for its fiscal year ending on or about December 31, 1998, in form and substance
(including as to scope and underlying assumptions) satisfactory to the Lender
Group in its sole and absolute discretion, a copy of which is attached hereto as
Exhibit B-1.
"Change of Control" shall be deemed to have occurred
at such time as: (a) a "person" or "group" (within the meaning of Sections 13(d)
and 14(d)(2) of the Exchange Act) becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of more than 30% of
the total voting power of all classes of Stock then outstanding of Borrower
entitled to vote in the election of directors; (b) the Existing Lenders and
Appaloosa Management, as a group, shall fail to own, directly or indirectly, 40%
or more of the total voting power of all classes of Stock then outstanding of
Borrower entitled to vote in the election of directors; and (c) the current
Chief Executive Officer of Borrower shall cease to be employed by Borrower in
such capacity (other than by reason of death or disability); provided, however,
that the cessation of such Person to be so employed shall not contribute toward
a "Change of Control" under clause (c) if, within a period of 90 days after the
first date of such cessation, the Board of Directors of Borrower appoints a
successor to that Person reasonably satisfactory to the Required Lenders and
such successor agrees to so serve in that position.
"Closing Date" means the date of the making of the
initial Advance (exclusive, however, of fees and other Lender Group Expenses
charged to Borrower's Loan Account hereunder on or after the Effective Date).
"Code" means the New York Uniform Commercial Code.
"Collateral" means all right, title, or interest of
Borrower with respect to each of the following:
(a) the Accounts,
(b) the Books,
(c) the Equipment,
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(d) the General Intangibles,
(e) the Inventory,
(f) the Negotiable Collateral,
(h) any money, or other assets of Borrower that now
or hereafter come into the possession, custody, or control of any member of the
Lender Group, and
(i) the proceeds and products, whether tangible or
intangible, of any of the foregoing, including proceeds of insurance covering
any or all of the Collateral, and any and all Accounts, the Books, Equipment,
General Intangibles, Inventory, Negotiable Collateral, Real Property, money,
deposit accounts, 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.
"Collateral Access Agreement" means a landlord waiver
or consent, mortgagee waiver or consent, bailee letter, or a similar
acknowledgement agreement of any warehouseman, processor, lessor, consignee, or
other Person in possession of, having a Lien upon, or having rights or interests
in the 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).
"Commitment" means, at any time with respect to a
Lender, the principal amount set forth beside such Lender's name under the
heading "Commitment" 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 15.1, as such Commitment
may be adjusted from time to time in accordance with the provisions of Section
15.1, and "Commitments" means, collectively, the aggregate amount of the
commitments of all of the Lenders.
"Compliance Certificate" means a certificate
substantially in the form of Exhibit C-1 and delivered by the chief accounting
officer of Borrower to Agent.
"Concentration Account" has the meaning set forth in
Section 2.7.
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"Concentration Account Agreement" means that certain
concentration account agreement, in form and substance satisfactory to Agent,
among Borrower, Agent, and the Designated Account Bank.
"Control Agreement" means a control agreement, in
form and substance reasonably satisfactory to Agent, between Borrower, Agent,
and the applicable securities intermediary with respect to the applicable
Securities Account and related Investment Property.
"copyright" shall have the meaning ascribed to such
term in the United States Copyright Act of 1976, as amended, and includes
unregistered copyrights.
"Copyright Collateral" has the meaning ascribed to
such term in the Copyright Security Agreement.
"Copyright Security Agreement" means a Copyright
Security Agreement, in the form of Exhibit C-2 attached hereto, dated as of even
date herewith, between Borrower and Agent.
"CRE" means Crystal River Engineering, Inc., a
California corporation.
"Daily Balance" means the amount of an Obligation
owed at the end of a given day.
"deems itself insecure" means, with respect to any
Person, that such Person in good faith believes that the prospect of payment or
performance is materially impaired.
"Deposit Account Security Agreement" means a Deposit
Account Security Agreement, by Borrower in favor of Agent, in form and substance
satisfactory to the Lenders.
"Designated Account" means account number 4277-152682
of Borrower maintained with Borrower's Designated Account Bank, or such other
deposit account of Borrower (located within the United States) which has been
designated, in writing and from time to time, by Borrower to Agent.
"Designated Account Bank" means ▇▇▇▇▇ Fargo Bank,
National Association, whose office is located at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and whose ABA number is ▇▇▇-▇▇▇-▇▇▇.
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"Dilution" means, in each case based upon the
experience of the immediately prior 90 days, the result of dividing the Dollar
amount of (a) bad debt write-downs, discounts, advertising, returns, promotions,
credits, or other dilution with respect to the Accounts, by (b) Borrower's
Collections (excluding extraordinary items) plus the Dollar amount of clause
(a).
"Dilution Reserve" means, as of any date of
determination, an amount sufficient to reduce the advance rate against Eligible
Accounts hereunder by one percentage point for each percentage point by which
Dilution is in excess of 5%.
"Dollars or $" means United States dollars.
"Early Termination Premium" has the meaning set forth
in Section 3.6.
"EBITDA" means, with respect to any fiscal period,
the sum of Borrower's net earnings (or loss) before interest expense, taxes,
amortization, and depreciation for such period as determined in accordance with
GAAP.
"Effective Date" means June 5, 1998.
"Eligible Accounts" means those Accounts (including
Foreign Accounts) created by Borrower in the ordinary course of business, that
arise out of Borrower's sale of goods, license of General Intangibles, or
rendition of services, that strictly comply with each and all of the
representations and warranties respecting Accounts made by Borrower to Agent in
the Loan Documents, and that are and at all times continue to be acceptable to
Agent in all respects as determined by Agent in good faith; provided, however,
that standards of eligibility may be fixed and revised from time to time by
Agent in Agent's good faith (as defined in the Code) business judgment. Eligible
Accounts shall not include the following:
(a) (i) in the case of Media Tech, (y) Accounts that
such Account Debtor has failed to pay within 30 days of due date, or (z)
Accounts with selling terms of more than 120 days; and (ii) in the case of any
other Account Debtor, (y) Accounts that such other Account Debtor has failed to
pay within 90 days of invoice date, or (z) Accounts with selling terms of more
than 60 days;
(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;
(c) Accounts with respect to which the Account Debtor
is an employee, Affiliate, or agent of Borrower;
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(d) Accounts with respect to which goods are placed
on consignment, guaranteed sale, sale or return, sale on approval, ▇▇▇▇ and
hold, or other terms by reason of which the payment by the Account Debtor may be
conditional;
(e) Accounts that are not payable in Dollars or with
respect to which the Account Debtor 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;
(f) 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
Borrower has complied, to the satisfaction of Agent, with the Assignment of
Claims Act, 31 U.S.C. Section 3727), or (ii) any State of the United States
(exclusive, however, of Accounts owed by any State that does not have a
statutory counterpart to the Assignment of Claims Act);
(g) Accounts with respect to which the Account Debtor
is a creditor of Borrower, has or has asserted a right of setoff, has disputed
its liability, or has made any claim with respect to the Account, in each case,
to the extent of such setoff, disputed liability, or claim;
(h) from and after the date 9 months following the
Effective Date, Accounts with respect to an Account Debtor whose total
obligations owing to Borrower exceed the lesser of (i) 35% of all Eligible
Accounts, and (ii) $5,000,000, in each case, to the extent of the obligations
owing by such Account Debtor in excess of such percentage or amount, as the case
may be; provided, however, that, with respect to any Account Debtor as to which
Borrower requests in writing an increase in the foregoing percentage, the
Lenders agree to consider such request in their reasonable (from the perspective
of a secured lender) discretion;
(i) Accounts with respect to which the Account Debtor
is or reasonably could be expected to become subject to any Insolvency
Proceeding, or becomes insolvent, or goes out of business;
(j) Accounts the collection of which Agent, in its
reasonable credit judgment, believes to be doubtful by reason of the Account
Debtor's financial condition;
(k) Accounts with respect to which the goods giving
rise to such Account have not been shipped and billed to the Account Debtor, the
services giving rise to such Account have not been performed and accepted by the
Account Debtor, or the Account otherwise does not represent a final sale;
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(l) Accounts with respect to which the Account Debtor
is located in the states of New Jersey, Minnesota, Indiana, or West Virginia (or
any other state that requires a creditor to file a Business Activity Report or
similar document in order to bring suit or otherwise enforce its remedies
against such Account Debtor in the courts or through any judicial process of
such state), unless Borrower has qualified to do business in New Jersey,
Minnesota, Indiana, West Virginia, or such other states, or has filed a Notice
of Business Activities Report with the applicable division of taxation, the
department of revenue, or with such other state offices, as appropriate, for the
then-current year, or is exempt from such filing requirement; and
(m) Accounts that represent progress payments or
other advance ▇▇▇▇▇▇▇▇ that are due prior to the completion of performance by
Borrower 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 $100,000,000; (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
having total assets in excess of $100,000,000; 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 business and having total assets in excess of $50,000,000; (d) any
Affiliate (other than individuals) of a pre-existing Lender; (e) so long as no
Event of Default has occurred and is continuing, any other Person approved by
Agent and Borrower; and (f) during the continuation of an Event of Default, any
other Person approved by Agent.
"Equipment" means all of Borrower's present and
hereafter acquired machinery, machine tools, motors, equipment, furniture,
furnishings, fixtures, vehicles (including motor vehicles and trailers), tools,
parts, goods (other than consumer goods, farm products, or Inventory), wherever
located, including, (a) any interest of Borrower in any of the foregoing, and
(b) all attachments, accessories, accessions, replacements, substitutions,
additions, and improvements to any of the foregoing.
"ERISA" means the Employee Retirement Income Security
Act of 1974, 29 U.S.C. Sections 1000 et seq., amendments thereto, successor
statutes, and regulations or guidance promulgated thereunder.
"ERISA Affiliate" means (a) any corporation subject
to ERISA whose employees are treated as employed by the same employer as the
employees of Borrower 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
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Borrower 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 Borrower 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 party subject to ERISA that is a party to an arrangement
with Borrower and whose employees are aggregated with the employees of Borrower
under IRC Section 414(o).
"ERISA Event" means (a) a Reportable Event with
respect to any Benefit Plan or Multiemployer Plan, (b) the withdrawal of
Borrower, any of its Subsidiaries or ERISA Affiliates from a Benefit Plan during
a plan year in which it was a "substantial employer" (as defined in Section
4001(a)(2) of ERISA), (c) the providing of notice of intent to terminate a
Benefit Plan in a distress termination (as described in Section 4041(c) of
ERISA), (d) the institution by the PBGC of proceedings to terminate a Benefit
Plan or Multiemployer Plan, (e) any event or condition (i) that provides a basis
under Section 4042(a)(1), (2), or (3) of ERISA for the termination of, or the
appointment of a trustee to administer, any Benefit Plan or Multiemployer Plan,
or (ii) that may result in termination of a Multiemployer Plan pursuant to
Section 4041A of ERISA, (f) the partial or complete withdrawal within the
meaning of Sections 4203 and 4205 of ERISA, of Borrower, any of its Subsidiaries
or ERISA Affiliates from a Multiemployer Plan, or (g) providing any security to
any Plan under Section 401(a)(29) of the IRC by Borrower or its Subsidiaries or
any of their ERISA Affiliates.
"Event of Default" has the meaning set forth in
Section 8.
"Exchange Act" means the Securities Exchange Act of
1934, as amended, and any successor statute thereto.
"Exempt Copyright" means any Incipient Copyright or
any Obsolete Copyright.
"Existing Debt Conversion Documentation" means,
collectively and with respect to any Person, (a) written evidence, in form and
substance reasonably satisfactory to each Lender, confirming that all
Indebtedness owed by Borrower to such Person immediately prior to the Effective
Date shall have been, as of the Effective Date, either cancelled by such Person
or converted by such Person into an equity capital contribution to Borrower, and
that all Liens (if any) existing in favor of such Person in and to the
properties or assets of Borrower shall have been terminated, and (b) a written
explanation, in form and substance satisfactory to each Lender, of the tax
consequences to Borrower of the cancellation or conversion of such Indebtedness.
"Existing Lender" means, individually and
collectively, TCW Special Credits Trust, TCW Special Credits Fund IIIb, TCW
Special Credits (as
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investment manager of Delaware State Employees Retirement Fund), and B III
Capital Partners, L.P., and TCW Special Credits as agent for the foregoing
Persons.
"FEIN" means Federal Employer Identification Number.
"Foreign Accounts" means Accounts with respect to
which the Account Debtor (i) does not maintain its chief executive office in the
United States, or (ii) is not organized under the laws of the United States or
any State thereof.
"Foreign Accounts Reserve" means, as of any date of
determination, a reserve in an amount equal to 2% of all outstanding Foreign
Accounts of Borrower constituting Eligible Accounts.
"Funding Date" means the date on which a Borrowing
occurs.
"GAAP" means generally accepted accounting principles
as in effect from time to time in the United States, consistently applied.
"General Intangibles" means all of Borrower's present
and future general intangibles and other personal property (including contract
rights, rights arising under common law, statutes, or regulations, choses or
things in action, goodwill, Permits, patents, trade names, 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, literature,
reports, catalogs, deposit accounts, insurance premium rebates, tax refunds, and
tax refund claims), other than goods, Accounts, and Negotiable Collateral.
"Governing Documents" means, with respect to any
Person, the certificate or articles of incorporation, by-laws, or other
organizational or governing documents of such Person.
"Governmental Authority" means any nation or
government, any state, province, or other political subdivision thereof, any
central bank (or similar monetary or regulatory authority) thereof, any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government, and any corporation or other entity
owned or controlled, through Stock or capital ownership or otherwise, by any of
the foregoing.
"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
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17
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.
"Incipient Copyright" means any copyright that: (a)
relates to software of Borrower under development (whether in the form of a new
product, a new version of a pre-existing product, an upgrade, add-on, or
modification to a pre-existing product, or otherwise) that has not yet become a
completed product, version, upgrade, add-on, or modification which is ready to
be marketed by or on behalf of Borrower or which in fact is being marketed by or
on behalf of Borrower; and (b) is not the subject of licenses thereof or other
dispositions by Borrower giving rise to Accounts.
"Indebtedness" means: (a) all obligations of Borrower
for borrowed money, (b) all obligations of Borrower evidenced by bonds,
debentures, notes, or other similar instruments and all reimbursement or other
obligations of Borrower in respect of letters of credit, bankers acceptances,
interest rate swaps, or other financial products, (c) all obligations of
Borrower under capital leases, (d) all obligations or liabilities of others
secured by a Lien on any property or asset of Borrower, irrespective of whether
such obligation or liability is assumed, and (e) any obligation of Borrower
guaranteeing or intended to guarantee (whether guaranteed, endorsed, co-made,
discounted, or sold with recourse to Borrower) any indebtedness, lease,
dividend, letter of credit, or other obligation of any other Person.
"Indemnified Liabilities" has the meaning set forth
in Section 11.3.
"Indemnified Person" has the meaning set forth in
Section 11.3.
"Insolvency Proceeding" means any proceeding
commenced by or against any Person under any provision of the Bankruptcy Code or
under any other 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.
"Intangible Assets" means, with respect to any
Person, that portion of the book value of all of such Person's assets that would
be treated as intangibles under GAAP.
"Intellectual Property" has the meaning ascribed
thereto in Section 5.16.
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"Inventory" means all present and future inventory in
which Borrower has any interest, including goods held for sale or lease or to be
furnished under a contract of service and all of Borrower's present and future
raw materials, work in process, finished goods, and packing and shipping
materials, wherever located.
"Investment Property" means "investment property" as
that term is defined in Section 9-115 of the Code.
"IP Collateral" means, individually and collectively,
the Copyright Collateral, the Patent Collateral, and the Trademark Collateral.
"IP Collections" means all Collections received by
Agent on account of the IP Collateral.
"IP Collateral Secured Tranche A Claims" has the
meaning ascribed thereto in Section 4.1(b).
"IP Collateral Secured Tranche B Claims" has the
meaning ascribed thereto in Section 4.1(d).
"IRC" means the Internal Revenue Code of 1986, as
amended, and the regulations thereunder.
"Legal Requirements" means all applicable
international, foreign, federal, state, and local laws, judgments, decrees,
orders, statutes, ordinances, rules, regulations, or Permits.
"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 15.1
hereof.
"Lender Group" means, individually and collectively,
each of the individual Lenders and Agent.
"Lender Group Expenses" means all: costs or expenses
(including taxes, and insurance premiums) required to be paid by Borrower under
any of the Loan Documents that are paid or incurred by the Lender Group; fees or
charges paid or incurred by the Lender Group in connection with the Lender
Group's transactions with Borrower, including, fees or charges for photocopying,
notarization, couriers and messengers, telecommunication, public record searches
(including tax lien, litigation, and UCC (or equivalent) 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), real estate surveys, real
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estate title policies and endorsements, and environmental audits; costs and
expenses incurred by Agent in the disbursement of funds to Borrower (by wire
transfer or otherwise); charges paid or incurred by Agent resulting from the
dishonor of checks; 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; costs and
expenses paid or incurred by Agent in examining the Books; 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
Borrower (or any of its Subsidiaries party to one or more Loan Documents); and
the Lender Group's reasonable attorneys fees and expenses incurred in advising,
structuring, drafting, reviewing, administering, amending, terminating,
enforcing (including attorneys fees and expenses incurred in connection with a
"workout," a "restructuring," or an Insolvency Proceeding concerning Borrower),
defending, or concerning the Loan Documents, irrespective of whether suit is
brought. Without limiting the generality of the foregoing, Lender Group Expenses
shall include, upon the occurrence and during the continuation of an Event of
Default, all fees, costs, and expenses of the Lender Group incurred in
connection with retaining D-Side Advisors or other similar consultant acceptable
to the Lender Group.
"Lender-Related Persons" means, with respect to any
Lender, such Lender, together with such Lender's Affiliates, and the officers,
directors, employees, counsel, agents, and attorneys-in-fact of such Lender and
such Lender's Affiliates.
"Lien" means any interest in property securing an
obligation owed to, or a claim by, any Person other than the owner of the
property, whether such interest shall be based on the common law, statute, or
contract, whether such interest shall be recorded or perfected, and whether such
interest shall be contingent upon the occurrence of some future event or events
or the existence of some future circumstance or circumstances, including the
lien or security interest arising from a mortgage, deed of trust, encumbrance,
pledge, hypothecation, assignment, deposit arrangement, security agreement,
adverse claim or charge, conditional sale or trust receipt, or from a lease,
consignment, or bailment for security purposes and also including 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
Concentration Account Agreement, the Copyright Security Agreement, the Patent
Security Agreement, the Trademark Security Agreement, the Stock Pledge
Agreement, the
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Deposit Account Security Agreement, the Warrants, any note or notes executed by
Borrower and payable to the Lender Group, and any other agreement entered into,
now or in the future, 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 Borrower, (b) the
material impairment of the ability of Borrower to perform its obligations under
the Loan Documents to which it is a party or of the Lender Group to enforce the
Obligations or realize upon the Collateral, (c) a material adverse effect on the
value of the Collateral or the amount that the Lender Group would be likely to
receive (after giving consideration to delays in payment and costs of
enforcement) in the liquidation of the Collateral, or (d) a material impairment
of the priority of the Agent's Liens with respect to the Collateral.
"Maturity Date" has the meaning set forth in Section
3.4.
"Maximum Amount" means the sum of the Maximum Tranche
A Amount and the Maximum Tranche B Amount.
"Maximum Tranche A Amount" means $32,500,000.
"Maximum Tranche B Amount" means $7,500,000.
"Multiemployer Plan" means a "multiemployer plan" (as
defined in Section 4001(a)(3) of ERISA) to which Borrower, any of its
Subsidiaries, or any ERISA Affiliate has contributed, or was obligated to
contribute, within the past six years.
"Negotiable Collateral" means all of a Person's
present and future letters of credit, notes, drafts, instruments, Investment
Property, documents, personal property leases (wherein such Person is the
lessor), chattel paper, and the Books relating to any of the foregoing.
"Non-Material Subsidiary" means any Subsidiary
identified on Schedule N-1 attached hereto.
"Obligations" means all loans, Advances, debts,
principal, interest (including any interest that, but for the provisions of the
Bankruptcy Code, would have accrued), premiums (including Early Termination
Premiums), liabilities (including all amounts charged to Borrower's Loan Account
pursuant hereto), obligations, fees, charges, costs, or Lender Group Expenses
(including any fees or expenses that, but for the provisions of the Bankruptcy
Code, would have accrued), lease payments, guaranties, covenants, and duties
owing by Borrower to the Lender Group of any kind and description (whether
pursuant to or evidenced by the Loan Documents or pursuant
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to any other agreement between the Lender Group and Borrower, 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 any debt, liability, or obligation owing from Borrower to others that
the Lender Group may have obtained by assignment or otherwise, and further
including all interest not paid when due and all Lender Group Expenses that
Borrower is required to pay or reimburse by the Loan Documents, by law, or
otherwise.
"Obsolete Copyright" means any copyright that relates
to software of Borrower that: (a) is no longer sold or marketed by Borrower; (b)
is not generating any material amount of Accounts or revenues of Borrower; or
(c) does not have a material fair market value.
"Other Collateral Secured Tranche A Claims" has the
meaning ascribed thereto in Section 4.1(a).
"Other Collateral Secured Tranche B Claims" has the
meaning ascribed thereto in Section 4.1(c).
"Other Collections" means all Collections received by
Agent that do not constitute IP Collections.
"Overadvance" has the meaning set forth in Section
2.5.
"Participant" has the meaning set forth in Section
15.1(e).
"Patent Collateral" has the meaning ascribed to such
term in the Patent Security Agreement.
"Patent Security Agreement" means a Patent Security
Agreement, in the form of Exhibit P-1 attached hereto, dated as of even date
herewith, between Borrower and Agent.
"PBGC" means the Pension Benefit Guaranty Corporation
as defined in Title IV of ERISA, or any successor thereto.
"Permits" of a Person shall mean all rights,
franchises, permits, authorities, licenses, certificates of approval or
authorizations, including licenses and other authorizations issuable by a
Governmental Authority, which pursuant to applicable Legal Requirements are
necessary to permit such Person lawfully to conduct and operate its business as
currently conducted and to own and use its assets.
"Permitted Disposition" means (a) the sale, exchange,
or other disposition, free and clear of Agent's security interest (other than
its security interest
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in the proceeds of such sale, exchange, or other disposition), of any Inventory
in the ordinary course of Borrower's business as currently conducted, (b) the
nonexclusive license, free and clear of Agent's security interest (other than
its security interest in the proceeds of such license), of any General
Intangible in the ordinary course of Borrower's business, (c) Permitted
Exclusive Licenses, free and clear of Agent's security interest (other than its
security interest in the proceeds of such license), of any General Intangible
constituting IP Collateral, in the ordinary course of Borrower's business, (d)
the sale, exchange, or other disposition of Borrower's Equipment that is
substantially worn, damaged, or obsolete in the ordinary course of business, and
(e) so long as no Event of Default has occurred and is continuing or would
result therefrom, the sale, exchange, or other disposition, free and clear of
Agent's security interest (other than its security interest in the proceeds of
such sale, exchange, or other disposition), of other assets of Borrower not in
the ordinary course of Borrower's business that do not exceed, on a book value
basis, $250,000 in the aggregate in any fiscal year.
"Permitted Exclusive License" means, with respect to
any General Intangible constituting IP Collateral, the license by Borrower to a
licensee of such General Intangible on an exclusive basis but reasonably limited
in time or place of effect, so long as: (i) the Lender Group has received from
Borrower not less than 10 Business Days prior written notice of the proposed
license, together with all materials required hereunder in connection with such
proposed license; (ii) Borrower has delivered to the Lender Group (y) written
details of the scope and material terms of such license, the value of such
license, and the projected impact of such license on Borrower's business, and
(z) all other materials or information reasonably and promptly requested by the
Lender Group Lender in connection with such proposed license; and (iii) the
Required Lenders have not delivered to Borrower their written objection to such
proposed license within 10 Business Days following the receipt of all items
described in the foregoing clauses (i) and (ii).
"Permitted Liens" means (a) Liens held by Agent for
the benefit of the Lender Group, (b) Liens for unpaid taxes that either (i) are
not yet due and payable or (ii) are the subject of Permitted Protests, (c) Liens
set forth on Schedule P-1, (d) the interests of lessors under operating leases
and purchase money Liens of lessors under capital leases and lenders under other
financing agreements to the extent that the acquisition or lease of the
underlying asset is permitted under Section 7.21 and so long as the Lien only
attaches to the asset purchased, acquired, or financed under such financing
agreement and only secures the purchase price (and reasonably related costs) of
the asset, (e) Liens arising by operation of law in favor of warehousemen,
landlords, carriers, mechanics, materialmen, laborers, or suppliers, incurred in
the ordinary course of business of Borrower and not in connection with the
borrowing of money, and which Liens either (i) are for sums not yet due and
payable, or (ii) are the subject of Permitted Protests, (f) Liens arising from
deposits made in connection with obtaining worker's compensation or other
unemployment insurance, (g) Liens or
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deposits to secure performance of bids, tenders, or leases (to the extent
permitted under this Agreement), incurred in the ordinary course of business of
Borrower and not in connection with the borrowing of money, (h) Liens arising by
reason of security for surety or appeal bonds in the ordinary course of business
of Borrower, (i) Liens of or resulting from any judgment or award that
reasonably could not be expected to result in a Material Adverse Change and as
to which the time for the appeal or petition for rehearing of which has not yet
expired, or in respect of which Borrower is in good faith prosecuting an appeal
or proceeding for a review and in respect of which a stay of execution pending
such appeal or proceeding for review has been secured, (j) with respect to any
Real Property, easements, rights of way, zoning and similar covenants and
restrictions, and similar encumbrances that customarily exist on properties of
Persons engaged in similar activities and similarly situated and that in any
event do not materially interfere with or impair the use or operation of the
Collateral by Borrower or the value of any of the Agent's Liens thereon or
therein for the benefit of the Lender Group, or materially interfere with the
ordinary conduct of the business of Borrower, and (k) the rights of licensees
relative to licenses of Borrower's General Intangibles, to the extent such
licenses qualify as Permitted Dispositions.
"Permitted Protest" means the right of Borrower to
protest any Lien other than any such Lien that secures the Obligations, tax
(other than payroll taxes or taxes that are the subject of a United States
federal tax lien), or rental payment, provided that (a) a reserve with respect
to such obligation is established on the books of Borrower in accordance with
GAAP, (b) any such protest is instituted and diligently prosecuted by Borrower
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 in and to the Collateral.
"Person" means and includes natural persons,
corporations, limited liability companies, limited partnerships, general
partnerships, limited liability partnerships, joint ventures, trusts, land
trusts, business trusts, or other organizations, irrespective of whether they
are legal entities, and governments and agencies and political subdivisions
thereof.
"Plan" means any employee benefit plan, program, or
arrangement maintained or contributed to by Borrower or with respect to which it
may incur liability.
"Potential 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.
"Pro Rata Share" means: (a) with respect to a
Lender's obligation to make Tranche A Advances and receive payments of interest
and principal with respect thereto, the percentage obtained by dividing (i) such
Lender's Commitment to make Tranche A Advances, as set forth on Schedule C-1, by
(ii) all such Commitments
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of all Lenders to make Tranche A Advances, as set forth on Schedule C-1; (b)
with respect to a Lender's obligation to make Tranche B Advances and receive
payments of interest and principal with respect thereto, the percentage obtained
by dividing (i) such Lender's Commitment to make Tranche B Advances, as set
forth on Schedule C-1, by (ii) all such Commitments of all Lenders to make
Tranche B Advances, as set forth on Schedule C-1; and (c) with respect to all
other matters (including the indemnification obligations arising under Section
17.7), the percentage obtained by dividing (i) such Lender's aggregate
Commitments to make Advances, as set forth on Schedule C-1, by (ii) the
aggregate Commitments of all Lenders to make Advances, as set forth on Schedule
C-1; provided, however, that, in each case, in the event the Commitments have
been terminated, Pro Rata Share shall be determined according to the Commitments
in effect immediately prior to such termination and otherwise as set forth
above.
"Real Property" means any estates or interests in
real property now owned or hereafter acquired by Borrower.
"Reference Rate" means, as of any date of
determination, the higher of (a) the highest of the respective variable rates of
interest, per annum, most recently announced by Citibank, NA (or any successor
thereto), First National Bank of Chicago (or any successor thereto), and Bank of
America National Trust and Savings Association, (or any successor thereto), as
such financial institution's "base rate" or "prime rate" (as the case may be),
irrespective of whether such announced rate is the best rate available from such
financial institution, and (b) the published annualized rate for 90 day dealer
commercial paper that appears in the "Money Rates" section of the Wall Street
Journal.
"Reportable Event" means any of the events described
in Section 4043(c) of ERISA or the regulations thereunder other than a
Reportable Event as to which the provision of 30 days notice to the PBGC is
waived under applicable regulations.
"Required Lenders" means, at any time, Lenders whose
Pro Rata Shares aggregate 66.67% or more of the Commitments, or, if the
Commitments have been terminated, 66.67% of the Obligations then outstanding.
"Retiree Health Plan" means an "employee welfare
benefit plan" within the meaning of Section 3(1) of ERISA that provides benefits
to individuals after termination of their employment, other than as required by
Section 601 of ERISA.
"Revolving Facility Usage" means, as of any date of
determination, the sum of (a) the aggregate amount of Tranche A Advances
outstanding, plus (b) the aggregate amount of Tranche B Advances outstanding.
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"SEC" means the United States Securities and Exchange
Commission and any successor Federal agency having similar powers.
"Securities Account" means a "securities account" as
that term is defined in Section 8-501 of the Code.
"Settlement Date" has the meaning set forth in
Section 2.3(c)(ii).
"Solvent" means, with respect to any Person on a
particular date, that on such date (a) at fair valuations, all of the properties
and assets of such Person are greater than the sum of the debts, including
contingent liabilities, of such Person, (b) the present fair salable value of
the properties and assets of such Person is not less than the amount that will
be required to pay the probable liability of such Person on its debts as they
become absolute and matured, (c) such Person is able to realize upon its
properties and assets and pay its debts and other liabilities, contingent
obligations and other commitments as they mature in the normal course of
business, (d) such Person does not intend to, and does not believe that it will,
incur debts beyond such Person's ability to pay as such debts mature, and (e)
such Person is not engaged in business or a transaction, and is not about to
engage in business or a transaction, for which such Person's properties and
assets would constitute unreasonably small capital after giving due
consideration to the prevailing practices in the industry in which such Person
is engaged. In computing the amount of contingent liabilities at any time, it is
intended that such liabilities will be computed at the amount that, in light of
all the facts and circumstances existing at such time, represents the amount
that reasonably can be expected to become an actual or matured liability.
"Stock" means all shares, options, warrants,
interests, participations, or other equivalents (regardless of how designated)
of or in a corporation or equivalent entity, 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 each Lender, executed and
delivered by Borrower to Agent with respect to the pledge of the capital Stock
of each of Borrower's Subsidiaries.
"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 or other ownership
interests 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.
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"Tangible Net Worth" means, as of any date of
determination, the difference of (a) Borrower's total stockholder's equity,
minus (b) the sum of: (i) all Intangible Assets of Borrower, (ii) all of
Borrower's prepaid expenses, and (iii) all amounts due to Borrower from
Affiliates.
"TBCC" means Transamerica Business Credit
Corporation, a Delaware corporation.
"Trademark Collateral" has the meaning ascribed to
such term in the Trademark Security Agreement.
"Trademark Security Agreement" means a Trademark
Security Agreement, in the form of Exhibit T-1 attached hereto, dated as of even
date herewith, between Borrower and Agent.
"Tranche A Advances" has the meaning set forth in
Section 2.1.
"Tranche A Availability" means the amount that
Borrower is entitled to borrow as Tranche A Advances under Section 2.1, such
amount being the difference derived when (a) the aggregate principal amount of
Tranche A Advances then outstanding (including any amounts that the Lender Group
may have paid for the account of Borrower pursuant to any of the Loan Documents
and that are reimbursed by Borrower by being charged to the Loan Account as
Tranche A Advances) is subtracted from (b) the lesser of (i) the Maximum Tranche
A Amount, or (ii) the Borrowing Base.
"Tranche B Advances" has the meaning set forth in
Section 2.2.
"Tranche B Availability" means the amount that
Borrower is entitled to borrow as Tranche B Advances under Section 2.2, such
amount being the difference derived when (a) the aggregate principal amount of
Tranche B Advances then outstanding (including any amounts that the Lender Group
may have paid for the account of Borrower pursuant to any of the Loan Documents
and that are reimbursed by Borrower by being charged to the Loan Account as
Tranche B Advances) is subtracted from (b) the Maximum Tranche B Amount.
"Voidable Transfer" has the meaning set forth in
Section 15.8.
"Year 2000 Compliant" means, with regard to any
Person, that all software in goods produced or sold by, or utilized by and
material to the business operations or financial condition of, such entity are
able to interpret and manipulate data on and involving all calendar dates
correctly and without causing any abnormal ending scenario, including in
relation to dates in and after the Year 2000.
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"Warrants" means those certain common stock purchase
warrants issued and delivered to Agent for the ratable benefit of the Lenders
(in accordance with their Pro Rata Shares) by Borrower, in form and substance
satisfactory to Agent and each Lender, on the Effective Date for the purchase of
1,350,000 shares of Borrower's common stock, $0.001 par value, having the
powers, preferences, and rights, and the qualifications, limitations, or
restrictions set forth in Borrower's Governing Documents.
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 "Borrower" is used in respect of a financial covenant or a
related definition, it shall be understood to mean Borrower 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 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 any other Loan Documents,
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. An Event of Default
shall "continue" or be "continuing" until such Event of Default has been waived
in writing by Agent. Section, subsection, clause, schedule, and exhibit
references herein are to this Agreement unless otherwise specified. Any
reference in this Agreement or in the Loan Documents to this Agreement or any of
the Loan Documents shall include all alterations, amendments, changes,
extensions, modifications, renewals, replacements, substitutions, joinders, and
supplements, thereto and thereof, as applicable.
1.5 SCHEDULES AND EXHIBITS. All of the schedules and exhibits
attached to this Agreement shall be deemed incorporated herein by reference.
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2. LOAN AND TERMS OF PAYMENT.
2.1 REVOLVING TRANCHE A ADVANCES.
(a) Subject to the terms and conditions of this
Agreement and during the term of this Agreement, each Lender agrees to make
advances ("Tranche A Advances") to Borrower 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 Tranche A Amount, or (ii) the Borrowing Base. For
purposes of this Agreement, "Borrowing Base", as of any date of determination,
shall mean 80% of Eligible Accounts (net of the Foreign Accounts Reserve), less
the amount, if any, of the Dilution Reserve.
(b) The Lenders shall have no obligation to make
further Tranche A Advances hereunder to the extent they would cause (i) the
outstanding aggregate amount of Tranche A Advances to exceed the lesser of the
Borrowing Base and the Maximum Tranche A Amount, or (ii) the outstanding
Obligations to exceed the Maximum Amount.
(c) 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.
(d) Anything to the contrary in Section 2.1
notwithstanding, Agent may, in its good faith (as defined in the Code) business
judgment, create reserves against the Borrowing Base.
2.2 REVOLVING TRANCHE B ADVANCES.
(a) Subject to the terms and conditions of this
Agreement and during the term of this Agreement, each Lender agrees to make
advances ("Tranche B Advances") to Borrower in an amount at any one time
outstanding not to exceed such Lender's Pro Rata Share of an amount equal to the
Maximum Tranche B Amount.
(b) The Lenders shall have no obligation to make
further Tranche B Advances hereunder to the extent they would cause (i) the
outstanding aggregate amount of Tranche B Advances to exceed the Maximum Tranche
B Amount, or (ii) the outstanding Obligations to exceed the Maximum Amount.
(c) Amounts borrowed pursuant to this Section 2.2 may
be repaid and, subject to the terms and conditions of this Agreement, reborrowed
at any time during the term of this Agreement.
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2.3 BORROWING PROCEDURES AND SETTLEMENTS.
(a) Procedure for Borrowing. Each Borrowing shall be
made upon Borrower's irrevocable request therefor delivered to Agent (which
notice must be received by Agent no later than 10:00 a.m. (California time) on
the Business Day immediately preceding the requested Funding Date) specifying
(i) the amount and type of Loans constituting such Borrowing, and (ii) the
requested Funding Date, which shall be a Business Day.
(b) Disbursement of Funds. Agent may, on behalf of
the Lenders, disburse funds to Borrower for Loans requested. Each Lender shall
reimburse Agent on demand for all funds disbursed on its behalf by Agent, or if
Agent so requests, each Lender will remit to Agent its Pro Rata Share of any
Loan before Agent disburses same to Borrower. If Agent elects to require that
each Lender make funds available to Agent, prior to a disbursement by Agent to
Borrower, Agent shall advise each Lender by telephone or telecopy of the amount
of such Lender's Pro Rata Share of the Loan requested by Borrower no later than
1:00 p.m. (California Time) on the Business Day immediately preceding the
requested Funding Date applicable thereto, and each such Lender shall pay Agent
such Lender's Pro Rata Share of such requested Loan, in same day funds, by wire
transfer to Agent's account on such Funding Date. If any Lender fails to pay the
amount of its Pro Rata Share within 1 Business Day after Agent's demand, Agent
shall promptly notify Borrower, and Borrower shall immediately repay such amount
to Agent. Any repayment required pursuant to this Section 2.3(b) shall be
without premium or penalty. Nothing in this Section 2.3(b) or elsewhere in this
Agreement or the other Loan Documents, including the provisions of Section
2.3(c), shall be deemed to require Agent to advance funds on behalf of any
Lender or to relieve any Lender from its obligation to fulfill its Commitments
hereunder or to prejudice any rights that Agent or Borrower may have against any
Lender as a result of any default by such Lender hereunder.
(c) Settlements.
(i) The Revolving Facility Usage may
fluctuate from day to day through Agent's disbursement of funds to, and receipt
of funds from, Borrower. In order to minimize the frequency of transfers of
funds between Agent and each Lender notwithstanding terms to the contrary set
forth herein, Advances and payments will be settled among Agent and Lenders
according to the procedures described in this Section 2.3(c). These procedures
notwithstanding, each Lender's obligation to fund its portion of any Advances
made by Agent to Borrower will commence on the date such Advances are made by
Agent. Such payments will be made by such Lender without set-off, counterclaim
or reduction of any kind.
(ii) On the 2nd Business Day of each week,
or more frequently (including daily), if Agent so elects (each such day being a
"Settlement
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Date"), Agent will advise each Lender by telephone or telecopy of the amount of
each such Lender's Pro Rata Share of the Revolving Facility Usage as of the
close of business of the 2nd Business Day immediately preceding the Settlement
Date. In the event that payments are necessary to adjust such Lender's actual
Pro Rata Share of the Revolving Facility Usage as of any Settlement Date to
equal the amount of such Lender's required Pro Rata Share of the Revolving
Facility Usage, the party from which such payment is due will pay the other, in
same day funds, by wire transfer to the other's account not later than 1:00 p.m.
(California time) on the Business Day immediately following the Settlement Date.
(d) Availability of Lender's Pro Rata Share.
(i) Unless Agent shall have received notice
from a Lender prior to a Funding Date that such Lender will not make available
its Pro Rata Share of an Advance requested by Borrower, Agent may assume that
such Lender has made such amount available to Agent on the Business Day
following the next Settlement Date. If a Lender has not in fact made its Pro
Rata Share available to the Agent on such date, then such Lender and Borrower
severally agree to pay, without duplication, to Agent forthwith on demand such
amount without set-off, counterclaim or deduction of any kind, together with
interest thereon, for each day from and including the date such amount was to
have been made available to Agent by such Lender to but excluding the date of
payment to Agent, at (a) in the case of such Lender, the Federal Funds Effective
Rate for up to the first 3 days and thereafter at the interest rate applicable
hereunder to such Advances, or (b) in the case of Borrower, the interest rate
applicable under this Agreement with respect to such Loan. Until any such amount
is paid to Agent, Agent shall not be obligated to submit to such Lender any
payment made by Borrower to Agent with respect to any Loan or any fees or other
payments with respect thereto.
(ii) Nothing contained in this Section
2.3(d) will be deemed to relieve a Lender of its obligation to fulfill its
commitments or to prejudice any rights Agent or Borrower may have against such
Lender as a result of any such default by such Lender under this Agreement.
(e) Return of Payments
(i) If Agent pays an amount to a Lender
under this Agreement in the belief or expectation that a related payment has
been or will be received by Agent from Borrower and such related payment is not
received by Agent, then Agent will be entitled to recover such amount from such
Lender without set-off, counterclaim or deduction of any kind together with
interest thereon, for each day from and including the date such amount is made
available by Agent to such Lender to but excluding the date of repayment to
Agent, at the Federal Funds Effective Rate, and such payment to such Lender
shall be deemed to not have been made.
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(ii) If Agent determines at any time that
any amount received by Agent under this Agreement must be returned to Borrower
or paid to any other person pursuant to any requirement at law, court order or
otherwise, then, notwithstanding any other term or condition of this Agreement,
Agent will not be required to distribute any portion thereof to any Lender. In
addition, each Lender will repay to Agent on demand any portion of such amount
that Agent has distributed to such Lender, together with interest at such rate,
if any, as Agent is required to pay to Borrower or such other Person, without
set-off, counterclaim or deduction of any kind.
(f) Lenders' Failure to Perform. It is understood
that (i) no Lender shall be responsible for any failure by any other Lender to
perform its obligation to make any Advances 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 obligation to make any Advances hereunder, and (ii) no
failure by any Lender to perform its obligation to make any Advances hereunder
shall excuse any other Lender from its obligation to make any Advances
hereunder.
(g) Effect of Bankruptcy. If a case is commenced by
or against Borrower under the U.S. Bankruptcy Code, or other statute providing
for debtor relief, then, unless otherwise agreed by all Lenders, the Lender
Group shall not make additional loans or provide additional financial
accommodations under the Loan Documents to Borrower as debtor or
debtor-in-possession, or to any trustee for Borrower, nor consent to the use of
cash collateral (provided that the Loan Account shall continue to be charged, to
the fullest extent permitted by law, for accruing interest, fees, and Lender
Group Expenses).
2.4 PAYMENTS.
(a) Payments by Borrower.
(i) All payments to be made by Borrower
shall be made without set-off, recoupment, deduction, or counterclaim, except as
otherwise required by law. Except as otherwise expressly provided herein, all
payments by Borrower shall be made to Agent for the account of the Lenders at
Agent's address set forth in Section 12, 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), at the option of Agent, 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) Whenever any payment is due on a day
other than a Business Day, such payment shall be made on the following Business
Day, and such extension of time shall in such case be included in the
computation of interest or fees, as the case may be.
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(iii) Unless Agent receives notice from
Borrower prior to the date on which any payment is due to the Lenders that
Borrower will not make such payment in full as and when required, Agent may
assume that Borrower has made 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 Borrower
has not made such payment in full to Agent, each Lender shall repay to Agent on
demand such amount distributed to such Lender, together with interest thereon
for each day from the date such amount is distributed to such Lender until the
date repaid at the Reference Rate for up to the first 3 days and thereafter at
the interest rate applicable hereunder to such Advances.
(b) Apportionment, Application, and Reversal of
Payments.
(i) All payments shall be remitted to Agent.
So long as no Event of Default has occurred and is continuing, except with
respect to defaulting Lenders, all Collections shall be applied: first, to pay
any fees or expense reimbursements then due to Agent from Borrower; second, to
pay any fees or expense reimbursements then due to the Lenders from Borrower;
third, to pay interest due in respect of all Advances; fourth, to pay the
outstanding principal of Tranche A Advances; fifth, to pay the outstanding
principal of Tranche B Advances; and sixth, ratably to pay any other Obligations
due to Agent or any Lender by Borrower.
(ii) Upon the occurrence and during the
continuation of an Event of Default:
(y) except as otherwise provided
with respect to defaulting Lenders, all IP Collections shall be applied: first,
to pay any fees, or expense reimbursements then due to Agent from Borrower;
second, to pay any fees or expense reimbursements then due to the Lenders from
Borrower; third, to pay interest due in respect of all Advances; fourth, to pay
the outstanding principal of Tranche B Advances; fifth, to pay the outstanding
principal of Tranche A Advances; and sixth, ratably to pay any other Obligations
due to Agent or any Lender by Borrower.
(z) except as otherwise provided
with respect to defaulting Lenders, all Other Collections shall be applied:
first, to pay any fees, or expense reimbursements then due to Agent from
Borrower; second, to pay any fees or expense reimbursements then due to the
Lenders from Borrower; third, to pay interest due in respect of all Advances;
fourth, to pay the outstanding principal of Tranche A Advances; fifth, to pay
the outstanding principal of Tranche B Advances; and sixth, ratably to pay any
other Obligations due to Agent or any Lender by Borrower.
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(iii) All IP Collections or Other
Collections applied pursuant to subsections (i) or (ii) above shall, within each
category of application, be apportioned ratably among those Lenders having a Pro
Rata Share of the Tranche A Advances or of the Tranche B Advances, as
applicable, to which such amounts are to be applied and payments of the fees
(other than fees designated for Agent's sole and separate account) shall, as
applicable, be apportioned ratably among the Lenders.
(iv) For purposes of the foregoing
subsections (i) and (ii), the Lenders agree for their mutual benefit and not for
the benefit of Borrower or any third Person, that in the event of the sale of
all or substantially all of the assets of Borrower (or any division thereof) or
the capital Stock of Borrower, the net cash proceeds of such sale shall be
apportioned as follows: (y) an amount equal to the value of the IP Collateral
that is being transferred in connection with such sale (or that are held by
Borrower in connection with sale of the capital Stock of Borrower) shall be
deemed to be IP Collections; and (z) the balance shall be deemed to be Other
Collections.
(v) For purposes of the foregoing, "payment
in full" with respect to interest shall include interest accrued after the
commencement of any Insolvency Proceeding irrespective of whether a claim for
such interest is allowable in such Insolvency Proceeding.
2.5 OVERADVANCES. If, at any time or for any reason, the
amount of Obligations pursuant to Sections 2.1 and 2.2 is greater than either
the Dollar or percentage limitations set forth in Sections 2.1 or 2.2 (an
"Overadvance"), Borrower 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 priority set forth in Section 2.4(b).
2.6 INTEREST: RATES, PAYMENTS, AND CALCULATIONS.
(a) Interest Rate. Except as provided in clause (c)
below, (i) all Obligations (except for Tranche B Advances) shall bear interest
at a per annum rate of 3 percentage points above the Reference Rate and (ii) all
Tranche B Advances shall bear interest at a rate of 5 percentage points above
the Reference Rate; provided, however, that, effective on the date that the
Lender Group receives Borrower's audited financial statements for its fiscal
year ending on or about December 31, 1998 (such date of receipt, the "Interest
Reduction Evaluation Date"), each of the respective foregoing rates of interest
automatically shall be decreased by 1 percentage point per annum if: (x) no
Potential Default exists on the Interest Reduction Evaluation Date that, but for
the passage of the applicable grace period (if any) under the Loan Documents,
would constitute an Event of Default; (y) no Event of Default exists on the
Interest Reduction Evaluation Date that has not been waived in writing by the
Lender Group in its sole discretion within 10 days following the Interest
Reduction
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Evaluation Date (provided that any such waiver shall be solely for
purposes of this Section 2.6(a) and shall not impair the ability of the Lender
Group to exercise any other right or remedy of the Lender Group following the
occurrence of an Event of Default); and (z) Borrower's audited financial
statements for such fiscal year ended on or about December 31, 1998 indicate
that Borrower has achieved, with respect to each of the projected financial
performance levels of Borrower relative to Tangible Net Worth, EBITDA, and gross
revenues, respectively set forth in the Business Plan for such fiscal year, not
less than 90% of the applicable projected levels.
(b) [intentionally omitted]
(c) Default Rate. Upon the occurrence and during the
continuation of an Event of Default, all Obligations shall bear interest at a
per annum rate equal to 3 percentage points above the applicable per annum rate
set forth in Section 2.6(a).
(d) Minimum Interest. (i) In no event shall the rate
of interest chargeable under Section 2.6(a) for any day be less than 9% per
annum. To the extent that interest accrued hereunder at the rate set forth in
such section 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. (ii) In no event shall the amount of interest accrued and
payable hereunder be less than $500,000 per year (or portion thereof). To the
extent that interest accrued hereunder at the rate set forth herein (including
the minimum interest rate) would be less than the foregoing minimum amount, the
interest rate chargeable hereunder for the period in question automatically
shall be deemed increased to that rate that would result in the minimum amount
of interest being accrued and payable hereunder. Without limiting the generality
of the foregoing, if the aggregate amount of interest accrued hereunder at the
rate set forth herein (including the minimum interest rate) (y) during the
period commencing on the Effective Date and ending on the earlier to occur of
the first anniversary of the Effective Date and the date of termination of this
Agreement is less than $500,000 (such date, the "First Interest Make-Whole
Date"), then Borrower shall pay to Agent for the ratable benefit of the Lender
Group the amount of such shortfall on the First Interest Make-Whole Date, and
(z) during the period commencing on the first anniversary of the Effective Date
and ending on the earlier to occur of the second anniversary of the Effective
Date and the date of termination of this Agreement is less than $500,000 (such
date, the "Second Interest Make-Whole Date"), then Borrower shall pay to Agent
for the ratable benefit of the Lender Group the amount of such shortfall on the
Second Interest Make-Whole Date; provided, however, that, if Borrower terminates
this Agreement in accordance with Section 3.6, no Event of Default exists at the
time of such termination, and the date of such termination is a date other than
any anniversary of the Effective Date, then (1) the $500,000 minimum interest
amount otherwise applicable for the period in question shall be pro-rated
through such date of termination, and (2) the amount by which the actual amount
of
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interest accrued hereunder at the rate set forth herein (including the
minimum interest rate) during such shortened period in question is less than the
pro-rated portion of $500,000 shall be payable by Borrower to Agent for the
ratable benefit of the Lender Group on such date of termination.
(e) Payments. Interest payable hereunder shall be due
and payable, in arrears, on the first day of each month during the term hereof.
Borrower hereby authorizes Agent, at its option, without prior notice to
Borrower, to charge such interest, all Lender Group Expenses (as and when
incurred), the fees and charges provided for in Section 2.11 (as and when
accrued or incurred), and all installments or other payments due under any Loan
Document to Borrower's Loan Account, first, as Tranche A Advances, until Tranche
A Availability equals zero, and, thereafter, as Tranche B Advances. All amounts
so charged to Borrower's Loan Account thereafter shall accrue interest at the
rate then applicable to Advances hereunder. Any interest not paid when due shall
be compounded and shall thereafter accrue interest at the rate then applicable
to Advances hereunder.
(f) Computation. The Reference Rate as of the date of
this Agreement is 8.5% per annum. In the event the Reference Rate is changed
from time to time hereafter, the rates of interest provided for in Section
2.6(a) and Section 2.6(c) automatically and immediately shall be increased or
decreased by an amount equal to such change in the Reference Rate. 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.
(g) Intent to Limit Charges to Maximum Lawful Rate.
In no event shall the interest 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. Borrower 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, Borrower is and shall be
liable only for the payment of such maximum as allowed by law, and payment
received from Borrower 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 COLLECTION OF ACCOUNTS. Borrower shall at all times
maintain a concentration account (the "Concentration Account") at the Designated
Account Bank and promptly deposit all Collections received by Borrower from any
source immediately upon receipt into the Concentration Account. Borrower, Agent,
and the Designated Account Bank shall enter into the Concentration Account
Agreement.
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Borrower agrees that all Collections and other amounts received by
Borrower from any Account Debtor or any other source immediately upon receipt
shall be deposited into the Concentration Account. Neither the Concentration
Account Agreement nor the arrangement contemplated thereby shall be modified by
Borrower without the prior written consent of Agent. Upon the terms and subject
to the conditions set forth in the Concentration Account Agreement, all amounts
received in the Concentration Account shall be wired each Business Day into an
account (the "Agent Account") maintained by Agent at a depositary selected by
Agent. Upon the occurrence and during the continuation of an Event of Default or
if Agent deems itself insecure with respect to Agent's good faith belief or
suspicion that Borrower has engaged in defalcation, intentional
misrepresentation, or fraud, Agent shall have the right to require Borrower to
establish, and thereafter maintain, lockbox arrangements satisfactory to Agent
in respect of the Collections and to instruct all Account Debtors with respect
to the Accounts, General Intangibles, and Negotiable Collateral of Borrower to
remit all Collections in respect thereof to such lockboxes.
2.8 CREDITING PAYMENTS; APPLICATION OF COLLECTIONS. The
receipt of any Collections by Agent (whether from transfers to Agent by the
Designated Account Bank pursuant to the Concentration Account Agreement or
otherwise) immediately shall be applied provisionally to reduce the Obligations
outstanding under the Loan Documents to zero and the excess, if any, shall be
transferred to the Designated Account. The application of such Collections (or
the proceeds thereof) to the Obligations shall not be considered a payment on
account unless such Collection item is a wire transfer of immediately available
federal funds and is made to the Agent Account or unless and until such
Collection item is honored when presented for payment. From and after the
Effective Date, Agent on behalf of the Lender Group shall be entitled to charge
Borrower for 3 Business Days of `clearance' or `float' at the rate set forth in
Section 2.6(a)(i) or Section 2.6(c)(i), as applicable, on all Collections that
are received by Agent (regardless of whether forwarded by the Designated Account
Bank to Agent, whether provisionally applied to reduce the Obligations under the
Loan Documents, or otherwise). This across-the-board 3 Business Day clearance or
float charge on all Collections is acknowledged by the parties to constitute an
integral aspect of the pricing of the Lender Group's financing of Borrower, and
shall apply irrespective of the characterization of whether receipts are owned
by Borrower or the Lender Group, and whether or not there are any outstanding
Advances, the effect of such clearance or float charge being the equivalent of
charging 3 Business Days of interest on such Collections. Should any Collection
item not be honored when presented for payment, then Borrower shall be deemed
not to have made such payment, and interest shall be recalculated accordingly.
Anything to the contrary contained herein notwithstanding, any Collection item
shall be deemed received by Agent only if it is received into the Agent Account
on a Business Day on or before 11:00 a.m. (California time). If any Collection
item is received into the Agent 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
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on the immediately following Business Day. The economic benefit of the 3
Business Day clearance or float charge provided for in this Section 2.8 is for
the ratable benefit of the Lenders in accordance with their Pro Rata Shares.
2.9 DESIGNATED ACCOUNT. Agent and the Lenders are authorized
to make the Advances 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(e). 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 Borrower and made
by Agent or the Lenders hereunder. Unless otherwise agreed by Agent and
Borrower, any Advance requested by Borrower and made 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 Borrower (the "Loan
Account") on which Borrower will be charged with all Advances made by Agent or
the Lenders to Borrower or for Borrower's account, including, accrued interest,
Lender Group Expenses, and any other payment Obligations of Borrower. In
accordance with Section 2.8, the Loan Account will be credited with all payments
received by Agent from Borrower or for Borrower's account, including all amounts
received in the Agent Account from the Concentration Account. On a monthly
basis, Agent shall render statements regarding the Loan Account to Borrower
(with copies to each Lender), including principal, interest, fees, and including
an itemization of all charges and expenses constituting Lender Group Expenses
owing, and such statements shall be conclusively presumed to be correct and
accurate and constitute an account stated between Borrower and the Lender Group
unless, within 30 days after receipt thereof by Borrower (or any Lender),
Borrower (or any Lender) shall deliver to Agent written objection thereto
describing the error or errors contained in any such statements.
2.11 FEES. Borrower shall pay to Agent for the ratable benefit
of the Lender Group (in accordance with the Lenders' respective Pro Rata
Shares), except as otherwise indicated, the following fees:
(a) Origination Fee. On the Effective Date, an
origination fee of $600,000.
(b) Supplemental Origination Fee. A one-time
supplemental origination fee in the amount of $200,000, such fee to be fully
earned on the Effective Date and due and payable on the first anniversary of the
Effective Date or such earlier date (if any) on which this Agreement is
terminated.
(c) Unused Line Fee. On the first day of each month
during the term of this Agreement, an unused line fee in an amount equal to 0.5%
per annum times the Average Unused Portion of the Maximum Amount.
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(d) [intentionally omitted]
(e) Financial Examination, Documentation, and
Appraisal Fees. For the sole and separate accounts of Agent and each Lender that
exercises its rights under Section 4.6 hereof: (i) a separate fee of $600 per
day per examiner, plus out-of-pocket expenses for each financial analysis and
examination (i.e., audits) of Borrower performed by the respective personnel
employed by Agent or any such Lender; provided, however, that, if during any
one-year period ending on each anniversary of the Effective Date there has not
occurred an Event of Default, Borrower will not be charged for more than 3 such
audits in that one-year period; (ii) a separate appraisal fee of $1,500 per day
per appraiser, plus out-of-pocket expenses for each appraisal of the Collateral
performed by the respective personnel employed by Agent or any such Lender; and
(iii) the actual charges paid or incurred by Agent or any such Lender if it
elects to employ the services of one or more third Persons to perform such
financial analyses and examinations (i.e., audits) of Borrower or to appraise
the Collateral.
(f) Loan Servicing Fee. For the sole and separate
account of Agent, on the first day of each month during the term of this
Agreement, a loan servicing fee in an amount equal to $3,000 per month.
2.12 TAXES. (a) Any and all payments by the Borrower hereunder
to or for the benefit of any Lender or the Agent shall be made free and clear of
and without deduction for any and all present or future taxes, levies, imposts,
deductions, charges or withholdings and penalties, interests and all other
liabilities with respect thereto ("Taxes"), excluding, (i) in the case of each
such Lender or the Agent, taxes imposed on its net income (including, without
limitation, any taxes imposed on branch profits) and franchise taxes imposed on
it by the jurisdiction under the laws of which such Lender or the Agent (as the
case may be) is organized or any political subdivision thereof, (ii) in the case
of each Lender, taxes imposed on its net income (including, without limitation,
any taxes imposed on branch profits), and franchise taxes imposed on it, by the
jurisdiction of such Lender's applicable lending office or any political
subdivision thereof, (iii) in the case of each such Lender and the Agent, any
Taxes that are in effect and that would apply to a payment to such Lender or
Agent, as applicable, as of the Effective Date, and (iv) if any Person acquires
any interest in this Agreement pursuant to the provisions hereof (any such
Person being referred to as a "Tax Transferee"), any Taxes to the extent that
they are in effect and would apply to a payment to such Tax Transferee as of the
date of the acquisition of such interest (all such nonexcluded Taxes being
hereinafter referred to as "Covered Taxes"). If the Borrower shall be required
by law to deduct any Covered Taxes from or in respect of any sum payable
hereunder, (A) the sum payable shall be increased as may be necessary so that
after making all required deductions of Covered Taxes (including deductions of
Covered Taxes applicable to additional sums payable under this Section 2.12)
such Lender, the Agent or such Tax Transferee, as the case may be, receives an
amount equal to the sum it would have received had no such deductions been made,
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(B) the Borrower shall make such deductions and (C) the Borrower shall pay the
full amount so deducted to the relevant taxation authority or other authority in
accordance with applicable law.
(b) In addition, the Borrower agrees to pay any present or
future stamp, documentary, excise, privilege, intangible or similar levies that
arise at any time or from time to time (i) from any payment made under any and
all Loan Documents, (ii) from the transfer of the rights of the Lender under any
Loan Documents to any transferee, or (iii) from the execution or delivery by the
Borrower of, or from the filing or recording or maintenance of, or otherwise
with respect to the exercise by the Agent or the Lenders of their rights under,
any and all Loan Documents (hereinafter referred to as "Other Taxes").
(c) The Borrower will indemnify each Lender, the Agent, and
any Tax Transferee for the full amount of (i) Covered Taxes imposed on or with
respect to amounts payable hereunder, (ii) Other Taxes, and (iii) any Taxes
(other than Covered Taxes imposed by any jurisdiction on amounts payable under
this Section 2.12) paid by such Lender or the Agent or such Tax Transferee, as
the case may be, and any liability (including penalties, interest and reasonable
expenses) arising solely therefrom or with respect thereto. Payment of this
indemnification shall be made within 15 days from the date such Lender or the
Agent or Tax Transferee makes written demand therefor to the Borrower certifying
and setting forth in reasonable detail the calculation thereof as to the amount
and type of such Taxes. Any such certificate submitted by the Lender or Agent or
Tax Transferee in good faith to the Borrower shall, absent manifest or
demonstrable error, be final, conclusive and binding on all parties.
(d) Within 30 days after the date of any payment of Covered
Taxes or Other Taxes, the Borrower will furnish to the Agent the original or a
certified copy of a receipt evidencing payment thereof.
3. CONDITIONS; TERM OF AGREEMENT.
3.1 CONDITIONS PRECEDENT TO THE INITIAL ADVANCE. The
obligation of the Lender Group (or any member thereof) to make the initial
Advance is subject to the fulfillment, to the satisfaction of each of the
Lenders and their respective counsel, of each of the following conditions on or
before the Closing Date (or such other date as expressly specified below):
(a) the Closing Date shall occur on or before August
31, 1998;
(b) Agent shall have received all financing
statements and fixture filings required by the Lender Group, duly executed by
Borrower, and Agent
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shall have received searches reflecting the filing of all such financing
statements and fixture filings;
(c) Agent shall have received each of the following
documents, in form and substance satisfactory to each of the Lenders, duly
executed, and each such document shall be in full force and effect, in each
case, on or before the Effective Date (or such later date, if any, expressly
specified below with respect to such document):
(1) the Concentration Account Agreement;
(2) the Existing Debt Conversion
Documentation in respect of not less than
$36,500,000 of Indebtedness owed by Borrower
as of the date immediately preceding the
Effective Date (including all such
Indebtedness owed by Borrower to each
Existing Lender), together with UCC
termination statements and other
documentation evidencing the termination by
each such Existing Lender of its Liens (if
any) in and to the properties and assets of
Borrower;
(3) the Copyright Security Agreement;
(4) the Patent Security Agreement;
(5) the Trademark Security Agreement;
(6) the Stock Pledge Agreement, together
with the shares of Stock of CRE, as well as
Stock powers with respect thereto endorsed
in blank;
(7) the Deposit Account Security Agreement;
(8) the Warrants;
(9) on or before the Closing Date, a Control
Agreement relative to each Securities
Account of Borrower in existence as of the
Closing Date;
(d) On or before the Effective Date, Agent shall have
received a certificate from the Secretary of Borrower attesting to the
resolutions of Borrower's Board of Directors authorizing its execution,
delivery, and performance of this Agreement and the other Loan Documents to
which Borrower is a party and authorizing specific officers of Borrower to
execute the same;
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(e) On or before the Effective Date, Agent shall have
received copies of Borrower's Governing Documents, as amended, modified, or
supplemented to the Effective Date, certified by the Secretary of Borrower;
(f) On or before the Effective Date, Agent shall have
received a certificate of status with respect to Borrower, dated within 10 days
of the Effective Date, such certificate to be issued by the appropriate officer
of the jurisdiction of organization of Borrower, which certificate shall
indicate that Borrower is in good standing in such jurisdiction;
(g) On or before the Effective Date, Agent shall have
received certificates of status with respect to Borrower, each dated within 15
days of the Effective Date, such certificates to be issued by the appropriate
officer of the jurisdictions in which its failure to be duly qualified or
licensed would constitute a Material Adverse Change, which certificates shall
indicate that Borrower is in good standing in such jurisdictions;
(h) On or before the Effective Date, Agent shall have
received a certificate of insurance, together with the endorsements thereto, as
are required by Section 6.10, the form and substance of which shall be
satisfactory to each of the Lenders and their respective counsel;
(i) Agent shall have received duly executed
certificates of title with respect to that portion of the Collateral that is
subject to certificates of title;
(j) On or before the Effective Date, each Lender
shall have received satisfactory evidence that CRE has duly transferred to
Borrower all right, title, and interest of CRE in and to all material assets of
CRE, including all Intellectual Property of CRE necessary for the operation of
the business of Borrower and its Subsidiaries as currently conducted;
(k) On or before the Effective Date, Agent shall have
received an opinion of Borrower's counsel in form and substance satisfactory to
each of the Lenders in its sole discretion;
(l) each Lender and its counsel shall have had an
opportunity to review the status of the Creative Technology, Ltd. litigation
filed in the United States District Court for the Northern District of
California as Case No. 98-0770 WHO, and the results of such review shall have
been satisfactory to each Lender and its counsel in their sole discretion;
(m) Borrower shall use best efforts to deliver to
Agent, on or before the Closing Date, any and all certificates representing
shares of Stock of all
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Subsidiaries other than CRE, as well as Stock powers with respect thereto
endorsed in blank;
(n) Agent shall have received not less than 5
Business Days, nor more than 10 Business Days, prior written notice from
Borrower of Borrower's request for the initial Advance so that Agent may conduct
and complete Agent's final pre-closing audit of Borrower satisfactory to Agent,
including the calculation of the Availability;
(o) [intentionally omitted]
(p) On or before the Effective Date, Agent shall have
received a certificate of the Chief Financial Officer of Borrower, in form and
substance satisfactory to the Agent, attesting that, on a pro forma basis
assuming the consummation of the transactions contemplated by this Agreement and
the other Loan Documents, both before and after such consummation, Borrower
shall not (i) be insolvent or rendered insolvent, (ii) be left with an
unreasonably small capital with which to engage in its business, or (iii) have
incurred debts beyond its ability to pay as such debts mature.
(q) [intentionally omitted]
(r) On or before the Effective Date, Agent and each
Lender shall have received a copy of the Business Plan, certified by the Chief
Financial Officer and Secretary of Borrower as being true, correct, and
complete;
(s) On or before the Effective Date, Agent shall have
received satisfactory evidence that all tax returns required to be filed by
Borrower have been timely filed and all taxes upon Borrower or its properties,
assets, income, and franchises (including real property taxes and payroll taxes)
have been paid prior to delinquency, except such taxes that are the subject of a
Permitted Protest; and
(t) 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 each Lender and its counsel.
3.2 CONDITIONS PRECEDENT TO ALL ADVANCES. The following shall
be conditions precedent to all Advances hereunder:
(a) the representations and warranties contained in
this Agreement and the other Loan Documents shall be true and correct in all
respects on and as of the date of such extension of credit, as though made on
and as of such date
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(except to the extent that such representations and warranties relate solely to
an earlier date);
(b) no Potential Default or Event of Default
(including under Section 8.3) 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 prohibiting, directly or indirectly, the extending of such
credit shall have been issued and remain in force by any governmental authority
against Borrower, Agent, the Lender Group, or any of their Affiliates; and
(d) the amount of the Revolving Facility Usage, after
giving effect to the requested Advance, shall not exceed the Availability.
3.3 CONDITIONS SUBSEQUENT. As conditions subsequent, Borrower
shall perform or cause to be performed each of the following, and the failure by
Borrower to timely perform or cause to be performed any of the following shall
constitute an Event of Default:
(a) within 30 days following the Effective Date,
deliver to Agent the certified copies of the policies of insurance, together
with the endorsements thereto, as are required by Section 6.10, the form and
substance of which shall be satisfactory to each Lender and its counsel.
(b) within 10 days following the Closing Date, Agent
shall have received satisfactory evidence that all existing copyrights of
Borrower (other than Exempt Copyrights) that are capable of being registered
pursuant to Section 6(a) of the Copyright Security Agreement have been
registered with the United States Copyright Office, and that all such copyrights
and any proceeds thereof are specifically encumbered by the Copyright Security
Agreement.
3.4 TERM. This Agreement shall become effective upon the
Effective Date and shall continue in full force and effect for a term ending on
the second anniversary of the Effective Date (the "Maturity Date"), unless
sooner terminated pursuant to the terms hereof. The foregoing notwithstanding,
the Lender Group 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 immediately shall become due and payable without
notice or demand. No termination of this Agreement, however, shall relieve or
discharge Borrower of Borrower's duties, Obligations, or covenants hereunder or
under the other Loan Documents, and Agent's security interests in the
Collateral, for the benefit of the
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Lender Group, shall remain in effect until all Obligations have been fully and
finally discharged and the Lender Group's obligations to provide additional
credit hereunder have been terminated.
3.6 EARLY TERMINATION BY BORROWER. Borrower has the option, at
any time upon 90 days prior written notice to Agent, to terminate this Agreement
by paying to Agent, for the ratable benefit of the Lender Group, in cash, the
Obligations, in full, together with a premium (the "Early Termination Premium")
equal to $250,000.
3.7 TERMINATION UPON EVENT OF DEFAULT. If the Lender Group
terminates this Agreement upon the occurrence of an Event of Default that
intentionally is caused by Borrower for the purpose, in the Required Lenders'
reasonable judgment, of avoiding payment of the Early Termination Premium
provided in Section 3.6, in view of the impracticability and extreme difficulty
of ascertaining actual damages and by mutual agreement of the parties as to a
reasonable calculation of the Lender Group's lost profits as a result thereof,
Borrower shall pay to Agent, for the ratable benefit of the Lender Group, upon
the effective date of such termination, a premium in an amount equal to the
Early Termination Premium. The Early Termination Premium shall be presumed to be
the amount of damages sustained by the Lender Group as the result of the early
termination and Borrower agrees that it is reasonable under the circumstances
currently existing. The Early Termination Premium provided for in this Section
3.7 shall be deemed included in the Obligations.
4. CREATION OF SECURITY INTEREST.
4.1 GRANTS OF SECURITY INTERESTS.
(a) Borrower hereby grants to Agent, for the ratable
benefit of the Lender Group, continuing Liens on all right, title, and interest
of Borrower in and to all currently existing and hereafter acquired or arising
Collateral (other than the IP Collateral) in order to secure prompt repayment of
any and all Obligations (other than the Tranche B Advances) and in order to
secure prompt performance by Borrower of each of its covenants and duties under
the Loan Documents (other than with respect to the Tranche B Advances). The
secured claims of the Lender Group with respect to the portions of the
Obligations and the Collateral described in this subsection (a) are referred to
herein as the "Other Collateral Secured Tranche A Claims."
(b) Borrower hereby grants to Agent, for the ratable
benefit of the Lender Group, continuing Liens on all right, title, and interest
of Borrower in and to all currently existing and hereafter acquired or arising
IP Collateral in order to secure prompt repayment of any and all Obligations
(other than the Tranche B Advances) and in order to secure prompt performance by
Borrower of each of its covenants and duties under the Loan Documents (other
than with respect to the
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Tranche B Advances). The secured claims of the Lender Group with respect to the
portions of the Obligations and the Collateral described in this subsection (b)
are referred to herein as the "IP Collateral Secured Tranche A Claims."
(c) Borrower hereby grants to Agent, for the ratable
benefit of the Lender Group, continuing Liens on all right, title, and interest
of Borrower in and to all currently existing and hereafter acquired or arising
Collateral (other than the IP Collateral) in order to secure prompt repayment of
any and all Tranche B Advances and in order to secure prompt performance by
Borrower of each of its covenants and duties under the Loan Documents with
respect to the Tranche B Advances. The secured claims of the Lender Group with
respect to the portions of the Obligations and the Collateral described in this
subsection (c) are referred to herein as the "Other Collateral Secured Tranche B
Claims."
(d) Borrower hereby grants to Agent, for the ratable
benefit of the Lender Group, continuing Liens on all right, title, and interest
of Borrower in and to all currently existing and hereafter acquired or arising
IP Collateral in order to secure prompt repayment of any and all Tranche B
Advances and in order to secure prompt performance by Borrower of each of its
covenants and duties under the Loan Documents with respect to the Tranche B
Advances. The secured claims of the Lender Group with respect to the portions of
the Obligations and the Collateral described in this subsection (d) are referred
to herein as the "IP Collateral Secured Tranche B Claims."
(e) The Agent's Liens on the Collateral shall attach
to all Collateral without further act on the part of the Lender Group or
Borrower. Anything contained in this Agreement or any other Loan Document to the
contrary notwithstanding, except for Permitted Dispositions, Borrower has no
authority, express or implied, to dispose of any item or portion of the
Collateral.
(f) Subject to Section 2.4(b):
(i) the Agent's Liens on the Collateral
(other than the IP Collateral) securing the Other Collateral Secured Tranche A
Claims shall be senior in Lien priority to the Agent's Liens on the Collateral
(other than the IP Collateral) securing the Other Collateral Secured Tranche B
Claims; and
(ii) the Agent's Liens on the IP Collateral
securing the IP Collateral Secured Tranche B Claims shall be senior in Lien
priority to the Agent's Liens on the IP Collateral securing the IP Collateral
Secured Tranche A Claims.
4.2 NEGOTIABLE COLLATERAL. In the event that any Collateral,
including proceeds, is evidenced by or consists of Negotiable Collateral (other
than originals of letters of credit), Borrower promptly shall endorse and
deliver physical possession of
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such Negotiable Collateral to Agent. Upon the reasonable (from the perspective
of a secured lender) request of Agent therefor, Borrower promptly shall endorse
and deliver physical possession of any Negotiable Collateral evidenced by or
consisting of originals of letter of credit.
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
customers or Account Debtors that the Accounts, General Intangibles, or
Negotiable Collateral have been assigned to Agent for the benefit of the Lender
Group, or that Agent, for the benefit of the Lender Group, has a security
interest therein and (b) collect the Accounts, General Intangibles, and
Negotiable Collateral directly and charge the collection costs and expenses to
the Loan Account. Borrower agrees that it will hold in trust for the Lender
Group, as the Lender Group's trustee, any Collections that it receives and
immediately will deliver said Collections to Agent in their original form as
received by Borrower.
4.4 DELIVERY OF ADDITIONAL DOCUMENTATION REQUIRED. At any time
upon the request of Agent, Borrower shall execute and deliver to Agent all
financing statements, collateral assignments, continuation financing statements,
fixture filings, security agreements, pledges, assignments, mortgages, leasehold
mortgages, deeds of trust, leasehold deeds of trust, endorsements of
certificates of title, applications for title, affidavits, reports, notices,
schedules of accounts, letters of authority, and all other documents that Agent
reasonably may request, in form satisfactory to Agent, to perfect and continue
perfected the Agent's Liens on the Collateral (whether now owned or hereafter
arising or acquired), and in order to consummate fully all of the transactions
contemplated hereby and under the other the Loan Documents.
4.5 POWER OF ATTORNEY. Borrower hereby irrevocably makes,
constitutes, and appoints Agent (and any of Agent's officers, employees, or
agents designated by Agent) as Borrower's true and lawful attorney, with power
to (a) if Borrower refuses to, or fails timely to execute and deliver any of the
documents described in Section 4.4, sign the name of Borrower 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 Borrower's name on any invoice or ▇▇▇▇ of
lading relating to any Account, drafts against Account Debtors, schedules and
assignments of Accounts, verifications of Accounts, and notices to Account
Debtors, (c) send requests for verification of Accounts (provided that such
requests shall not be made in the name of any member of the Lender Group), (d)
endorse Borrower's name on any Collection item that may come into the Lender
Group's possession, (e) at any time that an Event of Default has occurred and is
continuing, notify the post office authorities to change the address for
delivery of Borrower's mail to an address designated by Agent, to receive and
open all mail addressed to Borrower, and to retain all mail relating to the
Collateral and forward all other mail to Borrower, (f) at any time that an Event
of Default has occurred and is continuing, make, settle, and adjust all claims
under Borrower's
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policies of insurance and make all determinations and decisions with respect to
such policies of insurance (other than decisions with respect to reduction or
termination of coverage), and (g) at any time that an Event of Default has
occurred and is continuing, settle and adjust disputes and claims respecting the
Accounts 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 Borrower's attorney, and each and every one of Agent's
rights and powers, being coupled with an interest, is irrevocable until all of
the Obligations have been fully and finally repaid and performed and the Lender
Groups' obligations to extend credit hereunder are terminated.
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 during normal business hours to inspect the Books and to
check, test, and appraise the Collateral in order to verify Borrower's financial
condition or the amount, quality, value, condition of, or any other matter
relating to, the Collateral.
4.7 CONTROL AGREEMENTS. Borrower agrees that it will not
transfer assets out of any Securities Accounts other than as permitted under
Section 7.22 and, if to another securities intermediary, unless each of
Borrower, Agent, and the substitute securities intermediary have entered into a
Control Agreement. No arrangement contemplated hereby or by any Control
Agreement in respect of any Securities Accounts or other investment property
shall be modified by Borrower without the prior written consent of Agent. Upon
the occurrence and during the continuance of an Event of Default, Agent may
notify any securities intermediary to liquidate or transfer the applicable
Securities Account or any related investment property maintained or held thereby
and remit the proceeds thereof to the Agent Account.
5. REPRESENTATIONS AND WARRANTIES.
In order to induce the Lender Group to enter into this
Agreement, Borrower makes the following representations and warranties to the
Lender Group which shall be true, correct, and complete in all respects as of
the date hereof, and shall be true, correct, and complete in all respects as of
the Effective Date, and at and as of the date of the making of each Advance made
thereafter, as though made on and as of the date of the making of such Advance
(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. Borrower has good and indefeasible title
to the Collateral, free and clear of Liens except for Permitted Liens.
5.2 ELIGIBLE ACCOUNTS. The Eligible Accounts are bona fide
existing obligations created by the sale and delivery of Inventory, the license
of General
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Intangibles, or the rendition of services to Account Debtors in the ordinary
course of Borrower's business, unconditionally owed to Borrower without
defenses, disputes, offsets, counterclaims, or rights of return or cancellation.
The property giving rise to such Eligible Accounts has been delivered to the
Account Debtor, or to the Account Debtor's agent for immediate shipment to and
unconditional acceptance by the Account Debtor. Borrower has not received notice
of actual or imminent bankruptcy, insolvency, or material impairment of the
financial condition of any Account Debtor regarding any Eligible Account.
5.3 [INTENTIONALLY OMITTED]
5.4 EQUIPMENT. All of the Equipment is used or held for use in
Borrower's business and is fit for such purposes.
5.5 LOCATION OF INVENTORY AND EQUIPMENT. The Inventory and
Equipment are not stored with a bailee, warehouseman, or similar party (except
with respect to a non-material quantity and value of trade show booth Equipment
identified on Schedule 6.12) and are located only at the locations identified on
Schedule 6.12 or otherwise permitted by Section 6.12.
5.6 INVENTORY RECORDS. Borrower keeps correct and accurate
records itemizing and describing the kind, type, quality, and quantity of the
Inventory, and Borrower's cost therefor.
5.7 LOCATION OF CHIEF EXECUTIVE OFFICE; FEIN. The chief
executive office of Borrower is located at the address indicated in the preamble
to this Agreement and Borrower's FEIN is 943117385.
5.8 DUE ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.
(a) Borrower is duly organized and existing and in
good standing under the laws of the jurisdiction of its incorporation and
qualified and licensed to do business in, and in good standing in, any state
where the failure to be so licensed or qualified reasonably could be expected to
constitute a Material Adverse Change.
(b) Set forth on Schedule 5.8, is a complete and
accurate description of the authorized capital Stock of Borrower, by class, and,
as of the Effective Date, a description of the number of shares of each such
class that are issued and outstanding and the number of such shares that are
held in Borrower's treasury. All such outstanding shares have been validly
issued and, as of the Effective Date, are fully paid, nonassessable shares free
of contractual preemptive rights. The issuance and sale of all such shares have
been in compliance with all applicable federal and state securities laws. Other
than as described on Schedule 5.8, as of the Effective Date,
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49
there are no subscriptions, options, warrants, or calls relating to any shares
of Borrower's capital Stock, including any right of conversion or exchange under
any outstanding security or other instrument. Borrower is not 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, is a complete and
accurate list of Borrower's direct and indirect Subsidiaries, showing: (i) the
jurisdiction of their incorporation; (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 Borrower. 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, no capital
Stock (or any securities, instruments, warrants, options, purchase rights,
conversion or exchange rights, calls, commitments or claims of any character
convertible into or exercisable for capital Stock) of any direct or indirect
Subsidiary of Borrower is subject to the issuance of any security, instrument,
warrant, option, purchase right, conversion or exchange right, call, commitment
or claim of any right, title, or interest therein or thereto.
(e) Each Non-Material Subsidiary (i) does not
individually own any property or assets with a book value in excess of $200,000
or, together with all other Non-Material Subsidiaries, own any property or
assets with a book value in excess of $500,000 in the aggregate, (ii) does not
currently engage in any material business activity, and (iii) does not intend in
the future to engage in any material business activity.
5.9 DUE AUTHORIZATION; NO CONFLICT.
(a) The execution, delivery, and performance by
Borrower of this Agreement and the Loan Documents to which it is a party have
been duly authorized by all necessary corporate action.
(b) The execution, delivery, and performance by
Borrower of this Agreement and the Loan Documents to which it is a party do not
and will not (i) violate any provision of federal, state, or local law or
regulation (including Regulations G, T, U, and X of the Federal Reserve Board)
applicable to Borrower, the Governing Documents of Borrower, or any order,
judgment, or decree of any court or other Governmental Authority binding on
Borrower, (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 or material lease of Borrower, (iii) result in or require
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the creation or imposition of any Lien of any nature whatsoever upon any
properties or assets of Borrower, other than Permitted Liens, or (iv) require
any approval of stockholders or any approval or consent of any Person under any
material contractual obligation of Borrower.
(c) Other than the taking of any action expressly
required under this Agreement and the other Loan Documents, the execution,
delivery, and performance by Borrower of this Agreement and the other Loan
Documents to which Borrower 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 federal, state, foreign, or other Governmental Authority or other
Person.
(d) This Agreement and the other Loan Documents to
which Borrower is a party, and all other documents contemplated hereby and
thereby, when executed and delivered by Borrower, will be the legally valid and
binding obligations of Borrower, enforceable against Borrower 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 granted by Borrower to Agent,
for the benefit of the Lender Group, in and to its properties and assets
pursuant to this Agreement and the other Loan Documents are validly created,
perfected (except to the extent: (i) the Lender Group has failed to file or
continue any required UCC-1 financing statements; (ii) the Lender Group does not
have in its possession or control the original of any letter of credit issued to
Borrower; or (iii) by the terms of this Agreement, registrations and filings
with respect to the IP Collateral are not yet required), and first priority
Liens, subject only to Permitted Liens.
5.10 LITIGATION. There are no actions or proceedings pending
by or against Borrower before any court or administrative agency and Borrower
does not have knowledge or belief of any pending or threatened litigation,
governmental investigations, or claims, complaints, actions, or prosecutions
involving Borrower or any guarantor of the Obligations, except for: (a) ongoing
collection matters in which Borrower is the plaintiff; (b) matters disclosed on
Schedule 5.10; and (c) matters arising after the date hereof that, if decided
adversely to Borrower, reasonably could not be expected to result in a Material
Adverse Change.
5.11 NO MATERIAL ADVERSE CHANGE. All financial statements
relating to Borrower or any guarantor of the Obligations that have been
delivered by Borrower 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 fairly present
Borrower's (or such guarantor's, as applicable) financial condition as of the
date thereof and Borrower's results of
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51
operations for the period then ended. There has not been a Material Adverse
Change with respect to Borrower (or such guarantor, as applicable) since the
date of the latest financial statements submitted to the Lender Group on or
before the Effective Date.
5.12 NO FRAUDULENT TRANSFER.
(a) Borrower is Solvent.
(b) No transfer of property is being made by Borrower
and no obligation is being incurred by Borrower 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
Borrower.
5.13 EMPLOYEE BENEFITS. None of Borrower, any of its
Subsidiaries, or any of their ERISA Affiliates maintains or contributes to any
Benefit Plan, other than those listed on Schedule 5.13. Borrower, each of its
Subsidiaries and each ERISA Affiliate have satisfied the minimum funding
standards of ERISA and the IRC with respect to each Benefit Plan to which it is
obligated to contribute. No ERISA Event has occurred nor has any other event
occurred that may result in an ERISA Event that reasonably could be expected to
result in a Material Adverse Change. None of Borrower or its Subsidiaries, any
ERISA Affiliate, or any fiduciary of any Plan is subject to any direct or
indirect liability with respect to any Plan under any applicable law, treaty,
rule, regulation, or agreement. None of Borrower or its Subsidiaries or any
ERISA Affiliate is required to provide security to any Plan under Section
401(a)(29) of the IRC.
5.14 ENVIRONMENTAL CONDITION. None of Borrower's properties or
assets has ever been used by Borrower or, to the best of Borrower's knowledge,
by previous owners or operators in the disposal of, or to produce, store,
handle, treat, release, or transport, any Hazardous Materials, other than in
material compliance with applicable laws. None of Borrower's properties or
assets has ever been designated or identified in any manner pursuant to any
environmental protection statute as a Hazardous Materials disposal site, or a
candidate for closure pursuant to any environmental protection statute. No Lien
arising under any environmental protection statute has attached to any revenues
or to any real or personal property owned or operated by Borrower. Borrower has
not 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 Borrower resulting in the releasing or disposing of
Hazardous Materials into the environment.
5.15 BROKERAGE FEES. No brokerage commission or finders fees
has or shall be incurred or payable in connection with or as a result of
Borrower's obtaining financing from the Lender Group under this Agreement, and
Borrower has
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not utilized the services of any broker or finder in connection with Borrower's
obtaining financing from the Lender Group under this Agreement.
5.16 PERMITS AND OTHER INTELLECTUAL PROPERTY. Except as set
forth in Schedule 5.16: (a) Borrower owns or possesses adequate licenses or
other rights to use all Permits, patents, patent applications, trademarks,
trademark applications, service marks, service ▇▇▇▇ applications, trade names,
copyrights, trade secrets and know-how (collectively, the "Intellectual
Property") that are necessary for the operation of its business as currently
conducted; (b) no claim is pending or threatened to the effect that Borrower
infringes upon, or conflicts with, the asserted rights of any other Person under
any Intellectual Property, and to the best of Borrower's knowledge there is no
basis for any such claim (whether pending or threatened); (c) no claim is
pending or threatened to the effect that any such Intellectual Property owned or
licensed by Borrower, or in which Borrower otherwise has the right to use is
invalid or unenforceable by Borrower, and to the best of Borrower's knowledge
there is not basis for any such claim (whether or not pending or threatened);
and (d) CRE does not own or possess any Intellectual Property necessary for the
operation of the business of Borrower and its Subsidiaries as currently
conducted.
5.17 YEAR 2000 COMPLIANCE.
(a) On the basis of a comprehensive inventory, review
and assessment currently being undertaken by Borrower of Borrower's computer
applications utilized by Borrower or contained in products produced or sold by
Borrower, and upon inquiry made of Borrower's material suppliers and vendors,
Borrower's management is of the considered view that Borrower, its products, and
all such suppliers and vendors will be Year 2000 Compliant before October 1,
1999.
(b) Borrower (i) has undertaken a detailed inventory,
review and assessment of all areas within its business and operations that could
be adversely affected by the failure of Borrower or its products to be Year 2000
Compliant on a timely basis, (ii) is developing a detail plan and timeline for
becoming Year 2000 Compliant on a timely basis, and (iii) to date, is
implementing that plan in accordance with that timetable in all material
respects. Borrower reasonably anticipates that it will be Year 2000 Compliant on
a timely basis.
6. AFFIRMATIVE COVENANTS.
Borrower covenants and agrees that, so long as any credit
hereunder shall be available and until full and final payment of the
Obligations, and unless the Lender Group shall otherwise consent in writing,
Borrower shall do all of the following:
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6.1 ACCOUNTING SYSTEM. Maintain a standard and modern system
of accounting that enables Borrower to produce financial statements in
accordance with GAAP, and maintain records pertaining to the Collateral that
contain information as from time to time may be requested by Agent. Borrower
also shall keep a modern inventory reporting system that shows all additions,
sales, claims, returns, and allowances with respect to the Inventory.
6.2 COLLATERAL REPORTING. Provide Agent with the following
documents at the following times in form satisfactory to Agent: (a) on the first
business day of each week, a sales journal (including reporting relative to
product shipments to each customer), Collections report, and credit register
since the last such schedule and a calculation of the Borrowing Base as of such
date, (b) on a monthly basis and, in any event, by no later than the 10th day of
each month during the term of this Agreement, (i) a detailed calculation of the
Borrowing Base, and (ii) a detailed aging, by total, of the Accounts, together
with a reconciliation to the detailed calculation of the Borrowing Base
previously provided to Agent, (c) on a monthly basis and, in any event, by no
later than the 10th day of each month during the term of this Agreement, a
summary aging, by vendor, of Borrower's accounts payable and any book overdraft,
(d) [intentionally omitted], (e) on a weekly basis, notice of all returns,
disputes, or claims, (f) upon request, copies of invoices in connection with the
Accounts, customer statements, credit memos, remittance advices and reports,
deposit slips, shipping and delivery documents in connection with the Accounts
and for Inventory and Equipment acquired by Borrower, purchase orders and
invoices, (g) on a monthly basis, a detailed list of Borrower's customers, (h)
on a quarterly basis, an update relative to the status of the Creative
Technology, Ltd. litigation filed in the United States District Court for the
Northern District of California as Case No. 98-0770 WHO; and (i) such other
reports as to the Collateral or the financial condition of Borrower as Agent may
request from time to time. Original sales invoices evidencing daily sales shall
be mailed by Borrower to each Account Debtor and, at Agent's direction, the
invoices shall indicate on their face that the Account has been assigned to the
Lender Group and that all payments are to be made directly to Agent for the
benefit of the Lender Group. In addition, Borrower promptly shall deliver to
Agent and each Lender written reports on material developments relative to the
Creative Technology, Ltd. litigation filed in the United States District Court
for the Northern District of California as Case No. 98-0770 WHO.
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 after the end of each month during each of Borrower's fiscal
years, a company prepared balance sheet, income statement, and statement of cash
flow covering Borrower's operations during such period; and (b) as soon as
available, but in any event within 90 days after the end of each of Borrower's
fiscal years, financial statements of Borrower for each such fiscal year,
audited by independent certified public accountants reasonably acceptable to
Agent and certified, without any
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qualifications, by such accountants to have been prepared in accordance with
GAAP. Such audited financial statements shall include a balance sheet, profit
and loss statement, and statement of cash flow and, if prepared, such
accountants' letter to management. If Borrower is a parent company of one or
more Subsidiaries, or Affiliates, or is a Subsidiary or Affiliate of another
company, then, in addition to the financial statements referred to above,
Borrower agrees to deliver financial statements prepared on a consolidating
basis so as to present Borrower and each such related entity separately, and on
a consolidated basis.
Together with the above, Borrower also shall deliver
to Agent, with copies to each Lender, Borrower's Form 10-Q Quarterly Reports,
Form 10-K Annual Reports, and Form 8-K Current Reports, and any other filings
made by Borrower with the SEC, if any, as soon as the same are filed, or any
other information that is provided by Borrower to its shareholders, and any
other report reasonably requested by the Lender Group relating to the financial
condition of Borrower.
Each month, together with the financial statements
provided pursuant to Section 6.3(a), Borrower shall deliver to Agent, with
copies to each Lender, a certificate signed by its chief financial officer to
the effect that: (i) all financial statements delivered or caused to be
delivered to any one or more members of the Lender Group hereunder 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 fairly present the financial condition of Borrower, (ii) the
representations and warranties of Borrower 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), (iii) for each month that also is the date on which a financial covenant
in Section 7.20 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 7.20, and (iv) on the date of delivery
of such certificate to Agent there does not exist any condition or event that
constitutes a Potential Default or Event of Default (or, in the case of clauses
(i), (ii), or (iii), to the extent of any non-compliance, describing such
non-compliance as to which he or she may have knowledge and what action Borrower
has taken, is taking, or proposes to take with respect thereto).
Borrower shall have issued written instructions to
its independent certified public accountants authorizing them to communicate
with Agent and to release to Agent whatever financial information concerning
Borrower that Agent may request. Borrower hereby irrevocably authorizes and
directs all auditors, accountants, or other third parties to deliver to Agent,
at Borrower's expense, copies of Borrower's financial statements, papers related
thereto, and other accounting records of any nature in their possession, and to
disclose to Agent any information they may have regarding Borrower's business
affairs and financial conditions.
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6.4 TAX RETURNS. Deliver to Agent copies of each of Borrower's
future federal income tax returns, and any amendments thereto, within 30 days of
the filing thereof with the Internal Revenue Service.
6.5 GUARANTOR REPORTS. Cause any guarantor of any of the
Obligations to deliver its annual financial statements at the time when Borrower
provides its audited financial statements to Agent and copies of all federal
income tax returns as soon as the same are available and in any event no later
than 30 days after the same are required to be filed by law.
6.6 RETURNS. Cause returns and allowances, if any, as between
Borrower and its Account Debtors to be on the same basis and in accordance with
the usual customary practices of Borrower, as they exist at the time of the
execution and delivery of this Agreement. If, at a time when no Event of Default
has occurred and is continuing, any Account Debtor returns any Inventory to
Borrower, Borrower promptly shall determine the reason for such return and, if
Borrower accepts such return, issue a credit memorandum (with a copy to be sent
to Agent together with copies of all other such credit memoranda issued during
the same week) in the appropriate amount to such Account Debtor. If, at a time
when an Event of Default has occurred and is continuing, any Account Debtor
returns any Inventory to Borrower, Borrower promptly shall determine the reason
for such return and, if Agent consents (which consent shall not be unreasonably
withheld), issue a credit memorandum (with a copy to be sent to Agent
concurrently) in the appropriate amount to such Account Debtor. The foregoing to
the contrary notwithstanding, Borrower promptly shall send a copy of any such
credit memorandum issued relative to any return with a value in excess of
$50,000.
6.7 TITLE TO EQUIPMENT. Upon Agent's request, Borrower
promptly shall deliver to Agent, properly endorsed, any and all evidences of
ownership of, certificates of title, or applications for title to any items of
Equipment.
6.8 MAINTENANCE OF EQUIPMENT. Maintain the Equipment in good
operating condition and repair (ordinary wear and tear excepted), and make all
necessary replacements thereto so that the value and operating efficiency
thereof shall at all times be maintained and preserved. Other than those items
of Equipment that constitute fixtures on the Effective Date, Borrower shall not
permit any item of Equipment to become a fixture to real estate or an accession
to other property, and such Equipment shall at all times remain personal
property.
6.9 TAXES.
(a) Cause all assessments and taxes, whether real,
personal, or otherwise, due or payable by, or imposed, levied, or assessed
against Borrower or any of its property or assets to be paid in full, before
delinquency or before the expiration
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of any extension period, except to the extent that the validity of such
assessment or tax (other than payroll taxes or taxes that are the subject of a
United States federal tax lien) shall be the subject of a Permitted Protest.
(b) Make due and timely payment or deposit of all
such federal, state, and local taxes, assessments, or contributions required of
it by law, and will execute and deliver to Agent, on demand, appropriate
certificates attesting to the payment thereof or deposit with respect thereto.
(c) Make timely payment or deposit of all tax
payments and withholding taxes required of it by applicable laws, including
those laws concerning F.I.C.A., F.U.T.A., state disability, and local, state,
and federal income taxes, and will, upon request, furnish Agent with proof
satisfactory to Agent indicating that Borrower has made such payments or
deposits.
6.10 INSURANCE.
(a) At its expense, keep the Personal Property
Collateral insured against loss or damage by fire, theft, explosion, sprinklers,
and all other hazards and risks, and in such amounts, as are ordinarily insured
against by other owners in similar businesses. Borrower also shall maintain
business interruption, public liability, product liability, and property damage
insurance relating to Borrower's ownership and use of the Personal Property
Collateral, as well as insurance against larceny, embezzlement, and criminal
misappropriation.
(b) All such policies of insurance shall be in such
form, with such companies, and in such amounts as may be reasonably satisfactory
to Agent. All insurance required herein shall be written by companies which have
a Best's rating of A for capital and X for financial stability. All hazard
insurance and such other insurance as Agent shall specify, shall contain a Form
▇▇▇▇▇▇ (▇▇) lenders loss payable endorsement, or an equivalent endorsement
satisfactory to Agent, showing Agent as sole loss payee thereof, and shall
contain a waiver of warranties. Every policy of insurance referred to in this
Section 6.10 shall contain an agreement by the insurer that it will not cancel
such policy except after 30 days prior written notice to Agent and that any loss
payable thereunder shall be payable notwithstanding any act or negligence of
Borrower or the Lender Group which might, absent such agreement, result in a
forfeiture of all or a part of such insurance payment and notwithstanding any
foreclosure or other action or proceeding taken by the Lender Group pursuant to
the Loan Documents upon the happening of an Event of Default. Borrower shall
deliver to Agent certified copies of such policies of insurance and evidence of
the payment of all premiums therefor.
(c) Original policies or certificates thereof
satisfactory to Agent evidencing such insurance shall be delivered to Agent at
least 30 days prior to the
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expiration of the existing or preceding policies. Borrower shall give Agent
prompt notice of any loss covered by such insurance, and Agent shall have the
right to adjust any loss. Agent shall have the exclusive right to adjust all
losses payable under any such insurance policies without any liability to
Borrower whatsoever in respect of such adjustments. Any monies received as
payment for any loss under any insurance policy including the insurance policies
mentioned above, shall be paid over to Agent to be applied at the option of the
Required Lenders either to the prepayment of the Obligations without premium, in
such order or manner as Agent may elect, or shall be disbursed to Borrower under
stage payment terms satisfactory to Agent for application to the cost of
repairs, replacements, or restorations. All 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. Upon the occurrence of an Event of Default, the
Lender Group shall have the right to apply all prepaid premiums to the payment
of the Obligations in such order or form as Agent shall determine.
(d) Borrower 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 6.10, unless Agent is included thereon as named
insured with the loss payable to Agent under a standard 438BFU (NS) lenders loss
payable endorsement, or its local equivalent. 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
originals of such policies immediately shall be provided to Agent.
6.11 NO SETOFFS OR COUNTERCLAIMS. Make payments hereunder and
under the other Loan Documents by or on behalf of Borrower without setoff or
counterclaim and free and clear of, and without deduction or withholding for or
on account of, any federal, state, or local taxes.
6.12 LOCATION OF INVENTORY AND EQUIPMENT. Keep the Inventory
and Equipment only at the locations identified on Schedule 6.12; provided,
however, that Borrower may amend Schedule 6.12 so long as (a) such amendment
occurs by written notice to Agent not less than 15 days prior to the date on
which the Inventory or Equipment is moved to such new location, and (b) with
respect to Inventory or Equipment to be located within the United States,
Borrower provides any financing statements or fixture filings necessary or
advisable to perfect and continue perfected the Agent's Liens thereon.
6.13 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,
other than laws, rules, regulations, and orders the non-compliance with which,
individually or in the
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aggregate, would not result in and reasonably could not be expected to result
in a Material Adverse Change.
6.14 EMPLOYEE BENEFITS.
(a) Cause to be delivered to Agent: (i) promptly, and
in any event within 10 Business Days after Borrower or any of its Subsidiaries
knows or has reason to know that an ERISA Event has occurred that reasonably
could be expected to result in a Material Adverse Change, a written statement of
the chief financial officer of Borrower describing such ERISA Event and any
action that is being taking with respect thereto by Borrower, any such
Subsidiary or ERISA Affiliate, and any action taken or threatened by the IRS,
Department of Labor, or PBGC. Borrower or such Subsidiary, as applicable, shall
be deemed to know all facts known by the administrator of any Benefit Plan of
which it is the plan sponsor, (ii) promptly, and in any event within 3 Business
Days after the filing thereof with the IRS, a copy of each funding waiver
request filed with respect to any Benefit Plan and all communications received
by Borrower, any of its Subsidiaries or, to the knowledge of Borrower, any ERISA
Affiliate with respect to such request, and (iii) promptly, and in any event
within 3 Business Days after receipt by Borrower, any of its Subsidiaries or, to
the knowledge of Borrower, any ERISA Affiliate, of the PBGC's intention to
terminate a Benefit Plan or to have a trustee appointed to administer a Benefit
Plan, copies of each such notice.
(b) Cause to be delivered to Agent, upon Agent's
request, each of the following: (i) a copy of each Plan (or, where any such plan
is not in writing, complete description thereof) (and if applicable, related
trust agreements or other funding instruments) and all amendments thereto, all
written interpretations thereof and written descriptions thereof that have been
distributed to employees or former employees of Borrower or its Subsidiaries;
(ii) the most recent determination letter issued by the IRS with respect to each
Benefit Plan; (iii) for the three most recent plan years, annual reports on Form
5500 Series required to be filed with any governmental agency for each Benefit
Plan; (iv) all actuarial reports prepared for the last three plan years for each
Benefit Plan; (v) a listing of all Multiemployer Plans, with the aggregate
amount of the most recent annual contributions required to be made by Borrower
or any ERISA Affiliate to each such plan and copies of the collective bargaining
agreements requiring such contributions; (vi) any information that has been
provided to Borrower or any ERISA Affiliate regarding withdrawal liability under
any Multiemployer Plan; and (vii) the aggregate amount of the most recent annual
payments made to former employees of Borrower or its Subsidiaries under any
Retiree Health Plan.
6.15 LEASES. Pay when due all rents and other amounts payable
under any leases to which Borrower is a party or by which Borrower's properties
and assets are bound, unless such payments are the subject of a Permitted
Protest. To the extent
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that Borrower fails timely to make payment of such rents and other amounts
payable when due under its leases, Agent shall be entitled, in its discretion,
to reserve an amount equal to such unpaid amounts against the Borrowing Base.
6.16 BROKER COMMISSIONS. Pay any and all brokerage commission
or finders fees incurred or payable in connection with or as a result of
Borrower's obtaining financing from the Lender Group under this Agreement.
6.17 YEAR 2000 COMPLIANCE. Borrower will be Year 2000
Compliant by October 1, 1999.
6.18 SUBSIDIARIES OTHER THAN NON-MATERIAL SUBSIDIARIES.
Borrower shall cause each of its Subsidiaries, other than Non-Material
Subsidiaries, to execute and deliver to Agent a guaranty and all financing
statements, collateral assignments, continuation financing statements, fixture
filings, security agreements, pledges, assignments, mortgages, leasehold
mortgages, deeds of trust, leasehold deeds of trust, endorsements of
certificates of title, applications for title, affidavits, reports, notices,
schedules of accounts, letters of authority, and all other documents that Agent
reasonably may request, in each case in form and substance satisfactory to
Agent, in order to guaranty the Obligations and to grant and maintain perfected
Liens in favor of Agent for the benefit of the Lender Group on all or
substantially all of the property and assets of such Subsidiary.
6.19 COPYRIGHT REGISTRATIONS. No less frequently than
quarterly, unless Agent in Agent's sole discretion agrees otherwise, Borrower
shall (a) cause all copyrights generated by Borrower (other than Exempt
Copyrights) that are not already the subject of a registration with the United
States Copyright Office (or an application therefor diligently prosecuted) to be
registered with the United States Copyright Office in a manner sufficient to
impart constructive notice of Borrower's ownership thereof, and (b) cause to be
prepared, executed, and delivered to Agent, with sufficient time to permit Agent
to record no later than the last Business Day within 10 days following the date
that such copyrights have been registered or an application for registration has
been filed, a Copyright Security Agreement or supplemental schedules to the
Copyright Security Agreement reflecting the security interest of Agent on behalf
of the Lender Group in such new copyrights (other than Exempt Copyrights, which,
although subject to the security interest of Agent on behalf of the Lender
Group, shall not be required to be registered until such time, if any, as they
cease to be Incipient Copyrights), which supplemental schedules shall be in form
and content suitable for registration with the United States Copyright Office so
as to give constructive notice, when so registered, of the transfer by Borrower
to Agent on behalf of the Lender Group of a security interest in such
copyrights.
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7. NEGATIVE COVENANTS.
Borrower covenants and agrees that, so long as any credit
hereunder shall be available and until full and final payment of the
Obligations, Borrower will not do, and will not permit any of its Subsidiaries
to do, any of the following without the Lender Group's prior written consent:
7.1 INDEBTEDNESS. Create, incur, assume, permit, guarantee, or
otherwise become or remain, directly or indirectly, liable with respect to any
Indebtedness, except (without duplication):
(a) Indebtedness evidenced by this Agreement;
(b) Indebtedness set forth on Schedule 7.1;
(c) Indebtedness secured by Permitted Liens;
(d) unsecured capital expenditure Indebtedness to the
extent permitted under Section 7.21; and
(e) refinancings, renewals, or extensions of
Indebtedness permitted under clauses (b), (c), and (d) 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 materially impair the prospects of repayment of the Obligations by Borrower,
(ii) the net cash proceeds of such refinancings, renewals, or extensions do not
result in an increase in the aggregate principal amount of the Indebtedness so
refinanced, renewed, or extended, (iii) such refinancings, renewals, refundings,
or extensions do not result in a shortening of the average weighted maturity of
the Indebtedness so refinanced, renewed, or extended, and (iv) to the extent
that Indebtedness that is refinanced was subordinated in right of payment to the
Obligations, then the subordination terms and conditions of the refinancing
Indebtedness must be at least as favorable to the Lender Group as those
applicable to the refinanced Indebtedness.
7.2 LIENS. Create, incur, assume, or permit to exist, directly
or indirectly, any Lien on or with respect to any of its property or 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 under
Section 7.1(e) and so long as the replacement Liens only encumber those assets
or property that secured the original Indebtedness).
7.3 RESTRICTIONS ON FUNDAMENTAL CHANGES.
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(a) Enter into any merger, consolidation,
reorganization, or recapitalization, or reclassify its capital Stock.
(b) Liquidate, wind up, or dissolve itself (or suffer
any liquidation or dissolution).
(c) Convey, sell, assign, lease, transfer, or
otherwise dispose of, in one transaction or a series of transactions, all or any
substantial part of its property or assets.
(d) Cause, suffer, or permit any Non-Material
Subsidiary to (i) engage in any material business activity, (ii) individually
own any property or assets with a book value in excess of $200,000, or (iii)
together with all other Non-Material Subsidiaries, own any property or assets
with a book value in excess of $500,000 in the aggregate.
7.4 DISPOSAL OF ASSETS. Except for Permitted Dispositions,
sell, lease, assign, transfer, or otherwise dispose of any of its properties or
assets.
7.5 CHANGE NAME. Change Borrower's name, FEIN, corporate
structure (within the meaning of Section 9-402(7) of the Code), or identity, or
add any new fictitious name, in each case, without providing 30 days prior
written notification thereof to Agent and so long as, at the time of such
written notification, Borrower provides any financing statements or fixture
filings necessary to perfect and continue perfected the Agent's Liens.
7.6 GUARANTEE. Guarantee or otherwise become in any way liable
with respect to the obligations of any third Person except by endorsement of
instruments or items of payment for deposit to the account of Borrower or which
are transmitted or turned over to Agent.
7.7 NATURE OF BUSINESS. Make any change in the principal
nature of Borrower's business of providing audio technology for the personal
computer (PC) and consumer electronics markets.
7.8 PREPAYMENTS AND AMENDMENTS.
(a) Except in connection with a refinancing permitted
by Section 7.1(d), prepay, redeem, retire, defease, purchase, or otherwise
acquire any Indebtedness owing to any third Person, other than the Obligations
in accordance with this Agreement, and
(b) Directly or indirectly, amend, modify, alter,
increase, or change any of the terms or conditions of any agreement, instrument,
document,
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indenture, or other writing evidencing or concerning the convertible
preferred Stock of Borrower in any way materially adverse to the interests of
Borrower or the Lender Group.
7.9 CHANGE OF CONTROL. Cause, permit, or suffer, directly or
indirectly, any Change of Control.
7.10 [INTENTIONALLY OMITTED]
7.11 DISTRIBUTIONS. Make any distribution or declare or pay
any dividends (in cash or other property, other than capital Stock) on, or
purchase, acquire, redeem, or retire any of Borrower's capital Stock, of any
class, whether now or hereafter outstanding; provided, however, that Borrower
may (a) repurchase the capital Stock of Borrower held by former employees of
Borrower substantially contemporaneously with their cessation of employment with
Borrower and not exceeding in the aggregate $500,000 (provided that the cash
portion of the consideration paid by Borrower for repurchases of such Stock
issued under Borrower's employee stock option plans in the ordinary course shall
not be subject to such Dollar limitation to the extent that such cash portion
does not exceed the amount of cash received by Borrower for the purchase by such
employees of such Stock) in any consecutive 12 month period, or (b) repurchase
the capital Stock of Borrower using the net issuance proceeds of a new common
Stock offering (or a new offering of preferred Stock having terms, rights, and
preferences acceptable to the Required Lenders in their sole discretion)
consummated substantially contemporaneously with such repurchase.
7.12 ACCOUNTING METHODS. Modify or change its method of
accounting or enter into, modify, or terminate any 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 Borrower's accounting records
without said accounting firm or service bureau agreeing to provide Agent
information regarding the Collateral or Borrower's financial condition. Borrower
waives the right to assert a confidential relationship, if any, it may have with
any accounting firm or service bureau in connection with any information
requested by Agent pursuant to or in accordance with this Agreement, and agrees
that Agent may contact directly any such accounting firm or service bureau in
order to obtain such information.
7.13 INVESTMENTS. Directly or indirectly make, acquire, or
incur any liabilities or expenditures (including contingent obligations) for or
in connection with (a) the acquisition of the securities (whether debt or
equity) of, or other interests in, a Person, (b) loans, advances, capital
contributions, or transfers of property to a Person, or (c) the acquisition of
all or substantially all of the properties or assets of a Person.
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7.14 TRANSACTIONS WITH AFFILIATES. Directly or indirectly
enter into or permit to exist any material transaction with any Affiliate of
Borrower except for transactions that are in the ordinary course of Borrower's
business, upon fair and reasonable terms, that are fully disclosed to Agent, and
that are no less favorable to Borrower than would be obtained in an arm's length
transaction with a non-Affiliate.
7.15 SUSPENSION. Suspend or go out of a substantial portion of
its business.
7.16 [INTENTIONALLY OMITTED].
7.17 USE OF PROCEEDS. Use the proceeds of the Advances made
hereunder for any purpose other than (a) on the Effective Date, to pay
transactional fees, costs, and expenses incurred in connection with this
Agreement, and (b) thereafter, consistent with the terms and conditions hereof,
for general working capital purposes.
7.18 CHANGE IN LOCATION OF CHIEF EXECUTIVE OFFICE; INVENTORY
AND EQUIPMENT WITH BAILEES. Relocate its chief executive office to a new
location without providing 30 days prior written notification thereof to Agent
and so long as, at the time of such written notification, Borrower provides any
financing statements or fixture filings necessary to perfect and continue
perfected the Agent's Liens and also provides to Agent a Collateral Access
Agreement with respect to such new location. The Inventory and Equipment shall
not at any time now or hereafter be stored with a bailee, warehouseman, or
similar party without Agent's prior written consent.
7.19 NO PROHIBITED TRANSACTIONS UNDER ERISA. Directly or
indirectly:
(a) engage, or permit any Subsidiary of Borrower to
engage, in any prohibited transaction which is reasonably likely to result in a
civil penalty or excise tax described in Sections 406 of ERISA or 4975 of the
IRC for which a statutory or class exemption is not available or a private
exemption has not been previously obtained from the Department of Labor;
(b) permit to exist with respect to any Benefit Plan
any accumulated funding deficiency (as defined in Sections 302 of ERISA and 412
of the IRC), whether or not waived;
(c) fail, or permit any Subsidiary of Borrower to
fail, to pay timely required contributions or annual installments due with
respect to any waived funding deficiency to any Benefit Plan;
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(d) terminate, or permit any Subsidiary of Borrower
to terminate, any Benefit Plan where such event would result in any liability of
Borrower, any of its Subsidiaries or any ERISA Affiliate under Title IV of
ERISA;
(e) fail, or permit any Subsidiary of Borrower to
fail, to make any required contribution or payment to any Multiemployer Plan;
(f) fail, or permit any Subsidiary of Borrower to
fail, to pay any required installment or any other payment required under
Section 412 of the IRC on or before the due date for such installment or other
payment;
(g) amend, or permit any Subsidiary of Borrower to
amend, a Plan resulting in an increase in current liability for the plan year
such that either of Borrower, any Subsidiary of Borrower or any ERISA Affiliate
is required to provide security to such Plan under Section 401(a)(29) of the
IRC; or
(h) withdraw, or permit any Subsidiary of Borrower to
withdraw, from any Multiemployer Plan where such withdrawal is reasonably likely
to result in any liability of any such entity under Title IV of ERISA;
which, individually or in the aggregate, results in or reasonably would be
expected to result in a claim against or liability of Borrower, any of its
Subsidiaries or any ERISA Affiliate in excess of $200,000.
7.20 FINANCIAL COVENANTS. Fail to:
(a) Tangible Net Worth. Maintain Tangible Net Worth
of not less than the amount shown below for the date corresponding thereto:
--------------------------------------------------------------------------------
Date Minimum Tangible Net Worth
--------------------------------------------------------------------------------
the end of the fiscal quarter ending on or about $3,000,000
June 30, 1998
--------------------------------------------------------------------------------
the end of the fiscal quarter ending on or about $2,000,000
September 30, 1998
--------------------------------------------------------------------------------
the end of the fiscal quarter ending on or about $2,400,000
December 31, 1998
--------------------------------------------------------------------------------
the end of the fiscal quarter ending on or about $3,000,000
March 31, 1999
--------------------------------------------------------------------------------
the end of the fiscal quarter ending on or about $3,500,000
June 30, 1999
--------------------------------------------------------------------------------
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--------------------------------------------------------------------------------
Date Minimum Tangible Net Worth
--------------------------------------------------------------------------------
the end of the fiscal quarter ending on or about $4,500,000
September 30, 1999
--------------------------------------------------------------------------------
the end of the fiscal quarter ending on or about $6,500,000
December 31, 1999
--------------------------------------------------------------------------------
the end of the fiscal quarter ending on or about $6,500,000
March 31, 2000
--------------------------------------------------------------------------------
(b) Profitability. Achieve EBITDA of not less than
the amount shown below for the period corresponding thereto (amounts in brackets
($) are negative):
--------------------------------------------------------------------------------
Period Minimum EBITDA
--------------------------------------------------------------------------------
the fiscal quarter ending on or about June 30, 1998 ($4,500,000)
--------------------------------------------------------------------------------
the fiscal quarter ending on or about September 30, ($2,800,000)
1998
--------------------------------------------------------------------------------
the fiscal quarter ending on or about December 31, 1998 ($500,000)
--------------------------------------------------------------------------------
the fiscal quarter ending on or about March 31, 1999 $-0-
--------------------------------------------------------------------------------
the fiscal quarter ending on or about June 30, 1999 $500,000
--------------------------------------------------------------------------------
the fiscal quarter ending on or about September 30, $1,000,000
1999
--------------------------------------------------------------------------------
the fiscal quarter ending on or about December 31, 1999 $2,000,000
--------------------------------------------------------------------------------
the fiscal quarter ending on or about March 31, 2000 $2,000,000
--------------------------------------------------------------------------------
(c) Total Revenues. Achieve total revenues,
determined in accordance with GAAP on a basis consistent with past practice, of
not less than the amount shown below for the period corresponding thereto:
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--------------------------------------------------------------------------------
Period Minimum Total Revenue
--------------------------------------------------------------------------------
the fiscal quarter ending on or about June 30, 1998 $3,236,000
--------------------------------------------------------------------------------
the fiscal quarter ending on or about September 30, $7,040,000
1998
--------------------------------------------------------------------------------
the fiscal quarter ending on or about December 31, 1998 $10,800,000
--------------------------------------------------------------------------------
the fiscal quarter ending on or about March 31, 1999 $13,280,000
--------------------------------------------------------------------------------
the fiscal quarter ending on or about June 30, 1999 $14,280,000
--------------------------------------------------------------------------------
the fiscal quarter ending on or about September 30, $16,640,000
1999
--------------------------------------------------------------------------------
the fiscal quarter ending on or about December 31, 1999 $20,200,000
--------------------------------------------------------------------------------
the fiscal quarter ending on or about March 31, 2000 $20,200,000
--------------------------------------------------------------------------------
7.21 CAPITAL EXPENDITURES. Make capital expenditures in excess
of: (a) $3,500,000 during the fiscal year ending on or about December 31, 1998;
(b) $1,200,000 during the fiscal year ending on or about December 31, 1999; or
(c) $1,000,000 during the period commencing on the first day immediately
following the end of the fiscal year ending on or about December 31, 1999 and
ending on the Maturity Date.
7.22 SECURITIES ACCOUNTS. Borrower shall not establish or
maintain any Securities Account unless Agent shall have received a Control
Agreement, duly executed and in full force and effect, in respect of such
Securities Account. Borrower agrees that it will not transfer assets out of any
Securities Accounts; provided, however, that, so long as no Event of Default has
occurred and is continuing or would result therefrom, Borrower may (a) use such
assets to the extent permitted by this Agreement, or (b) sell or trade such
assets in the ordinary course so long as the proceeds of such sales or trades
are deposited in the Concentration Account or a Securities Account in respect of
which Agent has received a Control Agreement duly executed and in full force and
effect.
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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 Borrower fails to pay when due and payable or when
declared due and payable, 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 (a) If Borrower fails or neglects to perform, keep, or
observe any term, provision, condition, covenant, or agreement contained in
Sections 6.1 (Accounting System), 6.2 (Collateral Reporting), 6.3 (Financial
Statements, Reports, Certificates), 6.4 (Tax Returns), 6.12 (Location of
Inventory, etc.), 6.13 (Compliance with Laws), or 6.14 (Employee Benefits) of
this Agreement and such failure continues for a period of 10 Business Days; (b)
If Borrower fails or neglects to perform, keep, or observe any term, provision,
condition, covenant, or agreement contained in Sections 6.6 (Returns), or 6.15
(Leases) of this Agreement and such failure continues for a period of 15
Business Days; or (c) If Borrower fails or neglects to perform, keep, or observe
any other term, provision, condition, covenant, or agreement contained in this
Agreement, or in any of the other Loan Documents (giving effect to any grace
periods or required notices, if any, expressly provided for in such Loan
Documents), in each case, other than any such term, provision, condition,
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);
8.3 If there is a Material Adverse Change;
8.4 If any material portion of Borrower's properties or assets
is attached, seized, subjected to a writ or distress warrant, or is levied upon,
or comes into the possession of any third Person;
8.5 If an Insolvency Proceeding is commenced by Borrower;
8.6 If an Insolvency Proceeding is commenced against Borrower
and any of the following events occur: (a) Borrower consents to the institution
of the Insolvency Proceeding against it; (b) the petition commencing the
Insolvency Proceeding is not timely controverted; (c) the petition commencing
the Insolvency Proceeding is not dismissed within 45 calendar days of the date
of the filing thereof; provided, however, that, during the pendency of such
period, Agent, TBCC, and any other member of the Lender Group shall be relieved
of its obligation to extend credit hereunder; (d) an interim trustee is
appointed to take possession of all or a substantial portion of the properties
or assets of, or to operate all or any substantial portion of the
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business of, Borrower; or (e) an order for relief shall have been issued or
entered therein;
8.7 If Borrower is enjoined, restrained, or in any way
prevented by court order from continuing to conduct all or any material part of
its business affairs; without limiting the generality of the foregoing, an Event
of Default shall occur under this Section 8.7 if an injunction or other
equitable relief is granted in favor of Creative Technology, Ltd. and adverse to
Borrower in connection with the litigation filed in the United States District
Court for the Northern District of California as Case No. 98-0770 WHO;
8.8 If a notice of Lien, levy, or assessment is filed of
record with respect to any of Borrower's properties or assets by the United
States Government, or any department, agency, or instrumentality thereof, or by
any state, 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 of Borrower's properties or assets and the
same is not paid on the payment date thereof;
8.9 If a judgment or other claim becomes a Lien or encumbrance
upon any material portion of Borrower's properties or assets and the same is not
released, discharged, bonded against, or stayed pending appeal before the
earlier of 30 days of the date it first arises or 5 days of the date when such
property or asset is subject to being forfeited by Borrower; provided, however,
that, during such period, Agent shall be entitled to establish a reserve against
the Borrowing Base in an aggregate amount sufficient to discharge such Lien or
encumbrance and any and all penalties or interest payable in connection
therewith;
8.10 If there is a default in any material agreement to which
Borrower is a party with one or more third Persons and such default (a) occurs
at the final maturity of the obligations thereunder, or (b) results in a right
by such third Person(s), irrespective of whether exercised, to accelerate the
maturity of Borrower's obligations thereunder, to terminate such agreement, or
to refuse to renew such agreement pursuant to an automatic renewal right
therein;
8.11 If Borrower 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; or
8.12 If any material misstatement or misrepresentation exists
in any warranty, representation, statement, or report when made or deemed made
to the Lender Group by Borrower or any officer, employee, agent, or director of
Borrower, or if any such warranty or representation is withdrawn.
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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, except to the
extent otherwise expressly provided or required below, authorize and instruct
Agent 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 Borrower:
(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 Borrower under this Agreement, under any of the other Loan
Documents, or under any other agreement between Borrower 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 Agent's rights and security interests, for the benefit of the
Lender Group, in the Collateral and without affecting the Obligations;
(d) Settle or adjust disputes and claims directly
with Account Debtors for amounts and upon terms which Agent considers advisable,
and in such cases, Agent will credit Borrower's 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;
(e) Cause Borrower to hold all returned Inventory in
trust for the Lender Group, segregate all returned Inventory from all other
property of Borrower or in Borrower's possession and conspicuously label said
returned Inventory as the property of the Lender Group;
(f) Without notice to or demand upon Borrower or any
guarantor, make such payments and do such acts as Agent considers necessary or
reasonable to protect its security interests in the Collateral. Borrower agrees
to assemble the Personal Property Collateral if Agent so requires, and to make
the Personal Property Collateral available to Agent as Agent may designate.
Borrower authorizes Agent to enter the premises where the Personal Property
Collateral is located, to take and maintain possession of the Personal Property
Collateral, or any part of it, and to pay, purchase, contest, or compromise any
encumbrance, charge, or Lien that in Agent's determination appears to conflict
with the Agent's Liens and to pay all expenses incurred in connection therewith.
With respect to any of Borrower's
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owned or leased premises, Borrower hereby grants Agent a license to enter into
possession of such premises and to occupy the same, without charge, for up to
120 days 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 Borrower (such notice being
expressly waived), and without constituting a retention of any collateral in
satisfaction of an obligation (within the meaning of Section 9-505 of the Code),
set off and apply to the Obligations any and all (i) balances and deposits of
Borrower held by the Lender Group (including any amounts received in the
Concentration Account), or (ii) indebtedness at any time owing to or for the
credit or the account of Borrower held by the Lender Group;
(h) Hold, as cash collateral, any and all balances
and deposits of Borrower held by the Lender Group, and any amounts received in
the Concentration Account, 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 Personal Property Collateral. Borrower hereby grants to Agent a
license or other right to use, without charge, Borrower's labels, patents,
copyrights, rights of use of any name, trade secrets, trade names, trademarks,
service marks, and advertising matter, or any property of a similar nature, as
it pertains to the Personal Property Collateral, in completing production of,
advertising for sale, and selling any Personal Property Collateral and
Borrower's rights under all licenses and all franchise agreements shall inure to
the Lender Group's benefit;
(j) Sell the Personal Property 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
Borrower's premises) as Agent determines is commercially reasonable. It is not
necessary that the Personal Property Collateral be present at any such sale;
(k) Agent shall give notice of the disposition of the
Personal Property Collateral as follows:
(A) Agent shall give Borrower and each
holder of a security interest in the Personal Property Collateral who has filed
with Agent a written request for notice, 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 Personal Property
Collateral, then the time on or after which the private sale or other
disposition is to be made;
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(B) The notice shall be personally delivered
or mailed, postage prepaid, to Borrower as provided in Section 12, at least 10
days before the date fixed for the sale, or at least 10 days before the date on
or after which the private sale or other disposition is to be made; no notice
needs to be given prior to the disposition of any portion of the Personal
Property Collateral that is perishable or threatens to decline speedily in value
or that is of a type customarily sold on a recognized market. Notice to Persons
other than Borrower claiming an interest in the Personal Property Collateral
shall be sent to such addresses as they have furnished to Agent;
(C) If the sale is to be a public sale,
Agent also shall give notice of the time and place by publishing a notice one
time at least 10 days before the date of the sale in a newspaper of general
circulation in the county in which the sale is to be held;
(l) The Lender Group may credit bid and purchase at
any public sale;
(m) The Lender Group shall have all other rights and
remedies available to it at law or in equity pursuant to any other Loan
Documents; and
(n) Any deficiency that exists after disposition of
the Personal Property Collateral as provided above will be paid immediately by
Borrower. Any excess will be returned, without interest and subject to the
rights of third Persons, by Agent to Borrower.
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 Borrower 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 required proof of payment or deposit, all as
required under the terms of this Agreement, then, to the extent that Agent
determines that such failure by Borrower could result in a Material Adverse
Change, in its discretion and without prior notice to Borrower, Agent may do any
or all of the following: (a) make payment of
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the same or any part thereof; (b) set up such reserves in Borrower's Loan
Account as Agent deems necessary to protect the Lender Group from the exposure
created by such failure; or (c) obtain and maintain insurance policies of the
type described in Section 6.10, and take any action with respect to such
policies as Agent deems prudent. Any such amounts paid by Agent shall constitute
Lender Group Expenses. Any such payments made by Agent 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. Borrower waives demand, protest,
notice of protest, notice of default or dishonor, notice of payment and
nonpayment, nonpayment at maturity, release, compromise, settlement, extension,
or renewal of accounts, documents, instruments, chattel paper, and guarantees at
any time held by the Lender Group on which Borrower may in any way be liable.
11.2 THE LENDER GROUP'S LIABILITY FOR COLLATERAL. Borrower
hereby agrees that: (a) so long as the Lender Group complies with its
obligations, if any, under Section 9-207 of the Code, the Lender Group shall not
in any way or manner be liable or responsible for: (i) the safekeeping of the
Collateral; (ii) any loss or damage thereto occurring or arising in any manner
or fashion from any cause; (iii) any diminution in the value thereof; or (iv)
any act or default of any carrier, warehouseman, bailee, forwarding agency, or
other Person; and (b) all risk of loss, damage, or destruction of the Collateral
shall be borne by Borrower.
11.3 INDEMNIFICATION. Borrower shall pay, indemnify, defend,
and hold the Agent-Related Persons, the Lender-Related Persons with respect to
each Lender, each Participant, and each of their respective officers, directors,
employees, counsel, agents, and attorneys-in-fact (each, an "Indemnified
Person") harmless (to the fullest extent permitted by law) from and against any
and all liabilities, losses, obligations, claims, demands, suits, actions,
investigations, proceedings, judgments, penalties, 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 in connection with or as a result of or related
to the execution, delivery, enforcement, performance, and administration of this
Agreement and any other Loan Documents or the transactions contemplated herein,
and 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,
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collectively, the "Indemnified Liabilities"). Borrower 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 other Obligations.
12. NOTICES.
Unless otherwise provided in this Agreement, all notices or
demands by any party 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, or telefacsimile to the relevant
party at its address set forth below:
IF TO BORROWER: AUREAL SEMICONDUCTOR INC.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Vice President - Finance
Fax No. ▇▇▇.▇▇▇.▇▇▇▇
WITH COPIES TO: ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ & FREIDENRICH LLP
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇, Esq.
Fax No. ▇▇▇.▇▇▇.▇▇▇▇
IF TO AGENT OR
TBCC: TRANSAMERICA BUSINESS CREDIT CORPORATION
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇. ▇▇▇ ▇▇▇▇▇▇▇▇
Fax No. ▇▇▇.▇▇▇.▇▇▇▇
WITH COPIES TO: LUSKIN, ▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
Fax No. ▇▇▇.▇▇▇.▇▇▇▇
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AND TO: TRANSAMERICA BUSINESS CREDIT CORPORATION
▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Legal Department
Fax No. ▇▇▇.▇▇▇.▇▇▇▇
IF TO GSCP: ▇▇▇▇▇▇▇ SACHS CREDIT PARTNERS L.P.
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇
Fax No. ▇▇▇.▇▇▇.▇▇▇▇
WITH COPIES TO: ▇▇▇▇▇▇▇, PHLEGER & ▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇ Hilson, Esq.
Fax No. ▇▇▇.▇▇▇.▇▇▇▇
The parties hereto may change the address at which they are to
receive notices hereunder, by notice in writing in the foregoing manner given to
all other parties. All notices or demands sent in accordance with this Section
12, other than notices by the Lender Group in connection with Sections 9-504 or
9-505 of the Code, shall be deemed received on the earlier of the date of actual
receipt or 3 days after the deposit thereof in the mail. Borrower acknowledges
and agrees that notices sent by the Lender Group in connection with Sections
9-504 or 9-505 of the Code shall be deemed sent when deposited in the mail or
personally delivered, or, where permitted by law, transmitted telefacsimile or
other similar method set forth above.
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
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 NEW YORK.
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THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN
CONNECTION WITH THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE TRIED AND
LITIGATED ONLY IN THE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF NEW
YORK, STATE OF NEW YORK, PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT
AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT THE REQUIRED
LENDERS' OPTION, IN THE COURTS OF ANY JURISDICTION WHERE THE REQUIRED LENDERS
ELECT TO BRING SUCH ACTION OR WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE
FOUND. BORROWER 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.
BORROWER 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. BORROWER 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. DESTRUCTION OF BORROWER'S DOCUMENTS.
All documents, schedules, invoices, agings, or other papers
delivered to any one or more members of the Lender Group may be destroyed or
otherwise disposed of by such member of the Lender Group 4 months after they are
delivered to or received by such member of the Lender Group, unless Borrower
requests, in writing, the return of said documents, schedules, or other papers
and makes arrangements, at Borrower's expense, for their return.
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15. ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS.
15.1 ASSIGNMENTS AND PARTICIPATIONS.
(a) Any Lender may, with the written consent of
Agent, assign and delegate to one or more assignees (each an "Assignee") 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 Borrower
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, shall have been given to Borrower and
Agent by such Lender and the Assignee; (ii) such Lender and its Assignee shall
have delivered to Borrower and Agent an Assignment and Acceptance; and (iii) the
assignor Lender or Assignee has paid to Agent for Agent's sole and separate
account a processing fee in the amount of $3,500. Anything contained herein to
the contrary notwithstanding, the consent of Agent: (y) shall not be required 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 such Lender; and (z) shall not be unreasonably withheld,
conditioned, or delayed in connection with any assignment and delegation by a
Lender to any Eligible Transferee.
(b) From and after the date that Agent notifies the
assignor Lender 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 its 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 Borrower and the Assignee.
(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,
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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 Borrower or the performance or observance by
Borrower of any of its 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 action as agent on its behalf 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 in accordance with their terms all of the
obligations which by the terms of this Agreement are required to be performed by
it as a Lender.
(d) Immediately upon the satisfaction of the
conditions set forth in Section 15.1(a)(i), (ii), and (iii), 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.
(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 the 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's
obligations under this Agreement shall remain unchanged, (ii) the originating
Lender shall remain solely responsible for the performance of such obligations,
(iii) Borrower and Agent 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 sole and exclusive right to approve any amendment to, or any consent or
waiver with respect to, this Agreement or any other Loan Document, 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 a material
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portion 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 Borrower 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 direct rights as
to the other Lenders, Agent, Borrower, the Collections, 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 disclose all
documents and information which it now or hereafter may have relating to
Borrower or Borrower's business.
(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 203.14, and such Federal
Reserve Bank may enforce such pledge or security interest in any manner
permitted under applicable law.
15.2 SUCCESSORS. This Agreement shall bind and inure to the
benefit of the respective successors and assigns of each of the parties;
provided, however, that Borrower 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 Borrower 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 15.1 hereof and, except as expressly required
pursuant to Section 15.1 hereof, no consent or approval by Borrower is required
in connection with any such assignment.
16. AMENDMENTS; WAIVERS.
16.1 AMENDMENTS AND WAIVERS. No amendment or waiver of any
provision of this Agreement or any other Loan Document, and no consent with
respect
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to any departure by Borrower 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 Borrower 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 the Lenders and Borrower and
acknowledged by Agent, do any of the following:
(a) increase or extend the 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 to the Lenders (or any of them) hereunder or under any
other Loan Document;
(c) reduce the principal of, or the rate of interest
specified herein on any Loan, or any fees or other amounts payable hereunder or
under any other Loan Document;
(d) change the percentage of the Commitments that is
required for the Lenders or any of them to take any action hereunder;
(f) amend this Section or any provision of the
Agreement providing for consent or other action by all Lenders;
(g) release Collateral other than as permitted by
Section 17.11;
(j) subordinate any of the Obligations in favor of
any obligations owing by Borrower to any Person other than the Lender Group;
(h) change the definition of "Required Lenders";
(i) release Borrower from any Obligation for the
payment of money; or
(j) amend any of the provisions of Article 17.
and, provided further, however, that no amendment, waiver or consent shall,
unless in writing and signed by Agent, affect the rights or duties of Agent
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
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rights or obligations of Borrower, shall not require consent by or the
agreement of Borrower.
16.2 NO WAIVERS; CUMULATIVE REMEDIES. No failure by Agent or
any Lender to exercise any right, remedy, or option under this Agreement, any
other Loan Document, or any present or future supplement hereto or thereto, or
in any other agreement between or among Borrower and Agent or any Lender, 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
the Lenders on any occasion shall affect or diminish Agent's and each Lender's
rights thereafter to require strict performance by Borrower 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 which Agent or any Lender may have.
17. AGENT; THE LENDER GROUP.
17.1 APPOINTMENT AND AUTHORIZATION OF AGENT. Subject to
Section 17.9, each Lender hereby irrevocably designates and appoints TBCC as its
agent under this Agreement and the other Loan Documents and each Lender hereby
irrevocably authorizes Agent to take such 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 it 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 Article 17. The provisions of this Article 17 are
solely for the benefit of Agent and the Lenders, and Borrower shall have no
rights as a third party beneficiary of any of the provisions contained herein;
provided, however, that certain of the provisions of Section 17.10 hereof also
shall be for the benefit of Borrower. 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 TBCC is
merely the representative of the Lenders, and has only 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 which Agent is expressly 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
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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
Advances, the Collateral, the Collections, 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 as provided in the
Loan Documents; (e) open and maintain such bank accounts and lock boxes as Agent
deems necessary and appropriate in accordance with the Loan Documents for the
foregoing purposes with respect to the Collateral and the Collections; (f)
perform, exercise, and enforce any and all other rights and remedies of the
Lender Group with respect to Borrower, the Obligations, the Collateral, the
Collections, 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.
17.2 DELEGATION OF DUTIES. Except as otherwise provided in
this section, 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 in
compliance with this section and without gross negligence or willful misconduct.
17.3 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 Borrower or any
Subsidiary or Affiliate of Borrower, 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
Borrower 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 properties, books or records of Borrower
or any of Borrower's Subsidiaries or Affiliates.
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17.4 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 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 Borrower 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 it 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 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 Lenders and such request and any action taken or
failure to act pursuant thereto shall be binding upon all of the Lenders.
17.5 NOTICE OF POTENTIAL DEFAULT OR EVENT OF DEFAULT. Agent
shall not be deemed to have knowledge or notice of the occurrence of any
Potential 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, except with respect to Events of Default of
which Agent has actual knowledge, unless Agent shall have received written
notice from a Lender or Borrower referring to this Agreement, describing such
Potential 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 17.4, Agent shall take such action with respect to such
Potential 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
Potential Default or Event of Default as it shall deem advisable.
17.6 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
Borrower and its Subsidiaries 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
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of and investigation into the business, prospects, operations, property,
financial and other condition and creditworthiness of Borrower and any other
Person (other than the Lender Group) 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 Borrower. Each Lender also represents that it will, independently and
without 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 Borrower and any
other Person (other than the Lender Group) 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 Borrower and any other Person party to a Loan Document that
may come into the possession of any of the Agent-Related Persons.
17.7 COSTS AND EXPENSES; INDEMNIFICATION. Agent may incur and
pay Lender Group Expenses to the extent Agent deems reasonably necessary or
appropriate for the performance and fulfillment of its functions, powers, and
obligations pursuant to the Loan Documents, including without limiting the
generality of the foregoing, court costs, reasonable attorneys fees and
expenses, costs of collection by outside collection agencies and auctioneer fees
and costs of security guards or insurance premiums paid to maintain the
Collateral, whether or not Borrower is 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 Collections
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 Collections, 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 agree to indemnify upon demand the
Agent-Related Persons (to the extent not reimbursed by or on behalf of Borrower
and without limiting the obligation of Borrower to do so), according to their
Pro Rata Shares, from and against any and all Indemnified Liabilities at the
time of the occurrence of the event giving rise to such indemnity; provided,
however, that no Lender shall be liable for the payment to the Agent-Related
Persons of any portion of such Indemnified Liabilities resulting solely from
such Person's gross negligence or willful misconduct. Without limitation of the
foregoing, each Lender shall reimburse Agent upon demand for its ratable share
of any costs or out-of-pocket expenses (including attorneys fees and expenses)
incurred by Agent in connection with the preparation, execution, delivery,
administration, modification, amendment or enforcement (whether through
negotiations, legal
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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 Borrower. The undertaking in
this section shall survive the payment of all Obligations hereunder and the
resignation or replacement of Agent.
17.8 AGENT IN INDIVIDUAL CAPACITY. TBCC 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 Borrower and its
Subsidiaries and Affiliates and any other Person (other than the Lender Group)
party to any Loan Documents as though TBCC were not Agent hereunder and without
notice to or consent of the Lenders. The Lenders acknowledge that, pursuant to
such activities, TBCC or its Affiliates may receive information regarding
Borrower or its Affiliates and any other Person (other than the Lender Group)
party to any Loan Documents that is subject to confidentiality obligations in
favor of Borrower 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 be under no obligation to provide such information to them. With
respect to the TBCC Loans and Agent Advances, TBCC shall have the same rights
and powers under this Agreement as any other Lender and may exercise the same as
though it were not Agent, and the terms "Lender" and "Lenders" include TBCC in
its individual capacity.
17.9 SUCCESSOR AGENT. Agent may resign as Agent upon 30 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 17 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 30 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.
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17.10 WITHHOLDING TAX. (a) If any Lender is a "foreign
corporation, partnership or trust" 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
Borrower, to deliver to Agent and Borrower:
(i) if such Lender claims an exemption from,
or a reduction of, withholding tax under a United States tax treaty, properly
completed IRS Forms 1001 and W-8 before the payment of any interest in the first
calendar year and before the payment of any interest in each third succeeding
calendar year during which interest may be paid under this Agreement;
(ii) 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 4224 before the
payment of any interest is due in the first taxable year of such Lender and in
each succeeding taxable year of such Lender during which interest may be paid
under this Agreement, and IRS Form W-9; and
(iii) 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 Borrower of any change in
circumstances which would modify or render invalid any claimed exemption or
reduction.
(b) If any Lender claims exemption from, or reduction
of, withholding tax under a United States tax treaty by providing IRS Form 1001
and such Lender sells, assigns, grants a participation in, or otherwise
transfers all or part of the Obligations of Borrower 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 Borrower to such Lender. To the extent of
such percentage amount, Agent will treat such Lender's IRS Form 1001 as no
longer valid.
(c) If any Lender claiming exemption from United
States withholding tax by filing IRS Form 4224 with Agent sells, assigns, grants
a participation in, or otherwise transfers all or part of the Obligations of
Borrower to such Lender, such Lender agrees to undertake sole responsibility for
complying with the withholding tax requirements imposed by Sections 1441 and
1442 of the IRC.
(d) If any Lender is entitled to a reduction in the
applicable withholding tax, Agent may withhold from any interest payment to such
Lender an
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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.
(e) 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 Agent fully 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.
17.11 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 Borrower of all Obligations; (ii) constituting property being sold or
disposed of if a release is required or desirable in connection therewith and if
Borrower certifies to Agent that the sale or disposition is permitted under
Section 7 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 Borrower owned no interest at the time the
security interest was granted or at any time thereafter; or (iv) constituting
property leased to Borrower 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, of all of the Lenders, or (z) otherwise, all of the Lenders.
Upon request by Agent or 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 17.11; 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 Borrower in respect of)
all
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interests retained by Borrower, including, the proceeds of any sale, all of
which shall continue to constitute part of the Collateral.
(c) Agent shall have no obligation whatsoever to any
of the Lenders to assure that the Collateral exists or is owned by Borrower 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.
17.12 RESTRICTIONS ON ACTIONS BY LENDERS; SHARING OF PAYMENTS.
(a) Each of the Lenders agrees that it shall not, without the express consent of
Agent, and that it shall, to the extent it is lawfully entitled to do so, upon
the request of Agent, set off against the Obligations, any amounts owing by such
Lender to Borrower or any accounts of Borrower now or hereafter maintained with
such Lender. Each of the Lenders further agrees that it shall not, unless
specifically requested to do so 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 the purpose of which is, or could be, to give such Lender any
preference or priority against the other Lenders with respect to the Collateral.
(b) Subject to Section 17.8, 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 arising
under, or relating to, this Agreement or the other Loan Documents, 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 same day 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 if all or part of such excess payment received
by the purchasing party is thereafter recovered from it, those purchases of
participations
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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.
17.13 AGENCY FOR PERFECTION. Agent and each Lender hereby
appoints each other Lender as agent for the purpose of perfecting the Agent's
Liens in assets which, in accordance with Article 9 of the UCC can be perfected
only by possession. Should any Lender obtain possession of any such Collateral,
such Lender shall notify Agent thereof, and, promptly upon Agent's request
therefor shall deliver such Collateral to Agent or in accordance with Agent's
instructions.
17.14 PAYMENTS BY AGENT TO THE LENDERS. All payments to be
made by Agent to the Lenders shall be made by bank wire transfer or internal
transfer of immediately available funds to:
If to TBCC: First National Bank of Chicago
Chicago, Illinois
ABA # ▇▇▇-▇▇▇-▇▇▇
Credit: Transamerica Business Credit
Corporation
Account No. ▇▇-▇▇▇-▇▇
Ref: Aureal
If to GSCP: Citibank N.A.
New York, New York
ABA # ▇▇▇-▇▇▇-▇▇▇
Credit: GS Credit Partners L.P.
Account No. ▇▇▇▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Ref: Aureal
or pursuant to such other 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 on revolving advances or otherwise.
17.15 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 relating to the Collateral, for the
benefit of the Lender Group. Each member of the Lender Group agrees that any
action taken by Agent or all Lenders, as applicable, in accordance with the
terms of this Agreement or the other Loan Documents relating to the Collateral
and the exercise by Agent or all Lenders,
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as applicable, of their respective powers set forth therein or herein, together
with such other powers that are reasonably incidental thereto, shall be binding
upon all of the Lenders.
17.16 FIELD AUDITS AND EXAMINATION REPORTS; CONFIDENTIALITY;
DISCLAIMERS BY LENDERS; OTHER REPORTS AND INFORMATION. By signing 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 or by any Lender accompanying Agent on any such field audit or
examination, and Agent, and, if applicable, any other Lender that prepares any
such Report, shall so furnish each Lender with such Reports;
(b) expressly agrees and acknowledges that none of
TBCC, GSCP, Agent, or, if applicable, any other Lender (i) makes any
representation or warranty as to the accuracy of any Report, or (ii) shall 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, any Lender, or
any other party performing any audit or examination will inspect only specific
information regarding Borrower and will rely significantly upon Borrower's books
and records, as well as on representations of Borrower's personnel;
(d) agrees to keep all Reports and other material,
non-public information regarding Borrower and its Subsidiaries and their
operations, assets, and existing and contemplated business plans in a
confidential manner; it being understood and agreed by Borrower that in any
event such Lender may make disclosures: (i) to counsel for and other advisors,
accountants, and auditors to such Lender; (ii) reasonably required by any bona
fide potential or actual Assignee, transferee, or Participant in connection with
any contemplated or actual assignment or transfer by such Lender of an interest
herein or any participation interest in such Lender's rights hereunder,
provided, however, that by any such disclosure under this clause (ii), such
Assignee, transferee, or Participant shall be bound by the provisions of this
Section 17.16(d); (iii) of information that has become public by disclosures
made by Persons other than such Lender, its Affiliates, assignees, transferees,
or participants; (iv) as required or requested by any court, governmental or
administrative agency, pursuant to any subpoena or other legal process, or by
any law, statute, regulation, or court order; provided, however, that, unless
prohibited by applicable law, statute, regulation, or court order, such Lender
shall notify Borrower of any request by any court, governmental or
administrative agency, or pursuant to any subpoena or other legal process for
disclosure of any such non-public material information concurrent with, or
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where practicable, prior to the disclosure thereof; or (v) in connection with
the enforcement of Agent's Liens on the Collateral; 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 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 Borrower, or the
indemnifying Lender's participation in, or the indemnifying Lender's purchase
of, a loan or loans of Borrower; 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, attorney 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 Borrower to Agent which has not been contemporaneously
provided by Borrower to such Lender, and, upon receipt of such request, Agent
shall provide a copy of same to such Lender promptly upon receipt thereof from
Borrower; (y) To the extent that Agent is entitled, under any provision of the
Loan Documents, to request additional reports or information from Borrower, 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 Borrower the additional reports or information specified by such
Lender, and, upon receipt thereof from Borrower, Agent promptly shall provide a
copy of same to such Lender; and (z) Any time that Agent renders to Borrower a
statement regarding the Loan Account, Agent shall send a copy of such statement
to each Lender.
17.17 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
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obligation, duty, or liability to any Participant of any other Lender. Except as
provided in Section 17.7, no member of the Lender Group shall have any liability
for the acts of any other member of the Lender Group. No Lender shall be
responsible to 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.
18. GENERAL PROVISIONS.
18.1 EFFECTIVENESS. This Agreement shall be binding and deemed
effective when executed by Borrower and each member of the Lender Group whose
signature is provided for on the signature pages hereof.
18.2 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.
18.3 INTERPRETATION. Neither this Agreement nor any
uncertainty or ambiguity herein shall be construed or resolved against the
Lender Group or Borrower, 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 fairly accomplish the purposes and intentions of all parties hereto.
18.4 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.
18.5 AMENDMENTS IN WRITING. This Agreement can only be amended
by a writing signed by Agent, the requisite Lenders, and Borrower.
18.6 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.
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18.7 REVIVAL AND REINSTATEMENT OF OBLIGATIONS. If the
incurrence or payment of the Obligations by Borrower or any guarantor of the
Obligations or the transfer by either or both of such parties to the Lender
Group of any property of either or both of such parties 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, and 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 Borrower or such guarantor automatically shall
be revived, reinstated, and restored and shall exist as though such Voidable
Transfer had never been made.
18.8 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.
18.9 CERTAIN DAMAGES. BORROWER HEREBY EXPRESSLY AGREES THAT IN
NO EVENT WILL ANY MEMBER OF THE LENDER GROUP BE LIABLE FOR ANY SPECIAL,
CONSEQUENTIAL, INCIDENTAL, INDIRECT OR PUNITIVE DAMAGES, WHETHER ANY CLAIM IS
BASED ON CONTRACT OR TORT, WHETHER THE LIKELIHOOD OF SUCH DAMAGES WAS KNOWN TO
ANY MEMBER OF THE LENDER GROUP AND REGARDLESS OF THE FORM OF THE CLAIM OR
ACTION, INCLUDING ANY CLAIM OR ACTION ALLEGING FAILURE TO EXERCISE REASONABLE
CARE OR FAILURE TO ACT IN GOOD FAITH; PROVIDED, HOWEVER, THAT, IF AND TO THE
EXTENT THAT A MEMBER OF THE LENDER GROUP HAS ENGAGED IN ANY GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT RELATIVE TO THE LOAN DOCUMENTS THIS SECTION 18.9 SHALL NOT
APPLY TO SUCH MEMBER OF THE LENDER GROUP TO THE EXTENT OF SUCH GROSS NEGLIGENCE
OR WILLFUL MISCONDUCT.
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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.
AUREAL SEMICONDUCTOR INC.,
a Delaware corporation
By:___________________________________
Title:_________________________________
TRANSAMERICA BUSINESS CREDIT CORPORATION, a Delaware
corporation, as Agent and a Lender
By:___________________________________
Title:_________________________________
▇▇▇▇▇▇▇ ▇▇▇▇▇ CREDIT PARTNERS L.P., a Bermuda limited
partnership
By:___________________________________
Title: Authorized Signatory
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