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Exhibit 10.4
CREDIT AGREEMENT
between
LENDINGTREE, INC., as Borrower
and
THE UNION LABOR LIFE INSURANCE COMPANY,
ON BEHALF OF ITS SEPARATE ACCOUNT P, as Lender
March 7, 2001
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THIS CREDIT AGREEMENT (this "Agreement") dated as of March 7, 2001, is
made by and between LENDINGTREE, INC., a Delaware corporation ("Borrower"), and
THE UNION LABOR LIFE INSURANCE COMPANY, a Maryland corporation, ON BEHALF OF ITS
SEPARATE ACCOUNT P ("Lender").
ARTICLE 1
DEFINITIONS
For the purposes of this Agreement:
"Advance" has the meaning specified in Section 2.1 hereof.
"Advance Date" means the date on which each of the conditions set forth
in Section 4.2 hereof is satisfied (or waived by Lender) and an Advance is made.
"Affiliate" means any Person directly or indirectly controlling,
controlled by, or under common control with Borrower, and any Person who is a
director, officer or partner of Borrower. For purposes of this definition,
"control," when used with respect to any Person, includes, without limitation,
the direct or indirect beneficial ownership of ten percent (10%) or more of the
outstanding voting securities or voting equity of such Person or the power to
direct or cause the direction of the management and policies of such Person
whether by contract or otherwise; provided, however, that the term "Affiliate"
shall specifically exclude Lender.
"Agreement" has the meaning specified in the introductory paragraph
hereto.
"Applicable Laws" means, collectively, all applicable international,
foreign, federal, state and local statutes, treaties, rules, guidelines,
regulations, ordinances, codes and administrative or judicial precedents or
authorities, including the interpretation or administration thereof by any
Governmental Authority charged with the enforcement, interpretation or
administration thereof, and all applicable administrative orders, decrees,
directed duties, requests, licenses, authorizations and permits of, and
agreements with, any Governmental Authority, court or arbitral body, in each
case whether or not having the force of law.
"Asset Sale" means any sale, transfer, conveyance or other disposition
by Borrower or any of its Subsidiaries to any Person (including by way of
redemption by such Person), other than to Borrower or another Subsidiary that is
a Subsidiary Guarantor, of any asset (including, without limitation, any Capital
Stock or other securities of or equity interests in, another Person) except as
otherwise permitted under Section 8.7(b).
"Authorized Signatory" means such senior personnel of a Person as may
be duly authorized and designated in writing by such Person to execute
documents, agreements, and instruments on behalf of such Person.
"Borrower" has the meaning specified in the introductory paragraph
hereto.
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"Business Day" means any day other than a Saturday, Sunday or other day
on which commercial banks are authorized to close under the Applicable Laws of,
or are in fact closed in, the state where Lender's principal office is located.
"Business Plan" means Borrower's fiscal 2001 budget attached hereto as
Exhibit H.
"Capital Stock" means, as applied to any Person, any capital stock of
such Person, regardless of class or designation, and all warrants, options,
purchase rights, conversion or exchange rights, voting rights, calls or claims
of any character with respect thereto.
"Capital Z" means, collectively, Capital Z Financial Securities Fund
II, L.P., and its affiliates
"Change of Control" means the point in time at which (i) any Person (as
defined in Section 13(d) and Section 14(d)(2) under the Securities Exchange Act
of 1934, as amended) (A) acquires all or substantially all of the properties and
assets of Borrower or (B) shall have (directly or indirectly) acquired
beneficial ownership of fifty percent (50%) or more of the issued and
outstanding voting stock of Borrower or (ii) less than a majority of the members
of Borrower's Board shall be persons who either (A) were serving as directors on
the date of this Agreement or (B) were nominated as directors by the vote of a
majority of the directors who are directors referred to in clause (ii)(A) above
or this clause (ii)(B).
"Closing Date" means the date on which each of the conditions precedent
set forth in Section 4.1 hereof are met or waived by Lender.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Commitment" has the meaning specified in Section 2.1 hereof.
"Common Stock" has the meaning specified in Section 5.1(d)(i) hereof.
"Compliance Report" means the monthly report provided by Borrower to
Lender pursuant to Section 7.2 hereof.
"Coverage Ratio" means the ratio of (a) the amount of the Receivables
Value to (b) the amount of Borrower's Obligations to Lender under this
Agreement.
"Default" means any of the events specified in Section 9.1 hereof
regardless of whether there shall have occurred any passage of time or giving of
notice (or both) that would be necessary in order to constitute an Event of
Default.
"Dividends" means any direct or indirect distribution, dividend or
payment to any Person on account of any Capital Stock of Borrower.
"EBITDA" means, for any period, Borrower's operating income (loss),
excluding non-cash charges for compensation attributable to options, warrants
and other equity instruments, depreciation, amortization and one-time
non-operating charges, if any, as determined by Borrower in its reasonable
judgment consistent with the information as or to be reported in Borrower's
earnings releases and included or to be included in Borrower's SEC Filings, and
excludes
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deferred revenues adjustments determined as follows: Borrower may, from time to
time, perform services under customized software arrangements. At times, GAAP
accounting may require Borrower to recognize expenses before recognizing
proportional revenues for such arrangements. If this occurs during the term of
this Agreement, the actual EBITDA amount will be increased to the extent of any
cash paid in advance (deferred Revenue) to Borrower for such arrangements.
"Environmental Claims" means all claims, however asserted, by any
Governmental Authority or other Person alleging potential liability or
responsibility for violation of any Environmental Law, or for release or injury
to the environment.
"Environmental Laws" means any and all applicable federal, state, local
or municipal laws, rules, orders, regulations, statutes, ordinances, codes,
permit conditions, decrees or requirements of any Governmental Authority
regulating, relating to or imposing liability or standards of conduct concerning
environmental protection matters, including without limitation, hazardous
materials, as now or may at any time hereafter be in effect.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
in effect on the Closing Date and as such Act may be amended thereafter from
time to time.
"ERISA Affiliate" means any "affiliate" of Borrower within the meaning
of Section 414 of the Code.
"ERISA Event" shall mean, with respect to Borrower or any of its
Subsidiaries or any ERISA Affiliate, (a) any event described in Section 4043(c)
of ERISA with respect to a Title IV Plan; (b) the withdrawal of Borrower or such
Subsidiary or ERISA Affiliate from a Title IV Plan subject to section 4063 of
ERISA during a plan year in which it was a substantial employer, as defined in
Section 4001(a)(2) of ERISA; (c) the complete or partial withdrawal of Borrower
or such Subsidiary or any ERISA Affiliate from any Multiemployer Plan; (d) the
filing of a notice of intent to terminate a Title IV Plan or the treatment of a
plan amendment as a termination under Section 4041 of ERISA; (e) the institution
of proceedings to terminate a Title IV Plan or Multiemployer Plan by the Pension
Benefit Guaranty Corporation (or any successor thereto); (f) the failure by
Borrower or such Subsidiary or ERISA Affiliate to make when due required
contributions to a Multiemployer Plan or Title IV Plan unless such failure is
cured within 30 days; (g) any other event or condition which might reasonably be
expected to constitute grounds under Section 4042 of ERISA for the termination
of, or the appointment of a trustee to administer, any Title IV Plan or
Multiemployer Plan or for the imposition of liability under Section 4069 or
4212(c) of ERISA; (h) the termination of a Multiemployer Plan under Section
4041A of ERISA or the reorganization or insolvency of a Multiemployer Plan under
Section 4241 of ERISA; (i) the loss of a Qualified Plan's qualification or tax
exempt status; or (j) the termination of a Plan described in Section 4064 of
ERISA.
"Event of Default" means any of the events specified in Section 9.1
hereof, provided that any requirement for notice or lapse of time, or both, has
been satisfied.
"Financing Documentation" has the meaning specified in Section 4.1(f)
hereof.
"Financing Transactions" has the meaning specified in Section 4.1(f)
hereof.
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"Fiscal Quarter" means any of the quarterly accounting periods of
Borrower.
"▇▇▇▇▇▇▇ Mac" means the Federal Home Loan Mortgage Corporation.
"GAAP" means generally accepted accounting principles and practices in
the United States as in effect from time to time applied on a consistent basis.
If, at any time after the date hereof, there are changes in GAAP that materially
impact the Borrower's calculation of Revenue or EBITDA as compared to how it
calculated such amounts in prior periods, the Borrower and Lender shall
negotiate in good faith to adjust the Revenue and EBITDA amounts contained in
Section 3.1(b).
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Indebtedness" means, with respect to any Person, (a) all items, except
items of shareholders' and partners' equity or Capital Stock or surplus or
general contingency or deferred tax reserves, which in accordance with GAAP
would be included in determining total liabilities as shown on the liability
side of a balance sheet of such Person, (b) all direct or indirect obligations
secured by any Lien to which any property or asset owned by such Person is
subject, whether or not the obligation secured thereby shall have been assumed,
(c) all capitalized lease obligations of such Person, (d) all reimbursement
obligations with respect to outstanding letters of credit, and (e) all
obligations of other persons or entities which such Person has guaranteed.
"Independent Auditor" has the meaning specified in Section 7.1(a)
hereof.
"Intellectual Property" means all patents, patent applications, trade
names, trademarks, trademark registration applications, copyrights, copyright
registration applications and other material proprietary rights that are
registered and owned by or licensed to Borrower or used or to be used by
Borrower in its business as presently conducted or contemplated.
"Interest Payment Date" has the meaning specified in Section 2.4(c)
hereof.
"Interest Rate" has the meaning specified in Section 2.4(a) hereof.
"IRC" means the Internal Revenue Code, as amended.
"Lender" has the meaning specified in the introductory paragraph.
"Lien" means, with respect to any property, any mortgage, lien, pledge,
assignment, charge, security interest, title retention agreement, levy,
execution, seizure, attachment, garnishment, or other encumbrance of any kind in
respect of such property, whether or not ▇▇▇▇▇▇, vested, or perfected.
"Loan Availability Period" means the period from the Closing Date to,
but excluding, the Maturity Date.
"Loan Documents" means this Agreement, the Note, the Subsidiary
Guarantee Agreement, all Requests for Advance, all Compliance Reports, the
Security Documents
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(including the Pledge Agreement), the Warrants, the Registration Rights
Agreement and all other documents, instruments, certificates, and agreements
executed or delivered in connection with or contemplated by this Agreement.
"Loan Parties" means, collectively, Borrower or any Subsidiary that is
now or hereafter becomes a party to any Loan Document.
"Material Adverse Effect" means any material adverse effect (a) upon
the business, assets, liabilities, financial condition, results of operations,
or business prospects of Borrower and its Subsidiaries taken as a whole, or (b)
upon the ability of Borrower and its Subsidiaries taken as a whole to ensure
their performance under this Agreement or any other Loan Document, or (c) upon
the rights, benefits or interests of Lender in or to this Agreement or any other
Loan Document, in each case, resulting from any act, omission, situation,
status, event, or undertaking, either singly or taken together.
"Maturity Date" has the meaning specified in Section 2.2 hereof.
"Multiemployer Plan" means a multiemployer plan, as defined in Section
4001(a)(3) of ERISA, subject to Title IV of ERISA.
"Necessary Authorizations" means all material authorizations, consents,
permits, approvals, licenses, and exemptions from, and all filings and
registrations with, and reports to, any Governmental Authority whether federal,
state, local, and all agencies thereof, which are required for the conduct of
the businesses and the ownership (or lease) of the properties and assets of
Borrower and its Subsidiaries.
"Net Debt Proceeds" means, with respect to any incurrence of
Indebtedness for borrowed money, the cash proceeds (net of underwriting
discounts and commissions and other reasonable out-of-pocket costs associated
therewith) received by the respective Person from the respective incurrence of
such Indebtedness for borrowed money.
"Net Equity Proceeds" means, with respect to each issuance or sale of
any equity by any Person or any capital contribution to such Person, the cash
proceeds (net of underwriting discounts and commissions and other reasonable
out-of-pocket costs associated therewith) received by such Person from the
respective sale or issuance of its equity or from the respective capital
contribution.
"Net Sale Proceeds" means, for any Asset Sale, the gross cash proceeds
(including any cash received by way of deferred payment pursuant to a promissory
note, receivable or otherwise, but only as and when received) received from such
sale of assets, net of the reasonable out-of-pocket costs of such sale
(including fees and commissions, payments of unassumed liabilities relating to
the assets sold and required payments of any Indebtedness (other than
Indebtedness secured pursuant to the Security Documents) which is secured by the
respective assets which were sold), and the incremental taxes paid or payable as
a result of such Asset Sale.
"Note" means that certain promissory note dated as of the date hereof
in the aggregate principal amount of the Commitment issued by Borrower to Lender
and substantially in the form
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of Exhibit A attached hereto, and any extensions, renewals or amendments to, or
replacements of, the foregoing.
"Obligations" means (a) all payment and performance obligations of
Borrower and each of its Subsidiaries to Lender, under this Agreement and the
other Loan Documents (including any obligations that, but for the provisions of
Title 11 of the United States Code, would have accrued), as they may be amended
from time to time, or as a result of making the Advances, (b) the obligation to
pay an amount equal to the amount of any and all damages which Lender may suffer
by reason of a breach by Borrower or any of its Subsidiaries of any obligation,
covenant, or undertaking with respect to this Agreement or any other Loan
Document, and (c) all other obligations of Borrower to Lender (or any affiliate
of Lender) (other than in the capacity of a holder of Borrower's Warrants)
whatsoever now existing or hereafter arising, direct or indirect, due or to
become due.
"Option Plans" has the meaning specified in Section 5.1(d).
"Other Lender" means any person other than Lender or The Union Labor
Life Insurance Company, a Maryland corporation, or their respective Affiliates.
"Payment Office" means Lender's office designated as the Payment Office
on Schedule 1 hereto or such other office as may be designated from time to time
by Lender to Borrower in writing.
"Permitted Liens" means, as applied to any Person:
(i) Any Lien in favor of Lender;
(ii) Liens in favor of lessors under capitalized leases to the extent
that the obligations thereunder is Indebtedness permitted under Section 8.1(d)
of this Agreement; provided, however, that each such Lien extends only to the
property which is the subject of such capitalized lease and is given only to
secure the obligations under such capitalized lease;
(iii) Liens to secure Indebtedness for purchase money indebtedness to
the extent that such Indebtedness is permitted under Section 8.1(e) of this
Agreement; provided, however, that each such Lien is given only to secure the
purchase price of the property which is the subject of such purchase money
indebtedness, does not extend to any other property and is given at the time of
acquisition of the property;
(iv) Liens on real property for real property taxes not yet delinquent
and Liens for taxes, assessments, judgments, governmental charges or levies, or
claims, the non-payment of which is being diligently contested in good faith by
appropriate proceedings and for which adequate reserves have been set aside on
such Person's books;
(v) Liens of landlords and liens of carriers, warehousemen, mechanics,
laborers, suppliers, workers and materialmen incurred in the ordinary course of
business for sums not yet due or being diligently contested in good faith, if
such reserve or appropriate provision, if any, shall have been made therefor;
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(vi) Liens incurred in the ordinary course of business in connection
with worker's compensation and unemployment insurance or other types of social
security benefits;
(vii) Easements, rights-of-way, restrictions, and other similar
encumbrances on the use of real property which do not interfere with the
ordinary conduct of the business of such Person, or Liens incidental to the
conduct of the business of such Person or to the ownership of its properties
which were not incurred in connection with Indebtedness or other extensions of
credit and which do not in the aggregate materially detract from the value of
such properties or materially impair their use in the operation of the business
of such Person;
(viii) Deposits to secure the performance of bids, trade contracts,
tenders, sales, leases, statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a like nature incurred in the
ordinary course of business;
(ix) Liens listed on Schedule 3 hereto; provided, that (i) the
aggregate principal amount of the Indebtedness, if any, secured by such Liens
does not increase, and (ii) such Liens do not encumber any additional properties
of Borrower or any of its Subsidiaries;
(x) Liens of Other Lenders on Receivables permitted by Section
3.1(a)(i); and
(xi) Liens (if any) in favor of ▇▇▇▇▇▇▇ Mac under the Software
Customization, License and Services Agreement between ▇▇▇▇▇▇▇ Mac and the
Borrower dated July 7, 2000, as amended on March ___, 2001.
"Person" means an individual, corporation, partnership, trust, joint
stock company, limited liability company, unincorporated organization, or a
government or any agency or political subdivision thereof.
"Plan" means an employee benefit plan within the meaning of Section
3(3) of ERISA or any other plan maintained for employees of any Person or any
Affiliate of such Person.
"Pledge Agreement" means Stock Pledge Agreement substantially in the
form of Exhibit E hereto.
"Qualified Plan" means a Plan which is intended to be tax-qualified
under Section 401(a) of the IRC.
"Qualified Receivables" means those Receivables that meet the
requirements set forth in Schedule 2 hereof.
"Receivables" means all Accounts (as defined in the Security Documents)
arising from the licensing of Intellectual Property, sale of goods or provision
of services to any Person by Borrower, which Receivables are subject to a first
priority security interest in favor of Lender pursuant to the Security
Documents.
"Receivables Value" means, on any date of the determination thereof,
the Dollar value of Qualified Receivables.
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"Registration Rights Agreement" means the Registration Rights Agreement
substantially in the form of Exhibit G hereto.
"Revenue" means the amount of Borrower's total revenue as set forth in
Borrower's financial statements prepared in accordance with GAAP, and as are or
to be reported in Borrower's earning releases and included or to be included in
Borrower's SEC Filings.
"Reportable Event" has the meaning set forth in Section 4043(c) of
ERISA and the regulations thereunder, but shall not include any event which is
not subject to the thirty (30) day notice requirement of such regulations other
than 29 Code of Federal Regulations Sections 2615.11, 2615.12 and 2615.19.
"Request for Advance" means the request in substantially the form of
Exhibit B attached hereto.
"Restricted Payment" means (a) cash Dividends, (b) any payment of any
management fees, consulting fees or similar fees payable by Borrower to any of
its Affiliates (but excluding reimbursement of legal fees and other expenses, if
any, incurred by such Affiliates in connection with the Financing Transactions
or any other financing transactions otherwise permitted by this Agreement), (c)
any payment of any other Indebtedness for borrowed money to any Affiliate of
Borrower, and (d) any loan or advance to any Affiliate of Borrower (other than
loans to employees permitted pursuant to Section 8.5).
"Restricted Purchase" means any payment on account of the purchase,
redemption, or other acquisition or retirement of any shares of Capital Stock of
Borrower.
"SEC" means the Securities and Exchange Commission.
"SEC Filings" means documents and reports filed by Borrower with the
SEC pursuant to the Securities Act or Sections 13 or 15(d) of the Securities
Exchange Act of 1934, as amended.
"Securities Act" has the meaning specified in Section 5.1(x) hereof.
"Security Document" and "Security Documents" have the meaning set forth
in Section 3.1(c) hereof.
"Subsidiary" means (a) any corporation of which more than fifty percent
(50%) of the outstanding stock (other than directors' qualifying shares) having
ordinary voting power to elect a majority of its board of directors, regardless
of the existence at the time of a right of the holders of any class or classes
of securities of such corporation to exercise such voting power by reason of the
happening of any contingency, or any partnership of which more than fifty
percent (50%) of the outstanding partnership interests is at the time owned by
Borrower, or by one or more its Subsidiaries, or by Borrower and one or more of
its Subsidiaries, and (b) any other entity which is controlled or capable of
being controlled by Borrower, or by one or more of its Subsidiaries, or by
Borrower and one or more its Subsidiaries.
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"Subsidiary Guarantee Agreement" means the Subsidiary Guarantee
Agreement substantially in the form of Exhibit D hereto, executed by each of the
Borrower's Subsidiaries pursuant to Section 6.14.
"Subsidiary Guarantor" means any of the Borrower's Subsidiaries that is
party to the Subsidiary Guarantee Agreement.
"Title IV Plan" shall mean an employee pension benefit plan, as defined
in Section 3(2) of ERISA (other than a Multiemployer Plan), which is covered by
Title IV of ERISA, and which Borrower or any of its Subsidiaries or ERISA
Affiliate maintains, contributes to or has an obligation to contribute to on
behalf of participants who are or were employed by any of them.
"Warrant" means any warrant, issued by Borrower to Lender, delivered in
accordance with the terms hereof, and substantially in the form of Exhibit F
attached hereto.
Each definition of an agreement in this Article 1 shall include such
instrument or agreement as modified, amended, or supplemented from time to time
with, if required pursuant to the express terms hereof, the prior written
consent of Lender, and except where the context otherwise requires, definitions
imparting the singular shall include the plural and vice versa. Except where
otherwise specifically restricted, reference to a party to a Loan Document
includes that party and its successors and assigns. All accounting terms used
herein without definition shall be used as defined under GAAP.
ARTICLE 2
THE LOAN
Section 2.1 Extension of Credit.
(a) Subject to the terms and conditions of, and in reliance upon the
representations and warranties made in, this Agreement and the other Loan
Documents, Lender agrees to make available, from time to time, advances (each,
an "Advance") to Borrower during the Loan Availability Period consisting of
Advances in an aggregate principal amount not to exceed $5,000,000 (the
"Commitment") as hereafter provided. Within the limits of the Commitment, and
subject to the other terms and conditions hereof, Borrower may borrow under this
Section 2.1, prepay under Section 2.3 and reborrow under this Section 2.1.
(b) Borrowing Mechanics. In the event Borrower desires an Advance,
Borrower shall give Lender telephonic notice of the proposed borrowing by no
later than 11:00 a.m. (Washington, D.C. time) three (3) Business Days before the
Advance Date, which notice shall also specify (i) the proposed Advance Date
(which shall be a Business Day), (ii) the amount of such Advance, and (iii) the
account into which the proceeds of the Advance are to be deposited. Any such
telephonic notice shall be confirmed by delivery of a written Request for
Advance on the same day. Lender shall not incur any liability to Borrower for
acting upon any telephonic notice Lender believes in good faith to have been
given by a duly authorized officer or other person authorized to borrow on
behalf of Borrower or for otherwise acting in good faith under this Section
2.1(b). Each Advance shall be deposited by wire transfer in immediately
available funds in such account as Borrower designates in the applicable Request
for Advance.
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(c) Minimum Amounts. The initial Advance shall be in a principal amount
of $250,000 or a whole multiple of $250,000 in excess thereof. Each subsequent
Advance shall be in a principal amount of $250,000 or a whole multiple of
$250,000 in excess thereof.
(d) Use of Proceeds. The proceeds of the Advances shall be used for the
Borrower's technology, advertising and marketing activities and other general
corporate purposes.
Section 2.2 Repayment. The principal balance of all Advances then
outstanding, together with all accrued and unpaid interest and other
Obligations, shall be due and payable in full on the date (the "Maturity Date")
which is the earlier of (a) March __, 2003, or (b) such earlier date as all such
amounts may become due and payable and the Commitment is terminated upon the
occurrence of an Event of Default pursuant to Section 9.1.
Section 2.3 Optional/Mandatory Prepayments and Commitment Reductions
(a) Optional prepayments of the Advances may be made at any time upon
two (2) Business Days' prior irrevocable written notice to Lender, without
penalty or premium, provided that such prepayments shall be in minimum amounts
of $500,000 and whole multiples of $500,000 in excess thereof. Borrower may,
upon not less than three (3) Business Days' prior irrevocable written notice to
Lender, terminate the Commitment or permanently reduce the Commitment by an
aggregate minimum amount of $1,000,000 or any multiple of $1,000,000 in excess
thereof; unless, after giving effect to any reduction of Commitment and to any
prepayment of the Advances made on the effective date thereof, the outstanding
principal amount of the Advances would exceed the amount of the Commitment then
in effect. Upon any termination of the Commitment pursuant to this Section 2.3,
Borrower shall issue to Lender Warrants to purchase 40,000 shares of Common
Stock (as equitably and proportionately adjusted for stock splits, combinations,
stock dividends, reorganizations and reclassifications). Once reduced or
terminated in accordance with this Section 2.3(a), the Commitment may not be
increased or reinstated.
(b) In addition to any other mandatory prepayments made pursuant to
this Section 2.3, on each date after the Closing Date upon which the Borrower or
any of its Subsidiaries receives any cash proceeds from any capital contribution
or any sale or issuance of its equity, or options to purchase shares of its
Capital Stock, whether to officers, directors and employees of the Borrower and
its Subsidiaries or any other Persons (other than equity issuances pursuant to
employee benefit plans not in excess of $400,000 per year), an amount equal to
100% of the Net Equity Proceeds of such capital contribution or sale or issuance
of equity or options shall be applied as a mandatory prepayment of principal of
outstanding Advances in accordance with Section 2.8.
(c) In addition to any other mandatory prepayments made pursuant to
this Section 2.3, on each date on or after the Closing Date upon which the
Borrower or any of its Subsidiaries receives any cash proceeds equaling or
exceeding $50,000 from any incurrence by the Borrower or any of its Subsidiaries
of Indebtedness for borrowed money (other than Indebtedness in connection with
the Financing Transactions), an amount equal to 100% of the Net Debt Proceeds of
the respective incurrence of Indebtedness shall be applied as a mandatory
prepayment of principal of outstanding Advances in accordance with Section 2.8.
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(d) In addition to any other mandatory prepayments made pursuant to
this Section 2.3, on each date on or after the Closing Date upon which the
Borrower or any of its Subsidiaries receives any cash proceeds from any Asset
Sale, an amount equal to 100% of the Net Sale Proceeds therefrom shall be
applied as a mandatory prepayment of principal of outstanding Advances pursuant
to Section 2.8; provided that with respect to no more than $100,000 in the
aggregate of cash proceeds from Asset Sales in any fiscal year of the Borrower,
such Net Sale Proceeds therefrom shall not be required to be so applied on such
date so long as no Default or Event of Default then exists and the Borrower
delivers a certificate to the Agent on or prior to such date stating that such
Net Sale Proceeds shall be used to purchase replacement assets within 90 days
following the date of such Asset Sale (which certificate shall set forth the
estimates of the proceeds to be so expended), and provided further, that if all
of any portion of such Net Sale Proceeds not required to be applied to the
prepayment of outstanding Advances are not so reinvested in replacement assets
within such 90 day period, such remaining portion shall be applied on the last
day of such period as a mandatory prepayment of principal of outstanding
Advances as provided above in this Section 2.3 without regard to this proviso.
(e) Notwithstanding any right or intent of Borrower to prepay all or
any part of the Advances on or before the Maturity Date, (i) Borrower shall at
all times reserve and keep available for issuance such number of its authorized
but unissued shares of Common Stock (or other capital stock from time to time
issuable upon exercise of Warrants) as shall be necessary to permit the Lender
to exercise its rights under the Warrants that may or are issued hereunder, and
(ii) Borrower shall not, by amendment of its certificate of incorporation or
through reorganization, consolidation, merger, dissolution, issue or sale of
securities, sale of assets or any other voluntary action, avoid or seek to avoid
the observance or performance of any of the terms of Section 2.4, but shall at
all times in good faith assist in the carrying out of all such terms and in the
taking of all such action as may be necessary or appropriate in order to protect
the rights of Lender against impairment.
Section 2.4 Interest.
(a) Rate of Interest. The Advances and all other Obligations shall bear
interest from the date such Advances are made or such other Obligations become
due to the date paid at a rate per annum equal to twenty percent (20%) for
Advances and all other Obligations for which no other interest rate is specified
(the "Interest Rate").
(b) Payment of Interest All payments of interest due hereunder shall be
payable as follows: (a) thirty percent (30%) in immediately available cash, and
(b) seventy percent (70%) by the issuance of Warrants (the value of which, for
the purposes of this Agreement, shall be deemed to be $3.99 with respect to each
such Warrant); provided, however, that, with respect to clause (b), Borrower
shall pay such interest in cash in lieu of any Warrant that would otherwise be
issued for the purchase of a fractional share of Common Stock.
(c) Interest Payment Dates. Interest on all outstanding Advances and
all other Obligations shall be payable to Lender (i) quarterly in arrears on the
first Business Day of each [June, September, December and March of each year,
(ii) on the date of any prepayment of Advances if such prepayment is a full
prepayment of all Advances outstanding, but if such prepayment is for less than
the full amount outstanding on all Advances, then on the next Interest Payment
Date following the date of such partial prepayment, and (iii) on the Maturity
Date,
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whether by acceleration or otherwise (each such date, an "Interest Payment
Date"). Notwithstanding the foregoing, interest payable in Warrants shall be
payable to Lender not later than ten (10) days following the Interest Payment
Date applicable thereto.
Section 2.5 Computations of Interest and Fees. Computation of interest
on Advances and all fees shall be calculated on the basis of a year of 360 days
and the actual number of days elapsed based on the average daily balance of such
Advances and Obligations outstanding computed on a quarterly basis. Interest
shall accrue on each Advance for the day on which the Advance is made, and shall
not accrue on an Advance, or any portion thereof, for the day on which the
Advance or such portion is paid, provided that any Advance that is repaid on the
same day on which it is made shall bear interest for one day.
Section 2.6 Note; Loan Accounts. The Advances shall be repayable in
accordance with the terms and provisions set forth herein and in the Note, and
shall be evidenced by the Note. Lender may open and maintain on its books in the
name of Borrower a loan account with respect to the Advances and interest
thereon. Lender shall debit such loan account for the principal amount of each
Advance made by it, accrued interest thereon, and all other amounts which shall
become due from Borrower pursuant to this Agreement and shall credit such loan
account for each payment which Borrower shall make in respect to the
Obligations. The records of Lender with respect to such loan account shall be
prima facie evidence of the Advances and accrued interest thereon.
Section 2.7 Manner of Payment.
(a) Payment Dates. Each payment (including any prepayment) by Borrower
on account of the principal of or interest on the Advances, fees, and any other
amount owed to Lender under this Agreement, the Note, or the other Loan
Documents shall be made not later than 11:00 a.m. (Washington, D.C. time) on the
date specified for payment under this Agreement, the Note or any other Loan
Document to Lender at Lender's Payment Office in immediately available funds or
the issuance of Warrants, as required pursuant to Section 2.4(b). Any payment
received by Lender after 11:00 a.m. (Washington, D.C. time) on the date
specified therefor shall be deemed received on the next Business Day and any
applicable interest or fees shall continue to accrue.
(b) No Deduction; Taxes. Borrower agrees to pay principal, interest,
fees, and all other amounts due hereunder or under the Note without condition or
deduction for any counterclaim, defense, recoupment or setoff. If Borrower shall
hereafter be required by law to deduct any taxes from or in respect of any sum
payable hereunder or under the Note to Lender (other than income taxes solely on
Lender's taxable income), (i) the sum payable shall be increased as may be
necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this Section 2.7(b)), Lender
receives an amount equal to the sum it would have received had no such
deductions been made, (ii) Borrower shall make such deductions, and (iii)
Borrower shall pay the full amount deducted to the relevant taxation authority
or other authority in accordance with Applicable Law.
Section 2.8 Application of Payments. Borrower irrevocably waives the
right to direct the application of any and all payments in cash at any time or
times hereafter received from or on behalf of Borrower, and Borrower irrevocably
agrees that Lender shall have the continuing
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exclusive right to apply any and all such payments against the then due and
payable Obligations of Borrower and in repayment of the Advances, as Lender may
deem advisable. In the absence of a specific determination by Lender with
respect thereto, the same shall be applied in the following order: (a) then due
and payable fees and expenses; (b) then due and payable interest payments
(including, with respect to optional or mandatory prepayments made pursuant to
Section 2.3, interest due and payable accrued on amounts so prepaid through the
date of such prepayment); (c) then due and payable Obligations other than fees,
expenses and interest and principal payments; and (d) the principal amount due
on the Advances.
Section 2.9 Maximum Rate of Interest. In no contingency or event
whatsoever shall the aggregate of all amounts deemed interest on the Advances
and charged or collected pursuant to the terms of this Agreement or pursuant to
the Note exceed the highest rate permissible under any law which a court of
competent jurisdiction shall, in a final determination, deem applicable thereto.
In the event that such a court determines that Lender has charged or received
interest hereunder in excess of the highest applicable rate, the rate in effect
hereunder shall automatically be reduced to the maximum rate permitted by
Applicable Law and Lender shall promptly refund to Borrower any interest
received by it in excess of the maximum lawful rate or, if so requested by
Borrower, shall apply such excess to the principal balance of the Obligations.
It is the intent of the parties hereto that Borrower not pay or contract to pay,
and that Lender not receive or contract to receive, directly or indirectly in
any manner whatsoever, interest in excess of that which may be paid by Borrower
under Applicable Law.
ARTICLE 3
SECURITY
Section 3.1 Security for the Obligations.
(a) The Obligations of Borrower shall be secured at all times by:
(i) a first priority perfected security interest in and lien
upon all presently owned and hereafter acquired tangible and intangible
personal property and fixtures of Borrower, subject only to any
Permitted Liens (including without limitation the right to receive all
proceeds derived or arising from or in connection with the sale,
assignment or transfer thereof); provided, however, that so long as (A)
no Default or Event of Default has occurred and is continuing and (B)
Borrower's Coverage Ratio exceeds 150% as determined at the end of each
monthly reporting period or on any Advance Date, Borrower may (X) enter
into financing arrangements with Other Lenders and (Y) grant to any
such Other Lender a security interest in the Receivables; provided,
further, that any such financing arrangements with any such Other
Lender (including any intercreditor agreement proposed to be executed
in connection therewith between such Other Lender and Lender) shall be
on such terms and conditions that are satisfactory to the Lender in its
sole and absolute discretion; and
(ii) without limiting the generality of Section 3.1(a)(i), a
first priority perfected security interest in the Intellectual
Property, together with such third party consents as the Agent may
reasonably require.
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(b) Financial Targets; Deposit Accounts. In the event that:
(i) Borrower has Revenue for the Fiscal Quarter ending March
31, 2001 of less than $10,200,000 and an EBITDA loss for such quarter
of greater than negative $12,400,000;
(ii) Borrower has Revenue for the Fiscal Quarter ending June
30, 2001 of less than $13,700,000 and an EBITDA loss for such quarter
of greater than negative $10,100,000;
(iii) Borrower has Revenue for the Fiscal Quarter ending
September 30, 2001 of less than $15,000,000 and an EBITDA loss for such
quarter of greater than negative $9,000,000;
(iv) Borrower has Revenue for the Fiscal Quarter ending
December 31, 2001 of less than $16,000,000 and an EBITDA loss for such
quarter of greater than negative $7,500,000;
(v) commencing in the first Fiscal Quarter of 2002, Borrower
has negative EBITDA for any Fiscal Quarter and less than $5,000,000 in
cash, restricted cash and cash equivalents at the end of such Fiscal
Quarter;
(vi) Borrower raises more than $33,000,000 (in the aggregate)
in equity financing for operating purposes during the year 2001,
without first obtaining the Lender's consent or repaying all amounts
then outstanding under this Credit Agreement;
(vii) (A) is in default of a payment obligation in excess of
$25,000 under the terms of its agreement with its then-current hosting
service provider and such default is not cured within four (4) business
days and jeopardizes Borrower's ability to maintain uninterrupted
hosting of its software system, or (B) is in material, non-monetary
default with its then-current hosting service provider and such default
is not cured within thirty (30) days; or
(viii) Borrower fails to maintain the Coverage Ratio for two
consecutive monthly reporting periods;
then Lender may retain a third-party administrative or collateral agent to
monitor Receivables and to institute custody, lockbox, collection and cash
management arrangements (collectively, the "Cash Management Accounts") to
receive any cash received by Borrower, including with respect to the
Receivables. Borrower shall execute (and shall use its best efforts to cause
third parties to execute) all agreements, documents or instruments reasonably
necessary to institute and/or implement the Cash Management Accounts and to
grant Lender the right to cause funds held in connection therewith to be
remitted to Lender upon the occurrence or during the continuance of an Event of
Default under Section 9.1. The costs and expenses (including, without
limitation, reasonable attorneys' fees) incurred by Lender in connection with
the Cash Management Accounts shall be paid by Borrower as required by Section
10.2.
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(c) Security Documents. All agreements and instruments described or
contemplated in this Section 3.1, together with any and all other agreements and
instruments heretofore or hereafter securing the Note and the other Obligations
or otherwise executed in connection with this Agreement, are sometimes
hereinafter referred to collectively as the "Security Documents" and each
individually as a "Security Document." Borrower agrees to execute and deliver
any and all Security Documents in form and substance reasonably satisfactory to
Lender and to take such action as Lender may reasonably request from time to
time, in order to cause Lender to be secured at all times as described in this
Section 3.1.
ARTICLE 4
CONDITIONS PRECEDENT
Section 4.1 Conditions to Closing. This Agreement shall not be
effective, and Lender shall have no obligation to take, fulfill or perform any
action contemplated hereunder, until each of the following conditions has been
satisfied or waived by Lender:
(a) Lender shall have received each of the following documents, in form
and substance reasonably satisfactory to Lender:
(i) a duly executed Note payable to the order of Lender in the
amount of the Commitment;
(ii) duly executed Security Documents, including without
limitation, all Uniform Commercial Code Financing Statements to be
filed in state and county offices and all security agreements to be
filed with the United States Patent and Trademark Office;
(iii) the Subsidiary Guarantee Agreement, duly executed by the
parties thereto;
(iv) the Pledge Agreement, duly executed by the parties
thereto;
(v) the Registration Rights Agreement, duly executed by the
parties thereto;
(vi) from each Loan Party, a certificate signed by an
Authorized Signatory of such Loan Party in substantially the form of
Exhibit C attached hereto, including a certificate of incumbency with
respect to each Authorized Signatory of such Loan Party, together with
the following attachments: (A) a copy of the Certificate of
Incorporation of such Loan Party, certified to be true, complete and
correct by the applicable Secretary of State, (B) a true, complete and
correct copy of the by-laws of such Loan Party, (C) a true, complete
and correct copy of the resolutions of the Board of Directors of such
Loan Party authorizing the borrowing hereunder and/or the execution,
delivery and performance by such Loan Party of the Loan Documents, and
(D) certificates of good standing from each jurisdiction in which such
Loan Party does business;
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(vii) favorable written opinion(s) of Borrower's special
counsel in form and substance reasonably satisfactory to Lender and its
counsel, which opinion(s) shall cover such matters relating to the Loan
Documents and the transactions contemplated hereunder as Lender and its
counsel shall reasonably request;
(viii) consent of First Union Commercial Corporation in
connection with the Master Equipment Lease Agreement dated as of March
14, 2000 between the Borrower and First Union Commercial Corporation;
(ix) copies of any pay-off letters, termination statements,
canceled mortgages and the like required by Lender in connection with
the removal of any Liens (other than Permitted Liens) against the
assets of Borrower and its Subsidiaries;
(x) the Business Plan; and
(xi) all such other documents or information (including
without limitation, information regarding the assets, capitalization,
litigation, tax, accounting, labor, insurance, pension liabilities
(actual or contingent), real estate leases, material contacts,
agreements for Indebtedness, salary structure, property ownership,
environmental matters, contingent liabilities and management of the
Borrower and its Subsidiaries) as Lender may reasonably request,
certified by an appropriate governmental official or an Authorized
Signatory if so requested.
(b) Lender shall have received a commitment fee payable by Borrower to
Lender in the form of Warrants to purchase 40,000 shares of Common Stock (as
equitably and proportionately adjusted for stock splits, combinations, stock
dividends, reorganizations and reclassifications), which commitment fee shall be
fully earned when paid and non-refundable;
(c) Lender shall have received evidence reasonably satisfactory to it
that (i) all Necessary Authorizations for the transaction contemplated hereunder
have been obtained and (ii) there exists no action, suit, proceeding at law or
in equity, claim, investigation or dispute pending, which purports to affect or
pertain to this Agreement or any other Loan Document, or any of the transactions
contemplated hereby or thereby;
(d) Lender shall have received Lien search results with respect to
Borrower from all appropriate jurisdictions and filing offices;
(e) No Material Adverse Effect shall have occurred since January 31,
2001;
(f) Lender shall have received evidence reasonably satisfactory to it
that Borrower has entered into the unsecured debt facilities and equity
offerings (collectively, the "Financing Transactions") described in the term
sheets previously provided to Lender and Lender shall have received true and
complete, fully executed copies of all agreements, documents and instruments
related thereto (the "Financing Documentation"), which Financing Documentation
shall be in form and substance reasonably satisfactory to Lender; and
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(g) Lender shall have received payment of any expenses referenced in
Section 10.2(a) for which Lender has been invoiced as of the Closing Date;
provided however, that nothing contained in this Section 4.1(g) shall relieve
Borrower from its obligation under this Agreement to pay for any expenses
referenced in Section 10.2(a) that arise or are invoiced after the Closing Date.
Section 4.2 Conditions Precedent to Each Advance. The obligation of
Lender to undertake the Commitment and to make any Advance hereunder is subject
to the prior fulfillment of each of the following conditions or the waiver
thereof by Lender:
(a) Lender shall have received, in form and substance reasonably
satisfactory to Lender, a duly executed Request for Advance;
(b) Lender shall have received a certificate executed by the chief
financial officer of Borrower certifying (i) the Receivables Value and (ii) the
Coverage Ratio (after giving effect to such Advance);
(c) All of the representations and warranties of Borrower under this
Agreement, which, pursuant to Section 5.3 hereof, are made at and as of the time
of such Advance, shall be true and correct in all material respects at such
time, both before and after giving effect to the application of the proceeds of
the Advance, and Lender shall have received a certificate (which may be a
Request for Advance) to that effect signed by the Authorized Signatory of
Borrower in his representative capacity on behalf of Borrower, and not
individually, and dated the date of such Advance;
(d) The incumbency of the Authorized Signatories shall be as stated in
the certificate of incumbency contained in the certificate of Borrower delivered
pursuant to Section 4.1 hereof or as subsequently modified and reflected in a
certificate of incumbency delivered to Lender; and
(e) There shall not exist on the date of such Advance and after giving
effect thereto, a Default or Event of Default hereunder.
(f) There shall not have been initiated any litigation, legal or
administrative proceeding or other action of any nature in connection with
Capital Z's ownership of any of Borrower's securities or Capital Stock.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
Section 5.1 General Representations and Warranties. In order to induce
Lender to enter into this Agreement and to make Advances to Borrower, Borrower
hereby agrees, represents, and warrants, on behalf of itself and each of its
Subsidiaries, that:
(a) Organization; Power; Qualification. Each of Borrower and its
Subsidiaries is a corporation duly organized, validly existing, and in good
standing under the laws of its state of incorporation, has the corporate power
and authority to own or lease and operate its
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properties and to carry on its business as now being and hereafter proposed to
be conducted, and is duly qualified and is in good standing as a foreign
corporation, and authorized to do business, in each jurisdiction in which the
character of its properties or the nature of its business requires such
qualification or authorization, except where the failure to be so qualified
and/or in good standing, in the aggregate could not reasonably be expected to
have a Material Adverse Effect.
(b) Authorization; Enforceability. Each of Borrower and its
Subsidiaries has the power and has taken all necessary corporate action to
authorize it to execute, deliver, and perform this Agreement and each of the
other Loan Documents to which it is a party in accordance with the terms thereof
and to consummate the transactions contemplated hereby and thereby. This
Agreement and each of the other Loan Documents to which Borrower or any of its
Subsidiaries is a party has been duly executed and delivered by Borrower or such
Subsidiary, as the case may be, and is, and each of the other Loan Documents to
which Borrower or any of its Subsidiaries is a party is, a legal, valid and
binding obligation of Borrower and each such Subsidiary, as the case may be,
enforceable in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights generally and by
general equitable principles (whether enforcement is sought by proceedings in
equity or at law).
(c) Subsidiaries. Borrower has no Subsidiaries or Affiliates other than
those set forth in Schedule 5.1(c), and does not own or otherwise control,
directly or indirectly, any interest in any corporation, association or business
entity other than as set forth on Schedule 5.1(c). Borrower is not a participant
in any joint venture, partnership or similar arrangement.
(d) Capitalization. As of February 28, 2001, the authorized Capital
Stock of Borrower consists of:
(i) 100,000,000 shares of Common Stock, $.01 par value (the
"Common Stock"), of which 18,737,441 shares are outstanding. Under
Borrower's 1997 Stock Option Plan, its 1998 Stock Option Plan, its
Amended and Restated 1999 Stock Option Plan and its 2001 Stock Option
Plan (collectively, the "Option Plans"), (x) 894,668 shares of Common
Stock have been issued pursuant to restricted stock purchase agreements
and/or the exercise of outstanding options, (y) options to purchase
5,126,569 shares of Common Stock have been granted and are currently
outstanding and (z) 3,199,603 shares of Common Stock remain available
for future issuance to officers, directors, employees and consultants
of Borrower.
(ii) 10,000,000 shares of Series A Convertible Preferred
Stock, $.01 par value, (none of which are issued and outstanding prior
to the Closing). Borrower has reserved 3,900,000 shares of Common Stock
for issuance upon conversion of such Preferred Stock.
(iii) Borrower has reserved 8,326,172 shares of Common Stock
for issuance to officers, directors, employees or consultants pursuant
to the Option Plans. Except (x) as set forth in Schedule 5.1(d), (y)
for options granted pursuant to the Option Plans, and (z) as
contemplated under this Agreement and the
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Financing Transactions, there are no options, calls, warrants,
conversion privileges, preemptive rights, rights of first refusal or
other commitments or rights of any character whatsoever to which
Borrower is bound, presently outstanding or in existence with respect
to the purchase or other acquisition of any of the authorized but
unissued Capital Stock of Borrower.
(iv) All issued and outstanding shares of Borrower's Common
Stock (i) have been duly authorized and validly issued and are fully
paid and nonassessable, and (ii) were issued in compliance with all
applicable state and federal laws concerning the issuance of
securities.
(e) No Conflict. The execution, delivery, and performance of this
Agreement and each of the other Loan Documents in accordance with the terms
thereof and the consummation of the transactions contemplated hereby and thereby
do not and will not (i) violate any Applicable Law, (ii) conflict with, result
in a breach of, or constitute a default under the certificate or articles of
incorporation or by-laws of Borrower or any of its Subsidiaries or under any
material indenture, agreement, or other instrument to which Borrower is a party
or by which it or any of its properties may be bound, or (iii) result in or
require the creation or imposition of any Lien upon or with respect to any
property now owned or hereafter acquired by Borrower or any of its Subsidiaries,
except Permitted Liens.
(f) Necessary Authorizations. Each of Borrower and its Subsidiaries has
obtained all Necessary Authorizations and all such Necessary Authorizations are
in full force and effect. None of said Necessary Authorizations are the subject
of any pending or, to the best of Borrower's knowledge, threatened attack or
revocation, by the grantor of the Necessary Authorizations. Neither Borrower nor
any of its Subsidiaries is required to obtain any additional Necessary
Authorizations in connection with the execution, delivery, and performance, in
accordance with the terms of this Agreement or any other Loan Document, and the
borrowing hereunder.
(g) Title to Properties. Each of Borrower and its Subsidiaries has
good, marketable, and legal title to, or a valid leasehold interest in, all of
its material properties and assets, and none of such properties or assets is
subject to any Liens other than Permitted Liens.
(h) Taxes. All material federal, state, and other tax returns of
Borrower and each of its Subsidiaries required by law to be filed have been duly
filed, and all material federal, state, and other taxes, assessments, and other
governmental charges or levies upon Borrower and each of its Subsidiaries and
any of their respective properties, income, profits, and assets, which are due
and payable, have been paid, except any payment of any of the foregoing which
Borrower or the applicable Subsidiary is currently contesting in good faith by
appropriate proceedings and with respect to which reserves have been provided on
the books of Borrower or such Subsidiary. The charges, accruals, and reserves on
the books of Borrower or any of its Subsidiaries in respect of taxes are, in the
reasonable judgement of Borrower, adequate. Except as set forth on Schedule
5.1(h), neither Borrower nor any of its Subsidiaries is presently being audited
by, or received notice of any future audit from, the Internal Revenue Service or
any other tax authority.
(i) Financial Statements.
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(a) Borrower has heretofore furnished to Lender balance sheets
and statements of operations, changes in shareholders' equity (deficit)
and cash flows of Borrower (i) dated as of December 31, 1998 and 1999
and audited by and accompanied by the opinion of independent public
accountants, and (ii) dated as of September 30, 2000 for the nine-month
period then ended and prepared by management. Such balance sheets and
statements of income and cash flows present fairly in all material
respects the consolidated financial condition and results of operations
of Borrower and its consolidated Subsidiaries as of the dates and for
the periods indicated, and such audited balance sheets and the notes
thereto disclose all material liabilities, direct and contingent, of
Borrower and its Subsidiaries, as of the dates thereof, that are
required to be disclosed in accordance with GAAP.
(b) The Borrower has heretofore furnished to Lender projected
income statements, balance sheets and cash flows of Borrower on a
consolidated basis for a four year period (quarterly for the remainder
of 2001 and quarterly for 2002 and annually for the following two
years), such projections disclosing all material assumptions made by
Borrower in formulating such projections and giving effect to the
Transactions. The projections are based upon estimates and assumptions,
all of which were believed by management to be reasonable in light of
the conditions which existed at the time the projections were made and
have been prepared on the basis of the assumptions stated therein.
(c) The financial statements referred to in Section 5.1(i)(a)
have been prepared in accordance with GAAP, except that the unaudited
statements do not contain footnotes and are subject to year-end audit
adjustments.
(j) No Adverse Change. Since January 31, 2001, there has occurred no
event which has had, or could reasonably be expected to have, a Material Adverse
Effect on Borrower, any of its Subsidiaries.
(k) Investments and Guaranties. As of the Closing Date, neither
Borrower nor any of its Subsidiaries has made investments in, advances to, or
guaranties of, the obligations of any Person, except as reflected in the
financial statements referred to in Section 5.1(i) above, or otherwise expressly
set forth herein or disclosed to Lender in writing.
(l) Liabilities, Litigation. As of the Closing Date, except for
liabilities incurred in the normal course of business and liabilities incurred
in connection with the Financing Transactions, neither Borrower nor any of its
Subsidiaries has any material (individually or in the aggregate) liabilities,
direct or contingent, except as disclosed or referred to in the financial
statements referred to in Section 5.1(i) above or otherwise disclosed to Lender
in writing. As of the Closing Date, except as described on Schedule 5.1(l)
attached hereto, there is no litigation, legal or administrative proceeding,
investigation, or other action of any nature pending or, to the best knowledge
of Borrower, threatened against or affecting Borrower, or any of its properties
that involves an amount in controversy in excess of $100,000 or that is not
covered by insurance. None of such litigation disclosed on Schedule 5.1(l),
individually or collectively, involves the possibility of any judgment or
liability not fully covered by insurance, or, if determined adversely to
Borrower or any of its Subsidiaries could reasonably be expected to have a
Material Adverse Effect.
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(m) ERISA. Borrower, each of its Subsidiaries, each of its ERISA
Affiliates and its Plans are in compliance with ERISA and the Code in all
material respects. None of the Plans sponsored by Borrower or any of its
Subsidiaries, or to which Borrower or any of its Subsidiaries contributes, are
subject to Section 302 or Title IV of ERISA. Borrower, each of its Subsidiaries
and each of Borrower's ERISA Affiliates have complied in all material respects
with all requirements of ERISA Sections 601 through 608 and Code Section 4980B.
None of Borrower, its Subsidiaries and its ERISA Affiliates has made any
promises of retirement or other benefits to employees, except as set forth in
the Plans. No such Plans or trust created thereunder, or party in interest (as
defined in Section 3(14) of ERISA, or any fiduciary (as defined in Section 3(21)
of ERISA), has engaged in a "prohibited transaction" (as such term is defined in
Section 406 of ERISA or Section 4975 of the Code) which would subject such Plans
or any other Plans of Borrower, any of its Subsidiaries, any of its ERISA
Affiliates, any trust created thereunder, or any such party in interest or
fiduciary, or any party dealing with any such Plans or any such trust to the
penalty or tax on "prohibited transactions" imposed by Section 502 of ERISA or
Section 4975 of the Code. None of Borrower, its Subsidiaries and its ERISA
Affiliates is a participant in or is obligated to make any payment to a
Multiemployer Plan.
(n) Intellectual Property. Except as set forth on Schedule 5.1(n)
attached hereto, or as otherwise disclosed to Lender in writing, neither
Borrower nor any of its Subsidiaries owns any registered patents, trademarks,
service marks or copyrights and has no pending registration applications with
respect to patents, trademarks, service marks or copyrights. No other patents,
trademarks, service marks or copyrights are necessary for the operation of the
business of Borrower and its Subsidiaries.
(o) Compliance with Law; Absence of Default. Each of Borrower and its
Subsidiaries is in compliance with all Applicable Laws (except to the extent
that the failure to comply therewith could not reasonably be expected to have a
Material Adverse Effect) and with all provisions of its certificate or articles
of incorporation and by-laws, and no event has occurred or has failed to occur
which has not been remedied or waived, the occurrence or non-occurrence of which
constitutes (i) a Default or (ii) a default by Borrower or any of its
Subsidiaries under any other material indenture, agreement, or other instrument,
or any judgment, decree, or order to which Borrower or any of its Subsidiaries
is a party or by which Borrower, any of its Subsidiaries or any of their
respective properties may be bound.
(p) Compliance with Regulations U and X. Neither Borrower nor any of
its Subsidiaries is engaged principally in, or has as one of its important
activities, the business of purchasing or carrying, or extending credit for the
purpose of purchasing or carrying, any margin stock within the meaning of
Regulations U and X of the Board of Governors of the Federal Reserve System.
(q) Solvency. Borrower has received, or has the right hereunder to
receive, consideration which is the reasonably equivalent value of the
obligations and liabilities that Borrower has incurred to Lender. Borrower is
not insolvent as defined in Section 101 of Title 11 of the United States Code or
any applicable state insolvency statute, nor, after giving effect to the
consummation of the transactions contemplated herein, will Borrower be rendered
insolvent by the execution and delivery of this Agreement or the Note to Lender.
Borrower is not engaged or about to engage in any business or transaction for
which the assets retained by it shall be an unreasonably small capital, taking
into consideration the obligations to Lender incurred hereunder. Borrower does
not intend to, nor does it believe that it will, incur debts beyond its ability
to pay them as they mature.
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(r) Environmental Matters. Borrower conducts in the ordinary course of
business a review of the effect of existing Environmental Laws and existing
Environmental Claims on its business, operations and properties, and as a result
thereof Borrower has reasonably concluded that such Environmental Laws and
Environmental Claims could not, individually or in the aggregate, be expected to
have a Material Adverse Effect.
(s) Name of Borrower. Except as set forth on Schedule 5.1(s), neither
Borrower nor any of its Subsidiaries has changed its name within the preceding
five (5) years from the Closing Date nor has Borrower or any of its Subsidiaries
transacted business under any other name or trade name.
(t) Regulated Entities. Neither Borrower nor any of its Subsidiaries is
required to register under the provisions of the Investment Company Act of 1940,
as amended, and neither the entering into or performance by Borrower of this
Agreement nor the issuance of the Note violates any provision of such Act or
requires any consent, approval, or authorization of, or registration with, any
governmental or public body or authority pursuant to any of the provisions of
such Act. Borrower is not subject to regulation under the Public Utility Holding
Company Act of 1935, the Federal Power Act, the Interstate Commerce Act, any
state public utilities code, or any other federal or statute or regulation
limiting its ability to incur Indebtedness.
(u) No Material Misstatements. The information, reports, financial
statements, exhibits or schedules, taken as a whole, furnished by or on behalf
of the Loan Parties to Lender in connection with any of the Transactions or this
Agreement or any Loan Document or included therein, do not contain any material
misstatement of fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, misleading in any material respect; provided, however, that to the extent
any such information, report, financial statement, exhibit or schedule was based
upon or constitutes a forecast or projection, the Borrower represents only that
it acted in good faith and used reasonable assumptions based on information
available to it at the time of preparation thereof and due care in the
preparation of such information, report, financial statement, exhibit or
schedule.
(v) Ownership of Shares. Upon the issuance and delivery of the Common
Stock issuable to Lender pursuant to any Warrant issued in connection with this
Agreement, the Common Stock will be duly and validly issued, fully paid and
nonassessable, free and clear of all liens, charges and encumbrances, other than
any liens, charges or encumbrances created by Lender. The delivery of the Common
Stock issued to Lender will transfer good and valid title to, and beneficial
ownership of, the Common Stock, other than as a result of any encumbrances,
liens and claims described in the preceding sentence. The issuance of the Common
Stock pursuant to this Agreement will not be subject to any preemptive rights or
rights of first refusal that have not been properly waived or complied with.
(w) Registration Rights and Voting Rights. Except as set forth on
Schedule 5.1(w), as of the Closing Date, Borrower will not be under any
contractual obligation to register any of its securities or any of its
securities which may hereafter be issued, other than Borrower's
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securities issued or issuable pursuant to this Agreement and the other Loan
Documents. To Borrower's knowledge, no stockholder of Borrower has entered into
any agreement with respect to the voting of equity securities of Borrower.
(x) Offering. The offer, sale and issuance to Lender hereunder of the
Warrants (or Common Stock or other Capital Stock issued to Lender upon the
exercise thereof (collectively, the "Agreement Securities")) will be exempt from
the registration requirements of the Securities Act of 1933, as amended (the
"Securities Act"), and will have been registered or qualified (or are exempt
from registration and qualification) under the registration, permit or
qualification requirements of all applicable state securities laws. Neither
Borrower nor any agent on its behalf has solicited or will solicit any offers to
buy or has offered to sell or will offer to sell all or any part of the
Agreement Securities to any person or persons so as to bring the sale of such by
Borrower within the registration provisions of the Securities Act or any state
securities laws.
(y) Insurance. As of the Closing Date, Borrower and its Subsidiaries
are insured in accordance with Section 6.5 hereof.
(z) Deposit Accounts with Financial Institutions. As of the Closing
Date, Borrower and its Subsidiaries do not maintain any deposit account with any
bank or other financial institution other than those listed on Schedule 5.1(z).
(aa) ERISA Party In Interest. Neither Borrower nor any Subsidiary
Guarantor is (or will be) a party in interest under Section 3(14) of ERISA with
respect to the employee benefit plans invested in Lender except solely by reason
of providing services to such plans or by reason of having a relationship with a
person providing services to the plan as follows: a relative of a service
provider; an entity beneficially or otherwise owned 50 percent or more by a
service provider; or an employee, officer, director of, or 10 percent or more
owner or joint venturer in, a service provider.
Section 5.2 Investment Representations. Lender is acquiring the
Warrants purchased hereunder for its own account for investment purposes and not
with a view to distribution thereof. Lender understands that the Warrants have
not been registered under the Securities Act or the securities laws of any state
and must be held indefinitely unless subsequently registered under the
Securities Act and any applicable state securities laws or unless an exemption
from such registration becomes or is available. Lender is an "accredited
investor" for the purposes of Regulation D under the Securities Act.
Section 5.3 Survival of Representations and Warranties. All
representations and warranties made under this Agreement (other than those that
specifically refer to an earlier date) shall be deemed to be made, and shall be
true and correct in all material respects, at and as of the Closing Date and the
date of each Advance, except to the extent previously fulfilled in accordance
with the terms hereof and to the extent subsequently inapplicable and except as
disclosed in writing to Lender. All representations and warranties made under
this Agreement shall survive, and not be waived by, the execution hereof by
Lender, any investigation or inquiry by Lender, or the making of any Advance
under this Agreement.
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ARTICLE 6
GENERAL COVENANTS
Borrower covenants and agrees that, so long as any of the Obligations
are outstanding and unpaid or Borrower shall have the right to borrow hereunder
(whether or not the conditions to borrowing have been or can be fulfilled):
Section 6.1 Preservation of Existence and Similar Matters. Borrower
will, and will cause each of its Subsidiaries to, (i) preserve and maintain its
existence, rights, franchises, licenses, and privileges in its jurisdiction of
incorporation including, without limitation, all Necessary Authorizations,
except where the failure to have any such rights, franchises, licenses or
privileges could not be reasonably expected to have a Material Adverse Effect
and (ii) qualify and remain qualified and authorized to do business in each
jurisdiction in which the character of its properties or the nature of its
business requires such qualification or authorization, except where the failure
to be so qualified and/or in good standing, in the aggregate could not
reasonably be expected to have a Material Adverse Effect.
Section 6.2 Compliance with Applicable Law. Borrower will, and will
cause each of its Subsidiaries to, comply with the requirements of all
Applicable Law in all material respects.
Section 6.3 Maintenance of Properties and Assets. Borrower will, and
will cause each of its Subsidiaries to, maintain in the ordinary course of
business in good repair, working order, and condition, normal wear and tear
excepted, all equipment and other fixed assets used or useful in its business
(whether owned or held under lease), and from time to time make or cause to be
made all needed and appropriate repairs, renewals, replacements, additions,
betterments, and improvements thereto.
Section 6.4 Accounting Methods and Financial Records. Borrower will,
and will cause each of its Subsidiaries to, maintain a system of accounting
reasonably acceptable to Lender, and will keep adequate records and books of
account in which complete entries will be made in accordance with such system of
accounting.
Section 6.5 Insurance. Borrower will, and will cause each of its
Subsidiaries to:
(a) Maintain insurance, including, but not limited to, public liability
coverage insurance and business interruption insurance, from responsible
companies in at least such amounts and against at least such risks as are
usually insured against in the same general area by companies engaged in the
same or similar business; and
(b) Keep their respective properties and assets insured by responsible
companies against such risks, and in at least such amounts, as are usually
insured against by companies engaged in the same or a similar business.
Section 6.6 Payment of Taxes and Claims. Borrower will, and will cause
each of its Subsidiaries to, pay and discharge income taxes, if any, and all
material taxes, assessments, and governmental charges or levies imposed upon it
or its income or profit or upon any properties belonging to it prior to the date
on which penalties attach thereto, and all lawful claims for labor,
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materials and supplies which have become due and payable and which by law have
or may become a Lien upon any of its properties or assets; except that, no such
tax, assessment, charge, levy, or claim need be paid which is being contested in
good faith by appropriate proceedings and for which adequate reserves shall have
been set aside on the appropriate books, but only so long as such tax,
assessment, charge, levy, or claim does not become a Lien or charge other than a
Permitted Lien and no foreclosure, distraint, sale, or similar proceedings shall
have been commenced and remain unstayed for a period thirty (30) days after such
commencement. Borrower shall, and shall cause each of its Subsidiaries to,
timely file all information returns required by federal, state, or local tax
authorities.
Section 6.7 Visits and Inspections. Borrower will, and will cause each
of its Subsidiaries to, permit representatives of Lender to (a) visit and
inspect the properties of Borrower or such Subsidiary, as the case may be,
during normal business hours, (b) inspect and make extracts from and copies of
the books and records of Borrower or such Subsidiary, as the case may be, and
(c) discuss with its respective principal officers its businesses, assets,
liabilities, financial positions, results of operations, and business prospects.
Section 6.8 Payment of Indebtedness. Borrower will, and will cause each
of its Subsidiaries to, pay any and all of its Indebtedness when and as the same
becomes due in the ordinary course of business, other than amounts diligently
disputed in good faith and for which adequate reserves have been set aside.
Section 6.9 Conduct of Business. Borrower shall, and shall cause each
of its Subsidiaries to, continue to engage in the business in which it is
currently engaged.
Section 6.10 ERISA. Borrower shall, and shall cause each of its
Subsidiaries to, at all times, be in material compliance with all ERISA
requirements under ERISA.
Section 6.11 Further Assurances. Borrower at its expense will promptly
execute and deliver to Lender, or cause to be executed and delivered to Lender,
all such other and further documents, agreements, and instruments in compliance
with or required pursuant to the covenants and agreements of Borrower and its
Subsidiaries in the Loan Documents, including this Agreement, or to correct any
obvious omissions in the Loan Documents, or to obtain any consents, all as may
be necessary or appropriate in connection therewith as may be requested by
Lender.
Section 6.12 Indemnity. Borrower, for itself and on behalf of each of
its Subsidiaries, will indemnify and hold harmless Lender and each of its
employees, representatives, officers and directors from and against any and all
claims, liabilities, losses, damages, actions, fees and expenses of counsel for
Lender, and demands by any party, including the costs of investigating and
defending such claims (a) resulting from any breach or alleged breach by
Borrower or any of its Subsidiaries of any representation, warranty, or covenant
made hereunder or under any other Loan Document; (b) arising out of or in
connection with (i) the Commitment, the Advance or otherwise under this
Agreement or any other Loan Document, including, without limitation, the taking
of collateral security for the Obligations, the use of the proceeds of the
Advance hereunder in any fashion by Borrower or any of its Subsidiaries, or the
performance of their respective obligations under the Loan Documents by Borrower
or any of its Subsidiaries, (ii) allegations of any participation by Lender in
the affairs of Borrower or any of its Subsidiaries, or allegations
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that Lender has any joint liability with Borrower or any of its Subsidiaries for
any reason, or (iii) any claims against Lender by any shareholder, partner, or
other investor in or lender to Borrower or any of its Subsidiaries, by any
brokers or finders or investment advisers or investment bankers retained by
Borrower or by any other third party, arising out of the Commitment, the Advance
or otherwise under this Agreement or any other Loan Document; or (c) in
connection with taxes (other than income taxes), fees, and other charges payable
in connection with the Advance, or the execution, delivery, recording, and
enforcement of this Agreement, the other Loan Documents, and any amendments
thereto or waivers of any of the provisions thereof; unless the Person seeking
indemnification hereunder is determined in such case to have acted with gross
negligence or willful misconduct, in any case by a final, non-appealable
judicial order. The obligations of Borrower and its Subsidiaries under this
Section 6.12 are in addition to, and shall not otherwise limit, any liabilities
which Borrower or any of its Subsidiaries might otherwise have in connection
with any warranties or similar obligations of Borrower or such Subsidiary in any
other agreement or instrument or for any other reason.
Section 6.13 Environmental Matters. Borrower shall, and shall cause
each of its Subsidiaries to, conduct its business operations so as to not
violate any Environmental Laws.
Section 6.14 Subsidiary Guarantors. Borrower shall cause each of its
current and future Subsidiaries (with respect to such future Subsidiaries,
immediately upon such entity becoming a Subsidiary) to execute the Subsidiary
Guarantee Agreement (or a supplement thereto).
Section 6.15 Coverage Ratio. Borrower shall cause the Coverage Ratio to
be at least 150% at all times.
Section 6.16 Union Covenants.
(a) In the event of, at any time from the date hereof until the
Maturity Date, any attempt by any union to organize or seek to represent
employees of Borrower or any of its Subsidiaries, Borrower shall, and shall
cause its Subsidiaries and Affiliates to, recognize the union as the
representative of its workers upon a showing of majority support through a
formal gathering of cards for the union in an appropriate unit.
(b) In connection with any organizing done by a union, Borrower
recognizes the right of its employees (and those of its Subsidiaries) to choose
their bargaining representative without interference from their employer.
Accordingly, from the date hereof until the Maturity Date, Borrower shall, and
shall cause its Subsidiaries and Affiliates to, and its and their respective
officers, directors, employees and agents to, refrain from its or their support
of or opposition to the union and from actively campaigning in an opposition to
the designation of such union as the representative of such employees.
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ARTICLE 7
INFORMATION COVENANTS
Borrower covenants and agrees that, so long as any of the Obligations
are outstanding and unpaid or Borrower has a right to borrow hereunder (whether
or not the conditions to borrowing have been or can be fulfilled), it will
furnish or cause to be furnished to Lender:
Section 7.1 Financial Statements and Information.
(a) As soon as available, but not later than one hundred twenty (120)
days after the end of each fiscal year (commencing with the fiscal year ended
December 31, 2000), audited consolidated financial statements for Borrower and
its Subsidiaries, which statements shall contain a copy of the balance sheet as
of the end of such year and the related consolidated statements of income or
operations, shareholders' equity and cash flows for such year, setting forth in
each case in comparative form the figures for the previous fiscal year, and
accompanied by the opinion of a recognized independent public accounting firm
reasonably acceptable to the Lender (the "Independent Auditor") which opinion
shall state that such consolidated financial statements present fairly the
financial position of Borrower for the periods indicated in conformity with
GAAP. Such opinion shall not be limited because of a restricted or limited
examination by the Independent Auditor of any material portion of Borrower's
records. Borrower may satisfy its obligations under this Section 7.1(a) by
delivering to Lender its annual report or Form 10-K as filed with the SEC.
(b) As soon as available, but not later than sixty (60) days after the
end of each of the first three Fiscal Quarters of each fiscal year (commencing
with the Fiscal Quarter ended March 31, 2001), unaudited consolidated financial
statements for Borrower and its Subsidiaries, which statements shall contain a
copy of the balance sheet as of the end of such quarter and the related
statements of income and cash flows for the period commencing on the first day
and ending on the last day of such quarter, and certified by Borrower's chief
financial officer as fairly presenting the financial position and the results of
operations of Borrower. Borrower may satisfy its obligations under this Section
7.1(b) by delivering to Lender its quarterly report on Form 10-Q filed with the
SEC.
(c) As soon as available, but not later than thirty (30) days after the
end of the first two months of each Fiscal Quarter (commencing with February,
2001), unaudited consolidated financial statements for Borrower and its
Subsidiaries, which statements shall contain a copy of the balance sheet as of
the end of such month and the related statements of income, cash and cash
forecasts for the period commencing on the first day and ending on the last day
of such month, and certified by Borrower's chief financial officer as fairly
presenting the financial position and the results of operations of borrower.
(d) As soon as available, but not later than thirty (30) days after the
end of each month, a certified aging report on all Receivables, certified by the
Borrower's chief financial officer, which report shall also include an
identification of any Receivables (including the identity of the Person
obligated thereunder) owed by a Person not previously obligated to Lender under
any Receivable set forth (with respect to any aging report other than the
initial aging report delivered hereunder) in the immediately preceding aging
report delivered hereunder.
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Section 7.2 Compliance Reports. Within thirty (30) days after the end
of each calendar month, a Compliance Report executed by Borrower's chief
financial officer, (A) stating that, to the best of his or her knowledge, no
Default or Event of Default has occurred as at the end of such month, or, if a
Default or an Event of Default has occurred, disclosing each such Default or
Event of Default and its nature, when it occurred, whether it is continuing, and
the steps being taken by Borrower with respect to such Default or Event of
Default; and (B) setting forth, in reasonable detail, the calculations used to
determine Borrower's attainment or non-attainment of the financial targets set
forth in Section 3.1(b); and (C) setting forth, in reasonable detail, the
calculations used to determine Borrower's maintenance of the Coverage Ratio
during such calendar month.
Section 7.3 Access to Accountants. Borrower hereby authorizes Lender to
discuss the financial condition of Borrower and its Subsidiaries with Borrower's
independent public accountants.
Section 7.4 Notice of Litigation and Other Matters. Prompt notice (and,
in any event notice within three (3) Business Days of Borrower's receipt of
notice (or knowledge) of the occurrence thereof) of any of the following events
after Borrower has received notice or otherwise becomes aware thereof:
(a) the commencement of any material proceedings and investigations by
or before any governmental body and all actions and proceedings in any court or
before any arbitrator against, Borrower or any of its Subsidiaries or any
Necessary Authorizations;
(b) any change with respect to the business, assets, liabilities,
financial position, results of operations of Borrower or any of its Subsidiaries
that could reasonably be expected to have a Material Adverse Effect;
(c) any Default or Event of Default, or the occurrence or
non-occurrence of any event which constitutes, or which with the passage of time
or giving of notice or both would constitute a default by Borrower or any of its
Subsidiaries under any material agreement, other than this Agreement and the
other Loan Documents, to which Borrower or any of its Subsidiaries is a party or
by which any of their respective properties may be bound, which reasonably could
be expected to have a Material Adverse Effect, giving in each case the details
thereof and specifying the action proposed to be taken with respect thereto;
(d) the occurrence of any event subsequent to the Closing Date which,
if such event had occurred prior to the Closing Date, would have constituted an
exception to the representation and warranty in Section 5.1(l) hereof; and
(e) the occurrence of any "prohibited transaction" (as such term is
defined in Section 406 of ERISA or Section 4975 of the Code) with respect to any
Plan of Borrower, any of its Subsidiaries or any of its ERISA Affiliates or the
commencement or threatened commencement of any litigation regarding any such
Plan or naming it or the Trustee of any such Plan with respect to such Plan.
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ARTICLE 8
NEGATIVE COVENANTS
Borrower covenants and agrees that, so long as any of the Obligations
are outstanding and unpaid or Borrower has a right to borrow hereunder (whether
or not the conditions to borrowing have been or can be fulfilled):
Section 8.1 Indebtedness. Borrower will not, and will not permit any of
its Subsidiaries to, create, assume, incur, or otherwise become or remain
obligated in respect of, or permit to be outstanding, any Indebtedness except:
(a) Indebtedness to Lender arising under this Agreement, and the other
Loan Documents;
(b) Trade or accounts payable and/or similar obligations, and accrued
expenses, incurred in the ordinary course of business (other than Indebtedness
for borrowed money);
(c) Indebtedness with respect to capitalized lease obligations and
purchase money Indebtedness of Borrower or any of its Subsidiaries not to exceed
the aggregate sum of $3,000,000;
(d) Indebtedness arising under the Financing Transactions, so long as
the outstanding principal amount of such Indebtedness does not exceed in the
aggregate, $7,500,000;
(e) other Indebtedness for borrowed money or arising from financing or
factoring arrangements with Other Lenders pursuant to Section 3.1(a)(i);
(f) Indebtedness with respect to taxes, assessments, governmental
charges or levies which are being contested in good faith by appropriate
proceedings, provided that adequate reserves with respect thereto are maintained
on the books of Borrower or its Subsidiaries, as the case may be;
(g) Indebtedness existing on the date hereof and described on Schedule
8.1(g);
(h) Indebtedness owing to Borrower by any Subsidiary Guarantor or owing
to any Subsidiary Guarantor by Borrower; and
(i) any refinancing of any of the Indebtedness permitted pursuant to
the preceding clauses of this Section 8.1; provided, however, that the original
aggregate principal amount of such Indebtedness is not increased pursuant to
such refinancing.
Section 8.2 Guaranties. Borrower will not, and will not permit any of
its Subsidiaries to, at any time guarantee or enter into or assume any guaranty,
or be obligated with respect to, or permit to be outstanding, any guaranty
except for guaranties made in the ordinary
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course of the business by Borrower of obligations of any Subsidiary, which
obligations are otherwise permitted under this Agreement.
Section 8.3 Liens. Borrower will not, and will not permit any of its
Subsidiaries to, create, assume, incur, or permit to exist or to be created,
assumed, or permitted to exist, directly or indirectly, any Lien on any of its
property, real or personal, now owned or hereafter acquired, except for
Permitted Liens.
Section 8.4 Restricted Payments and Purchases. Borrower shall not, and
shall not permit any of its Subsidiaries to, directly or indirectly declare or
make any Restricted Payment or Restricted Purchase, or set aside any funds for
any such purpose; provided, however, that any Subsidiary of Borrower or Borrower
may make Restricted Payments to Borrower or a Subsidiary of Borrower.
Section 8.5 Investments. Borrower will not, and will not permit any of
its Subsidiaries to, make any loan or advance (other than loans to employees
described on Schedule 8.5 and additional loans approved by the Board of
Directors of Borrower or any of its Subsidiaries to officers thereof in an
aggregate amount (with respect to all such loans) not to exceed $1,000,000 at
any time) to, or otherwise acquire for consideration evidences of Indebtedness,
Capital Stock, partnership interests or other securities of or equity interests
in any Person other than Borrower or its Subsidiaries.
Section 8.6 Affiliate Transactions. Borrower shall not, and shall not
permit any of its Subsidiaries to, enter into any transaction or series of
transactions (including, without limitation, any purchase, sale, lease or
exchange of property or the rendering of any service) whether or not in the
ordinary course of business, with any Affiliate of any of the Loan Parties other
than on fair and reasonable terms no less favorable to Borrower or such
Subsidiary, as the case may be, than it would obtain in a comparable arm's
length transaction with a Person which is not an Affiliate; provided, however,
that the foregoing restriction shall not prohibit the transaction contemplated
by the agreements listed in Schedule 8.6.
Section 8.7 Liquidation; Change in Ownership, Name, or Year;
Disposition or Acquisition of Assets. Borrower shall not, and shall not permit
any of its Subsidiaries to, at any time:
(a) Liquidate or dissolve itself (or suffer any liquidation or
dissolution) or otherwise wind up its business;
(b) Sell, lease, abandon, transfer or otherwise dispose of, in a single
transaction or a series of related transactions, any assets, property or
business except (i) in the ordinary course of business at the fair market value
thereof and for cash or cash equivalents, (ii) for physical assets used,
consumed or otherwise disposed of in the ordinary course of business, and (iii)
the sale of Receivables in connection with factoring arrangements permitted by
Section 8.1(e);
(c) Become a partner or joint venturer with any third party;
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(d) Acquire (i) all or any substantial part of the assets, property or
business of, or (ii) any assets that constitute a division or operating unit of
the business of, any other Person;
(e) Merge or consolidate with any other Person or conduct a
reorganization or recapitalization of its Capital Stock;
(f) Change its corporate name without giving Lender thirty (30) days
prior written notice of its intention to do so and complying with all
requirements of Lender in regard thereto;
(g) Create any Subsidiary; provided, however, that Borrower may create
any such Subsidiary so long as (x) such Subsidiary executes a Subsidiary
Guarantee Agreement and (y) such Subsidiary's stock is pledged to Lender
pursuant to a Pledge Agreement; and
(h) Change its year-end for accounting purposes from December 31.
Section 8.8 Amendment and Waiver. Borrower shall not, without the prior
written consent of Lender, enter into any amendment, or agree to or accept any
waiver, of its certificate or articles of incorporation or by-laws.
Section 8.9 ERISA Liability. Neither Borrower nor any of its
Subsidiaries shall, or shall cause or permit any ERISA Affiliate to, cause or
permit to occur an event which could result in the imposition of a Lien under
Section 302 or 4068 of ERISA or cause or permit to occur an ERISA Event to the
extent such ERISA Event could reasonably be expected to have a Material Adverse
Effect.
Section 8.10 Negative Pledge. Borrower shall not, and shall not permit
any of its Subsidiaries to, directly or indirectly, enter into any agreement
with any Person that prohibits or restricts or limits the ability of Borrower or
any such Subsidiary to create, incur, pledge, or suffer to exist any Lien upon
any assets of Borrower or any such Subsidiary.
Section 8.11 No Additional Deposit Accounts. Borrower shall not, and
shall not permit it Subsidiaries to, maintain any deposit account with any bank
or other financial institution other than those listed on Schedule 5.1(z) and
those deposit accounts (which shall not contain more than $2,500 at any time)
maintained with state regulatory authorities in connection with Borrower's
obtainment and maintenance of its mortgage broker's licenses in certain
jurisdictions without first notifying Lender within five (5) Business Days prior
to establishing any such deposit account.
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ARTICLE 9
DEFAULT
Section 9.1 Events of Default. Each of the following shall constitute
an Event of Default, whatever the reason for such event and whether it shall be
voluntary or involuntary or be effected by operation of law or pursuant to any
judgment or order of any court or any order, rule, or regulation of any
governmental or non-governmental body:
(a) Any representation or warranty made or deemed made by Borrower or
any other Loan Party herein or in any other Loan Document or which is contained
in any certificate, document or financial or other statement furnished by it at
any time under or in connection with this Agreement or any such other Loan
Document shall prove to have been incorrect in any material respect on or as of
the date made or deemed made;
(b) Borrower shall (i) default in the payment when due of any principal
of or interest on any or all of the Advances, or (ii) default, and such default
shall continue for five (5) or more days, in the payment when due of any fees or
any other amounts owing hereunder or under any other Loan Document;
(c) Any Loan Party shall (i) default in the due performance or
observance by it of any term, covenant or agreement contained in Article 7 or 8
of this Agreement, or (ii) default in the due performance or observance by it of
any term, covenant or agreement (other than those referred to in Section 9.1(a),
9.1(b) or clause (i) of this Section 9.1(c)) contained in this Agreement or any
of the other Loan Documents and such default, in the case of the preceding
clauses (i) and (ii), shall continue unremedied for a period of at least 30 days
after Borrower obtains knowledge thereof including as a result of written notice
to the defaulting party by Lender;
(d) There shall occur any Change of Control;
(e) There shall be entered a decree or order for relief in respect of
Borrower or any of its Subsidiaries under Title 11 of the United States Code, as
now constituted or hereafter amended, or any other applicable federal or state
bankruptcy law or other similar law, or appointing a receiver, liquidator,
assignee, trustee, custodian, sequestrator, or similar official of Borrower or
any of its Subsidiaries or of any substantial part of any of their respective
properties, or ordering the winding-up or liquidation of the affairs of Borrower
or any of its Subsidiaries or an involuntary petition shall be filed against
Borrower or any of its Subsidiaries and a temporary stay entered, and (i) such
involuntary petition and stay shall not be diligently contested, or (ii) any
such involuntary petition and stay shall continue undismissed for a period of
sixty (60) consecutive days;
(f) Borrower or any of its Subsidiaries shall file a petition, answer,
or consent seeking relief under Title 11 of the United States Code, as now
constituted or hereafter amended, or any other applicable federal or state
bankruptcy law or other similar law, or Borrower or any of its Subsidiaries
shall consent to the institution of proceedings thereunder or to the filing of
any such petition or to the appointment or taking of possession of a receiver,
liquidator, assignee, trustee, custodian, sequestrator, or other similar
official of Borrower or any
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of its Subsidiaries or of any substantial part of any of their respective
properties, or Borrower or any of its Subsidiaries shall fail generally to pay
its debts as they become due, or Borrower or any of its Subsidiaries shall take
any action in furtherance of any such action;
(g) One or more judgments or decrees shall be entered against any Loan
Party involving a liability of $100,000 or more in the case of any one such
judgment or decree and $500,000 or more in the aggregate for all such judgments
and decrees for all Loan Parties (all to the extent not covered by insurance
with respect to which such Loan Party shall have delivered to Lender a written
acknowledgement from the applicable insurance carrier of its unconditional
liability to pay such judgment and related costs) and any such judgments or
decrees shall not have been vacated, discharged or stayed or bonded pending
appeal for a period of sixty (60) consecutive days at any time after the entry
thereof;
(h) [Intentionally left blank]
(i) (A) Any Loan Party shall (1) default in any payment with respect to
any Indebtedness (other than the Obligations but including Indebtedness
evidenced by the Financing Transactions) beyond the period of grace, if any,
applicable thereto or (2) default in the observance or performance of any
agreement or condition relating to any Indebtedness (other than the Obligations
but including Indebtedness evidenced by the Financing Transactions) or contained
in any instrument or agreement evidencing, securing or relating thereto, or any
other event shall occur or condition exist, the effect of which default or other
event or condition is to cause, or to permit the holder or holders of such
Indebtedness (or a trustee or agent on behalf of such holder or holders) to
cause any such Indebtedness to become due prior to its stated maturity; or (B)
any such Indebtedness of any Loan Party shall be declared to be due and payable
prior to the stated maturity thereof, provided that it shall not constitute an
Event of Default pursuant to clauses (A) or (B) above unless the principal
amount of all Indebtedness referred to in clauses (A) and (B) above exceeds
$100,000 at any one time;
(j) All or any portion of any Loan Document shall at any time and for
any reason be declared to be null and void, or a proceeding shall be commenced
by Borrower, any of its Subsidiaries or any of respective Affiliates, or by any
governmental authority having jurisdiction over Borrower, any of its
Subsidiaries or any of its Affiliates, seeking to establish the invalidity or
unenforceability thereof (exclusive of questions of interpretation of any
provision thereof), or Borrower, or any of its Subsidiaries or any of its
Affiliates shall deny that it has any liability or obligation for the payment of
principal or interest purported to be created under any Loan Document;
(k) Borrower defaults under any of its material obligations beyond the
period of grace, if any, applicable thereto, under the agreements, contracts or
documents executed in connection with the Financing Transactions; or
(l) Borrower shall fail to maintain the Coverage Ratio at the end of
each month, as reported in each Compliance Report delivered in accordance with
Section 7.2.
Section 9.2 Remedies. If an Event of Default shall have occurred and be
continuing, and until such Event of Default is waived in writing by Lender,
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(a) With the exception of an Event of Default specified in Section
9.1(e) or (f) hereof, Lender may (i) terminate the Commitment, or (ii) declare
the principal of and interest on the Advances and the Note and all other
Obligations to be forthwith due and payable without presentment, demand,
protest, or notice of any kind, all of which are hereby expressly waived,
anything in this Agreement or in the Note to the contrary notwithstanding, or
both.
(b) Upon the occurrence and continuance of an Event of Default
specified in Sections 9.1(e) or (f) hereof, such principal, interest, and other
Obligations shall thereupon and concurrently therewith become due and payable,
and the Commitment shall forthwith terminate, all without any action by Lender
or any holder of the Note and without presentment, demand, protest, or other
notice of any kind, all of which are expressly waived, anything in this
Agreement or in the Note to the contrary notwithstanding.
(c) Lender may exercise all of the post default rights granted to it
under the Loan Documents or under Applicable Law. Lender shall have the right to
the appointment of a receiver for the property and assets of Borrower and its
Subsidiaries, and Borrower hereby consents, for itself and on behalf of its
Subsidiaries, to such rights and such appointment and hereby waives any
objection Borrower or any Subsidiary may have thereto or the right to have a
bond or other security posted by Lender in connection therewith.
(d) The rights and remedies of Lender hereunder shall be cumulative and
not exclusive.
ARTICLE 10
MISCELLANEOUS
Section 10.1 Notices.
(a) All notices and other communications under this Agreement shall be
in writing and shall be deemed to have been given five (5) days after deposit in
the mail, designated as certified mail, return receipt requested, post-prepaid,
or one (1) Business Day after being entrusted to a reputable commercial
overnight delivery service, or when sent by facsimile (provided confirmation is
obtained and such notice or communication is thereafter deposited in the mail,
postage prepaid) addressed to the party to which such notice is directed at its
address or telephone number set forth below. All notices and other
communications under this Agreement shall be given to the parties hereto at the
following addresses:
(i) If to Borrower, to it at:
LendingTree, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇., ▇▇▇▇ ▇▇▇▇▇▇
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
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with a copy to:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ L.L.P.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
(ii) If to Lender, to it at:
The Union Labor Life Insurance Company
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Mr. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Paul, Hastings, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
(b) Any party hereto may change the address to which notices shall be
directed under this Section 10.1 by giving ten (10) days' written notice of such
change to the other parties.
Section 10.2 Expenses. Borrower agrees to promptly pay:
(a) All reasonable out-of-pocket expenses of Lender in connection with
the preparation, negotiation, execution, and delivery of this Agreement and the
other Loan Documents, the transactions contemplated hereunder and thereunder,
and the making of the initial Advance hereunder, including, but not limited to,
the reasonable fees and disbursements of counsel for Lender;
(b) All reasonable out-of-pocket expenses of Lender in connection with
the administration of transactions contemplated in this Agreement or the other
Loan Documents, and the preparation, negotiation, execution, and delivery of any
waiver, amendment, or consent by Lender relating to this Agreement or the other
Loan Documents, including, but not limited to, the reasonable fees and
disbursements of counsel for Lender; and
(c) All reasonable out-of-pocket costs and expenses of Lender in
connection with any restructuring, refinancing, or "work out" of the
transactions contemplated by this Agreement, and of obtaining performance under
this Agreement or the other Loan Documents, and all reasonable out-of-pocket
costs and expenses of collection if default is made in the payment of the Note,
which in each case shall include the reasonable fees and expenses of
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counsel for Lender, and the reasonable fees and expenses of any experts, agents,
or consultants of Lender.
Section 10.3 Waivers. The rights and remedies of Lender under this
Agreement and the other Loan Documents shall be cumulative and not exclusive of
any rights or remedies which it would otherwise have. No failure or delay by
Lender in exercising any right shall operate as a waiver of such right. Lender
expressly reserves the right to require strict compliance with the terms of this
Agreement in connection with any funding of any Advance. In the event Lender
decides to fund any Advance at a time when Borrower is not in strict compliance
with the terms of this Agreement, such decision by Lender shall not be deemed to
constitute an undertaking by Lender to fund any further Advances or preclude
Lender from exercising any rights available to it under the Loan Documents or at
law or equity. Any waiver or indulgence granted by Lender shall not constitute a
modification of this Agreement, except to the extent expressly provided in such
waiver or indulgence, or constitute a course of dealing by Lender at variance
with the terms of the Agreement such as to require further notice by Lender of
its intent to require strict adherence to the terms of the Agreement in the
future. Any such actions shall not in any way affect the ability of Lender, in
its discretion, to exercise any rights available to it under this Agreement or
under any other agreement relating to Borrower, whether or not Lender is a
party.
Section 10.4 Set-Off. In addition to any rights now or hereafter
granted under Applicable Law and not by way of limitation of any such rights,
Lender and any subsequent holder or holders of the Note are hereby authorized by
Borrower at any time or from time to time after any Event of Default has
occurred and is continuing, without notice to Borrower or to any other Person,
any such notice being hereby expressly waived to the extent permitted by
Applicable Law, to set-off and to appropriate and apply any and all deposits
(general or special, time or demand, including, but not limited to, Indebtedness
evidenced by certificates of deposit, in each case whether matured or unmatured)
and any other Indebtedness at any time held or owing by Lender or such holder to
or for the credit or the account of Borrower, against and on account of the
obligations and liabilities of Borrower, to Lender or such holder under this
Agreement, the Note, and any other Loan Document, including, but not limited to,
all claims of any nature or description arising out of or connected with this
Agreement, the Note, or any other Loan Document, irrespective of whether or not
(a) Lender or the holder of the Note shall have made any demand hereunder or (b)
Lender shall have declared the principal of and interest on the Advance and the
Note and other amounts due hereunder to be due and payable as permitted by
Section 10.2 hereof and although said obligations and liabilities, or any of
them, shall be contingent or unmatured. Any sums obtained by Lender or by any
subsequent holder of the Note shall be subject to the application of payment
provisions of Article 2 hereof.
Section 10.5 Assignment.
(a) Borrower shall not assign or transfer any of its rights or
obligations hereunder, under the Note or under any other Loan Document without
the prior written consent of Lender.
(b) Lender may assign, negotiate, pledge or otherwise hypothecate all
or any portion of this Agreement, or grant participations herein, in all or any
portion of the Advance or in any of its rights or security hereunder and under
the other Loan Documents or any part thereof, including, without limitation, any
instruments securing Borrower's obligations hereunder.
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Section 10.6 Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original, but all such
separate counterparts shall together constitute but one and the same instrument.
Section 10.7 Governing Law and Jurisdiction; Waiver of Jury Trial. (a)
THIS AGREEMENT AND THE NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAW OF THE STATE OF NEW YORK (EXCLUDING ITS CHOICE OF LAW RULES)
PROVIDED THAT LENDER SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.
(a) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR
ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR
IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, BOTH
LOCATED IN NEW YORK CITY, NEW YORK (COLLECTIVELY, THE "NEW YORK COURTS"), AND BY
EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF BORROWER AND LENDER CONSENTS,
FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF
THOSE NEW YORK COURTS. EACH OF BORROWER AND LENDER IRREVOCABLY WAIVES ANY
OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE
GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
BRINGING OF ANY ACTION OR PROCEEDING IN THE NEW YORK COURTS IN RESPECT OF THIS
AGREEMENT OR ANY DOCUMENT RELATED HERETO. BORROWER AND LENDER EACH WAIVE
PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE
BY ANY OTHER MEANS PERMITTED BY NEW YORK LAW.
(b) BORROWER AND LENDER EACH WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL
BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED
TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE
BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY, PARTICIPANT OR ASSIGNEE,
WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. BORROWER AND
LENDER EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A
COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER
AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF
THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN
WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT
OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER
SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS
TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
Section 10.8 Severability. Any provision of this Agreement which is
prohibited or unenforceable shall be ineffective to the extent of such
prohibition or unenforceability without
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invalidating the remaining provisions hereof in that jurisdiction or affecting
the validity or enforceability of such provision in any other jurisdiction.
Section 10.9 Headings. Headings used in this Agreement are for
convenience only and shall not be used in connection with the interpretation of
any provision hereof.
Section 10.10 Entire Agreement. Except as otherwise expressly provided
herein, this Agreement and the other documents described or contemplated herein
embody the entire Agreement and understanding among the parties hereto and
thereto and supersede all prior agreements, understandings, and conversations
relating to the subject matter hereof and thereof.
Section 10.11 Amendment and Waiver. Neither this Agreement nor any term
hereof may be amended orally, nor may any provision hereof be waived orally but
only by an instrument in writing signed by Lender and by Borrower.
Section 10.12 Other Relationships. No relationship created hereunder or
under any other Loan Document shall in any way affect the ability of Lender to
enter into or maintain business relationships with Borrower, or any of its
Affiliates, beyond the relationships specifically contemplated by this Agreement
and the other Loan Documents.
Section 10.13 Pronouns. The pronouns used herein shall include, when
appropriate, either gender and both singular and plural, and the grammatical
construction of sentences shall conform thereto.
Section 10.14 Disclosure. Upon the approval by Borrower of the contents
thereof, Borrower agrees that Lender shall have the right to issue press
releases regarding the making of the Advances to Borrower pursuant to the terms
of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed under seal by their duly authorized officers, all as of the day and
year first above written.
BORROWER: LENDINGTREE, INC.
By:
-----------------------------------------
Its:
-------------------------------
LENDER: UNION LABOR LIFE INSURANCE COMPANY,
ACTING ON BEHALF OF ITS SEPARATE
ACCOUNT P
By:
-----------------------------------------
Its:
-------------------------------
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SCHEDULE 1
PAYMENT OFFICE
The Union Labor Life Insurance Company
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
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SCHEDULE 2
QUALIFIED RECEIVABLES
The Receivables constituting Qualified Receivables shall not include any
Receivable:
(a) that does not arise from the licensing of Intellectual Property,
the sale of goods or the performance of services by Borrower in the ordinary
course of Borrower's business;
(b) upon which (i) Borrower's right to receive payment is not absolute
or is contingent upon the fulfillment of any condition whatsoever or (ii)
Borrower is not able to bring suit or otherwise enforce its remedies against the
obligor thereunder through judicial process;
(c) (i) against which any defense, counterclaim or setoff, whether
well-founded or otherwise, is asserted against such Receivables or (ii) which
are "contra" Receivables.
(d) that is not a true and correct statement of a bona fide
indebtedness incurred in the amount of the Receivables and accepted by the
Person obligated under such Receivables;
(e) that is not owned by Borrower or is subject to any right, claim, or
interest of another Person, other than the Lien in favor of Lender;
(f) that arises from a transaction with an employee, Affiliate,
Subsidiary or shareholder of Borrower or any other Loan Party, or an entity
which has common officers or directors with Borrower;
(g) that is the obligation of a Person located in a country other than
the U.S. unless such Receivables are supported by a letter of credit acceptable
to Lender;
(h) that is the obligation of a Person to whom Borrower is or may
become liable for goods sold or services rendered by such Person to Borrower, to
the extent of Borrower's liability to such Person;
(i) that arises on terms by reason of which the payment by the obligor
of such Receivable may be conditional;
(j) that is in default; provided, that Receivables shall be deemed in
default upon the occurrence of any of the following:
(i) the Receivables are not paid within 60 days from its due
date or 90 days from their invoice date;
(ii) the Person obligated on such Receivables suspends
business, makes a general assignment for the benefit of creditors, or
fails to pay its debts generally as they come due; or
(iii) a petition is filed by or against any Person obligated
upon such Receivables under any bankruptcy law or any other national,
state or provincial receivership, insolvency relief or other law or
laws for the relief of debtors;
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(k) that is the obligation of a Person that is in default (as defined
in subparagraph (j) above) on 50% or more of the Receivables upon which such
Person is obligated;
(l) as to which Lender's interest therein is not a first priority
perfected security interest (including those Receivables of the federal
government subject to the Federal Assignment of Claims Act of 1940 for which the
Borrower has not yet obtained the necessary consents as required thereunder);
(m) to the extent that such Receivables exceed any credit limit
established by Lenders in Lender's sole discretion, which discretion shall be
exercised reasonably based on such credit and collateral considerations as
Lender may reasonably deem appropriate;
(n) that represents interest payments or service charges owing to
Borrower; or
(o) that is not otherwise acceptable in the sole discretion of Lender,
which discretion shall be exercised reasonably based on such credit and
collateral considerations as Lender may reasonably deem appropriate;
provided, that Lender shall have the right to create and adjust eligibility
standards and related reserves from time to time in its sole judgment.
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ARTICLE 1 DEFINITIONS.............................................1
ARTICLE 2 THE LOAN................................................9
Section 2.1 Extension of Credit................................9
(b) Borrowing Mechanics................................9
(c) Minimum Amounts....................................9
(d) Use of Proceeds....................................9
Section 2.2 Repayment..........................................9
Section 2.3 Optional/Mandatory Prepayments and Commitment
Reductions......................................10
Section 2.4 Interest..........................................11
(a) Rate of Interest..................................11
(b) Payment of Interest...............................11
(c) Interest Payment Dates............................11
Section 2.5 Computations of Interest and Fees.................11
Section 2.6 Note; Loan Accounts...............................12
Section 2.7 Manner of Payment.................................12
(a) Payment Dates.....................................12
(b) No Deduction; Taxes...............................12
Section 2.8 Application of Payments...........................12
Section 2.9 Maximum Rate of Interest..........................12
ARTICLE 3 SECURITY...............................................13
Section 3.1 Security for the Obligations......................13
ARTICLE 4 CONDITIONS PRECEDENT...................................15
Section 4.1 Conditions to Closing.............................15
Section 4.2 Conditions Precedent to Each Advance..............16
ARTICLE 5 REPRESENTATIONS AND WARRANTIES.........................17
Section 5.1 General Representations and Warranties............17
(a) Organization; Power; Qualification................17
(b) Authorization; Enforceability.....................17
(c) Subsidiaries......................................18
(d) Capitalization....................................18
(e) No Conflict.......................................18
(f) Necessary Authorizations..........................19
(g) Title to Properties...............................19
(h) Taxes.............................................19
(i) Financial Statements..............................19
45
(j) No Adverse Change.................................20
(k) Investments and Guaranties........................20
(l) Liabilities, Litigation...........................20
(m) ERISA.............................................20
(n) Intellectual Property.............................21
(o) Compliance with Law; Absence of Default...........21
(p) Compliance with Regulations U and X...............21
(q) Solvency..........................................21
(r) Environmental Matters.............................21
(s) Name of Borrower..................................21
(t) Regulated Entities................................22
(v) Ownership of Shares...............................22
(w) Registration Rights and Voting Rights.............22
(x) Offering..........................................22
(y) Insurance.........................................23
(z) Deposit Accounts with Financial Institutions......23
(aa) ERISA Party In Interest...........................23
Section 5.2 Investment Representations........................23
Section 5.3 Survival of Representations and Warranties........23
ARTICLE 6 GENERAL COVENANTS......................................23
Section 6.1 Preservation of Existence and Similar Matters.....23
Section 6.2 Compliance with Applicable Law....................24
Section 6.3 Maintenance of Properties and Assets..............24
Section 6.4 Accounting Methods and Financial Records..........24
Section 6.5 Insurance.........................................24
Section 6.6 Payment of Taxes and Claims.......................24
Section 6.7 Visits and Inspections............................24
Section 6.8 Payment of Indebtedness...........................25
Section 6.9 Conduct of Business...............................25
Section 6.10 ERISA.............................................25
Section 6.11 Further Assurances................................25
Section 6.12 Indemnity.........................................25
Section 6.13 Environmental Matters.............................26
Section 6.14 Subsidiary Guarantors.............................26
Section 6.15 Coverage Ratio....................................26
46
(a) 26
ARTICLE 7 INFORMATION COVENANTS..................................26
Section 7.1 Financial Statements and Information..............26
Section 7.2 Compliance Reports................................27
Section 7.3 Access to Accountants.............................27
Section 7.4 Notice of Litigation and Other Matters............27
ARTICLE 8 NEGATIVE COVENANTS.....................................28
Section 8.1 Indebtedness......................................28
Section 8.2 Guaranties........................................29
Section 8.3 Liens.............................................29
Section 8.4 Restricted Payments and Purchases.................29
Section 8.5 Investments.......................................29
Section 8.6 Affiliate Transactions............................29
Section 8.7 Liquidation; Change in Ownership, Name, or
Year; Disposition or Acquisition of Assets......30
Section 8.8 Amendment and Waiver..............................30
Section 8.9 ERISA Liability...................................30
Section 8.9 ERISA Liability TC "Section 8.9 ERISA
Liability" \l "2"...............................30
Section 8.10 Negative Pledge...................................31
Section 8.11 No Additional Deposit Accounts....................31
ARTICLE 9 DEFAULT................................................31
Section 9.1 Events of Default.................................31
Section 9.2 Remedies..........................................33
ARTICLE 10 MISCELLANEOUS..........................................33
Section 10.1 Notices...........................................33
Section 10.2 Expenses..........................................34
Section 10.3 Waivers...........................................35
Section 10.4 Set-Off...........................................35
Section 10.5 Assignment........................................36
Section 10.6 Counterparts......................................36
Section 10.7 Governing Law and Jurisdiction; Waiver of
Jury Trial......................................36
Section 10.8 Severability......................................37
Section 10.9 Headings..........................................37
Section 10.10 Entire Agreement..................................37
Section 10.11 Amendment and Waiver..............................37
47
Section 10.12 Other Relationships...............................37
Section 10.13 Pronouns..........................................37
Section 10.14 Disclosure........................................37
48
EXHIBIT TITLE
Exhibit A Form of Promissory Note
Exhibit B Form of Request for Advance
Exhibit C Form of Loan Party Certificate
Exhibit D Form of Subsidiary Guarantee Agreement
Exhibit E Form of Pledge Agreement
Exhibit F Form of Warrant
Exhibit G Form of Registration Rights Agreement
Exhibit H Business Plan
SCHEDULE TITLE
Schedule 1 Payment Office
Schedule 2 Qualified Receivables
Schedule 3 Liens
Schedule 5.1(c) Subsidiaries or Affiliates
Schedule 5.1(d) Capitalization
Schedule 5.1(h) Tax Audits
Schedule 5.1(l) Litigation
Schedule 5.1(n) Intellectual Property
Schedule 5.1(s) Name of Borrower
Schedule 5.1(w) Registration Rights and Voting Rights
Schedule 5.1(z) Deposit Accounts
Schedule 8.1(g) Indebtedness
Schedule 8.5 Loans to Employees
Schedule 8.6 Affiliate Transactions