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EXHIBIT 10(v) TO FRONTSTEP, INC. ANNUAL REPORT ON FORM 10-K
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LOAN AND SECURITY AGREEMENT
BY AND AMONG
FRONTSTEP, INC.
FRONTSTEP SOLUTIONS GROUP, INC.
BRIGHTWHITE SOLUTIONS, INC.
FRONTSTEP CANADA, INC.,
AS BORROWERS,
THE LENDERS THAT ARE SIGNATORIES HERETO
AS THE LENDERS,
AND
FOOTHILL CAPITAL CORPORATION
AS THE ARRANGER AND ADMINISTRATIVE AGENT
DATED AS OF JULY 17, 2001
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LOAN AND SECURITY AGREEMENT
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THIS LOAN AND SECURITY AGREEMENT (this "AGREEMENT"), is
entered into as of July 17, 2001, between and among, on the one hand, the
lenders identified on the signature pages hereof (such lenders, together with
their respective successors and assigns, are referred to hereinafter each
individually as a "LENDER" and collectively as the "LENDERS"), FOOTHILL CAPITAL
CORPORATION, a California corporation, as the arranger and administrative agent
for the Lenders ("AGENT"), and, on the other hand, FRONTSTEP, INC., an Ohio
corporation ("Parent"), and each of Parent's Subsidiaries identified on the
signature pages hereof (such Subsidiaries, together with Parent, are referred to
hereinafter each individually as a "BORROWER", and individually and
collectively, jointly and severally, as "BORROWERS").
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION.
1.1 DEFINITIONS. As used in this Agreement, the following
terms shall have the following definitions:
"ACCOUNT DEBTOR" means any Person who is or who may become
obligated under, with respect to, or on account of, an Account, chattel paper,
or a General Intangible.
"ACCOUNTS" means all of Borrowers' now owned or hereafter
acquired right, title, and interest with respect to "accounts" (as that term is
defined in the Code), and any and all supporting obligations in respect thereof,
including, without limitation, each Borrower's right to payment of a monetary
obligation (i) for property that has been or is to be sold, leased, licensed,
assigned or otherwise disposed of or (ii) for services rendered or to be
rendered.
"ACCOUNTS RESERVE" means $2,500,000, PROVIDED that one year
after the Closing Date, Agent may, in its Permitted Discretion, eliminate this
$2,500,000 reserve based upon Borrowers' satisfaction of the following: (i) on
the applicable date of determination, the financial performance of Borrowers for
the period covered by Borrowers' most recent financial statements delivered to
Agent in accordance with SECTION 6.3 shall at a minimum meet Borrowers'
projected financial performance for such period set forth in the Closing Date
Business Plan; and (ii) Agent shall have received an appraisal of Borrowers'
Eligible Recurring Maintenance Revenues performed by an appraiser, acceptable to
Agent, which shows that, as of the date of such appraisal, the aggregate value
of such Eligible Recurring Maintenance Revenues is not less than the aggregate
value of Borrowers' Eligible Recurring Maintenance Revenues as reflected in the
appraisal of such Eligible Recurring Maintenance Revenues received by Agent
prior to the Closing Date.
"ADDITIONAL DOCUMENTS" has the meaning set forth in SECTION
4.4.
"ADMINISTRATIVE BORROWER" has the meaning set forth in SECTION
17.9.
"ADVANCES" has the meaning set forth in SECTION 2.1.
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"AFFILIATE" means, as applied to any Person, any other Person
who, directly or indirectly, controls, is controlled by, or is under common
control with, such Person. For purposes of this definition, "control" means the
possession, directly or indirectly, of the power to direct the management and
policies of a Person, whether through the ownership of Stock, by contract, or
otherwise; PROVIDED, HOWEVER, that, in any event: (a) any Person which owns
directly or indirectly 10% or more of the securities having ordinary voting
power for the election of directors or other members of the governing body of a
Person or 10% or more of the partnership or other ownership interests of a
Person (other than as a limited partner of such Person) shall be deemed to
control such Person; (b) each director (or comparable manager) of a Person shall
be deemed to be an Affiliate of such Person; and (c) each partnership or joint
venture in which a Person is a partner or joint venturer shall be deemed to be
an Affiliate of such Person.
"AGENT" means Foothill, solely in its capacity as agent for
the Lenders hereunder, and any successor thereto.
"AGENT'S ACCOUNT" means an account at a bank designated by
Agent from time to time as the account into which Borrowers shall make all
payments to Agent for the benefit of the Lender Group and into which the Lender
Group shall make all payments to Agent under this Agreement and the other Loan
Documents; unless and until Agent notifies Administrative Borrower and the
Lender Group to the contrary, Agent's Account shall be that certain deposit
account bearing account number 323-266193 and maintained by Agent with The Chase
Manhattan Bank, 4 New York Plaza, 15th Floor, New York, New York 10004, ABA
#▇▇▇▇▇▇▇▇▇.
"AGENT ADVANCES" has the meaning set forth in SECTION
2.3(e)(i).
"AGENT'S LIENS" means the Liens granted by Borrowers to Agent
for the benefit of the Lender Group under this Agreement or the other Loan
Documents.
"AGENT-RELATED PERSONS" means Agent together with its
Affiliates, officers, directors, employees, and agents.
"AGREEMENT" has the meaning set forth in the preamble hereto.
"APPLICABLE PREPAYMENT PREMIUM" means, as of any date of
determination, an amount equal to (a) during the period of time from and after
the date of the execution and delivery of this Agreement up to the date that is
the first anniversary of the Closing Date, 3% times the sum of (i) the Maximum
Revolver Amount, plus (ii) the outstanding principal balance of the Term Loan on
the date immediately prior to the date of determination, (b) during the period
of time from and including the date that is the first anniversary of the Closing
Date up to the date that is the second anniversary of the Closing Date, 2% times
the sum of (i) the Maximum Revolver Amount, plus (ii) the outstanding principal
balance of the Term Loan on the date immediately prior to the date of
determination, and (c) during the period of time from and including the date
that is the second anniversary of the Closing Date up to the Maturity Date, 1%
times the sum of (i) the Maximum Revolver Amount, plus (ii) the outstanding
principal balance of the Term Loan on the date immediately prior to the date of
determination.
"ASSIGNEE" has the meaning set forth in SECTION 14.1.
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"ASSIGNMENT AND ACCEPTANCE" means an Assignment and Acceptance
in the form of EXHIBIT A-1.
"AUTHORIZED PERSON" means any officer or other employee of
Administrative Borrower.
"AVAILABILITY" means, as of any date of determination, if such
date is a Business Day, and determined at the close of business on the
immediately preceding Business Day, if such date of determination is not a
Business Day, the amount that Borrowers are entitled to borrow as Advances under
SECTION 2.1 (after giving effect to all then outstanding Obligations and all
sublimits and reserves applicable hereunder).
"BANKRUPTCY CODE" means the United States Bankruptcy Code, as
in effect from time to time.
"BASE LIBOR RATE" means the rate per annum, determined by
Agent 2 Business Days prior to the commencement of the applicable Interest
Period of each LIBOR Rate Loan, based on the USD British Banker's Association's
determination (as quoted in various publications, including Bloomberg), or if
such quotation becomes unavailable or impractical for Agent to obtain, then the
Base LIBOR Rate shall be determined by Agent in accordance with its customary
procedures, and utilizing such electronic or other quotation sources as it
considers appropriate (rounded upwards, if necessary, to the next 1/16%), on the
basis of the rates at which Dollar deposits are offered to major banks in the
London interbank market 2 Business Days prior to the commencement of the
applicable Interest Period, for a term and in amounts comparable to the Interest
Period and amount of the LIBOR Rate Loan requested by Administrative Borrower in
accordance with this Agreement, which determination shall be conclusive in the
absence of manifest error.
"BASE RATE" means, the rate of interest announced within ▇▇▇▇▇
Fargo at its principal office in San Francisco as its "prime rate", with the
understanding that the "prime rate" is one of ▇▇▇▇▇ Fargo's base rates (not
necessarily the lowest of such rates) and serves as the basis upon which
effective rates of interest are calculated for those loans making reference
thereto and is evidenced by the recording thereof after its announcement in such
internal publication or publications as ▇▇▇▇▇ Fargo may designate.
"BASE RATE LOAN" means each portion of an Advance or the Term
Loan that bears interest at a rate determined by reference to the Base Rate.
"BASE RATE MARGIN" means 1 percentage points.
"BASE RATE TERM LOAN MARGIN" means 5.0 percentage points.
"BENEFIT PLAN" means a "defined benefit plan" (as defined in
SECTION 3(35) of ERISA) for which any Borrower or any Subsidiary or ERISA
Affiliate of any Borrower has been an "employer" (as defined in SECTION 3(5) of
ERISA) within the past six years.
"BOARD OF DIRECTORS" means the board of directors (or
comparable managers) of Parent or any committee thereof duly authorized to act
on behalf thereof.
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"BOOKS" means all of each Borrower's now owned or hereafter
acquired books and records (including all of its Records indicating,
summarizing, or evidencing its assets (including the Collateral) or liabilities,
all of its Records relating to its business operations or financial condition,
and all of its goods or General Intangibles related to such information).
"BORROWER" and "BORROWERS" have the respective meanings set
forth in the preamble to this Agreement.
"BORROWING" means a borrowing hereunder consisting of Advances
(or term loans, in the case of the Term Loan) made on the same day by the
Lenders (or Agent on behalf thereof), or by Swing Lender in the case of a Swing
Loan, or by Agent in the case of an Agent Advance.
"BORROWING BASE" has the meaning set forth in SECTION 2.1.
"BORROWING BASE CERTIFICATE" means a certificate in the form
of EXHIBIT B-1.
"BRIGHTWHITE" means brightwhite solutions, inc., an Ohio
corporation.
"BUSINESS DAY" means any day that is not a Saturday, Sunday,
or other day on which national banks are authorized or required to close, except
that, if a determination of a Business Day shall relate to a LIBOR Rate Loan,
the term "Business Day" also shall exclude any day on which banks are closed for
dealings in Dollar deposits in the London interbank market.
"BUSINESS INTELLECTUAL PROPERTY" has the meaning set forth in
SECTION 5.16.
"CAPITAL LEASE" means a lease that is required to be
capitalized for financial reporting purposes in accordance with GAAP.
"CAPITALIZED LEASE OBLIGATION" means any Indebtedness
represented by obligations under Capital Lease.
"CASH EQUIVALENTS" means (a) marketable direct obligations
issued or unconditionally guaranteed by the United States or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within 1 year from the date of acquisition thereof, (b)
marketable direct obligations issued by any state of the United States or any
political subdivision of any such state or any public instrumentality thereof
maturing within 1 year from the date of acquisition thereof and, at the time of
acquisition, having the highest rating obtainable from either S&P or ▇▇▇▇▇'▇,
(c) commercial paper maturing no more than 1 year from the date of acquisition
thereof and, at the time of acquisition, having a rating of A-1 or P-1, or
better, from S&P or ▇▇▇▇▇'▇, and (d) certificates of deposit or bankers'
acceptances maturing within 1 year from the date of acquisition thereof either
(i) issued by any bank organized under the laws of the United States or any
state thereof which bank has a rating of A or A2, or better, from S&P or
▇▇▇▇▇'▇, or (ii) certificates of deposit less than or equal to $100,000 in the
aggregate issued by any other bank insured by the Federal Deposit Insurance
Corporation.
"CASH MANAGEMENT BANK" has the meaning set forth in SECTION
2.7(a).
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"CASH MANAGEMENT ACCOUNT" has the meaning set forth in SECTION
2.7(a).
"CASH MANAGEMENT AGREEMENTS" means those certain cash
management service agreements, in form and substance satisfactory to Agent, each
of which is among Administrative Borrower, Agent, and one of the Cash Management
Banks.
"CHANGE OF CONTROL" means (a) any "person" or "group" (within
the meaning of Sections 13(d) and 14(d) of the Exchange Act), other than
Permitted Holders, becomes the beneficial owner (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of 15%, or more, of the Stock of
Parent having the right to vote for the election of members of the Board of
Directors, or (b) a majority of the members of the Board of Directors do not
constitute Continuing Directors, or (c) any Borrower ceases to directly own and
control the same percentage of the outstanding capital Stock of each of its
Subsidiaries as set forth in Schedule 5.8(c) as of the Closing Date, except as a
result of the merger of brightwhite with and into the Parent in accordance with
SECTION 6.13.
"CLOSING DATE" means the date of the making of the initial
Advance (or other extension of credit) hereunder.
"CLOSING DATE BUSINESS PLAN" means the set of Projections of
Borrowers for the 3 year period following the Closing Date (on a year by year
basis, and for the 1 year period following the Closing Date, on a quarter by
quarter basis), in form and substance (including as to scope and underlying
assumptions) satisfactory to Agent.
"CODE" means the New York Uniform Commercial Code, as in
effect from time to time.
"COLLATERAL" means all of each Borrower's now owned or
hereafter acquired right, title, and interest in and to each of the following:
(a) Accounts,
(b) Books,
(c) Equipment,
(d) General Intangibles,
(e) Inventory,
(f) Investment Property,
(g) Negotiable Collateral,
(h) money or other assets of each such Borrower
that now or hereafter come into the possession, custody, or control of any
member of the Lender Group, and
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(i) the proceeds and products, whether tangible or
intangible, of any of the foregoing, including proceeds of insurance covering
any or all of the foregoing, and any and all Accounts, Books, Equipment,
General Intangibles, Inventory, Investment Property, Negotiable Collateral,
Real Property, money, deposit accounts, or other tangible or intangible
property resulting from the sale, exchange, collection, or other disposition of
any of the foregoing, or any portion thereof or interest therein, and the
proceeds thereof.
"COLLATERAL ACCESS AGREEMENT" means a landlord waiver, bailee
letter, or acknowledgement agreement of any lessor, warehouseman, processor,
consignee, or other Person in possession of, having a Lien upon, or having
rights or interests in the Equipment or Inventory, in each case, in form and
substance satisfactory to Agent.
"COLLECTIONS" means all cash, checks, notes, instruments, and
other items of payment (including insurance proceeds, proceeds of cash sales,
rental proceeds, and tax refunds) of Borrowers.
"COMMITMENT" means, with respect to each Lender, its Revolver
Commitment, its Term Loan Commitment, or its Total Commitment, as the context
requires, and, with respect to all Lenders, their Revolver Commitments, their
Term Loan Commitments, or their Total Commitments, as the context requires, in
each case as such Dollar amounts are set forth beside such Lender's name under
the applicable heading on SCHEDULE C-1 or on the signature page of the
Assignment and Acceptance pursuant to which such Lender became a Lender
hereunder in accordance with the provisions of SECTION 14.1.
"COMMON STOCK" means the common stock, no par value, of the
Parent.
"COMPLIANCE CERTIFICATE" means a certificate substantially in
the form of Exhibit C-1 delivered by the chief financial officer of Parent to
Agent.
"CONTINUING DIRECTOR" means (a) any member of the Board of
Directors who was a director (or comparable manager) of Parent on the Closing
Date, and (b) any individual who becomes a member of the Board of Directors
after the Closing Date if such individual was appointed or nominated for
election to the Board of Directors by a majority of the Continuing Directors,
but excluding any such individual originally proposed for election in opposition
to the Board of Directors in office at the Closing Date in an actual or
threatened election contest relating to the election of the directors (or
comparable managers) of Parent (as such terms are used in Rule 14a-11 under the
Exchange Act) and whose initial assumption of office resulted from such contest
or the settlement thereof.
"CONTRIBUTION AGREEMENT" means that certain Contribution
Agreement, dated of even date herewith, among Borrowers, in form and substance
satisfactory to Agent.
"CONTROL AGREEMENT" means a control agreement, in form and
substance satisfactory to Agent, executed and delivered by the applicable
Borrower, Agent, and the applicable securities intermediary with respect to a
Securities Account or a bank with respect to a deposit account.
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"COPYRIGHT OFFICE" means the United States Register of
Copyrights, Library of Congress.
"COPYRIGHT SECURITY AGREEMENT" means a copyright security
agreement executed and delivered by each Borrower and Agent, the form and
substance of which is satisfactory to Agent.
"COPYRIGHTS" has the meaning set forth in the definition of
the term "Intellectual Property".
"DAILY BALANCE" means, with respect to each day during the
term of this Agreement, the amount of an Obligation owed at the end of such day.
"DDA" means any checking or other demand deposit account
maintained by any Borrower.
"DEFAULT" means an event, condition, or default that, with the
giving of notice, the passage of time, or both, would be an Event of Default.
"DEFAULTING LENDER" means any Lender that fails to make any
Advance (or other extension of credit) that it is required to make hereunder on
the date that it is required to do so hereunder.
"DEFAULTING LENDER RATE" means (a) the Base Rate for the first
3 days from and after the date the relevant payment is due, and (b) thereafter,
at the interest rate then applicable to Advances that are Base Rate Loans
(inclusive of the Base Rate Margin applicable thereto).
"DESIGNATED ACCOUNT" means account number 611 808 676 of
Administrative Borrower maintained with the Designated Account Bank, or such
other deposit account of Administrative Borrower (located within the United
States) that has been designated as such, in writing, by Administrative Borrower
to Agent.
"DESIGNATED ACCOUNT BANK" means Bank One, N.A., whose office
is located at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, and whose ABA number
is 044 000 037.
"DILUTION" means, as of any date of determination, a
percentage, based upon the experience of the immediately prior 90 days, that is
the result of dividing the Dollar amount of (a) bad debt write-downs, discounts,
advertising allowances, credits, or other dilutive items with respect to the
Accounts during such period, by (b) Borrowers' Collections with respect to
Accounts during such period (excluding extraordinary items) plus the Dollar
amount of clause (a).
"DILUTION RESERVE" means, as of any date of determination, an
amount sufficient to reduce the advance rate against Eligible Accounts by one
percentage point for each percentage point by which Dilution is in excess of 5%.
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"DISBURSEMENT LETTER" means an instructional letter executed
and delivered by Administrative Borrower to Agent regarding the extensions of
credit to be made on the Closing Date, the form and substance of which is
satisfactory to Agent.
"DOLLARS" or "$" means United States dollars.
"DOMESTIC COLLECTIONS" means Collections on Accounts with
respect to which the Account Debtor either (i) maintains its chief executive
office in the United States, or (ii) is organized under the laws of the United
States or any state thereof.
"DSI" means DSI Technology Escrow Service, and its successors
and assigns.
"DUE DILIGENCE LETTER" means the due diligence letter sent by
Agent's counsel to Administrative Borrower, together with Administrative
Borrower's completed responses to the inquiries set forth therein, the form and
substance of such responses to be satisfactory to Agent.
"EBITDA" means, with respect to any fiscal period, Parent's
and its Subsidiaries consolidated net earnings (or loss), minus extraordinary
gains, plus extraordinary losses, plus interest expense, income taxes, and
depreciation and amortization for such period, as determined in accordance with
GAAP.
"ELIGIBLE ACCOUNTS" means those Accounts created by each
Borrower in the ordinary course of its business, that arise out of its sale or
licensing of Software or rendition of training, installation and/or other
related consulting services, that comply with each of the representations and
warranties respecting Eligible Accounts made by Borrowers under the Loan
Documents, and that are not excluded as ineligible by virtue of one or more of
the criteria set forth below; PROVIDED, HOWEVER, that such criteria may be fixed
and revised from time to time by Agent in Agent's Permitted Discretion to
address the results of any audit performed by Agent from time to time after the
Closing Date. In determining the amount to be included, Eligible Accounts shall
be calculated net of customer deposits and unapplied cash remitted to Borrowers.
Eligible Accounts shall not include the following:
(a) Accounts that the Account Debtor has failed to pay
within 90 days of original invoice date or Accounts which are more than 60 days
past due,
(b) Accounts owed by an Account Debtor (or its Affiliates)
where 50% or more of all Accounts owed by that Account Debtor (or its
Affiliates) are deemed ineligible under clause (a) above,
(c) Accounts with respect to which the Account Debtor is
an employee, Affiliate, or agent (other than an authorized distributor of any
Borrower's Marketed Software that is not an Affiliate of any Borrower) of any
Borrower,
(d) Accounts arising in a transaction wherein goods are
placed on consignment or are sold pursuant to a guaranteed sale, a sale or
return, a sale on approval, a ▇▇▇▇ and hold, or any other terms by reason of
which the payment by the Account Debtor may be conditional,
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(e) Accounts that are not payable in Dollars,
(f) Accounts with respect to which the Account Debtor
either (i) does not maintain its chief executive office in the United States or
Canada, or (ii) is not organized under the laws of the United States, Canada or
any state or province thereof, or (iii) is the government of any foreign country
or sovereign state (other than Canada), or of any state, province, municipality,
or other political subdivision thereof, or of any department, agency, public
corporation, or other instrumentality thereof, unless (y) the Account is
supported by an irrevocable letter of credit satisfactory to Agent (as to form,
substance, and issuer or domestic confirming bank) that has been delivered to
Agent and is directly drawable by Agent, or (z) the Account is covered by credit
insurance in form, substance, and amount, and by an insurer, satisfactory to
Agent,
(g) Accounts with respect to which the Account Debtor is
either (i) the United States or any department, agency, or instrumentality of
the United States (exclusive, however, of Accounts with respect to which the
applicable Borrower has complied, to the reasonable satisfaction of Agent, with
the Assignment of Claims Act, 31 USC Section 3727), or (ii) any state of the
United States (exclusive, however, of (y) Accounts owed by any state that does
not have a statutory counterpart to the Assignment of Claims Act or (z) Accounts
owed by any state that does have a statutory counterpart to the Assignment of
Claims Act as to which the applicable Borrower has complied to Agent's
satisfaction),
(h) Accounts with respect to which the Account Debtor is a
creditor of any Borrower, has or has asserted a right of setoff, has disputed
its liability, or has made any claim with respect to its obligation to pay the
Account, to the extent of such claim, right of setoff, or dispute,
(i) Accounts with respect to an Account Debtor whose total
obligations owing to Borrowers exceed 10% of all Eligible Accounts, to the
extent of the obligations owing by such Account Debtor in excess of such
percentage,
(j) Accounts with respect to which the Account Debtor is
subject to an Insolvency Proceeding, is not Solvent, has gone out of business,
or as to which a Borrower has received notice of an imminent Insolvency
Proceeding or a material impairment of the financial condition of such Account
Debtor,
(k) Accounts with respect to which the Account Debtor is
located in the states of New Jersey, Minnesota, or West Virginia (or any other
state that requires a creditor to file a business activity report or similar
document in order to bring suit or otherwise enforce its remedies against such
Account Debtor in the courts or through any judicial process of such state),
unless the applicable Borrower has qualified to do business in New Jersey,
Minnesota, West Virginia, or such other states, or has filed a business
activities report with the applicable division of taxation, the department of
revenue, or with such other state offices, as appropriate, for the then-current
year, or is exempt from such filing requirement,
(l) Accounts, the collection of which, Agent, in its
Permitted Discretion, believes to be doubtful by reason of the Account Debtor's
financial condition,
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(m) (i) Accounts (other than Accounts created by Frontstep
Canada) that are not subject to a valid and perfected first priority Agent's
Lien or (ii) in the case of Accounts created by Frontstep Canada, any such
Accounts that are not subject to a valid and perfected first priority Agent's
Lien after expiration of the time period set forth in SECTION 3.2(e),
(n) Accounts with respect to which (i) the goods giving
rise to such Account have not been shipped and billed to the Account Debtor, or
(ii) the services giving rise to such Account have not been performed and billed
to the Account Debtor, or
(o) Accounts that represent the right to receive progress
payments or other advance ▇▇▇▇▇▇▇▇ that are due prior to the completion of
performance by the applicable Borrower of the subject contract for goods or
services.
"ELIGIBLE NON-MAINTENANCE ACCOUNTS" means Eligible Accounts
that are Non-Maintenance Accounts.
"ELIGIBLE RECURRING MAINTENANCE REVENUES" means, as of any
date of determination, the aggregate maintenance contract revenues (excluding
deferred maintenance revenue in excess of one year) derived from Maintenance
Contracts with customers located in the United States and Canada (excluding
time, materials, warranties and other non-Maintenance Contract items) which have
been recognized by a Borrower during the preceding twelve (12) calendar month
period as reflected on the monthly income statements of such Borrower delivered
to Agent pursuant to Section 6.3 for such months; PROVIDED that maintenance
contract revenues derived from Maintenance Contracts that (a) contain
proscriptions or limitations on a Borrower's right to assign such contracts, or
(b) relate to computer software or other copyrightable subject matter (1) not
owned by a Borrower, or (2) with respect to which a copyright has not been
registered with the Copyright Office or, with respect to any copyright that is
not specifically encumbered in favor of Agent by a Copyright Security Agreement
that has been filed in the Copyright Office, shall not be included in Eligible
Recurring Maintenance Revenues.
"ELIGIBLE TRANSFEREE" means (a) a commercial bank organized
under the laws of the United States, or any state thereof, and having total
assets in excess of $250,000,000, (b) a commercial bank organized under the laws
of any other country which is a member of the Organization for Economic
Cooperation and Development or a political subdivision of any such country and
which has total assets in excess of $250,000,000, provided that such bank is
acting through a branch or agency located in the United States, (c) a finance
company, insurance company, or other financial institution or fund that is
engaged in making, purchasing, or otherwise investing in commercial loans in the
ordinary course of its business and having (together with its Affiliates) total
assets in excess of $250,000,000, (d) any Affiliate (other than individuals) of
a Lender that was party hereto as of the Closing Date, (e) so long as no Event
of Default has occurred and is continuing, any other Person approved by Agent
and Administrative Borrower, and (f) during the continuation of an Event of
Default, any other Person approved by Agent.
"ENVIRONMENTAL ACTIONS" means any complaint, summons,
citation, notice, directive, order, claim, litigation, investigation, judicial
or administrative proceeding, judgment,
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letter, or other communication from any Governmental Authority, or any third
party involving violations of Environmental Laws or releases of Hazardous
Materials from (a) any assets, properties, or businesses of any Borrower or any
predecessor in interest, (b) from adjoining properties or businesses, or (c)
from or onto any facilities which received Hazardous Materials generated by any
Borrower or any predecessor in interest.
"ENVIRONMENTAL LAW" means any applicable federal, state,
provincial, foreign or local statute, law, rule, regulation, ordinance, code,
binding and enforceable guideline, binding and enforceable written policy or
rule of common law now or hereafter in effect and in each case as amended, or
any judicial or administrative interpretation thereof, including any judicial or
administrative order, consent decree or judgment, to the extent binding on
Borrowers, relating to the environment, employee health and safety, or Hazardous
Materials, including CERCLA; RCRA; the Federal Water Pollution Control Act, 33
USC Section 1251 et seq; the Toxic Substances Control Act, 15 USC, Section 2601
et seq; the Clean Air Act, 42 USC Section 7401 et seq.; the Safe Drinking Water
Act, 42 USC. Section 3803 et seq.; the Oil Pollution Act of 1990, 33 USC.
Section 2701 et seq.; the Emergency Planning and the Community Right-to-Know Act
of 1986, 42 USC. Section 11001 et seq.; the Hazardous Material Transportation
Act, 49 USC Section 1801 et SEQ.; and the Occupational Safety and Health Act, 29
USC. Section 651 et seq. (to the extent it regulates occupational exposure to
Hazardous Materials); any state and local or foreign counterparts or
equivalents, in each case as amended from time to time.
"ENVIRONMENTAL LIABILITIES AND COSTS" means all liabilities,
monetary obligations, Remedial Actions, losses, damages, punitive damages,
consequential damages, treble damages, costs and expenses (including all
reasonable fees, disbursements and expenses of counsel, experts, or consultants,
and costs of investigation and feasibility studies), fines, penalties,
sanctions, and interest incurred as a result of any claim or demand by any
Governmental Authority or any third party, and which relate to any Environmental
Action.
"ENVIRONMENTAL LIEN" means any Lien in favor of any
Governmental Authority for Environmental Liabilities and Costs.
"EQUIPMENT" means all of Borrowers' now owned or hereafter
acquired right, title, and interest with respect to equipment, machinery,
machine tools, motors, furniture, furnishings, fixtures, vehicles (including
motor vehicles), tools, parts, goods (other than consumer goods, farm products,
or Inventory), wherever located, including all attachments, accessories,
accessions, replacements, substitutions, additions, and improvements to any of
the foregoing.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and any successor statute thereto.
"ERISA AFFILIATE" means (a) any Person subject to ERISA whose
employees are treated as employed by the same employer as the employees of a
Borrower under IRC Section 414(b), (b) any trade or business subject to ERISA
whose employees are treated as employed by the same employer as the employees of
a Borrower under IRC Section 414(c), (c) solely for purposes of Section 302 of
ERISA and Section 412 of the IRC, any organization subject to ERISA that is a
member of an affiliated service group of which a Borrower is a member under IRC
Section 414(m), or (d) solely for purposes of Section 302 of ERISA and
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Section 412 of the IRC, any Person subject to ERISA that is a party to an
arrangement with a Borrower and whose employees are aggregated with the
employees of a Borrower under IRC Section 414(o).
"EVENT OF DEFAULT" has the meaning set forth in SECTION 8.
"EXCESS AVAILABILITY" means the amount, as of the date any
determination thereof is to be made, equal to Availability minus the aggregate
amount, if any, of all trade payables of Borrowers aged in excess of their
historical levels with respect thereto and all book overdrafts in excess of
their historical practices with respect thereto, in each case as determined by
Agent in its Permitted Discretion.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
in effect from time to time.
"EXISTING LENDER" means PNC Bank, National Association, in its
capacity as agent for certain lenders party to the PNC Credit Agreement.
"FAMILY MEMBER" means, with respect to any individual, any
other individual having a relationship by blood (to the second degree of
consanguinity), marriage, or adoption to such individual.
"FAMILY TRUSTS" means, with respect to any individual, trusts
or other estate planning vehicles established for the benefit of Family Members
of such individual and in respect of which such individual serves as trustee or
in a similar capacity.
"FEE LETTER" means that certain fee letter, dated as of even
date herewith, between Borrowers and Agent, in form and substance satisfactory
to Agent.
"FEIN" means Federal Employer Identification Number.
"FOOTHILL" means Foothill Capital Corporation, a California
corporation.
"FRONTSTEP CANADA" means Frontstep Canada, Inc., an Ontario
corporation.
"FUNDING DATE" means the date on which a Borrowing occurs.
"FUNDING LOSSES" has the meaning set forth in SECTION
2.13(b)(ii).
"GAAP" means generally accepted accounting principles as in
effect from time to time in the United States, consistently applied.
"GENERAL INTANGIBLES" means all of Borrowers' now owned or
hereafter acquired right, title, and interest with respect to general
intangibles (including payment intangibles, contract rights, rights to payment,
rights arising under common law, statutes, or regulations, choses or things in
action, goodwill, Intellectual Property, blueprints, drawings, purchase orders,
customer lists, monies due or recoverable from pension funds, route lists,
rights to payment and other rights under any royalty or licensing agreements,
infringement claims, computer programs
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including, without limitation, Software (in source code and object code),
information contained on computer disks or tapes, software, literature, reports,
catalogs, money, deposit accounts, insurance premium rebates, tax refunds, and
tax refund claims), and any and all supporting obligations in respect thereof,
and any other personal property other than goods, Accounts, Investment Property,
and Negotiable Collateral.
"GOVERNING DOCUMENTS" means, with respect to any Person, the
certificate or articles of incorporation, by-laws, or other organizational
documents of such Person.
"GOVERNMENTAL AUTHORITY" means any federal, state, local, or
other governmental or administrative body, instrumentality, department, or
agency or any court, tribunal, administrative hearing body, arbitration panel,
commission, or other similar dispute-resolving panel or body.
"HAZARDOUS MATERIALS" means (a) substances that are defined or
listed in, or otherwise classified pursuant to, any applicable laws or
regulations as "hazardous substances," "hazardous materials," "hazardous
wastes," "toxic substances," or any other formulation intended to define, list,
or classify substances by reason of deleterious properties such as ignitability,
corrosivity, reactivity, carcinogenicity, reproductive toxicity, or "EP
toxicity", (b) oil, petroleum, or petroleum derived substances, natural gas,
natural gas liquids, synthetic gas, drilling fluids, produced waters, and other
wastes associated with the exploration, development, or production of crude oil,
natural gas, or geothermal resources, (c) any flammable substances or explosives
or any radioactive materials, and (d) asbestos in any form or electrical
equipment that contains any oil or dielectric fluid containing levels of
polychlorinated biphenyls in excess of 50 parts per million.
"INDEBTEDNESS" means (a) all obligations of a Borrower for
borrowed money, (b) all obligations of a Borrower evidenced by bonds,
debentures, notes, or other similar instruments and all reimbursement or other
obligations of a Borrower in respect of letters of credit, bankers acceptances,
interest rate swaps, or other financial products, (c) all obligations of a
Borrower under Capital Leases, (d) all obligations or liabilities of others
secured by a Lien on any asset of a Borrower, irrespective of whether such
obligation or liability is assumed, (e) all obligations of a Borrower for the
deferred purchase price of assets (other than trade debt incurred in the
ordinary course of a Borrower's business and repayable in accordance with
customary trade practices), and (f) any obligation of a Borrower guaranteeing or
intended to guarantee (whether directly or indirectly guaranteed, endorsed,
co-made, discounted, or sold with recourse to a Borrower) any obligation of any
other Person.
"INDEMNIFIED LIABILITIES" has the meaning set forth in SECTION
11.3.
"INDEMNIFIED PERSON" has the meaning set forth in SECTION
11.3.
"INSOLVENCY PROCEEDING" means any proceeding commenced by or
against any Person under any provision of the Bankruptcy Code or under any other
state or federal bankruptcy or insolvency law, assignments for the benefit of
creditors, formal or informal moratoria, compositions, extensions generally with
creditors, or proceedings seeking reorganization, arrangement, or other similar
relief.
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"INTANGIBLE ASSETS" means, with respect to any Person, that
portion of the book value of all of such Person's assets that would be treated
as intangibles under GAAP.
"INTELLECTUAL PROPERTY" shall mean all foreign and domestic
(i) trademarks, service marks, brand names, certification marks, collective
marks, d/b/a's, Internet domain names, logos, symbols, trade dress, assumed
names, fictitious names, trade names, and other indicia of origin, all
applications and registrations for all of the foregoing, and all goodwill
associated therewith and symbolized thereby, including without limitation all
extensions, modifications and renewals of same (collectively, "Trademarks");
(ii) inventions, discoveries and ideas, whether patentable or not, and all
patents, registrations, and applications therefor, including without limitation
divisions, continuations, continuations-in-part and renewal applications, and
including without limitation renewals, extensions and reissues (collectively,
"Patents"); (iii) confidential and proprietary information, trade secrets and
know-how, including without limitation processes, schematics, databases,
formulae, drawings, prototypes, models, designs and customer lists
(collectively, "Trade Secrets"); (iv) published and unpublished works of
authorship, whether copyrightable or not, copyrights therein and thereto, and
registrations and applications therefor, and all renewals, extensions,
restorations and reversions thereof (collectively, "Copyrights"); and (v) all
other intellectual property or proprietary rights and claims or causes of action
arising out of or related to any infringement, misappropriation or other
violation of any of the foregoing, including without limitation rights to
recover for past, present and future violations thereof.
"INTERCOMPANY SUBORDINATION AGREEMENT" means a subordination
agreement executed and delivered by Borrowers and Agent, the form and substance
of which is satisfactory to Agent.
"INTERCREDITOR AGREEMENT" means the Intercreditor and
Subordination Agreement, executed and delivered by Softech and Agent, the form
and substance of which is satisfactory to Agent.
"INTEREST PERIOD" means, with respect to each LIBOR Rate Loan,
a period commencing on the date of the making of such LIBOR Rate Loan and ending
1, 2, or 3 months thereafter; PROVIDED, HOWEVER, that (a) if any Interest Period
would end on a day that is not a Business Day, such Interest Period shall be
extended (subject to clauses (c)-(e) below) to the next succeeding Business Day,
(b) interest shall accrue at the applicable rate based upon the LIBOR Rate from
and including the first day of each Interest Period to, but excluding, the day
on which any Interest Period expires, (c) any Interest Period that would end on
a day that is not a Business Day shall be extended to the next succeeding
Business Day unless such Business Day falls in another calendar month, in which
case such Interest Period shall end on the next preceding Business Day, (d) with
respect to an Interest Period that begins on the last Business Day of a calendar
month (or on a day for which there is no numerically corresponding day in the
calendar month at the end of such Interest Period), the Interest Period shall
end on the last Business Day of the calendar month that is 1, 2, or 3 months
after the date on which the Interest Period began, as applicable, and (e)
Borrowers (or Administrative Borrower on behalf thereof) may not elect an
Interest Period which will end after the Maturity Date.
"INVENTORY" means all Borrowers' now owned or hereafter
acquired right, title, and interest with respect to inventory, including goods
held for sale or lease or to be furnished
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under a contract of service, goods that are leased by a Borrower as lessor,
goods that are furnished by a Borrower under a contract of service, and raw
materials, work in process, or materials used or consumed in a Borrower's
business.
"INVESTMENT" means, with respect to any Person, any investment
by such Person in any other Person (including Affiliates) in the form of loans,
guarantees, advances, or capital contributions (excluding (a) commission,
travel, and similar advances to officers and employees of such Person made in
the ordinary course of business, and (b) bona fide Accounts arising in the
ordinary course of business consistent with past practice), purchases or other
acquisitions for consideration of Indebtedness or Stock, and any other items
that are or would be classified as investments on a balance sheet prepared in
accordance with GAAP.
"INVESTMENT PROPERTY" means all of Borrowers' now owned or
hereafter acquired right, title, and interest with respect to "investment
property" as that term is defined in the Code, and any and all supporting
obligations in respect thereof.
"IRC" means the Internal Revenue Code of 1986, as in effect
from time to time.
"ISSUING LENDER" means Foothill or any other Lender that, at
the request of Administrative Borrower and with the consent of Agent agrees, in
such Lender's sole discretion, to become an Issuing Lender for the purpose of
issuing L/Cs or L/C Undertakings pursuant to SECTION 2.12.
"L/C" has the meaning set forth in SECTION 2.12(a).
"L/C DISBURSEMENT" means a payment made by the Issuing Lender
pursuant to a Letter of Credit.
"L/C UNDERTAKING" has the meaning set forth in SECTION
2.12(a).
"LENDER" and "LENDERS" have the respective meanings set forth
in the preamble to this Agreement, and shall include any other Person made a
party to this Agreement in accordance with the provisions of SECTION 14.1.
"LENDER GROUP" means, individually and collectively, each of
the Lenders (including the Issuing Lender) and Agent.
"LENDER GROUP EXPENSES" means all (a) costs or expenses
(including taxes, and insurance premiums) required to be paid by a Borrower
under any of the Loan Documents that are paid or incurred by the Lender Group,
(b) fees or charges paid or incurred by Agent in connection with the Lender
Group's transactions with Borrowers, including, fees or charges for
photocopying, notarization, couriers and messengers, telecommunication, public
record searches (including tax lien, judgment, and UCC searches and including
searches with the patent and trademark office, the copyright office, or the
department of motor vehicles), filings, recordings, publications, appraisals
(including periodic Collateral appraisals or business valuations to the extent
of the fees and charges (and up to the amount of any limitation) contained in
this Agreement), real estate surveys, real estate title policies and
endorsements, and environmental audits, (c) costs and expenses incurred by Agent
in the disbursement of funds to or for the
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account of Borrowers (by wire transfer or otherwise), (d) charges paid or
incurred by Agent resulting from the dishonor of checks, (e) reasonable costs
and expenses paid or incurred by the Lender Group to correct any default or
enforce any provision of the Loan Documents, or in gaining possession of,
maintaining, handling, preserving, storing, shipping, selling, preparing for
sale, or advertising to sell the Collateral, or any portion thereof,
irrespective of whether a sale is consummated, (f) audit fees and expenses of
Agent related to audit examinations of the Books to the extent of the fees and
charges (and up to the amount of any limitation) contained in this Agreement,
(g) reasonable costs and expenses of third party claims or any other suit paid
or incurred by the Lender Group in enforcing or defending the Loan Documents or
in connection with the transactions contemplated by the Loan Documents or the
Lender Group's relationship with any Borrower or any guarantor of the
Obligations, (h) Agent's and each Lender's reasonable fees and expenses
(including attorneys fees) incurred in advising, structuring, drafting,
reviewing, administering, or amending the Loan Documents, and (i) Agent's and
each Lender's reasonable fees and expenses (including attorneys fees) incurred
in terminating, enforcing (including attorneys fees and expenses incurred in
connection with a "workout," a "restructuring," or an Insolvency Proceeding
concerning any Borrower or in exercising rights or remedies under the Loan
Documents), or defending the Loan Documents, irrespective of whether suit is
brought, or in taking any Remedial Action concerning the Collateral.
"LENDER-RELATED PERSON" means, with respect to any Lender,
such Lender, together with such Lender's Affiliates, and the officers,
directors, employees, and agents of such Lender.
"LETTER OF CREDIT" means an L/C or an L/C Undertaking, as the
context requires.
"LETTER OF CREDIT USAGE" means, as of any date of
determination, the aggregate undrawn amount of all outstanding Letters of Credit
plus 100% of the amount of outstanding time drafts accepted by an Underlying
Issuer as a result of drawings under Underlying Letters of Credit.
"LIBOR DEADLINE" has the meaning set forth in SECTION
2.13(b)(i).
"LIBOR NOTICE" means a written notice in the form of EXHIBIT
L-1.
"LIBOR RATE" means, for each Interest Period for each LIBOR
Rate Loan, the rate per annum determined by Agent (rounded upwards, if
necessary, to the next 1/16%) by dividing (a) the Base LIBOR Rate for such
Interest Period, by (b) 100% minus the Reserve Percentage. The LIBOR Rate shall
be adjusted on and as of the effective day of any change in the Reserve
Percentage.
"LIBOR RATE LOAN" means each portion of an Advance that bears
interest at a rate determined by reference to the LIBOR Rate.
"LIBOR RATE MARGIN" means 3 percentage points.
"LIEN" means any interest in an asset securing an obligation
owed to, or a claim by, any Person other than the owner of the asset, whether
such interest shall be based on the common law, statute, or contract, whether
such interest shall be recorded or perfected, and
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whether such interest shall be contingent upon the occurrence of some future
event or events or the existence of some future circumstance or circumstances,
including the lien or security interest arising from a mortgage, deed of trust,
encumbrance, pledge, hypothecation, assignment, deposit arrangement, security
agreement, conditional sale or trust receipt, or from a lease, consignment, or
bailment for security purposes and also including reservations, exceptions,
encroachments, easements, rights-of-way, covenants, conditions, restrictions,
leases, and other title exceptions and encumbrances affecting Real Property.
"LOAN ACCOUNT" has the meaning set forth in SECTION 2.10.
"LOAN DOCUMENTS" means this Agreement, the Cash Management
Agreements, the Contribution Agreement, the Control Agreements, the Copyright
Security Agreement, the Disbursement Letter, the Due Diligence Letter, the Fee
Letter, the Letters of Credit, the Officers' Certificate, the Source Code Escrow
Agreement, the Stock Pledge Agreement, the Trademark Security Agreement, the
Intercompany Subordination Agreement, the Intercreditor Agreement, the Warrants,
the Registration Rights Agreement, any note or notes executed by a Borrower in
connection with this Agreement and payable to a member of the Lender Group, and
any other agreement entered into, now or in the future, by any Borrower and the
Lender Group in connection with this Agreement.
"MAINTENANCE ACCOUNT" means an account arising out of computer
software maintenance and support performed by a Borrower pursuant to a
Maintenance Contract; PROVIDED that such Accounts are invoiced and accounted for
separately from Accounts not arising from services and support performed
pursuant to a Maintenance Contract.
"MAINTENANCE CONTRACTS" means those certain license agreements
or other agreements between a Borrower and an Account Debtor under which such
Borrower provides maintenance or support services to such Account Debtor.
"MARKETED SOFTWARE" has the meaning set forth in SECTION
5.16(b).
"MATERIAL ADVERSE CHANGE" means (a) a material adverse change
in the business, prospects, operations, results of operations, assets,
liabilities or condition (financial or otherwise) of any Borrower or the Parent
and its Subsidiaries taken as a whole, (b) a material impairment of a Borrower's
ability to perform its obligations under the Loan Documents to which it is a
party or of the Lender Group's ability to enforce the Obligations or realize
upon the Collateral, or (c) a material impairment of the enforceability or
priority of the Agent's Liens with respect to the Collateral as a result of an
action or failure to act on the part of a Borrower.
"MATURITY DATE" has the meaning set forth in SECTION 3.4.
"MAXIMUM REVOLVER AMOUNT" means $25,000,000 minus the Term
Loan Amount.
"NEGOTIABLE COLLATERAL" means all of Borrowers' now owned and
hereafter acquired right, title, and interest with respect to letters of credit,
letter of credit rights, instruments, promissory notes, drafts, documents, and
chattel paper (including electronic chattel paper and tangible chattel paper),
and any and all supporting obligations in respect thereof.
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"NON-MAINTENANCE ACCOUNTS" means Accounts that are not
Maintenance Accounts.
"OBLIGATIONS" means all loans (including the Term Loan),
Advances, debts, principal, interest (including any interest that, but for the
provisions of the Bankruptcy Code, would have accrued), contingent reimbursement
obligations with respect to outstanding Letters of Credit, premiums, liabilities
(including all amounts charged to Borrowers' Loan Account pursuant hereto),
obligations, fees (including the fees provided for in the Fee Letter), charges,
costs, Lender Group Expenses (including any fees or expenses that, but for the
provisions of the Bankruptcy Code, would have accrued), lease payments,
guaranties, covenants, and duties of any kind and description owing by Borrowers
to the Lender Group pursuant to or evidenced by the Loan Documents and
irrespective of whether for the payment of money, whether direct or indirect,
absolute or contingent, due or to become due, now existing or hereafter arising,
and including all interest not paid when due and all Lender Group Expenses that
Borrowers are required to pay or reimburse by the Loan Documents, by law, or
otherwise. Any reference in this Agreement or in the Loan Documents to the
Obligations shall include all amendments, changes, extensions, modifications,
renewals replacements, substitutions, and supplements, thereto and thereof, as
applicable, both prior and subsequent to any Insolvency Proceeding.
"OFFICERS' CERTIFICATE" means the representations and
warranties of officers form submitted by Agent to Administrative Borrower,
together with Borrowers' completed responses to the inquiries set forth therein,
the form and substance of such responses to be satisfactory to Agent.
"ORIGINATING LENDER" has the meaning set forth in SECTION
14.1(e).
"OTHER CURRENCY" has the meaning set forth in SECTION 17.10.
"OVERADVANCE" has the meaning set forth in SECTION 2.5.
"PATENTS" has the meaning set forth in the definition of the
term "Intellectual Property".
"PARENT" has the meaning set forth in the preamble to this
Agreement.
"PARTICIPANT" has the meaning set forth in SECTION 14.1(e).
"PAY-OFF LETTER" means a letter, in form and substance
satisfactory to Agent, from Existing Lender to Agent respecting the amount
necessary to repay in full all of the obligations of Borrowers owing to Existing
Lender and obtain a release of all of the Liens existing in favor of Existing
Lender in and to the assets of Borrowers and their Subsidiaries.
"PERMITTED DISCRETION" means a determination made in good
faith and in the exercise of reasonable (from the perspective of a secured
asset-based lender) business judgment.
"PERMITTED DISPOSITIONS" means (a) sales or other dispositions
by Borrowers of Equipment that is substantially worn, damaged, or obsolete in
the ordinary course of the applicable Borrower's business, (b) sales by
Borrowers of Inventory to buyers in the ordinary course of business, (c) the use
or transfer of money or Cash Equivalents by Borrowers in a
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manner that is not prohibited by the terms of this Agreement or the other Loan
Documents, and (d) the licensing by Borrowers, on an exclusive or non-exclusive
basis, of patents, trademarks, copyrights, and other intellectual property
rights in the ordinary course of the applicable Borrower's business.
"PERMITTED HOLDER" means (i) ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ & Co.
and (ii) ▇▇▇▇▇▇▇▇ ▇▇▇, Chairman of the Parent, and his Family Members, and his
Family Trusts.
"PERMITTED INVESTMENTS" means (a) Investments in Cash
Equivalents, (b) Investments in negotiable instruments for collection, (c)
advances made in connection with purchases of goods or services in the ordinary
course of business, (d) Investments by any Borrower in any other Borrower
provided that if any such Investment is in the form of Indebtedness, such
Indebtedness investment shall be subject to the terms and conditions of the
Intercompany Subordination Agreement, (e) Investments by any Borrower in any of
its Subsidiaries, provided that (i) the aggregate amount of such Investments
made after the Closing Date in Borrowers' Subsidiaries shall not exceed
$1,000,000 in any fiscal year of Borrowers and (ii) immediately before and after
giving effect to each such Investment, Borrowers' Excess Availability is at
least $3,000,000, and (f) Investments set forth on SCHEDULE 7.13.
"PERMITTED LIENS" means (a) Liens held by Agent for the
benefit of Agent and the Lenders, (b) Liens for unpaid taxes that either (i) are
not yet delinquent, or (ii) do not constitute an Event of Default hereunder and
are the subject of Permitted Protests, (c) Liens set forth on SCHEDULE P-1, (d)
the interests of lessors under operating leases, (e) purchase money Liens or the
interests of lessors under Capital Leases to the extent that such Liens or
interests secure Permitted Purchase Money Indebtedness and so long as such Lien
attaches only to the asset purchased or acquired and the proceeds thereof, (f)
Liens arising by operation of law in favor of warehousemen, landlords, carriers,
mechanics, materialmen, laborers, or suppliers, incurred in the ordinary course
of Borrowers' business and not in connection with the borrowing of money, and
which Liens either (i) are for sums not yet delinquent, or (ii) are the subject
of Permitted Protests, (g) Liens arising from deposits made in connection with
obtaining worker's compensation or other unemployment insurance, (h) Liens or
deposits to secure performance of bids, tenders, or leases incurred in the
ordinary course of Borrowers' business and not in connection with the borrowing
of money, (i) Liens granted as security for surety or appeal bonds in connection
with obtaining such bonds in the ordinary course of Borrowers' business, (j)
Liens resulting from any judgment or award that is not an Event of Default
hereunder, and (k) with respect to any Real Property, easements, rights of way,
and zoning restrictions that do not materially interfere with or impair the use
or operation thereof by Borrowers.
"PERMITTED PROTEST" means the right of the applicable Borrower
to protest any Lien (other than any such Lien that secures the Obligations),
taxes (other than payroll taxes or taxes that are the subject of a United States
federal tax lien), or rental payment, provided that (a) a reserve with respect
to such obligation is established on the Books in such amount as is required
under GAAP, (b) any such protest is instituted promptly and prosecuted
diligently by the applicable Borrower in good faith, and (c) Agent is satisfied
that, while any such protest is pending, there will be no impairment of the
enforceability, validity, or priority of any of the Agent's Liens.
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"PERMITTED PURCHASE MONEY INDEBTEDNESS" means, as of any date
of determination, Purchase Money Indebtedness incurred after the Closing Date in
an aggregate amount not in excess of $2,000,000 outstanding at any one time,
PROVIDED that not more than $1,000,000 of such Purchase Money Indebtedness may
be incurred in any fiscal year of the Parent.
"PERSON" means natural persons, corporations, limited
liability companies, limited partnerships, general partnerships, limited
liability partnerships, joint ventures, trusts, land trusts, business trusts, or
other organizations, irrespective of whether they are legal entities, and
governments and agencies and political subdivisions thereof.
"PNC CREDIT AGREEMENT" means that certain Revolving Credit and
Security Agreement, dated as of December 19, 2000, among the Borrowers, the
lenders parties thereto and the Existing Lender, as agent.
"PROJECTIONS" means Parent's forecasted (a) balance sheets,
(b) profit and loss statements, and (c) cash flow statements, all prepared on a
consistent basis with Parent's historical financial statements, together with
appropriate supporting details and a statement of underlying assumptions.
"PRO RATA SHARE" means:
(a) with respect to a Lender's obligation to make Advances
and receive payments of principal, interest, fees, costs, and expenses with
respect thereto, the percentage obtained by dividing (i) such Lender's Revolver
Commitment, by (ii) the aggregate Revolver Commitments of all Lenders,
(b) with respect to a Lender's obligation to participate
in Letters of Credit, to reimburse the Issuing Lender, and to receive payments
of fees with respect thereto, the percentage obtained by dividing (i) such
Lender's Revolver Commitment, by (ii) the aggregate Revolver Commitments of all
Lenders,
(c) with respect to a Lender's obligation to make the Term
Loan and receive payments of interest, fees, and principal with respect thereto,
the percentage obtained by dividing (i) such Lender's Term Loan Commitment, by
(ii) the aggregate amount of all Lenders' Term Loan Commitments, and
(d) with respect to all other matters (including the
indemnification obligations arising under Section 16.7), the percentage obtained
by dividing (i) such Lender's Total Commitment, by (ii) the aggregate amount of
Total Commitments of all Lenders; PROVIDED, HOWEVER, that, in each case, in the
event all Commitments have been terminated, Pro Rata Share shall be determined
according to the Commitments in effect immediately prior to such termination.
"PSI NOTES" means those certain Second Amended and Restated
Subordinated Promissory Notes issued by Parent on or about the Closing Date in
the aggregate original principal amount of approximately $1,573,413 as
consideration for Parent's acquisition of Profit Solutions, Inc., a Minnesota
corporation, on or about February 9, 2000.
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"PURCHASE MONEY INDEBTEDNESS" means Indebtedness (other than
the Obligations, but including Capitalized Lease Obligations), incurred at the
time of, or within 20 days after, the acquisition of any fixed assets for the
purpose of financing all or any part of the acquisition cost thereof, PROVIDED
that Purchase Money Indebtedness shall not include any Indebtedness incurred by
any Borrower after the Closing Date that is owing to Softech.
"REAL PROPERTY" means any estates or interests in real
property now owned or hereafter acquired by any Borrower and the improvements
thereto.
"RECORD" means information that is inscribed on a tangible
medium or which is stored in an electronic or other medium and is retrievable in
perceivable form.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement, in form and substance satisfactory to Foothill, by and between the
Parent and Foothill, with respect to the shares of Warrant Stock that Foothill
may acquire pursuant to the Warrants.
"REMEDIAL ACTION" means all actions taken to (a) clean up,
remove, remediate, contain, treat, monitor, assess, evaluate, or in any way
address Hazardous Materials in the indoor or outdoor environment, (b) prevent or
minimize a release or threatened release of Hazardous Materials so they do not
migrate or endanger or threaten to endanger public health or welfare or the
indoor or outdoor environment, (c) perform any pre-remedial studies,
investigations, or post-remedial operation and maintenance activities, or (d)
conduct any other actions authorized by 42 USC Section 9601.
"REPORT" has the meaning set forth in SECTION 16.17.
"REQUIRED AVAILABILITY" means Excess Availability and
unrestricted cash and Cash Equivalents in an amount of not less than $3,000,000.
"REQUIRED LENDERS" means, at any time, (a) Agent, and (b)
Lenders whose Pro Rata Shares aggregate 51% of the Total Commitments, or if the
Commitments have been terminated irrevocably, 51% of the Obligations then
outstanding.
"RESERVE PERCENTAGE" means, on any day, for any Lender, the
maximum percentage prescribed by the Board of Governors of the Federal Reserve
System (or any successor Governmental Authority) for determining the reserve
requirements (including any basic, supplemental, marginal, or emergency
reserves) that are in effect on such date with respect to eurocurrency funding
(currently referred to as "eurocurrency liabilities") of that Lender, but so
long as such Lender is not required or directed under applicable regulations to
maintain such reserves, the Reserve Percentage shall be zero.
"REVOLVER COMMITMENT" means, with respect to each Lender, its
Revolver Commitment, and, with respect to all Lenders, their Revolver
Commitments, in each case as such Dollar amounts are set forth beside such
Lender's name under the applicable heading on Schedule C-1 or on the signature
page of the Assignment and Acceptance pursuant to which such Lender became a
Lender hereunder in accordance with the provisions of SECTION 14.1.
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"REVOLVER USAGE" means, as of any date of determination, the
sum of (a) the then extant amount of outstanding Advances, plus (b) the then
extant amount of the Letter of Credit Usage.
"RISK PARTICIPATION LIABILITY" means, as to each Letter of
Credit, all reimbursement obligations of Borrowers to the Issuing Lender with
respect to an L/C Undertaking, consisting of (a) the amount available to be
drawn or which may become available to be drawn, (b) all amounts that have been
paid by the Issuing Lender to the Underlying Issuer to the extent not reimbursed
by Borrowers, whether by the making of an Advance or otherwise, and (c) all
accrued and unpaid interest, fees, and expenses payable with respect thereto.
"SEC" means the United States Securities and Exchange
Commission and any successor thereto.
"SECURITIES ACCOUNT" means a "securities account" as that term
is defined in the Code.
"SETTLEMENT" has the meaning set forth in SECTION 2.3(f)(i).
"SETTLEMENT DATE" has the meaning set forth in SECTION
2.3(f)(i).
"SOFTECH" means EAB Leasing Corp., through its Softech
Financial division.
"SOFTECH RESERVE" means $700,000, PROVIDED that such reserve
shall be either (i) eliminated upon Borrowers' satisfaction of the conditions
set forth in SECTION 3.2(h) or (ii) reduced to an amount less than $700,000 if
Softech claims in writing such lesser amount is the only amount owing to
Softech.
"SOFTWARE" means any computer programs sold, marketed,
distributed, licensed or maintained by any Borrower, and any computer programs
necessary for the conduct of any Borrower's business as currently conducted.
"SOLVENT" means, with respect to any Person on a particular
date, that such Person is not insolvent (as such term is defined in the Uniform
Fraudulent Transfer Act).
"SOURCE CODE ESCROW AGREEMENT" means a source code escrow
agreement, in the form of EXHIBIT S-1 hereto among Borrowers, Agent and DSI, as
escrow agent.
"STOCK" means all shares, options, warrants, interests,
participations, or other equivalents (regardless of how designated) of or in a
Person, whether voting or nonvoting, including common stock, preferred stock, or
any other "equity security" (as such term is defined in Rule 3a11-1 of the
General Rules and Regulations promulgated by the SEC under the Exchange Act).
"STOCK PLEDGE AGREEMENT" means a stock pledge agreement, in
form and substance satisfactory to Agent, executed and delivered by each
Borrower that owns Stock of a Subsidiary of Parent.
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"SUBSIDIARY" of a Person means a corporation, partnership,
limited liability company, or other entity in which that Person directly or
indirectly owns or controls the shares of Stock having ordinary voting power to
elect a majority of the board of directors (or appoint other comparable
managers) of such corporation, partnership, limited liability company, or other
entity.
"SWING LENDER" means Foothill or any other Lender that, at the
request of Administrative Borrower and with the consent of Agent agrees, in such
Lender's sole discretion, to become the Swing Lender hereunder.
"SWING LOAN" has the meaning set forth in SECTION 2.3(d)(i).
"SYTELINE SOFTWARE" has the meaning set forth in SECTION
5.16(d).
"TANGIBLE NET WORTH" means, as of any date of determination,
the result of (a) the total stockholder's equity of Parent and its Subsidiaries,
minus (b) the sum of (i) all Intangible Assets of Parent and its Subsidiaries,
(ii) all of Parent's prepaid expenses, and (iii) all amounts due to Parent and
its Subsidiaries from Affiliates.
"TAXES" has the meaning set forth in SECTION 16.11.
"TERM LOAN" has the meaning set forth in SECTION 2.2.
"TERM LOAN AMOUNT" means, as of any date of determination, the
outstanding principal amount of the Term Loan, plus the then extant Term Loan
PIK Amount.
"TERM LOAN COMMITMENT" means, with respect to each Lender, its
Term Loan Commitment, and, with respect to all Lenders, their Term Loan
Commitments, in each case as such Dollar amounts are set forth beside such
Lender's name under the applicable heading on SCHEDULE C-1 or on the signature
page of the Assignment and Acceptance pursuant to which such Lender became a
Lender hereunder in accordance with the provisions of SECTION 14.1.
"TERM LOAN PIK AMOUNT" means, as of any date of determination,
the amount of all interest accrued with respect to the Term Loan Amount that has
been paid in kind by being added to the balance thereof in accordance with
SECTION 2.6(a)(ii).
"TOTAL COMMITMENT" means, with respect to each Lender, its
Total Commitment, and, with respect to all Lenders, their Total Commitments, in
each case as such Dollar amounts are set forth beside such Lender's name under
the applicable heading on SCHEDULE C-1 attached hereto or on the signature page
of the Assignment and Acceptance pursuant to which such Lender became a Lender
hereunder in accordance with the provisions of SECTION 14.1.
"TRADE SECRETS" has the meaning set forth in the definition of
the term "Intellectual Property".
"TRADEMARK SECURITY AGREEMENT" means a trademark security
agreement executed and delivered by each Borrower and Agent, the form and
substance of which is satisfactory to Agent.
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"TRADEMARKS" has the meaning set forth in the definition of
the term "Intellectual Property".
"UNDERLYING ISSUER" means a third Person which is the
beneficiary of an L/C Undertaking and which has issued a letter of credit at the
request of the Issuing Lender for the benefit of Borrowers.
"UNDERLYING LETTER OF CREDIT" means a letter of credit that
has been issued by an Underlying Issuer.
"VOIDABLE TRANSFER" has the meaning set forth in SECTION 17.7.
"WARRANTS" has the meaning set forth in SECTION 18.
"WARRANT STOCK" means each share of Common Stock issuable by
the Parent upon the exercise of the Warrants.
"▇▇▇▇▇ FARGO" means ▇▇▇▇▇ Fargo Bank, National Association, a
national banking association.
1.2 ACCOUNTING TERMS. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP. When used herein, the
term "financial statements" shall include the notes and schedules thereto.
Whenever the term "Borrowers" or the term "Parent" is used in respect of a
financial covenant or a related definition, it shall be understood to mean
Parent and its Subsidiaries on a consolidated basis unless the context clearly
requires otherwise.
1.3 CODE. Any terms used in this Agreement that are defined in
the Code shall be construed and defined as set forth in the Code unless
otherwise defined herein.
1.4 CONSTRUCTION. Unless the context of this Agreement or any
other Loan Document clearly requires otherwise, references to the plural include
the singular, references to the singular include the plural, the term
"including" is not limiting, and the term "or" has, except where otherwise
indicated, the inclusive meaning represented by the phrase "and/or." The words
"hereof," "herein," "hereby," "hereunder," and similar terms in this Agreement
or any other Loan Document refer to this Agreement or such other Loan Document,
as the case may be, as a whole and not to any particular provision of this
Agreement or such other Loan Document, as the case may be. Section, subsection,
clause, schedule, and exhibit references herein are to this Agreement unless
otherwise specified. Any reference in this Agreement or in the other Loan
Documents to any agreement, instrument, or document shall include all
alterations, amendments, changes, extensions, modifications, renewals,
replacements, substitutions, joinders, and supplements, thereto and thereof, as
applicable (subject to any restrictions on such alterations, amendments,
changes, extensions, modifications, renewals, replacements, substitutions,
joinders, and supplements set forth herein). Any reference herein to any Person
shall be construed to include such Person's successors and assigns. Any
requirement of a writing contained herein or in the other Loan Documents shall
be satisfied by the transmission of a Record and any Record transmitted shall
constitute a representation and warranty as to the accuracy and completeness of
the information contained therein.
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1.5 SCHEDULES AND EXHIBITS. All of the schedules and exhibits
attached to this Agreement shall be deemed incorporated herein by reference.
2. LOAN AND TERMS OF PAYMENT.
2.1 REVOLVER ADVANCES.
(a) Subject to the terms and conditions of this Agreement,
and during the term of this Agreement, each Lender with a Revolver Commitment
agrees (severally, not jointly or jointly and severally) to make advances
("Advances") to Borrowers in an amount at any one time outstanding not to exceed
such Lender's Pro Rata Share of an amount equal to the lesser of (i) the Maximum
Revolver Amount LESS the Letter of Credit Usage, or (ii) the Borrowing Base less
the Letter of Credit Usage. For purposes of this Agreement, "Borrowing Base," as
of any date of determination, shall mean the result of:
(x) the lesser of
(i) 85% of the amount of Eligible
Non-Maintenance Accounts, less the amount, if any, of the
Dilution Reserve, and
(ii) an amount equal to 33% of Borrowers'
Domestic Collections with respect to Accounts for the
immediately preceding 90 day period, minus
(y) the sum of (i) the Accounts Reserve and (ii)
the Softech Reserve, minus
(z) the aggregate amount of reserves, if any,
established by Agent under SECTION 2.1(b).
(b) Anything to the contrary in this SECTION 2.1
notwithstanding, Agent shall have the right to establish reserves in such
amounts, and with respect to such matters, as Agent in its Permitted Discretion
shall deem necessary or appropriate, against the Borrowing Base, including
reserves with respect to (i) sums that Borrowers are required to pay (such as
taxes, assessments, insurance premiums, or, in the case of leased assets, rents
or other amounts payable under such leases) and has failed to pay under any
Section of this Agreement or any other Loan Document, and (ii) amounts owing by
Borrowers to any Person to the extent secured by a Lien on, or trust over, any
of the Collateral (other than any existing Permitted Lien set forth on SCHEDULE
P-1 which is specifically identified thereon as entitled to have priority over
the Agent's Liens), which Lien or trust, in the Permitted Discretion of Agent
likely would have a priority superior to the Agent's Liens (such as Liens or
trusts in favor of landlords, warehousemen, carriers, mechanics, materialmen,
laborers, or suppliers, or Liens or trusts for ad valorem, excise, sales, or
other taxes where given priority under applicable law) in and to such item of
the Collateral.
(c) The Lenders with Revolver Commitments shall have no
obligation to make additional Advances hereunder to the extent such Advances
would cause the sum of the
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Revolver Usage and the Term Loan Amount to exceed 80% of the Borrower's Domestic
Collections with respect to Accounts for the immediately preceding 90 day
period.
(d) The Lenders with Revolver Commitments shall have no
obligation to make additional Advances hereunder to the extent such additional
Advances would cause the Revolver Usage to exceed the Maximum Revolver Amount.
(e) Amounts borrowed pursuant to this Section may be
repaid and, subject to the terms and conditions of this Agreement, reborrowed at
any time during the term of this Agreement.
2.2 TERM LOAN.
(a) Subject to the terms and conditions of this Agreement,
on the Closing Date each Lender with a Term Loan Commitment agrees (severally,
not jointly or jointly and severally) to make term loans (collectively, the
"Term Loan") to Borrowers in an amount equal to such Lender's Pro Rata Share of
$15,000,000.
(b) The Term Loan shall be repaid in consecutive monthly
installments each in a principal amount equal to 1/36th of the Term Loan Amount,
plus accrued interest on the amount of principal so repaid, on the first day of
each month, commencing on October 1, 2001. Borrowers may, at any time, prepay
all or a portion of the Term Loan without penalty or premium. The outstanding
unpaid principal balance and all accrued and unpaid interest under the Term Loan
shall be due and payable on the date of termination of this Agreement, whether
by its terms, by prepayment, or by acceleration. All amounts outstanding under
the Term Loan shall constitute Obligations.
2.3 BORROWING PROCEDURES AND SETTLEMENTS.
(a) PROCEDURE FOR BORROWING. Each Borrowing shall be made
by an irrevocable written request by an Authorized Person delivered to Agent
(which notice must be received by Agent no later than 10:00 a.m. (California
time) on the Business Day prior to the date that is the requested Funding Date
in the case of a request for an Advance or the Term Loan specifying (i) the
amount of such Borrowing, and (ii) the requested Funding Date, which shall be a
Business Day; PROVIDED, HOWEVER, that in the case of a request for Swing Loan in
an amount of $2,500,000, or less, such notice will be timely received if it is
received by Agent no later than 10:00 a.m. (California time) on the Business Day
that is the requested Funding Date) specifying (i) the amount of such Borrowing,
and (ii) the requested Funding Date, which shall be a Business Day. At Agent's
election, in lieu of delivering the above-described written request, any
Authorized Person may give Agent telephonic notice of such request by the
required time, with such telephonic notice to be confirmed in writing within 24
hours of the giving of such notice.
(b) AGENT'S ELECTION. Promptly after receipt of a request
for a Borrowing pursuant to SECTION 2.3(a), Agent shall elect, in its
discretion, (i) to have the terms of SECTION 2.3(c) apply to such requested
Borrowing, or (ii) if the Borrowing is for an Advance (other than an Advance
that is to be a LIBOR Rate Loan), to request Swing Lender to make a Swing Loan
pursuant to the terms of SECTION 2.3(d) in the amount of the requested
Borrowing;
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PROVIDED, HOWEVER, that if Swing Lender declines in its sole discretion to make
a Swing Loan pursuant to SECTION 2.3(d), Agent shall elect to have the terms of
SECTION 2.3(c) apply to such requested Borrowing.
(c) MAKING OF ADVANCES.
(i) In the event that Agent shall elect to have the
terms of this SECTION 2.3(c) apply to a requested Borrowing as
described in SECTION 2.3(b), then promptly after receipt of a request
for a Borrowing pursuant to SECTION 2.3(a), Agent shall notify the
Lenders, not later than 1:00 p.m. (California time) on the Business Day
immediately preceding the Funding Date applicable thereto, by telecopy,
telephone, or other similar form of transmission, of the requested
Borrowing. Each Lender shall make the amount of such Lender's Pro Rata
Share of the requested Borrowing available to Agent in immediately
available funds, to Agent's Account, not later than 10:00 a.m.
(California time) on the Funding Date applicable thereto. After Agent's
receipt of the proceeds of such Advances (or the Term Loan, as
applicable), upon satisfaction of the applicable conditions precedent
set forth in SECTION 3 hereof, Agent shall make the proceeds thereof
available to Administrative Borrower on the applicable Funding Date by
transferring immediately available funds equal to such proceeds
received by Agent to Administrative Borrower's Designated Account;
PROVIDED, HOWEVER, that, subject to the provisions of SECTION 2.3(i),
Agent shall not request any Lender to make, and no Lender shall have
the obligation to make, any Advance (or its portion of the Term Loan)
if Agent shall have actual knowledge that (1) one or more of the
applicable conditions precedent set forth in SECTION 3 will not be
satisfied on the requested Funding Date for the applicable Borrowing
unless such condition has been waived, or (2) the requested Borrowing
would exceed the Availability on such Funding Date.
(ii) Unless Agent receives notice from a Lender on or
prior to the Closing Date or, with respect to any Borrowing after the
Closing Date, at least 1 Business Day prior to the date of such
Borrowing, that such Lender will not make available as and when
required hereunder to Agent for the account of Borrowers the amount of
that Lender's Pro Rata Share of the Borrowing, Agent may assume that
each Lender has made or will make such amount available to Agent in
immediately available funds on the Funding Date and Agent may (but
shall not be so required), in reliance upon such assumption, make
available to Borrowers on such date a corresponding amount. If and to
the extent any Lender shall not have made its full amount available to
Agent in immediately available funds and Agent in such circumstances
has made available to Borrowers such amount, that Lender shall on the
Business Day following such Funding Date make such amount available to
Agent, together with interest at the Defaulting Lender Rate for each
day during such period. A notice submitted by Agent to any Lender with
respect to amounts owing under this subsection shall be conclusive,
absent manifest error. If such amount is so made available, such
payment to Agent shall constitute such Lender's Advance on the date of
Borrowing for all purposes of this Agreement. If such amount is not
made available to Agent on the Business Day following the Funding Date,
Agent will notify Administrative Borrower of such failure to fund and,
upon demand by Agent, Borrowers shall pay such amount to Agent for
Agent's account, together with interest thereon for each day elapsed
since the date of such Borrowing, at a rate per
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annum equal to the interest rate applicable at the time to the Advances
composing such Borrowing. The failure of any Lender to make any Advance
on any Funding Date shall not relieve any other Lender of any
obligation hereunder to make an Advance on such Funding Date, but no
Lender shall be responsible for the failure of any other Lender to make
the Advance to be made by such other Lender on any Funding Date.
(iii) Agent shall not be obligated to transfer to a
Defaulting Lender any payments made by Borrowers to Agent for the
Defaulting Lender's benefit, and, in the absence of such transfer to
the Defaulting Lender, Agent shall transfer any such payments to each
other non-Defaulting Lender member of the Lender Group ratably in
accordance with their Commitments (but only to the extent that such
Defaulting Lender's Advance was funded by the other members of the
Lender Group) or, if so directed by Administrative Borrower and if no
Default or Event of Default had occurred and is continuing (and to the
extent such Defaulting Lender's Advance was not funded by the Lender
Group), retain same to be re-advanced to Borrowers as if such
Defaulting Lender had made Advances to Borrowers. Subject to the
foregoing, Agent may hold and, in its Permitted Discretion, re-lend to
Borrowers for the account of such Defaulting Lender the amount of all
such payments received and retained by it for the account of such
Defaulting Lender. Solely for the purposes of voting or consenting to
matters with respect to the Loan Documents, such Defaulting Lender
shall be deemed not to be a "Lender" and such Lender's Commitment shall
be deemed to be zero. This Section shall remain effective with respect
to such Lender until (x) the Obligations under this Agreement shall
have been declared or shall have become immediately due and payable,
(y) the non-Defaulting Lenders, Agent, and Administrative Borrower
shall have waived such Defaulting Lender's default in writing, or (z)
the Defaulting Lender makes its Pro Rata Share of the applicable
Advance and pays to Agent all amounts owing by Defaulting Lender in
respect thereof. The operation of this Section shall not be construed
to increase or otherwise affect the Commitment of any Lender, to
relieve or excuse the performance by such Defaulting Lender or any
other Lender of its duties and obligations hereunder, or to relieve or
excuse the performance by Borrowers of their duties and obligations
hereunder to Agent or to the Lenders other than such Defaulting Lender.
Any such failure to fund by any Defaulting Lender shall constitute a
material breach by such Defaulting Lender of this Agreement and shall
entitle Administrative Borrower at its option, upon written notice to
Agent, to arrange for a substitute Lender to assume the Commitment of
such Defaulting Lender, such substitute Lender to be acceptable to
Agent. In connection with the arrangement of such a substitute Lender,
the Defaulting Lender shall have no right to refuse to be replaced
hereunder, and agrees to execute and deliver a completed form of
Assignment and Acceptance Agreement in favor of the substitute Lender
(and agrees that it shall be deemed to have executed and delivered such
document if it fails to do so) subject only to being repaid its share
of the outstanding Obligations (including an assumption of its Pro Rata
Share of the Risk Participation Liability) without any premium or
penalty of any kind whatsoever; provided further, however, that any
such assumption of the Commitment of such Defaulting Lender shall not
be deemed to constitute a waiver of any of the Lender Groups' or
Borrowers' rights or remedies against any such Defaulting Lender
arising out of or in relation to such failure to fund.
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(d) MAKING OF SWING LOANS.
(i) In the event Agent shall elect, with the consent
of Swing Lender, as a Lender, to have the terms of this SECTION 2.3(d)
apply to a requested Borrowing as described in SECTION 2.3(b), Swing
Lender as a Lender shall make such Advance in the amount of such
Borrowing (any such Advance made solely by Swing Lender as a Lender
pursuant to this SECTION 2.3(d) being referred to as a "Swing Loan" and
such Advances being referred to collectively as "Swing Loans")
available to Borrowers on the Funding Date applicable thereto by
transferring immediately available funds to Administrative Borrower's
Designated Account. Each Swing Loan is an Advance hereunder and shall
be subject to all the terms and conditions applicable to other
Advances, except that no such Swing Loan shall be eligible for the
LIBOR Option and all payments on any Swing Loan shall be payable to
Swing Lender as a Lender solely for its own account (and for the
account of the holder of any participation interest with respect to
such Swing Loan). Subject to the provisions of SECTION 2.3(i), Agent
shall not request Swing Lender as a Lender to make, and Swing Lender as
a Lender shall not make, any Swing Loan if Agent has actual knowledge
that (i) one or more of the applicable conditions precedent set forth
in SECTION 3 will not be satisfied on the requested Funding Date for
the applicable Borrowing unless such condition has been waived, or (ii)
the requested Borrowing would exceed the Availability on such Funding
Date. Swing Lender as a Lender shall not otherwise be required to
determine whether the applicable conditions precedent set forth in
SECTION 3 have been satisfied on the Funding Date applicable thereto
prior to making, in its sole discretion, any Swing Loan.
(ii) The Swing Loans shall be secured by the Agent's
Liens, shall constitute Advances and Obligations hereunder, and shall
bear interest at the rate applicable from time to time to Advances that
are Base Rate Loans.
(e) AGENT ADVANCES.
(i) Agent hereby is authorized by Borrowers and the
Lenders, from time to time in Agent's sole discretion, (1) after the
occurrence and during the continuance of a Default or an Event of
Default, or (2) at any time that any of the other applicable conditions
precedent set forth in SECTION 3 have not been satisfied, to make
Advances to Borrowers on behalf of the Lenders that Agent, in its
Permitted Discretion deems necessary or desirable (A) to preserve or
protect the Collateral, or any portion thereof, (B) to enhance the
likelihood of repayment of the Obligations, or (C) to pay any other
amount chargeable to Borrowers pursuant to the terms of this Agreement,
including Lender Group Expenses and the costs, fees, and expenses
described in SECTION 10 (any of the Advances described in this SECTION
2.3(e) shall be referred to as "AGENT ADVANCES"). Each Agent Advance is
an Advance hereunder and shall be subject to all the terms and
conditions applicable to other Advances, except that no such Agent
Advance shall be eligible for the LIBOR Option and all payments thereon
shall be payable to Agent solely for its own account (and for the
account of the holder of any participation interest with respect to
such Agent Advance).
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(ii) The Agent Advances shall be repayable on demand
and secured by the Agent's Liens granted to Agent under the Loan
Documents, shall constitute Advances and Obligations hereunder, and
shall bear interest at the rate applicable from time to time to
Advances that are Base Rate Loans.
(f) SETTLEMENT. It is agreed that each Lender's funded
portion of the Advances is intended by the Lenders to equal, at all times, such
Lender's Pro Rata Share of the outstanding Advances. Such agreement
notwithstanding, Agent, Swing Lender, and the other Lenders agree (which
agreement shall not be for the benefit of or enforceable by Borrowers) that in
order to facilitate the administration of this Agreement and the other Loan
Documents, settlement among them as to the Advances, the Swing Loans, and the
Agent Advances shall take place on a periodic basis in accordance with the
following provisions:
(i) Agent shall request settlement ("SETTLEMENT") with
the Lenders on a weekly basis, or on a more frequent basis if so
determined by Agent, (1) on behalf of Swing Lender, with respect to
each outstanding Swing Loan, (2) for itself, with respect to each Agent
Advance, and (3) with respect to Collections received, as to each by
notifying the Lenders by telecopy, telephone, or other similar form of
transmission, of such requested Settlement, no later than 2:00 p.m.
(California time) on the Business Day immediately prior to the date of
such requested Settlement (the date of such requested Settlement being
the "SETTLEMENT DATE"). Such notice of a Settlement Date shall include
a summary statement of the amount of outstanding Advances, Swing Loans,
and Agent Advances for the period since the prior Settlement Date.
Subject to the terms and conditions contained herein (including SECTION
2.3(c)(iii)): (y) if a Lender's balance of the Advances, Swing Loans,
and Agent Advances exceeds such Lender's Pro Rata Share of the
Advances, Swing Loans, and Agent Advances as of a Settlement Date, then
Agent shall, by no later than 12:00 p.m. (California time) on the
Settlement Date, transfer in immediately available funds to the account
of such Lender as such Lender may designate, an amount such that each
such Lender shall, upon receipt of such amount, have as of the
Settlement Date, its Pro Rata Share of the Advances, Swing Loans, and
Agent Advances, and (z) if a Lender's balance of the Advances, Swing
Loans, and Agent Advances is less than such Lender's Pro Rata Share of
the Advances, Swing Loans, and Agent Advances as of a Settlement Date,
such Lender shall no later than 12:00 p.m. (California time) on the
Settlement Date transfer in immediately available funds to the Agent's
Account, an amount such that each such Lender shall, upon transfer of
such amount, have as of the Settlement Date, its Pro Rata Share of the
Advances, Swing Loans, and Agent Advances. Such amounts made available
to Agent under clause (z) of the immediately preceding sentence shall
be applied against the amounts of the applicable Swing Loan or Agent
Advance and, together with the portion of such Swing Loan or Agent
Advance representing Swing Lender's Pro Rata Share thereof, shall
constitute Advances of such Lenders. If any such amount is not made
available to Agent by any Lender on the Settlement Date applicable
thereto to the extent required by the terms hereof, Agent shall be
entitled to recover for its account such amount on demand from such
Lender together with interest thereon at the Defaulting Lender Rate.
(ii) In determining whether a Lender's balance of the
Advances, Swing Loans, and Agent Advances is less than, equal to, or
greater than such
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Lender's Pro Rata Share of the Advances, Swing Loans, and Agent
Advances as of a Settlement Date, Agent shall, as part of the relevant
Settlement, apply to such balance the portion of payments actually
received in good funds by Agent with respect to principal, interest,
fees payable by Borrowers and allocable to the Lenders hereunder, and
proceeds of Collateral. To the extent that a net amount is owed to any
such Lender after such application, such net amount shall be
distributed by Agent to that Lender as part of such next Settlement.
(iii) Between Settlement Dates, Agent, to the extent
no Agent Advances or Swing Loans are outstanding, may pay over to Swing
Lender any payments received by Agent, that in accordance with the
terms of this Agreement would be applied to the reduction of the
Advances, for application to Swing Lender's Pro Rata Share of the
Advances. If, as of any Settlement Date, Collections received since the
then immediately preceding Settlement Date have been applied to Swing
Lender's Pro Rata Share of the Advances other than to Swing Loans, as
provided for in the previous sentence, Swing Lender shall pay to Agent
for the accounts of the Lenders, and Agent shall pay to the Lenders, to
be applied to the outstanding Advances of such Lenders, an amount such
that each Lender shall, upon receipt of such amount, have, as of such
Settlement Date, its Pro Rata Share of the Advances. During the period
between Settlement Dates, Swing Lender with respect to Swing Loans,
Agent with respect to Agent Advances, and each Lender (subject to the
effect of letter agreements between Agent and individual Lenders) with
respect to the Advances other than Swing Loans and Agent Advances,
shall be entitled to interest at the applicable rate or rates payable
under this Agreement on the daily amount of funds employed by Swing
Lender, Agent, or the Lenders, as applicable.
(g) NOTATION. Agent shall record on its books the
principal amount of the Advances owing to each Lender, including the Swing Loans
owing to Swing Lender, and Agent Advances owing to Agent, and the interests
therein of each Lender, from time to time. In addition, each Lender is
authorized, at such Lender's option, to note the date and amount of each payment
or prepayment of principal of such Lender's Advances in its books and records,
including computer records, such books and records constituting conclusive
evidence, absent manifest error, of the accuracy of the information contained
therein.
(h) LENDERS' FAILURE TO PERFORM. All Advances (other than
Swing Loans and Agent Advances) shall be made by the Lenders contemporaneously
and in accordance with their Pro Rata Shares. It is understood that (i) no
Lender shall be responsible for any failure by any other Lender to perform its
obligation to make any Advance (or other extension of credit) hereunder, nor
shall any Commitment of any Lender be increased or decreased as a result of any
failure by any other Lender to perform its obligations hereunder, and (ii) no
failure by any Lender to perform its obligations hereunder shall excuse any
other Lender from its obligations hereunder.
(i) OPTIONAL OVERADVANCES. Any contrary provision of this
Agreement notwithstanding, the Lenders hereby authorize Agent or Swing Lender,
as applicable, and Agent or Swing Lender, as applicable, may, but is not
obligated to, knowingly and intentionally, continue to make Advances (including
Swing Loans) to Borrowers notwithstanding that an Overadvance exists or thereby
would be created, so long as (i) after
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giving effect to such Advances (including a Swing Loan), the Revolver Usage does
not exceed the Borrowing Base by more than $2,500,000, (ii) after giving effect
to such Advances (including a Swing Loan) the outstanding Revolver Usage (except
for and excluding amounts charged to the Loan Account for interest, fees, or
Lender Group Expenses) does not exceed the Maximum Revolver Amount, and (iii) at
the time of the making of any such Advance (including a Swing Loan), Agent does
not believe, in good faith, that the Overadvance created by such Advance will be
outstanding for more than 90 days. The foregoing provisions are for the
exclusive benefit of Agent, Swing Lender, and the Lenders and are not intended
to benefit Borrowers in any way. The Advances and Swing Loans, as applicable,
that are made pursuant to this SECTION 2.3(i) shall be subject to the same terms
and conditions as any other Advance or Swing Loan, as applicable, except that
they shall not be eligible for the LIBOR Option and the rate of interest
applicable thereto shall be the rate applicable to Advances that are Base Rate
Loans under SECTION 2.6(c) hereof without regard to the presence or absence of a
Default or Event of Default.
(i) In the event Agent obtains actual knowledge that
the Revolver Usage exceeds the amounts permitted by the preceding
paragraph, regardless of the amount of, or reason for, such excess,
Agent shall notify Lenders as soon as practicable (and prior to making
any (or any additional) intentional Overadvances (except for and
excluding amounts charged to the Loan Account for interest, fees, or
Lender Group Expenses) unless Agent determines that prior notice would
result in imminent harm to the Collateral or its value), and the
Lenders with Revolver Commitments thereupon shall, together with Agent,
jointly determine the terms of arrangements that shall be implemented
with Borrowers and intended to reduce, within a reasonable time, the
outstanding principal amount of the Advances to Borrowers to an amount
permitted by the preceding paragraph. In the event Agent or any Lender
disagrees over the terms of reduction or repayment of any Overadvance,
the terms of reduction or repayment thereof shall be implemented
according to the determination of the Required Lenders.
(ii) Each Lender with a Revolver Commitment shall be
obligated to settle with Agent as provided in SECTION 2.3(f) for the
amount of such Lender's Pro Rata Share of any unintentional
Overadvances by Agent reported to such Lender, any intentional
Overadvances made as permitted under this SECTION 2.3(i), and any
Overadvances resulting from the charging to the Loan Account of
interest, fees, or Lender Group Expenses.
2.4 PAYMENTS.
(a) PAYMENTS BY BORROWERS.
(i) Except as otherwise expressly provided herein, all
payments by Borrowers shall be made to Agent's Account for the account
of the Lender Group and shall be made in immediately available funds,
no later than 11:00 a.m. (California time) on the date specified
herein. Any payment received by Agent later than 11:00 a.m.
(California time), shall be deemed to have been received on the
following Business Day and any applicable interest or fee shall
continue to accrue until such following Business Day.
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(ii) Unless Agent receives notice from Administrative
Borrower prior to the date on which any payment is due to the
Lenders that Borrowers will not make such payment in full as and when
required, Agent may assume that Borrowers have made (or will make)
such payment in full to Agent on such date in immediately available
funds and Agent may (but shall not be so required), in reliance upon
such assumption, distribute to each Lender on such due date an amount
equal to the amount then due such Lender. If and to the extent
Borrowers do not make such payment in full to Agent on the date when
due, each Lender severally shall repay to Agent on demand such amount
distributed to such Lender, together with interest thereon at the
Defaulting Lender Rate for each day from the date such amount is
distributed to such Lender until the date repaid.
(b) APPORTIONMENT AND APPLICATION OF PAYMENTS.
(i) Except as otherwise provided with respect to
Defaulting Lenders and except as otherwise provided in the Loan
Documents (including letter agreements between Agent and individual
Lenders), aggregate principal and interest payments shall be
apportioned ratably among the Lenders (according to the unpaid
principal balance of the Obligations to which such payments relate
held by each Lender) and payments of fees and expenses (other than
fees or expenses that are for Agent's separate account, after giving
effect to any letter agreements between Agent and individual Lenders)
shall be apportioned ratably among the Lenders having a Pro Rata Share
of the type of Commitment or Obligation to which a particular fee
relates. All payments shall be remitted to Agent and all such payments
(other than payments received while no Default or Event of Default has
occurred and is continuing and which relate to the payment of
principal or interest of specific Obligations or which relate to the
payment of specific fees), and all proceeds of Accounts or other
Collateral received by Agent, shall be applied as follows:
A. FIRST, to pay any Lender Group Expenses then due
to Agent under the Loan Documents, until paid in full,
B. SECOND, to pay any Lender Group Expenses then due
to the Lenders under the Loan Documents, on a ratable basis,
until paid in full,
C. THIRD, to pay any fees then due to Agent (for its
separate accounts, after giving effect to any letter
agreements between Agent and the individual Lenders) under the
Loan Documents until paid in full,
D. FOURTH, to pay any fees then due to any or all of
the Lenders (after giving effect to any letter agreements
between Agent and individual Lenders) under the Loan
Documents, on a ratable basis, until paid in full,
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E. FIFTH, to pay interest due in respect of all
Agent Advances, until paid in full,
F. SIXTH, ratably to pay interest due in respect of
the Advances (other than Agent Advances), the Swing Loans, and
the Term Loan until paid in full,
G. SEVENTH, to pay the principal of all Agent
Advances until paid in full,
H. EIGHTH, ratably to pay all principal amounts then
due and payable (other than as a result of an acceleration
thereof) with respect to the Term Loan until paid in full,
I. NINTH, to pay the principal of all Swing Loans
until paid in full,
J. TENTH, to pay the principal of all Advances until
paid in full,
K. ELEVENTH, if an Event of Default has occurred and
is continuing, to pay the outstanding principal balance of the
Term Loan (in the inverse order of the maturity of the
installments due thereunder), including the Term Loan PIK
Amount, until the Term Loan is paid in full,
L. TWELFTH, if an Event of Default has occurred and
is continuing, to Agent, to be held by Agent, for the ratable
benefit of Issuing Lender and those Lenders having a Revolver
Commitment, as cash collateral in an amount up to 105% of the
then extant Letter of Credit Usage until paid in full,
M. THIRTEENTH, to pay any other Obligations until
paid in full, and
N. FOURTEENTH, to Borrowers (to be wired to the
Designated Account) or such other Person entitled thereto
under applicable law.
(ii) Agent promptly shall distribute to each Lender,
pursuant to the applicable wire instructions received from each
Lender in writing, such funds as it may be entitled to receive,
subject to a Settlement delay as provided in SECTION 2.3(h).
(iii) In each instance, so long as no Default or Event of
Default has occurred and is continuing, SECTION 2.4(b) shall
not be deemed to apply to any payment by Borrowers specified by
Borrowers to be for the payment of specific Obligations then due and
payable (or prepayable) under any provision of this Agreement.
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(iv) For purposes of the foregoing, "paid in full" means
payment of all amounts owing under the Loan Documents according
to the terms thereof, including loan fees, service fees, professional
fees, interest (and specifically including interest accrued after the
commencement of any Insolvency Proceeding), default interest, interest
on interest, and expense reimbursements, whether or not the same would
be or is allowed or disallowed in whole or in part in any Insolvency
Proceeding.
(v) In the event of a direct conflict between the priority
provisions of this SECTION 2.4 and other provisions contained in any
other Loan Document, it is the intention of the parties hereto
that such priority provisions in such documents shall be read together
and construed, to the fullest extent possible, to be in concert with
each other. In the event of any actual, irreconcilable conflict that
cannot be resolved as aforesaid, the terms and provisions of this
SECTION 2.4 shall control and govern.
2.5 OVERADVANCES. If, at any time or for any reason, the
amount of Obligations owed by Borrowers to the Lender Group pursuant to SECTIONS
2.1 AND 2.12 is greater than either the Dollar or percentage limitations set
forth in SECTIONS 2.1 OR 2.12, (an "OVERADVANCE"), Borrowers immediately shall
pay to Agent, in cash, the amount of such excess, which amount shall be used by
Agent to reduce the Obligations in accordance with the priorities set forth in
SECTION 2.4(b). In addition, Borrowers hereby promise to pay the Obligations
(including principal, interest, fees, costs, and expenses) in Dollars in full to
the Lender Group as and when due and payable under the terms of this Agreement
and the other Loan Documents.
2.6 INTEREST RATES AND LETTER OF CREDIT FEE: RATES, PAYMENTS,
AND CALCULATIONS.
(a) INTEREST RATES. Except as provided in clause (c)
below,
(i) all Obligations (except for undrawn Letters of
Credit and the Term Loan Amount) that have been
charged to the Loan Account pursuant to the terms
hereof shall bear interest on the Daily Balance
thereof at a per annum rate equal to (A) if the
relevant Obligation is an Advance that is a LIBOR Rate
Loan, at a per annum rate equal to the LIBOR Rate plus
the LIBOR Rate Margin, or (B) otherwise, at a per
annum rate equal to the Base Rate plus the Base Rate
Margin; and
(ii) the Term Loan Amount (inclusive of any Term Loan
PIK Amount) shall bear interest on the amount thereof
outstanding from time to time at a per annum rate
equal to the greater of (A) the Base Rate plus the
Base Rate Term Loan Margin and (B) 12.00% (to the
extent that interest accrued hereunder at the rate set
forth herein would be less than the foregoing minimum
daily rate, the interest rate chargeable hereunder for
such day automatically shall be deemed increased to
the minimum rate); provided, however, that, so long as
no Event of Default has
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occurred and is continuing, that portion of such
interest equal to 1.50 percentage points per annum (
the "Term Loan PIK Amount") shall, in the absence of
an election by Borrowers to pay such interest in cash,
be paid-in-kind by being added to the principal
balance of the Term Loan Amount (inclusive of any Term
Loan PIK Amount theretofore so added); provided,
further, however, that Borrower may, on or prior to
the date that is 5 Business Days prior to the due date
thereof, elect to pay all accrued and unpaid interest
under this Section 2.6(a)(ii) in cash.
(b) LETTER OF CREDIT FEE. Borrowers shall pay Agent (for
the ratable benefit of the Lenders with a Revolver Commitment, subject to any
letter agreement between Agent and individual Lenders), a Letter of Credit fee
(in addition to the charges, commissions, fees, and costs set forth in SECTION
2.12(e)) which shall accrue at a rate equal to 2% per annum times the Daily
Balance of the undrawn amount of all outstanding Letters of Credit.
(c) DEFAULT RATE. Upon the occurrence and during the
continuation of an Event of Default (and at the election of Agent or the
Required Lenders),
(i) all Obligations (except for undrawn Letters of
Credit) that have been charged to the Loan Account pursuant to the
terms hereof shall bear interest on the Daily Balance thereof at a per
annum rate equal to 4 percentage points above the per annum rate
otherwise applicable hereunder, and
(ii) the Letter of Credit fee provided for above shall
be increased to 4 percentage points above the per annum rate otherwise
applicable hereunder.
(d) PAYMENT. Interest, Letter of Credit fees, and all
other fees payable hereunder shall be due and payable, in arrears, on the first
day of each month at any time that Obligations or Commitments are outstanding.
Borrowers hereby authorize Agent, from time to time, without prior notice to
Borrowers, to charge such interest and fees, all Lender Group Expenses (as and
when incurred), the charges, commissions, fees, and costs provided for in
SECTION 2.12(e) (as and when accrued or incurred), the fees and costs provided
for in SECTION 2.11 (as and when accrued or incurred), and all other payments as
and when due and payable under any Loan Document (including the installments due
and payable with respect to the Term Loan) to Borrowers' Loan Account, which
amounts thereafter constitute Advances hereunder and shall accrue interest at
the rate then applicable to Advances hereunder. Any interest not paid when due
shall be compounded by being charged to Borrowers' Loan Account and shall
thereafter constitute Advances hereunder and shall accrue interest at the rate
then applicable to Advances that are Base Rate Loans hereunder.
(e) COMPUTATION. All interest and fees chargeable under
the Loan Documents shall be computed on the basis of a 360 day year for the
actual number of days elapsed. In the event the Base Rate is changed from time
to time hereafter, the rates of interest hereunder based upon the Base Rate
automatically and immediately shall be increased or decreased by an amount equal
to such change in the Base Rate.
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(f) INTENT TO LIMIT CHARGES TO MAXIMUM LAWFUL RATE. In no
event shall the interest rate or rates payable under this Agreement, plus any
other amounts paid in connection herewith, exceed the highest rate permissible
under any law that a court of competent jurisdiction shall, in a final
determination, deem applicable. Borrowers and the Lender Group, in executing and
delivering this Agreement, intend legally to agree upon the rate or rates of
interest and manner of payment stated within it; PROVIDED, HOWEVER, that,
anything contained herein to the contrary notwithstanding, if said rate or rates
of interest or manner of payment exceeds the maximum allowable under applicable
law, then, IPSO FACTO, as of the date of this Agreement, Borrowers are and shall
be liable only for the payment of such maximum as allowed by law, and payment
received from Borrowers in excess of such legal maximum, whenever received,
shall be applied to reduce the principal balance of the Obligations to the
extent of such excess.
2.7 CASH MANAGEMENT.
(a) Borrowers shall (i) establish and maintain cash
management services of a type and on terms satisfactory to Agent at one or more
of the banks set forth on SCHEDULE 2.7(a) (each a "CASH MANAGEMENT BANK"), and
shall request in writing and otherwise take such reasonable steps to ensure that
all of its Account Debtors forward payment of the amounts owed by them directly
to such Cash Management Bank, and (ii) deposit or cause to be deposited
promptly, and in any event no later than the first Business Day after the date
of receipt thereof, all Collections (including those sent directly by Account
Debtors to a Cash Management Bank) into a bank account in Agent's name (a "Cash
Management Account") at one of the Cash Management Banks.
(b) Each Cash Management Bank shall establish and maintain
Cash Management Agreements with Agent and Borrowers, in form and substance
acceptable to Agent. Each such Cash Management Agreement shall provide, among
other things, that (i) all items of payment deposited in such Cash Management
Account and proceeds thereof are held by such Cash Management Bank agent or
bailee-in-possession for Agent, (ii) the Cash Management Bank has no rights of
setoff or recoupment or any other claim against the applicable Cash Management
Account, other than for payment of its service fees and other charges directly
related to the administration of such Cash Management Account and for returned
checks or other items of payment, and (iii) it immediately will forward by daily
sweep all amounts in the applicable Cash Management Account to the Agent's
Account.
(c) So long as no Default or Event of Default has occurred
and is continuing, Administrative Borrower may amend Schedule 2.7(a) or (b) to
add or replace a Cash Management Account Bank or Cash Management Account;
provided, HOWEVER, that (i) such prospective Cash Management Bank shall be
satisfactory to Agent and Agent shall have consented in writing in advance to
the opening of such Cash Management Account with the prospective Cash Management
Bank, and (ii) prior to the time of the opening of such Cash Management Account,
Borrowers and such prospective Cash Management Bank shall have executed and
delivered to Agent a Cash Management Agreement. Borrowers shall close any of
their Cash Management Accounts (and establish replacement cash management
accounts in accordance with the foregoing sentence) promptly and in any event
within 30 days of notice from Agent that the creditworthiness of any Cash
Management Bank is no longer acceptable in Agent's reasonable judgment, or as
promptly as practicable and in any event within 60 days of
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notice from Agent that the operating performance, funds transfer, or
availability procedures or performance of the Cash Management Bank with respect
to Cash Management Accounts or Agent's liability under any Cash Management
Agreement with such Cash Management Bank is no longer acceptable in Agent's
reasonable judgment.
(d) The Cash Management Accounts shall be cash collateral
accounts, with all cash, checks and similar items of payment in such accounts
securing payment of the Obligations, and in which Borrowers are hereby deemed to
have granted a Lien to Agent.
2.8 CREDITING PAYMENTS; FLOAT CHARGE.
(a) The receipt of any payment item by Agent (whether from
transfers to Agent by the Cash Management Banks pursuant to the Cash Management
Agreements or otherwise) shall not be considered a payment on account unless
such payment item is a wire transfer of immediately available federal funds made
to the Agent's Account or unless and until such payment item is honored when
presented for payment. Should any payment item not be honored when presented for
payment, then Borrowers shall be deemed not to have made such payment and
interest shall be calculated accordingly. Anything to the contrary contained
herein notwithstanding, any payment item shall be deemed received by Agent only
if it is received into the Agent's Account on a Business Day on or before 11:00
a.m. (California time). If any payment item is received into the Agent's Account
on a non-Business Day or after 11:00 a.m. (California time) on a Business Day,
it shall be deemed to have been received by Agent as of the opening of business
on the immediately following Business Day. From and after the Closing Date,
Agent shall be entitled to charge Borrowers for 1 Business Day of 'clearance or
float' at the rate applicable to Base Rate Loans under SECTION 2.6 on all
Collections that are received by Borrowers (regardless of whether forwarded by
the Cash Management Banks to Agent). This across-the-board 1 Business Day
clearance or float charge on all Collections is acknowledged by the parties to
constitute an integral aspect of the pricing of the financing of Borrowers and
shall apply irrespective of whether or not there are any outstanding monetary
Obligations; the effect of such clearance or float charge being the equivalent
of charging 1 Business Day of interest on such Collections. The parties
acknowledge and agree that the economic benefit of the foregoing provisions of
this SECTION 2.8 shall be for the exclusive benefit of Agent.
(b) So long as on any date (i) no Advances (other than
Advances that are LIBOR Rate Loans) are outstanding and no Obligations are due
and payable on such date and (ii) no Event of Default has occurred and is
continuing on such date, all payment items received by Agent and constituting
payments on account on such day in accordance with SECTION 2.8(a) shall be
remitted by Agent to Borrowers' Designated Account subject to the terms of
SECTION 7.13.
2.9 DESIGNATED ACCOUNT. Agent is authorized to make the
Advances and the Term Loan, and Issuing Lender is authorized to issue the
Letters of Credit, under this Agreement based upon telephonic or other
instructions received from anyone purporting to be an Authorized Person, or
without instructions if pursuant to SECTION 2.6(d). Administrative Borrower
agrees to establish and maintain the Designated Account with the Designated
Account Bank for the purpose of receiving the proceeds of the Advances requested
by Borrowers and made by Agent or the Lenders hereunder. Unless otherwise agreed
by Agent and Administrative Borrower, any
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Advance, Agent Advance, or Swing Loan requested by Borrowers and made by Agent
or the Lenders hereunder shall be made to the Designated Account.
2.10 MAINTENANCE OF LOAN ACCOUNT; STATEMENTS OF OBLIGATIONS.
Agent shall maintain an account on its books in the name of Borrowers (the "Loan
Account") on which Borrowers will be charged with the Term Loan, all Advances
(including Agent Advances and Swing Loans) made by Agent, Swing Lender, or the
Lenders to Borrowers or for Borrowers' account, the Letters of Credit issued by
Issuing Lender for Borrowers' account, and with all other payment Obligations
hereunder or under the other Loan Documents, including, accrued interest, fees
and expenses, and Lender Group Expenses. In accordance with SECTION 2.8, the
Loan Account will be credited with all payments received by Agent from Borrowers
or for Borrowers' account, including all amounts received in the Agent's Account
from any Cash Management Bank. Agent shall render statements regarding the Loan
Account to Administrative Borrower, including principal, interest, fees, and
including an itemization of all charges and expenses constituting Lender Group
Expenses owing, and such statements shall be conclusively presumed to be correct
and accurate and constitute an account stated between Borrowers and the Lender
Group unless, within 30 days after receipt thereof by Administrative Borrower,
Administrative Borrower shall deliver to Agent written objection thereto
describing the error or errors contained in any such statements.
2.11 FEES. Borrowers shall pay to Agent the following fees and
charges, which fees and charges shall be non-refundable when paid (irrespective
of whether this Agreement is terminated thereafter) and shall be apportioned
among the Lenders in accordance with the terms of letter agreements between
Agent and individual Lenders:
(a) Unused Line Fee. On the first day of each month
during the term of this Agreement, an unused line fee in the amount equal to
0.375% per annum times the result of (a) the Maximum Revolver Amount, less (b)
the sum of (i) the average Daily Balance of Advances that were outstanding
during the immediately preceding month, plus (ii) the average Daily Balance of
the Letter of Credit Usage during the immediately preceding month,
(b) Fee Letter Fees. As and when due and payable under
the terms of the Fee Letter, Borrowers shall pay to Agent the fees set forth in
the Fee Letter, and
(c) Audit, Appraisal, and Valuation Charges. For the
separate account of Agent, audit, appraisal, and valuation fees and charges as
follows, (i) a fee of $850 pay day, per auditor, plus out-of-pocket expenses for
each financial audit of a Borrower performed by personnel employed by Agent,
(ii) if implemented, a one time charge of $3,000 plus out-of-pocket expenses for
expenses for the establishment of electronic collateral reporting systems, (iii)
a fee of $1,500 per day per appraiser, plus out-of-pocket expenses, for each
appraisal of the Collateral performed by personnel employed by Agent, and (iv)
the actual charges paid or incurred by Agent if it elects to employ the services
of one or more third Persons to perform financial audits of Borrowers, to
appraise the Collateral, or any portion thereof, or to assess a Borrower's
business valuation.
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2.12 LETTERS OF CREDIT.
(a) Subject to the terms and conditions of this
Agreement, the Issuing Lender agrees to issue letters of credit for the account
of Borrowers (each, an "L/C") or to purchase participations or execute
indemnities or reimbursement obligations (each such undertaking, an "L/C
UNDERTAKING") with respect to letters of credit issued by an Underlying Issuer
(as of the Closing Date, the prospective Underlying Issuer is to be ▇▇▇▇▇ Fargo)
for the account of Borrowers. To request the issuance of an L/C or an L/C
Undertaking (or the amendment, renewal, or extension of an outstanding L/C or
L/C Undertaking), Administrative Borrower shall hand deliver or telecopy (or
transmit by electronic communication, if arrangements for doing so have been
approved by the Issuing Lender) to the Issuing Lender and Agent (reasonably in
advance of the requested date of issuance, amendment, renewal, or extension) a
notice requesting the issuance of an L/C or L/C Undertaking, or identifying the
L/C or L/C Undertaking to be amended, renewed, or extended, the date of
issuance, amendment, renewal, or extension, the date on which such L/C or L/C
Undertaking is to expire, the amount of such L/C or L/C Undertaking, the name
and address of the beneficiary thereof (or of the Underlying Letter of Credit,
as applicable), and such other information as shall be necessary to prepare,
amend, renew, or extend such L/C or L/C Undertaking. If requested by the Issuing
Lender, Borrowers also shall be an applicant under the application with respect
to any Underlying Letter of Credit that is to be the subject of an L/C
Undertaking. The Issuing Lender shall have no obligation to issue a Letter of
Credit if any of the following would result after giving effect to the requested
Letter of Credit:
(i) the Letter of Credit Usage would exceed the
Borrowing Base LESS the amount of outstanding Advances, or
(ii) the Letter of Credit Usage would exceed
$2,000,000, or
(iii) the Letter of Credit Usage would exceed the
Maximum Revolver Amount LESS the then extant amount of outstanding
Advances.
Borrowers and the Lender Group acknowledge and agree that
certain Underlying Letters of Credit may be issued to support letters of credit
that already are outstanding as of the Closing Date. Each Letter of Credit (and
corresponding Underlying Letter of Credit) shall have an expiry date no later
than 30 days prior to the Maturity Date and all such Letters of Credit (and
corresponding Underlying Letter of Credit) shall be in form and substance
acceptable to the Issuing Lender (in the exercise of its Permitted Discretion),
including the requirement that the amounts payable thereunder must be payable in
Dollars. If Issuing Lender is obligated to advance funds under a Letter of
Credit, Borrowers immediately shall reimburse such L/C Disbursement to Issuing
Lender by paying to Agent an amount equal to such L/C Disbursement not later
than 11:00 a.m., California time, on the date that such L/C Disbursement is
made, if Administrative Borrower shall have received written or telephonic
notice of such L/C Disbursement prior to 10:00 a.m., California time, on such
date, or, if such notice has not been received by Administrative Borrower prior
to such time on such date, then not later than 11:00 a.m., California time, on
(i) the Business Day that Administrative Borrower receives such notice, if such
notice is received prior to 10:00 a.m., California time, on the date of receipt,
and, in the absence of such reimbursement, the L/C Disbursement immediately and
automatically shall be
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deemed to be an Advance hereunder and, thereafter, shall bear interest at the
rate then applicable to Advances that are Base Rate Loans under SECTION 2.6. To
the extent an L/C Disbursement is deemed to be an Advance hereunder, Borrowers'
obligation to reimburse such L/C Disbursement shall be discharged and replaced
by the resulting Advance. Promptly following receipt by Agent of any payment
from Borrowers pursuant to this paragraph, Agent shall distribute such payment
to the Issuing Lender or, to the extent that Lenders have made payments pursuant
to SECTION 2.12(c) to reimburse the Issuing Lender, then to such Lenders and the
Issuing Lender as their interest may appear.
(b) Promptly following receipt of a notice of L/C
Disbursement pursuant to SECTION 2.12(a), each Lender with a Revolver Commitment
agrees to fund its Pro Rata Share of any Advance deemed made pursuant to the
foregoing subsection on the same terms and conditions as if Borrowers had
requested such Advance and Agent shall promptly pay to Issuing Lender the
amounts so received by it from the Lenders. By the issuance of a Letter of
Credit (or an amendment to a Letter of Credit increasing the amount thereof) and
without any further action on the part of the Issuing Lender or the Lenders with
Revolver Commitment, the Issuing Lender shall be deemed to have granted to each
Lender with a Revolver Commitment, and each Lender with a Revolver Commitment
shall be deemed to have purchased, a participation in each Letter of Credit, in
an amount equal to its Pro Rata Share of the Risk Participation Liability of
such Letter of Credit, and each such Lender agrees to pay to Agent, for the
account of the Issuing Lender, such Lender's Pro Rata Share of any payments made
by the Issuing Lender under such Letter of Credit. In consideration and in
furtherance of the foregoing, each Lender with a Revolver Commitment hereby
absolutely and unconditionally agrees to pay to Agent, for the account of the
Issuing Lender, such Lender's Pro Rata Share of each L/C Disbursement made by
the Issuing Lender and not reimbursed by Borrowers on the date due as provided
in clause (a) of this Section, or of any reimbursement payment required to be
refunded to Borrowers for any reason. Each Lender with a Revolver Commitment
acknowledges and agrees that its obligation to deliver to Agent, for the account
of the Issuing Lender, an amount equal to its respective Pro Rata Share pursuant
to this SECTION 2.12(b) shall be absolute and unconditional and such remittance
shall be made notwithstanding the occurrence or continuation of an Event of
Default or Default or the failure to satisfy any condition set forth in SECTION
3 hereof. If any such Lender fails to make available to Agent the amount of such
Lender's Pro Rata Share of any payments made by the Issuing Lender in respect of
such Letter of Credit as provided in this Section, Agent (for the account of the
Issuing Lender) shall be entitled to recover such amount on demand from such
Lender together with interest thereon at the Defaulting Lender Rate until paid
in full.
(c) Each Borrower hereby agrees to indemnify, save,
defend, and hold the Lender Group harmless from any loss, cost, expense, or
liability, and reasonable attorneys fees incurred by the Lender Group arising
out of or in connection with any Letter of Credit; PROVIDED, HOWEVER, that no
Borrower shall be obligated hereunder to indemnify for any loss, cost, expense,
or liability that is caused by the gross negligence or willful misconduct of the
Issuing Lender or any other member of the Lender Group. Each Borrower agrees to
be bound by the Underlying Issuer's regulations and interpretations of any
Underlying Letter of Credit or by Issuing Lender's interpretations of any L/C
issued by Issuing Lender to or for such Borrower's account, even though this
interpretation may be different from such Borrower's own, and each Borrower
understands and agrees that the Lender Group shall not be liable for any error,
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negligence, or mistake, whether of omission or commission, in following
Borrowers' instructions or those contained in the Letter of Credit or any
modifications, amendments, or supplements thereto. Each Borrower understands
that the L/C Undertakings may require Issuing Lender to indemnify the Underlying
Issuer for certain costs or liabilities arising out of claims by Borrowers
against such Underlying Issuer. Each Borrower hereby agrees to indemnify, save,
defend, and hold the Lender Group harmless with respect to any loss, cost,
expense (including reasonable attorneys fees), or liability incurred by the
Lender Group under any L/C Undertaking as a result of the Lender Group's
indemnification of any Underlying Issuer; PROVIDED, however, that no Borrower
shall be obligated hereunder to indemnify for any loss, cost, expense, or
liability that is caused by the gross negligence or willful misconduct of the
Issuing Lender or any other member of the Lender Group.
(d) Each Borrower hereby authorizes and directs any
Underlying Issuer to deliver to the Issuing Lender all instruments, documents,
and other writings and property received by such Underlying Issuer pursuant to
such Underlying Letter of Credit and to accept and rely upon the Issuing
Lender's instructions with respect to all matters arising in connection with
such Underlying Letter of Credit and the related application.
(e) Any and all charges, commissions, fees, and costs
incurred by the Issuing Lender relating to Underlying Letters of Credit shall be
Lender Group Expenses for purposes of this Agreement and immediately shall be
reimbursable by Borrowers to Agent for the account of the Issuing Lender; it
being acknowledged and agreed by each Borrower that, as of the Closing Date, the
issuance charge imposed by the prospective Underlying Issuer is .825% per annum
times the face amount of each Underlying Letter of Credit, that such issuance
charge may be changed from time to time, and that the Underlying Issuer also
imposes a schedule of charges for amendments, extensions, drawings, and
renewals.
(f) If by reason of (i) any change in any applicable law,
treaty, rule, or regulation or any change in the interpretation or application
thereof by any Governmental Authority, or (ii) compliance by the Underlying
Issuer or the Lender Group with any direction, request, or requirement
(irrespective of whether having the force of law) of any Governmental Authority
or monetary authority including, Regulation D of the Federal Reserve Board as
from time to time in effect (and any successor thereto):
(i) any reserve, deposit, or similar requirement is
or shall be imposed or modified in respect of any Letter of Credit
issued hereunder, or
(ii) there shall be imposed on the Underlying Issuer
or the Lender Group any other condition regarding any Underlying Letter
of Credit or any Letter of Credit issued pursuant hereto;
and the result of the foregoing is to increase, directly or indirectly, the cost
to the Lender Group of issuing, making, guaranteeing, or maintaining any Letter
of Credit or to reduce the amount receivable in respect thereof by the Lender
Group, then, and in any such case, Agent may, at any time within a reasonable
period after the additional cost is incurred or the amount received is reduced,
notify Administrative Borrower, and Borrowers shall pay on demand such amounts
as Agent may specify to be necessary to compensate the Lender Group for such
additional cost or
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reduced receipt, together with interest on such amount from the date of such
demand until payment in full thereof at the rate then applicable to Base Rate
Loans hereunder. The determination by Agent of any amount due pursuant to this
Section, as set forth in a certificate setting forth the calculation thereof in
reasonable detail, shall, in the absence of manifest or demonstrable error, be
final and conclusive and binding on all of the parties hereto.
2.13 LIBOR OPTION.
(a) INTEREST AND INTEREST PAYMENT DATES. In lieu of
having interest charged at the rate based upon the Base Rate, Borrowers shall
have the option (the "LIBOR OPTION") to have interest on all or a portion of the
Advances be charged at the LIBOR Rate. Interest on LIBOR Rate Loans shall be
payable on the earliest of (i) the last day of the Interest Period applicable
thereto, (ii) the occurrence of an Event of Default in consequence of which the
Required Lenders or Agent on behalf thereof elect to accelerate the maturity of
the Obligations, or (iii) termination of this Agreement pursuant to the terms
hereof. On the last day of each applicable Interest Period, unless
Administrative Borrower properly has exercised the LIBOR Option with respect
thereto, the interest rate applicable to such LIBOR Rate Loan automatically
shall convert to the rate of interest then applicable to Base Rate Loans of the
same type hereunder. At any time that an Event of Default has occurred and is
continuing, Borrowers no longer shall have the option to request that Advances
bear interest at the LIBOR Rate and Agent shall have the right to convert the
interest rate on all outstanding LIBOR Rate Loans to the rate then applicable to
Base Rate Loans hereunder.
(b) LIBOR ELECTION.
(i) Administrative Borrower may, at any time and from
time to time, so long as no Event of Default has occurred and is
continuing, elect to exercise the LIBOR Option by notifying Agent prior
to 11:00 a.m. (California time) at least 3 Business Days prior to the
commencement of the proposed Interest Period (the "LIBOR DEADLINE").
Notice of Administrative Borrower's election of the LIBOR Option for a
permitted portion of the Advances and an Interest Period pursuant to
this Section shall be made by delivery to Agent of a LIBOR Notice
received by Agent before the LIBOR Deadline, or by telephonic notice
received by Agent before the LIBOR Deadline (to be confirmed by
delivery to Agent of a LIBOR Notice received by Agent prior to 5:00
p.m. (California time) on the same day. Promptly upon its receipt of
each such LIBOR Notice, Agent shall provide a copy thereof to each of
the Lenders having a Revolver Commitment.
(ii) Each LIBOR Notice shall be irrevocable and
binding on Borrowers. In connection with each LIBOR Rate Loan, each
Borrower shall indemnify, defend, and hold Agent and the Lenders
harmless against any loss, cost, or expense incurred by Agent or any
Lender as a result of (a) the payment of any principal of any LIBOR
Rate Loan other than on the last day of an Interest Period applicable
thereto (including as a result of an Event of Default), (b) the
conversion of any LIBOR Rate Loan other than on the last day of the
Interest Period applicable thereto, or (c) the failure to borrow,
convert, continue or prepay any LIBOR Rate Loan on the date specified
in any LIBOR Notice delivered pursuant hereto (such losses, costs, and
expenses, collectively,
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"FUNDING LOSSES"). Funding Losses shall, with respect to Agent or any
Lender, be deemed to equal the amount determined by Agent or such
Lender to be the excess, if any, of (i) the amount of interest that
would have accrued on the principal amount of such LIBOR Rate Loan had
such event not occurred, at the LIBOR Rate that would have been
applicable thereto, for the period from the date of such event to the
last day of the then current Interest Period therefor (or, in the case
of a failure to borrow, convert or continue, for the period that would
have been the Interest Period therefor), minus (ii) the amount of
interest that would accrue on such principal amount for such period at
the interest rate which Agent or such Lender would be offered were it
to be offered, at the commencement of such period, Dollar deposits of a
comparable amount and period in the London interbank market. A
certificate of Agent or a Lender delivered to Administrative Borrower
setting forth any amount or amounts that Agent or such Lender is
entitled to receive pursuant to this Section shall be conclusive absent
manifest error.
(iii) Borrowers shall have not more than 5 LIBOR Rate
Loans in effect at any given time. Borrowers only may exercise the
LIBOR Option for LIBOR Rate Loans of at least $1,000,000 and integral
multiples of $500,000 in excess thereof.
(c) PREPAYMENTS. Borrowers may prepay LIBOR Rate Loans at
any time; PROVIDED, HOWEVER, that in the event that LIBOR Rate Loans are prepaid
on any date that is not the last day of the Interest Period applicable thereto,
including as a result of any automatic prepayment through the required
application by Agent of proceeds of Collections in accordance with SECTION
2.4(b) or for any other reason, including early termination of the term of this
Agreement or acceleration of the Obligations pursuant to the terms hereof, each
Borrower shall indemnify, defend, and hold Agent and the Lenders and their
Participants harmless against any and all Funding Losses in accordance with
clause (b) above.
(d) SPECIAL PROVISIONS APPLICABLE TO LIBOR RATE.
(i) The LIBOR Rate may be adjusted by Agent with
respect to any Lender on a prospective basis to take into account any
additional or increased costs to such Lender of maintaining or
obtaining any eurodollar deposits or increased costs due to changes in
applicable law occurring subsequent to the commencement of the then
applicable Interest Period, including changes in tax laws (except
changes of general applicability in corporate income tax laws) and
changes in the reserve requirements imposed by the Board of Governors
of the Federal Reserve System (or any successor), excluding the Reserve
Percentage, which additional or increased costs would increase the cost
of funding loans bearing interest at the LIBOR Rate. In any such event,
the affected Lender shall give Administrative Borrower and Agent notice
of such a determination and adjustment and Agent promptly shall
transmit the notice to each other Lender and, upon its receipt of the
notice from the affected Lender, Administrative Borrower may, by notice
to such affected Lender (y) require such Lender to furnish to
Administrative Borrower a statement setting forth the basis for
adjusting such LIBOR Rate and the method for determining the amount of
such adjustment, or (z) repay the LIBOR Rate Loans with respect to
which such adjustment is made (together with any amounts due under
clause (b)(ii) above).
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(ii) In the event that any change in market conditions
or any law, regulation, treaty, or directive, or any change therein or
in the interpretation of application thereof, shall at any time after
the date hereof, in the reasonable opinion of any Lender, make it
unlawful or impractical for such Lender to fund or maintain LIBOR
Advances or to continue such funding or maintaining, or to determine or
charge interest rates at the LIBOR Rate, such Lender shall give notice
of such changed circumstances to Agent and Administrative Borrower and
Agent promptly shall transmit the notice to each other Lender and (y)
in the case of any LIBOR Rate Loans of such Lender that are
outstanding, the date specified in such Lender's notice shall be deemed
to be the last day of the Interest Period of such LIBOR Rate Loans, and
interest upon the LIBOR Rate Loans of such Lender thereafter shall
accrue interest at the rate then applicable to Base Rate Loans, and (z)
Borrowers shall not be entitled to elect the LIBOR Option until such
Lender determines that it would no longer be unlawful or impractical to
do so.
(e) NO REQUIREMENT OF MATCHED FUNDING. Anything to the
contrary contained herein notwithstanding, neither Agent, nor any Lender, nor
any of their Participants, is required actually to acquire eurodollar deposits
to fund or otherwise match fund any Obligation as to which interest accrues at
the LIBOR Rate. The provisions of this Section shall apply as if each Lender or
its Participants had match funded any Obligation as to which interest is
accruing at the LIBOR Rate by acquiring eurodollar deposits for each Interest
Period in the amount of the LIBOR Rate Loans.
2.14 CAPITAL REQUIREMENTS. If, after the date hereof, any
Lender determines that (i) the adoption of or change in any law, rule,
regulation or guideline regarding capital requirements for banks or bank holding
companies, or any change in the interpretation or application thereof by any
Governmental Authority charged with the administration thereof, or (ii)
compliance by such Lender or its parent bank holding company with any guideline,
request or directive of any such entity regarding capital adequacy (whether or
not having the force of law), the effect of reducing the return on such Lender's
or such holding company's capital as a consequence of such Lender's Commitments
hereunder to a level below that which such Lender or such holding company could
have achieved but for such adoption, change, or compliance (taking into
consideration such Lender's or such holding company's then existing policies
with respect to capital adequacy and assuming the full utilization of such
entity's capital) by any amount deemed by such Lender to be material, then such
Lender may notify Administrative Borrower and Agent thereof. Following receipt
of such notice, Borrowers agree to pay such Lender on demand the amount of such
reduction of return of capital as and when such reduction is determined, payable
within 90 days after presentation by such Lender of a statement in the amount
and setting forth in reasonable detail such Lender's calculation thereof and the
assumptions upon which such calculation was based (which statement shall be
deemed true and correct absent manifest error). In determining such amount, such
Lender may use any reasonable averaging and attribution methods.
2.15 JOINT AND SEVERAL LIABILITY OF BORROWERS.
(a) Each of Borrowers is accepting joint and several
liability hereunder and under the other Loan Documents in consideration of the
financial accommodations to be provided by the Agent and the Lenders under this
Agreement, for the
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mutual benefit, directly and indirectly, of each of Borrowers and in
consideration of the undertakings of the other Borrowers to accept joint and
several liability for the Obligations.
(b) Each of Borrowers, jointly and severally, hereby
irrevocably and unconditionally accepts, not merely as a surety but also as a
co-debtor, joint and several liability with the other Borrowers, with respect to
the payment and performance of all of the Obligations (including, without
limitation, any Obligations arising under this SECTION 2.15), it being the
intention of the parties hereto that all the Obligations shall be the joint and
several obligations of each Person composing Borrowers without preferences or
distinction among them.
(c) If and to the extent that any of Borrowers shall fail
to make any payment with respect to any of the Obligations as and when due or to
perform any of the Obligations in accordance with the terms thereof, then in
each such event the other Persons composing Borrowers will make such payment
with respect to, or perform, such Obligation.
(d) The Obligations of each Person composing Borrowers
under the provisions of this SECTION 2.15 constitute the absolute and
unconditional, full recourse Obligations of each Person composing Borrowers
enforceable against each such Borrower to the full extent of its properties and
assets, irrespective of the validity, regularity or enforceability of this
Agreement or any other circumstances whatsoever.
(e) Except as otherwise expressly provided in this
Agreement, each Person composing Borrowers hereby waives notice of acceptance of
its joint and several liability, notice of any Advances or Letters of Credit
issued under or pursuant to this Agreement, notice of the occurrence of any
Default, Event of Default, or of any demand for any payment under this
Agreement, notice of any action at any time taken or omitted by Agent or Lenders
under or in respect of any of the Obligations, any requirement of diligence or
to mitigate damages and, generally, to the extent permitted by applicable law,
all demands, notices and other formalities of every kind in connection with this
Agreement (except as otherwise provided in this Agreement). Each Person
composing Borrowers hereby assents to, and waives notice of, any extension or
postponement of the time for the payment of any of the Obligations, the
acceptance of any payment of any of the Obligations, the acceptance of any
partial payment thereon, any waiver, consent or other action or acquiescence by
Agent or Lenders at any time or times in respect of any default by any Person
composing Borrowers in the performance or satisfaction of any term, covenant,
condition or provision of this Agreement, any and all other indulgences
whatsoever by Agent or Lenders in respect of any of the Obligations, and the
taking, addition, substitution or release, in whole or in part, at any time or
times, of any security for any of the Obligations or the addition, substitution
or release, in whole or in part, of any Person composing Borrowers. Without
limiting the generality of the foregoing, each of Borrowers assents to any other
action or delay in acting or failure to act on the part of any Agent or Lender
with respect to the failure by any Person composing Borrowers to comply with any
of its respective Obligations, including, without limitation, any failure
strictly or diligently to assert any right or to pursue any remedy or to comply
fully with applicable laws or regulations thereunder, which might, but for the
provisions of this SECTION 2.15 afford grounds for terminating, discharging or
relieving any Person composing Borrowers, in whole or in part, from any of its
Obligations under this SECTION 2.15, it being the intention of each Person
composing Borrowers that, so long as any of the Obligations hereunder remain
unsatisfied, the Obligations of such Person composing
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Borrowers under this SECTION 2.15 shall not be discharged except by performance
and then only to the extent of such performance. The Obligations of each Person
composing Borrowers under this SECTION 2.15 shall not be diminished or rendered
unenforceable by any winding up, reorganization, arrangement, liquidation,
reconstruction or similar proceeding with respect to any Person composing
Borrowers or any Agent or Lender. The joint and several liability of the Persons
composing Borrowers hereunder shall continue in full force and effect
notwithstanding any absorption, merger, amalgamation or any other change
whatsoever in the name, constitution or place of formation of any of the Persons
composing Borrowers or any Agent or Lender.
(f) Each Person composing Borrowers represents and
warrants to Agent and Lenders that such Borrower is currently informed of the
financial condition of Borrowers and of all other circumstances which a diligent
inquiry would reveal and which bear upon the risk of nonpayment of the
Obligations. Each Person composing Borrowers further represents and warrants to
Agent and Lenders that such Borrower has read and understands the terms and
conditions of the Loan Documents. Each Person composing Borrowers hereby
covenants that such Borrower will continue to keep informed of Borrowers'
financial condition, the financial condition of other guarantors, if any, and of
all other circumstances which bear upon the risk of nonpayment or nonperformance
of the Obligations.
(g) Each of the Persons composing Borrowers waives all
rights and defenses arising out of an election of remedies by the Agent or any
Lender, even though that election of remedies, such as a nonjudicial foreclosure
with respect to security for a guaranteed obligation, has destroyed the Agent's
or such Lender's rights of subrogation and reimbursement against such Borrower
by the operation of applicable law.
(h) The provisions of this SECTION 2.15 are made for the
benefit of the Agent, the Lenders and their respective successors and assigns,
and may be enforced by it or them from time to time against any or all of the
Persons composing Borrowers as often as occasion therefor may arise and without
requirement on the part of any such Agent, Lender, successor or assign first to
marshal any of its or their claims or to exercise any of its or their rights
against any of the other Persons composing Borrowers or to exhaust any remedies
available to it or them against any of the other Persons composing Borrowers or
to resort to any other source or means of obtaining payment of any of the
Obligations hereunder or to elect any other remedy. The provisions of this
SECTION 2.15 shall remain in effect until all of the Obligations shall have been
paid in full or otherwise fully satisfied. If at any time, any payment, or any
part thereof, made in respect of any of the Obligations, is rescinded or must
otherwise be restored or returned by any Agent or Lender upon the insolvency,
bankruptcy or reorganization of any of the Persons composing Borrowers, or
otherwise, the provisions of this SECTION 2.15 will forthwith be reinstated in
effect, as though such payment had not been made.
(i) Each of the Persons composing Borrowers hereby agrees
that it will not enforce any of its rights of contribution or subrogation
against the other Persons composing Borrowers with respect to any liability
incurred by it hereunder or under any of the other Loan Documents, any payments
made by it to the Agent or the Lenders with respect to any of the Obligations or
any collateral security therefor until such time as all of the Obligations have
been paid in full in cash. Any claim which any Borrower may have against any
other Borrower with respect to any payments to any Agent or Lender hereunder or
under any other Loan
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Documents are hereby expressly made subordinate and junior in right of payment,
without limitation as to any increases in the Obligations arising hereunder or
thereunder, to the prior payment in full in cash of the Obligations and, in the
event of any insolvency, bankruptcy, receivership, liquidation, reorganization
or other similar proceeding under the laws of any jurisdiction relating to any
Borrower, its debts or its assets, whether voluntary or involuntary, all such
Obligations shall be paid in full in cash before any payment or distribution of
any character, whether in cash, securities or other property, shall be made to
any other Borrower therefor.
(j) Each of the Persons composing Borrowers hereby agrees
that, after the occurrence and during the continuance of any Default or Event of
Default, the payment of any amounts due with respect to the indebtedness owing
by any Borrower to any other Borrower is hereby subordinated to the prior
payment in full in cash of the Obligations. Each Borrower hereby agrees that
after the occurrence and during the continuance of any Default or Event of
Default, such Borrower will not demand, ▇▇▇ for or otherwise attempt to collect
any indebtedness of any other Borrower owing to such Borrower until the
Obligations shall have been paid in full in cash. If, notwithstanding the
foregoing sentence, such Borrower shall collect, enforce or receive any amounts
in respect of such indebtedness, such amounts shall be collected, enforced and
received by such Borrower as trustee for the Lender Group, and such Borrower
shall deliver any such amounts to Agent for application to the Obligations in
accordance with SECTION 2.4(b).
3. CONDITIONS; TERM OF AGREEMENT.
3.1 CONDITIONS PRECEDENT TO THE INITIAL EXTENSION OF CREDIT.
The obligation of the Lender Group (or any member thereof) to make the initial
Advance (or otherwise to extend any credit provided for hereunder), is subject
to the fulfillment, to the satisfaction of Agent, of each of the conditions
precedent set forth below:
(a) the Closing Date shall occur on or before July 13,
2001;
(b) Agent shall have received all financing statements
required by Agent, duly executed by the applicable Borrowers, and Agent shall
have received searches reflecting the filing of all such financing statements;
(c) Agent shall have received each of the following
documents, in form and substance satisfactory to Agent, duly executed, and each
such document shall be in full force and effect:
(i) the Control Agreements,
(ii) the Copyright Security Agreement,
(iii) the Disbursement Letter,
(iv) the Due Diligence Letter,
(v) the Fee Letter,
(vi) the Cash Management Agreements,
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(vii) the Officers' Certificate,
(viii) the Stock Pledge Agreement, together with all
certificates representing the shares of Stock pledged thereunder (to
the extent such shares are certificated), as well as Stock powers
endorsed in blank or other proper instruments of transfer with respect
thereto,
(ix) the Trademark Security Agreement,
(x) the Contribution Agreement,
(xi) the Intercompany Subordination Agreement,
(xii) the Pay-Off Letter, together with UCC
termination statements and other documentation evidencing the
termination by Existing Lender of its Liens in and to the properties
and assets of Borrowers;
(xiii) the Source Code Escrow Agreement;
(xiv) the Registration Rights Agreement; and
(xv) the Warrants.
(d) Agent shall have received a certificate from the
Secretary of each Borrower attesting to the resolutions of such Borrower's Board
of Directors authorizing its execution, delivery, and performance of this
Agreement and the other Loan Documents (including the Warrants) to which such
Borrower is a party and authorizing specific officers of such Borrower to
execute the same;
(e) Agent shall have received copies of each Borrower's
Governing Documents, as amended, modified, or supplemented to the Closing Date,
certified by the Secretary of such Borrower;
(f) Agent shall have received a certificate of status with
respect to each Borrower, dated within 10 days of the Closing Date, such
certificate to be issued by the appropriate officer of the jurisdiction of
organization of such Borrower, which certificate shall indicate that such
Borrower is in good standing in such jurisdiction;
(g) Agent shall have received certificates of status with
respect to each Borrower, each dated within 30 days of the Closing Date, such
certificates to be issued by the appropriate officer of the jurisdictions (other
than the jurisdiction of organization of such Borrower) in which its failure to
be duly qualified or licensed would constitute a Material Adverse Change, which
certificates shall indicate that such Borrower is in good standing in such
jurisdictions;
(h) Agent shall have received a certificate of insurance,
together with the endorsements thereto, as are required by SECTION 6.8, the form
and substance of which shall be satisfactory to Agent;
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(i) Agent shall have received Collateral Access Agreements
with respect to the following locations: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇.
(j) Agent shall have received opinions of Borrowers'
counsel as to such matters as the Agent may reasonably request, including,
without limitation, the Warrants;
(k) Agent shall have received satisfactory evidence
(including a certificate of the chief financial officer of Parent) that all tax
returns required to be filed by Borrowers have been timely filed and all taxes
upon Borrowers or their properties, assets, income, and franchises (including
Real Property taxes and payroll taxes) have been paid prior to delinquency,
except such taxes that are the subject of a Permitted Protest;
(l) Borrowers shall have the Required Availability after
giving effect to the initial extensions of credit hereunder;
(m) Agent shall have completed its business, legal, and
collateral due diligence, including (i) confirmation that each Borrower's source
code for its Software is proprietary and has not been provided to any Borrower's
customers distributors and/or business partners except those Persons
specifically approved by Agent, (ii) a collateral audit and review of Borrowers'
books and records and verification of Borrowers' representations and warranties
to the Lender Group, the results of which shall be satisfactory to Agent, (iii)
receipt of a final appraisal performed by Empire Valuation, the results of which
are acceptable to Agent, (iv) a review of Borrowers' significant Maintenance
Contracts, the results of which are acceptable to Agent, and (v) receipt of a
report prepared by a third party consulting firm selected by Agent, the results
of which are satisfactory to Agent in its sole discretion, which (A) validates
the recent cost reduction measures taken by Borrowers, (B) contains a detailed
cash flow projection that reconciles Borrowers' cash receipts and cash expenses
and (C) sets forth the results of such firm's review of Borrowers' credit memos
for the purpose of determining the composition of the Dilution;
(n) Agent shall have received completed reference checks
with respect to Borrowers' senior management, the results of which are
satisfactory to Agent in its sole discretion;
(o) Agent shall have received copies of searches
satisfactory to Agent respecting each Borrower's trademarks and trademark
applications, and each Borrower's copyrights and copyright applications, with
the United States Patent and Trademark Office and the Copyright Office,
respectively.
(p) Agent shall have received satisfactory evidence that
Borrowers shall have filed applications for registration with the Copyright
Office for each Copyright in each version of the Syteline Software and that
Borrowers have made proper application for, and have paid all necessary fees to,
obtain expedited treatment from the Copyright Office for such applications for
registration;
(q) Agent shall have received Borrowers' Closing Date
Business Plan;
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(r) Borrowers shall pay all Lender Group Expenses incurred
in connection with the transactions evidenced by this Agreement;
(s) Borrowers shall have received all licenses, approvals
or evidence of other actions required by any Governmental Authority in
connection with the execution and delivery by Borrowers of this Agreement or any
other Loan Document or with the consummation of the transactions contemplated
hereby and thereby; and
(t) all other documents and legal matters in connection
with the transactions contemplated by this Agreement shall have been delivered,
executed, or recorded and shall be in form and substance satisfactory to Agent.
3.2 CONDITIONS SUBSEQUENT TO THE INITIAL EXTENSION OF CREDIT.
The obligation of the Lender Group (or any member thereof) to continue to make
Advances (or otherwise extend credit hereunder) is subject to the fulfillment,
on or before the date applicable thereto, of each of the conditions subsequent
set forth below (the failure by Borrowers to so perform or cause to be performed
constituting an Event of Default):
(a) within 30 days of the Closing Date, deliver to Agent
certified copies of the policies of insurance, together with the endorsements
thereto, as are required by SECTION 6.8, the form and substance of which shall
be satisfactory to Agent and its counsel;
(b) as soon as received by a Borrower, but in any event
within 30 days of the Closing Date, Agent shall have received satisfactory
evidence that Borrowers have filed applications for registration for all
Copyrights of Borrowers in each version of the Marketed Software (other than the
Syteline Software required to be registered under clause (p) of Section 3.1)
existing on the Closing Date and that Borrowers have made proper application
for, and have paid all necessary fees to, obtain expedited treatment from the
Copyright Office for such applications for registration;
(c) as soon as received by a Borrower, but in any event
within 30 days of the Closing Date, Agent shall have received satisfactory
evidence that all Copyrights of Borrowers required to be registered under clause
(p) of Section 3.1 have been registered with the Copyright Office and are
specifically encumbered in favor of Agent by the Copyright Security Agreement
which has been filed with the Copyright Office;
(d) as soon as received by a Borrower, but in any event
within 60 days of the Closing Date, Agent shall have received satisfactory
evidence that all Copyrights of Borrowers required to be registered under clause
(b) of Section 3.2 have been registered with the Copyright Office and are
specifically encumbered in favor of Agent by the Copyright Security Agreement
which has been filed with the Copyright Office;
(e) within 30 days of the Closing Date, Agent shall have
received copies of the Personal Property Security Act, tax and judgment Lien
searches in the Province of Ontario in respect of Frontstep Canada, the results
of which are satisfactory to Agent;
(f) within 30 days of the Closing Date, Frontstep Canada
shall have executed and delivered to Agent all Personal Property Security Act
financing statements and any other Additional Documents requested by Agent to
perfect the Agent's Liens on the assets and properties of Frontstep Canada in
the Province of Ontario;
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(g) within 30 days of the Closing Date, Agent shall have
received an opinion of counsel to Frontstep Canada with respect to the
perfection of Agent's Liens on the assets and properties of Frontstep Canada in
the Province of Ontario, which opinion shall be in form and substance
satisfactory to Agent; and
(h) within 30 days of the Closing Date, Agent shall have
received either (i) the Intercreditor Agreement duly executed by Softech and
Parent, (ii) a lien release, in form and substance satisfactory to Agent, duly
executed by Softech, pertaining to the release of Softech's Liens on the
Collateral other than certain specified Equipment financed by Softech or (iii) a
lien release, in form and substance satisfactory to Agent, duly executed by
Softech, pertaining to the release of Softech's Liens on the Collateral.
3.3 CONDITIONS PRECEDENT TO ALL EXTENSIONS OF CREDIT. The
obligation of the Lender Group (or any member thereof) to make all Advances (or
to extend any other credit hereunder) shall be subject to the following
conditions precedent:
(a) the representations and warranties contained in this
Agreement and the other Loan Documents shall be true and correct in all material
respects on and as of the date of such extension of credit, as though made on
and as of such date (except to the extent that such representations and
warranties relate solely to an earlier date);
(b) no Default or Event of Default shall have occurred and
be continuing on the date of such extension of credit, nor shall either result
from the making thereof;
(c) no injunction, writ, restraining order, or other order
of any nature prohibiting, directly or indirectly, the extending of such credit
shall have been issued and remain in force by any Governmental Authority against
any Borrower, Agent, any Lender, or any of their Affiliates;
(d) Agent shall have received satisfactory evidence that
Borrowers shall have filed applications for registration with the Copyright
Office for each Software copyright acquired or generated by a Borrower after the
Closing Date applicable to any Marketed Software other than Marketed Software
for which Borrowers generate less than $100,000 of Accounts in the aggregate
during any fiscal year of Parent; and
(e) no Material Adverse Change shall have occurred.
3.4 TERM. This Agreement shall become effective upon the
execution and delivery hereof by Borrowers, Agent, and the Lenders and shall
continue in full force and effect for a term ending on July 17, 2004 (the
"Maturity Date"). The foregoing notwithstanding, the Lender Group, upon the
election of the Required Lenders, shall have the right to terminate its
obligations under this Agreement immediately and without notice upon the
occurrence and during the continuation of an Event of Default.
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3.5 EFFECT OF TERMINATION. On the date of termination of this
Agreement, all Obligations (including contingent reimbursement obligations of
Borrowers with respect to any outstanding Letters of Credit) immediately shall
become due and payable without notice or demand. No termination of this
Agreement, however, shall relieve or discharge Borrowers of their duties,
Obligations, or covenants hereunder and the Agent's Liens in the Collateral
shall remain in effect until all Obligations have been fully and finally
discharged and the Lender Group's obligations to provide additional credit
hereunder have been terminated. When this Agreement has been terminated and all
of the Obligations have been fully and finally discharged and the Lender Group's
obligations to provide additional credit under the Loan Documents have been
terminated irrevocably, Agent will, at Borrowers' sole expense, execute and
deliver any UCC termination statements, lien releases, mortgage releases,
re-assignments of trademarks and copyrights, discharges of security interests,
and other similar discharge or release documents (and, if applicable, in
recordable form) as are reasonably necessary to release, as of record, the
Agent's Liens and all notices of security interests and liens previously filed
by Agent with respect to the Obligations.
3.6 EARLY TERMINATION BY BORROWERS. Borrowers have the option,
at any time upon 90 days prior written notice by Administrative Borrower to
Agent, to terminate this Agreement by paying to Agent, for the benefit of the
Lender Group, in cash, the Obligations (including either (i) providing cash
collateral to be held by Agent for the benefit of those Lenders with a Revolver
Commitment in an amount equal to 105% of the then extant Letter of Credit Usage,
or (ii) causing the original Letters of Credit to be returned to the Issuing
Lender), in full, together with the Applicable Prepayment Premium (to be
allocated based upon letter agreements between Agent and individual Lenders). If
Administrative Borrower has sent a notice of termination pursuant to the
provisions of this Section, then the Commitments shall terminate and Borrowers
shall be obligated to repay the Obligations (including either (i) providing cash
collateral to be held by Agent for the benefit of those Lenders with a Revolver
Commitment in an amount equal to 105% of the then extant Letter of Credit Usage,
or (ii) causing the original Letters of Credit to be returned to the Issuing
Lender), in full, together with the Applicable Prepayment Premium, on the date
set forth as the date of termination of this Agreement in such notice. In the
event of the termination of this Agreement and repayment of the Obligations at
any time prior to the Maturity Date, for any other reason, including (a)
termination upon the election of the Required Lenders to terminate after the
occurrence of an Event of Default, (b) foreclosure and sale of Collateral, (c)
sale of the Collateral in any Insolvency Proceeding, or (iv) restructure,
reorganization or compromise of the Obligations by the confirmation of a plan of
reorganization, or any other plan of compromise, restructure, or arrangement in
any Insolvency Proceeding, then, in view of the impracticability and extreme
difficulty of ascertaining the actual amount of damages to the Lender Group or
profits lost by the Lender Group as a result of such early termination, and by
mutual agreement of the parties as to a reasonable estimation and calculation of
the lost profits or damages of the Lender Group, Borrowers shall pay the
Applicable Prepayment Premium to Agent (to be allocated based upon letter
agreements between Agent and individual Lenders), measured as of the date of
such termination.
4. CREATION OF SECURITY INTEREST.
4.1 GRANT OF SECURITY INTEREST. Each Borrower hereby grants to
Agent, for the benefit of the Lender Group, a continuing security interest
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in all of its right, title, and interest in all currently existing and hereafter
acquired or arising Collateral (except that Agent shall only have a security
interest in sixty-six (66%) percent of the shares of capital stock of each
Borrower's Subsidiaries organized outside of the United States of America) in
order to secure prompt repayment of any and all of the Obligations in accordance
with the terms and conditions of the Loan Documents and in order to secure
prompt performance by Borrowers of each of their covenants and duties under the
Loan Documents. The Agent's Liens in and to the Collateral shall attach to all
Collateral without further act on the part of Agent or Borrowers. Anything
contained in this Agreement or any other Loan Document to the contrary
notwithstanding, except for Permitted Dispositions, Borrowers have no authority,
express or implied, to dispose of any item or portion of the Collateral.
4.2 NEGOTIABLE COLLATERAL. In the event that any Collateral,
including proceeds, is evidenced by or consists of Negotiable Collateral, and if
and to the extent that perfection or priority of Agent's security interest is
dependent on or enhanced by possession, the applicable Borrower, immediately
upon the request of Agent, shall endorse and deliver physical possession of such
Negotiable Collateral to Agent.
4.3 COLLECTION OF ACCOUNTS, GENERAL INTANGIBLES, AND
NEGOTIABLE COLLATERAL. At any time after the occurrence and during the
continuation of an Event of Default, Agent or Agent's designee may (a) notify
Account Debtors of Borrowers that the Accounts, chattel paper, or General
Intangibles have been assigned to Agent or that Agent has a security interest
therein, or (b) collect the Accounts, chattel paper, or General Intangibles
directly and charge the collection costs and expenses to the Loan Account. Each
Borrower agrees that it will hold in trust for the Lender Group, as the Lender
Group's trustee, any Collections that it receives and immediately will deliver
said Collections to Agent or a Cash Management Bank in their original form as
received by the applicable Borrower.
4.4 DELIVERY OF ADDITIONAL DOCUMENTATION REQUIRED. At any time
upon the request of Agent, Borrowers shall execute and deliver to Agent, any and
all financing statements, original financing statements in lieu of continuation
statements, fixture filings, security agreements, pledges, assignments,
endorsements of certificates of title, and all other documents (the "Additional
Documents") that Agent may request in its Permitted Discretion, in form and
substance satisfactory to Agent, to perfect and continue perfected or better
perfect the Agent's Liens in the Collateral (whether now owned or hereafter
arising or acquired), to create and perfect Liens in favor of Agent in any Real
Property acquired after the Closing Date, and in order to fully consummate all
of the transactions contemplated hereby and under the other Loan Documents. To
the maximum extent permitted by applicable law, each Borrower authorizes Agent
to execute any such Additional Documents in the applicable Borrower's name and
authorize Agent to file such executed Additional Documents in any appropriate
filing office. In addition, on such periodic basis as Agent shall require,
Borrowers shall (a) provide Agent with a report of all new domestic patentable,
copyrightable, or trademarkable materials acquired or generated by Borrowers
during the prior period, (b) cause all domestic patents, copyrights, and
trademarks acquired or generated by Borrowers that are used in or are related to
any Marketed Software and that are not already the subject of a registration
with the appropriate filing office (or an application therefor diligently
prosecuted) to be registered with such appropriate filing office in a manner
sufficient to impart constructive notice of Borrowers' ownership thereof, and
(c) cause to be prepared, executed, and delivered to Agent supplemental
schedules to the
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applicable Loan Documents to identify such patents, copyrights, and trademarks
as being subject to the security interests created thereunder.
4.5 POWER OF ATTORNEY. Each Borrower hereby irrevocably makes,
constitutes, and appoints Agent (and any of Agent's officers, employees, or
agents designated by Agent) as such Borrower's true and lawful attorney, with
power to (a) if such Borrower refuses to, or fails to execute and deliver any of
the documents described in SECTION 4.4 within ten (10) days of the delivery of
written notice of such request to such Borrower by Agent, sign the name of such
Borrower on any of the documents described in SECTION 4.4, (b) at any time that
an Event of Default has occurred and is continuing, sign such Borrower's name on
any invoice or ▇▇▇▇ of lading relating to the Collateral, drafts against Account
Debtors, or notices to Account Debtors, (c) send requests for verification of
Accounts, (d) endorse such Borrower's name on any Collection item that may come
into the Lender Group's possession, (e) at any time that an Event of Default has
occurred and is continuing, make, settle, and adjust all claims under such
Borrower's policies of insurance and make all determinations and decisions with
respect to such policies of insurance, and (f) at any time that an Event of
Default has occurred and is continuing, settle and adjust disputes and claims
respecting the Accounts, chattel paper, or General Intangibles directly with
Account Debtors, for amounts and upon terms that Agent determines to be
reasonable, and Agent may cause to be executed and delivered any documents and
releases that Agent determines to be necessary. The appointment of Agent as each
Borrower's attorney, and each and every one of its rights and powers, being
coupled with an interest, is irrevocable until all of the Obligations have been
fully and finally repaid and performed and the Lender Group's obligations to
extend credit hereunder are terminated.
4.6 RIGHT TO INSPECT. Agent and each Lender (through any of
their respective officers, employees, or agents) shall have the right, from time
to time hereafter to inspect the Books and to check, test, and appraise the
Collateral in order to verify Borrowers' financial condition or the amount,
quality, value, condition of, or any other matter relating to, the Collateral.
4.7 CONTROL AGREEMENTS. Each Borrower agrees that it will not
transfer assets out of any Securities Accounts other than as permitted under
SECTION 7.19 and, if to another securities intermediary, unless each of the
applicable Borrower, Agent, and the substitute securities intermediary have
entered into a Control Agreement. No arrangement contemplated hereby or by any
Control Agreement in respect of any Securities Accounts or other Investment
Property shall be modified by Borrowers without the prior written consent of
Agent. Upon the occurrence and during the continuance of a Default or Event of
Default, Agent may notify any securities intermediary to liquidate the
applicable Securities Account or any related Investment Property maintained or
held thereby and remit the proceeds thereof to the Agent's Account.
5. REPRESENTATIONS AND WARRANTIES.
In order to induce the Lender Group to enter into this
Agreement, each Borrower makes the following representations and warranties to
the Lender Group which shall be true, correct, and complete, in all material
respects, as of the date hereof, and shall be true, correct, and complete, in
all material respects, as of the Closing Date, and at and as of the date of the
making of each Advance (or other extension of credit) made thereafter, as though
made on and
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as of the date of such Advance (or other extension of credit) (except to the
extent that such representations and warranties relate solely to an earlier
date) and such representations and warranties shall survive the execution and
delivery of this Agreement:
5.1 NO ENCUMBRANCES. Each Borrower has good and indefeasible
title to its Collateral and the Real Property, free and clear of Liens except
for Permitted Liens.
5.2 ELIGIBLE ACCOUNTS. The Eligible Accounts are bona fide
existing payment obligations of Account Debtors that arise out of Borrowers'
sale or licensing of Software or rendition of training, installation and/or
other related consulting services to such Account Debtors in the ordinary course
of Borrowers' business, owed to Borrowers without defenses, disputes, offsets,
counterclaims, or rights of return or cancellation. As to each Eligible Account,
such Account is not:
(a) owed by an employee, Affiliate, or agent (other than
an authorized distributor of a Borrower's Marketed Software that is not an
Affiliate of a Borrower) of a Borrower,
(b) on account of a transaction wherein goods were placed
on consignment or were sold pursuant to a guaranteed sale, a sale or return, a
sale on approval, a ▇▇▇▇ and hold, or on any other terms by reason of which the
payment by the Account Debtor may be conditional,
(c) payable in a currency other than Dollars,
(d) owed by an Account Debtor that has or has asserted a
right of setoff, has disputed its liability, or has made any claim with respect
to its obligation to pay the Account,
(e) owed by an Account Debtor that is subject to any
Insolvency Proceeding or is not Solvent or as to which a Borrower has received
notice of an imminent Insolvency Proceeding or a material impairment of the
financial condition of such Account Debtor,
(f) on account of a transaction as to which the goods
giving rise to such Account have not been shipped and billed to the Account
Debtor or the services giving rise to such Account have not been performed and
accepted by the Account Debtor,
(g) a right to receive progress payments or other advance
▇▇▇▇▇▇▇▇ that are due prior to the completion of performance by the applicable
Borrower of the subject contract for goods or services, and
(h) an Account that has not been billed to the customer.
5.3 [Intentionally Omitted]
5.4 EQUIPMENT. All of the Equipment is used or held for use in
Borrowers' business and is fit for such purposes.
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5.5 LOCATION OF INVENTORY AND EQUIPMENT. The Inventory and
Equipment are not stored with a bailee, warehouseman, or similar party and are
located only at the locations identified on Schedule 5.5.
5.6 INVENTORY RECORDS. Each Borrower keeps correct and
accurate records itemizing and describing the type, quality, and quantity of its
Inventory and the book value thereof.
5.7 LOCATION OF CHIEF EXECUTIVE OFFICE; FEIN. The chief
executive office of each Borrower is located at the address indicated in
Schedule 5.7 and each Borrower's FEIN is identified in Schedule 5.7.
5.8 DUE ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.
(a) Each Borrower is duly organized and existing and in
good standing under the laws of the jurisdiction of its organization and
qualified to do business in any state where the failure to be so qualified
reasonably could be expected to have a Material Adverse Change.
(b) Set forth on Schedule 5.8(b), is a complete and
accurate description of the authorized capital Stock of each Borrower, by class,
and, as of the Closing Date, a description of the number of shares of each such
class that are issued and outstanding. Other than as described on Schedule
5.8(b), there are no subscriptions, options, warrants, or calls relating to any
shares of each Borrower's capital Stock, including any right of conversion or
exchange under any outstanding security or other instrument. No Borrower is
subject to any obligation (contingent or otherwise) to repurchase or otherwise
acquire or retire any shares of its capital Stock or any security convertible
into or exchangeable for any of its capital Stock. The Parent has reserved, out
of its authorized but unissued Common Stock, a sufficient number of shares of
Common Stock to permit Foothill to purchase shares of the Warrants Stock in
accordance with the Warrants.
(c) Set forth on Schedule 5.8(c), is a complete and
accurate list of each Borrower's direct and indirect Subsidiaries, showing: (i)
the jurisdiction of their organization; (ii) the number of shares of each class
of common and preferred Stock authorized for each of such Subsidiaries; and
(iii) the number and the percentage of the outstanding shares of each such class
owned directly or indirectly by the applicable Borrower. All of the outstanding
capital Stock of each such Subsidiary has been validly issued and is fully paid
and non-assessable.
(d) Except as set forth on Schedule 5.8(c), there are no
subscriptions, options, warrants, or calls relating to any shares of any
Borrower's Subsidiaries' capital Stock, including any right of conversion or
exchange under any outstanding security or other instrument. No Borrower or any
of its respective Subsidiaries is subject to any obligation (contingent or
otherwise) to repurchase or otherwise acquire or retire any shares of any
Borrower's Subsidiaries' capital Stock or any security convertible into or
exchangeable for any such capital Stock.
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5.9 DUE AUTHORIZATION; NO CONFLICT.
(a) As to each Borrower, the execution, delivery, and
performance by such Borrower of this Agreement and the Loan Documents to which
it is a party have been duly authorized by all necessary action on the part of
such Borrower.
(b) As to each Borrower, the execution, delivery, and
performance by such Borrower of this Agreement and the Loan Documents to which
it is a party do not and will not (i) violate any provision of federal, state,
or local law or regulation applicable to any Borrower, the Governing Documents
of any Borrower, or any order, judgment, or decree of any court or other
Governmental Authority binding on any Borrower, (ii) conflict with, result in a
breach of, or constitute (with due notice or lapse of time or both) a default
under any material contractual obligation of any Borrower, (iii) result in or
require the creation or imposition of any Lien of any nature whatsoever upon any
properties or assets of Borrower, other than Permitted Liens, or (iv) require
any approval of any Borrower's interest holders or any approval or consent of
any Person under any material contractual obligation of any Borrower.
(c) Other than the filing of financing statements, the
execution, delivery, and performance by each Borrower of this Agreement and the
Loan Documents to which such Borrower is a party do not and will not require any
registration with, consent, or approval of, or notice to, or other action with
or by, any Governmental Authority or other Person.
(d) As to each Borrower, this Agreement and the other Loan
Documents to which such Borrower is a party, and all other documents
contemplated hereby and thereby, when executed and delivered by such Borrower
will be the legally valid and binding obligations of such Borrower, enforceable
against such Borrower in accordance with their respective terms, except as
enforcement may be limited by equitable principles or by bankruptcy, insolvency,
reorganization, moratorium, or similar laws relating to or limiting creditors'
rights generally.
(e) The Agent's Liens are validly created, perfected, and
first priority Liens, subject only to Permitted Liens
5.10 LITIGATION. Other than those matters disclosed on
Schedule 5.10, there are no actions, suits, or proceedings pending or, to the
best knowledge of Borrowers, threatened against Borrowers, or any of their
Subsidiaries, as applicable, except for (a) matters that are fully covered by
insurance (subject to customary deductibles), and (b) matters that, if decided
adversely to Borrowers, or any of their Subsidiaries, as applicable, reasonably
could not be expected to result in a Material Adverse Change.
5.11 NO MATERIAL ADVERSE CHANGE. All financial statements
relating to Borrowers that have been delivered by Borrowers to the Lender Group
have been prepared in accordance with GAAP (except, in the case of unaudited
financial statements, for the lack of footnotes and being subject to year-end
audit adjustments) and present fairly in all material respects, Borrowers'
financial condition as of the date thereof and results of operations for the
period then ended. There has not been a Material Adverse Change with respect to
Borrowers
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since the date of the latest financial statements submitted to the Lender Group
on or before the Closing Date.
5.12 FRAUDULENT TRANSFER.
(a) each Borrower is Solvent.
(b) No transfer of property is being made by any Borrower
and no obligation is being incurred by any Borrower in connection with the
transactions contemplated by this Agreement or the other Loan Documents with the
intent to hinder, delay, or defraud either present or future creditors of
Borrowers.
5.13 EMPLOYEE BENEFITS. None of Borrowers, any of their
Subsidiaries, or any of their ERISA Affiliates maintains or contributes to any
Benefit Plan.
5.14 ENVIRONMENTAL CONDITION. Except as set forth on Schedule
5.14, (a) to Borrowers' knowledge, none of Borrowers' properties or assets has
ever been used by Borrowers or by previous owners or operators in the disposal
of, or to produce, store, handle, treat, release, or transport, any Hazardous
Materials, where such production, storage, handling, treatment, release or
transport was in violation, in any material respect, of applicable Environmental
Law, (b) to Borrowers' knowledge, none of Borrowers' properties or assets has
ever been designated or identified in any manner pursuant to any environmental
protection statute as a Hazardous Materials disposal site, (c) none of Borrowers
have received notice that a Lien arising under any Environmental Law has
attached to any revenues or to any Real Property owned or operated by Borrowers,
and (d) none of Borrowers have received a summons, citation, notice, or
directive from the Environmental Protection Agency or any other federal or state
governmental agency concerning any action or omission by any Borrower resulting
in the releasing or disposing of Hazardous Materials into the environment.
5.15 BROKERAGE FEES. Borrowers have not utilized the services
of any broker or finder in connection with Borrowers' obtaining financing from
the Lender Group under this Agreement other than US Bank/Libra, and no brokerage
commission or finders fee is payable by Borrowers in connection herewith except
to US Bank/Libra.
5.16 INTELLECTUAL PROPERTY. (a) Each Borrower owns, or holds
appropriate licenses in, all Intellectual Property that is necessary to the
conduct of its business as currently conducted (collectively, the "BUSINESS
INTELLECTUAL PROPERTY"). Attached hereto as Schedule 5.16(a) is a true, correct,
and complete listing of all registered or material unregistered Business
Intellectual Property with respect to which any Borrower is the owner or is an
exclusive licensee (with all such Business Intellectual Property being
identified as a Patent, Trademark, Trade Secret, or Copyright, as the case may
be). Schedule 5.16(a) designates any of the Business Intellectual Property as to
which a Borrower is an exclusive licensee.
(b) Except as set forth in Schedule 5.16(a):
(i) a Borrower is the sole owner of the Business
Intellectual Property, free and clear of any Lien (other than in favor
of Agent) without the payment of any monies or royalty except with
respect to off-the-shelf software;
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(ii) each Borrower has taken, and will continue to
take, all actions which are necessary or advisable to acquire and
protect the Business Intellectual Property, consistent with prudent
commercial practices, including without limitation: (x) registering all
domestic Copyrights (as defined in the Copyright Security Agreement and
included within the Business Intellectual Property) applicable to any
Marketed Software in the Copyright Office, and (y) registering all
domestic Trademarks (as defined in the Trademark Security Agreement and
included within the Business Intellectual Property) applicable to any
Marketed Software in the United States Patent and Trademark Office;
(iii) each Borrower's rights in and to the Business
Intellectual Property are valid and enforceable;
(iv) none of the Borrowers has received a demand,
claim, notice or inquiry from any Person in respect of the Business
Intellectual Property which challenges, threatens to challenge or
inquiries as to whether there is any basis to challenge, the validity
of, the rights of a Borrower in or the right of a Borrower to use, any
such Business Intellectual Property, and Borrowers know of no basis for
any such challenge;
(v) no claim has been threatened or asserted that any
Borrower has violated or infringed upon the Intellectual Property
rights of any Person and, to the knowledge of each Borrower, no
Borrower is in violation or infringement of, and has not violated or
infringed any proprietary rights of any other Person;
(vi) to the knowledge of each Borrower, no Person is
infringing any Business Intellectual Property;
(vii) except between and among Borrowers and their
Subsidiaries and except on an arm's-length basis for value and other
commercially reasonable terms, none of the Borrowers has granted any
license with respect to any Intellectual Property to any Person;
(viii) all versions of Software sold, marketed,
distributed, licensed or maintained by any Borrower on and after the
Closing Date, including without limitation the Syteline Software, and
all Software pursuant to which a Borrower generates Accounts
(collectively, the "MARKETED SOFTWARE") (A) were authored by regular
employees of such Borrower within the scope of their employment and
such Borrower was thus the original author pursuant to the work made
for hire doctrine, or (B) are software products which such Borrower
licenses from providers thereof with all necessary rights to resell or
sublicense to third parties;
(ix) subject to paragraphs (c) and (d) of SECTION
3.2, Borrowers have registered copyrights in the Copyright Office in
all versions of the Marketed Software owned by any Borrower.
(x) the Borrowers have taken all reasonable measures
to protect the secrecy, confidentiality and value of all confidential
and proprietary
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information, trade secrets and know-how used in their respective
businesses, including without limitation in connection with the
Syteline Software (collectively, "TRADE SECRETS") (including, without
limitation, entering into appropriate confidentiality agreements with
all officers, directors, employees, and other Persons with access to
the Trade Secrets). Except as set forth on Schedule 5.16(a) hereto, the
Trade Secrets have not been disclosed to any Persons other than the
Borrower' employees or contractors who had a need to know and use such
Trade Secrets in the ordinary course of employment or contract
performance and who executed appropriate confidentiality agreements
prohibiting unauthorized disclosure of such Trade Secrets.
(c) With respect to all Software used by any Borrower,
including the Marketed Software, (i) such Borrower is in possession of copies of
all source and object codes, other than Software owned by third parties and
licensed to such Borrower, and (ii) all such source and object codes are
proprietary information of a Borrower, other than such source and object codes
relating to Software owned by third parties and licensed to such Borrower.
(d) Schedule 5.16(d) hereto sets forth a true and
complete list of all material versions of the Software known currently as
"Syteline" in existence as of the Closing Date, including all versions currently
being sold, licensed, distributed, marketed or maintained by any Borrower (the
"SYTELINE SOFTWARE").
(e) Schedule 5.16(e) hereto contains a breakdown by
Marketed Software of the maintenance revenues generated by Borrowers as of the
Closing Date.
(f) Schedule B to the Copyright Security Agreement
includes a true and complete list of the Syteline Software and, on and after the
30th day following the Closing Date, all other Marketed Software, as such
Schedule B is modified from time to time in accordance with the terms of the
Copyright Security Agreement, including all prior versions of Software for which
any version of the Marketed Software constitutes a derivative work under U.S.
copyright law, the names of all Persons having contributed in the creation of
each such version, and the dates of creation for each such version.
5.17 LEASES. Borrowers enjoy peaceful and undisturbed
possession under all leases material to the business of Borrowers and to which
Borrowers are a party or under which Borrowers are operating. All of such leases
are valid and subsisting and no material default by Borrowers exists under any
of them.
5.18 DDAS. Set forth on Schedule 5.18 are all of the DDAs
of each Borrower, including, with respect to each depository (i) the name and
address of that depository, and (ii) the account numbers of the accounts
maintained with such depository.
5.19 COMPLETE DISCLOSURE. All factual information (taken
as a whole) furnished by or on behalf of Borrowers in writing to Agent or any
Lender (including all information contained in the Schedules hereto or in the
other Loan Documents) for purposes of or in connection with this Agreement, the
other Loan Documents or any transaction contemplated herein or therein is, and
all other such factual information (taken as a whole) hereafter furnished by or
on behalf of Borrowers in writing to the Agent or any Lender will be,
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true and accurate in all material respects on the date as of which such
information is dated or certified and not incomplete by omitting to state any
fact necessary to make such information (taken as a whole) not misleading in any
material respect at such time in light of the circumstances under which such
information was provided. On the Closing Date, the Closing Date Projections
represent, and as of the date on which any other Projections are delivered to
Agent, such additional Projections represent Borrowers' good faith best estimate
of its future performance for the periods covered thereby.
5.20 INDEBTEDNESS. Set forth on Schedule 5.20 is a true and
complete list of all Indebtedness of each Borrower outstanding immediately prior
to the Closing Date that is to remain outstanding after the Closing Date and
such Schedule accurately reflects the aggregate principal amount of such
Indebtedness and the principal terms thereof.
5.21 MAINTENANCE CONTRACTS. Each Maintenance Contract entered
into by a Borrower is substantially in the form attached hereto as EXHIBIT M-1.
6. AFFIRMATIVE COVENANTS.
Each Borrower covenants and agrees that, so long as any credit
hereunder shall be available and until full and final payment of the
Obligations, Borrowers shall and shall cause each of their respective
Subsidiaries to do all of the following:
6.1 ACCOUNTING SYSTEM. Maintain a system of accounting that
enables Borrowers to produce financial statements in accordance with GAAP and
maintain records pertaining to the Collateral that contain information as from
time to time reasonably may be requested by Agent.
6.2 COLLATERAL REPORTING. Provide Agent (and if so requested
by Agent, with copies for each Lender) with the following documents at the
following times in form satisfactory to Agent:
================================================================================
Daily (a) a sales journal, collection journal, and
credit register since the last such schedule and
a calculation of the Borrowing Base as of such
date, and
(b) notice of all returns, disputes, or claims.
--------------------------------------------------------------------------------
Monthly (not later (c) a detailed calculation of the Borrowing Base
than the (including detail regarding those
10th day of Accounts that are not Eligible Accounts),
each month)
(d) a detailed aging, by total, of the Accounts,
together with a reconciliation to the detailed
calculation of the Borrowing Base previously
provided to Agent,
(e) a summary aging, by vendor, of Borrowers'
accounts payable and any book overdraft,
--------------------------------------------------------------------------------
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--------------------------------------------------------------------------------
(f) a calculation of Dilution for the prior month,
and
(g) a list of any software license agreements,
Maintenance Contracts or other agreements giving
rise to Accounts of a Borrower which contain
proscriptions of, or limitations on, a Borrower's
right to assign such agreements.
--------------------------------------------------------------------------------
Quarterly (h) a detailed list of each Borrower's customers,
(i) a report regarding each Borrower's accrued, but
unpaid, ad valorem taxes,
--------------------------------------------------------------------------------
Upon request by (j) copies of invoices in connection with the
Agent Accounts, credit memos, remittance advices,
deposit slips, shipping and delivery documents in
connection with the Accounts and, for Inventory
and Equipment acquired by Borrowers, purchase
orders and invoices, and
(k) such other reports as to the Collateral, or the
financial condition of Borrowers as Agent may
request.
================================================================================
In addition, each Borrower agrees to cooperate fully with
Agent to facilitate and implement a system of electronic collateral reporting in
order to provide electronic reporting of each of the items set forth above.
6.3 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES. Deliver to
Agent, with copies to each Lender:
(a) as soon as available, but in any event within 30 days
(45 days in the case of a month that is the end of one of the first 3 fiscal
quarters in a fiscal year) after the end of each month during each of Parent's
fiscal years,
(i) a company prepared consolidated balance sheet,
income statement, and statement of cash flow covering Parent's and its
Subsidiaries' operations during such period,
(ii) a certificate signed by the chief financial
officer of Parent to the effect that:
A. the financial statements delivered hereunder
have been prepared in accordance with GAAP (except for the
lack of footnotes and being subject to year-end audit
adjustments) and fairly present in all material respects
the financial condition of Parent and its Subsidiaries,
provided that the financial statements for any month
(other than a month that is the end of a fiscal quarter)
are not required to be prepared in accordance with GAAP,
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B. the representations and warranties of
Borrowers contained in this Agreement and the other Loan
Documents are true and correct in all material respects on
and as of the date of such certificate, as though made on
and as of such date (except to the extent that such
representations and warranties relate solely to an earlier
date), and
C. there does not exist any condition or event
that constitutes a Default or Event of Default (or, to the
extent of any non-compliance, describing such
non-compliance as to which he or she may have knowledge
and what action Borrowers have taken, are taking, or
propose to take with respect thereto), and
(iii) for each month that is the date on which a
financial covenant in SECTION 7.20 is to be tested, a Compliance
Certificate demonstrating, in reasonable detail, compliance at the end
of such period with the applicable financial covenants contained in
SECTION 7.20, and
(b) as soon as available, but in any event within 90 days
after the end of each of Parent's fiscal years,
(i) financial statements of Parent and its
Subsidiaries for each such fiscal year, audited by independent
certified public accountants reasonably acceptable to Agent and
certified, without any qualifications, by such accountants to have been
prepared in accordance with GAAP (such audited financial statements to
include a balance sheet, income statement, and statement of cash flow
and, if prepared, such accountants' letter to management),
(ii) a certificate of such accountants addressed to
Agent and the Lenders stating that such accountants do not have
knowledge of the existence of any Default or Event of Default under
SECTION 7.20,
(c) as soon as available, but in any event within 30 days
prior to the start of each of Parent's fiscal years,
(i) copies of Borrowers' Projections, in form and
substance (including as to scope and underlying assumptions)
satisfactory to Agent, in its sole discretion, for the forthcoming 3
years, year by year, and for the forthcoming fiscal year, month by
month, certified by the chief financial officer of Parent as being such
officer's good faith best estimate of the financial performance of
Parent and its Subsidiaries during the period covered thereby,
(d) if and when filed by any Borrower,
(i) 10-Q quarterly reports, Form 10-K annual reports,
and Form 8-K current reports,
(ii) any other filings made by any Borrower with the
SEC,
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(iii) copies of Borrowers' federal income tax returns,
and any amendments thereto, filed with the Internal Revenue Service,
and
(iv) any other information that is provided by Parent
to its shareholders generally,
(e) if and when filed by any Borrower and as requested by
Agent, satisfactory evidence of payment of applicable excise taxes in each
jurisdictions in which (i) any Borrower conducts business or is required to pay
any such excise tax, (ii) where any Borrower's failure to pay any such
applicable excise tax would result in a Lien on the properties or assets of any
Borrower, or (iii) where any Borrower's failure to pay any such applicable
excise tax reasonably could be expected to result in a Material Adverse Change,
(f) if and when filed by the Parent, but in any event by
September 30, 2001, a copy of the certificate of merger or other applicable
document filed with the Secretary of State of the State of Ohio in respect of
the merger of brightwhite with and into the Parent in accordance with SECTION
6.13;
(g) promptly, but in any event within 3 Business Days
after the release of any deposit materials under any agreement between DSI and
any Borrower or any of their respective predecessors including, without
limitation, that certain Sourceflex Software Source Code Escrow Agreement -
Sourcefile Number 7470 between FileSafe, Inc. and Symix Computer Systems, Inc.,
notice of the release of such deposit materials,
(h) as soon as a Borrower has knowledge of any event or
condition that constitutes a Default or an Event of Default, notice thereof and
a statement of the curative action that Borrowers propose to take with respect
thereto, and
(i) upon the request of Agent, any other report reasonably
requested relating to the financial condition of Borrowers.
In addition to the financial statements referred to above, Borrowers agree to
deliver financial statements prepared on both a consolidated and consolidating
basis and that no Borrower, or any Subsidiary of a Borrower, will have a fiscal
year different from that of Parent. Borrowers agree that their independent
certified public accountants are authorized to communicate with Agent and to
release to Agent whatever financial information concerning Borrowers that Agent
reasonably may request. Each Borrower waives the right to assert a confidential
relationship, if any, it may have with any accounting firm or service bureau in
connection with any information requested by Agent pursuant to or in accordance
with this Agreement, and agree that Agent may contact directly any such
accounting firm or service bureau in order to obtain such information.
6.4 [INTENTIONALLY OMITTED]
6.5 RETURN. Cause returns and allowances as between Borrowers
and their Account Debtors, to be on the same basis and in accordance with the
usual customary practices of the applicable Borrower, as they exist at the time
of the execution and delivery of this Agreement. If, at a time when no Event of
Default has occurred and is continuing, any Account Debtor returns any Inventory
to any Borrower, the applicable Borrower promptly shall determine
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the reason for such return and, if the applicable Borrower accepts such return,
issue a credit memorandum (with a copy to be sent to Agent) in the appropriate
amount to such Account Debtor. If, at a time when an Event of Default has
occurred and is continuing, any Account Debtor returns any Inventory to any
Borrower, the applicable Borrower promptly shall determine the reason for such
return and, if Agent consents (which consent shall not be unreasonably
withheld), issue a credit memorandum (with a copy to be sent to Agent) in the
appropriate amount to such Account Debtor.
6.6 MAINTENANCE OF PROPERTIES. Maintain and preserve all of
its properties which are necessary or useful in the proper conduct to its
business in good working order and condition, ordinary wear and tear excepted,
and comply at all times with the provisions of all leases to which it is a party
as lessee, so as to prevent any loss or forfeiture thereof or thereunder.
6.7 TAXES. Cause all assessments and taxes, whether real,
personal, or otherwise, due or payable by, or imposed, levied, or assessed
against Borrowers or any of their assets to be paid in full, before delinquency
or before the expiration of any extension period, except to the extent that the
validity of such assessment or tax shall be the subject of a Permitted Protest.
Borrowers will make timely payment or deposit of all tax payments and
withholding taxes required of it by applicable laws, including those laws
concerning F.I.C.A., F.U.T.A., state disability, and local, state, and federal
income taxes, and will, upon request, furnish Agent with proof satisfactory to
Agent indicating that the applicable Borrower has made such payments or
deposits. Borrowers shall deliver satisfactory evidence of payment of applicable
excise taxes in each jurisdictions in which any Borrower is required to pay any
such excise tax.
6.8 INSURANCE.
(a) At Borrowers' expense, maintain insurance respecting
its property and assets wherever located, covering loss or damage by fire,
theft, explosion, and all other hazards and risks as ordinarily are insured
against by other Persons engaged in the same or similar businesses. Borrowers
also shall maintain business interruption, public liability, and product
liability insurance, as well as insurance against larceny, embezzlement, and
criminal misappropriation. All such policies of insurance shall be in such
amounts and with such insurance companies as are reasonably satisfactory to
Agent. Borrowers shall deliver copies of all such policies to Agent with a
satisfactory lender's loss payable endorsement naming Agent as sole loss payee
or additional insured, as appropriate. Each policy of insurance or endorsement
shall contain a clause requiring the insurer to give not less than 30 days prior
written notice to Agent in the event of cancellation of the policy for any
reason whatsoever.
(b) Administrative Borrower shall give Agent prompt notice
of any loss covered by such insurance. Agent shall have the exclusive right to
adjust any losses payable under any such insurance policies in excess of
$50,000, without any liability to Borrowers whatsoever in respect of such
adjustments. Any monies received as payment for any loss under any insurance
policy mentioned above (other than liability insurance policies) or as payment
of any award or compensation for condemnation or taking by eminent domain, shall
be paid over to Agent to be applied at the option of the Required Lenders either
to the prepayment of the Obligations or shall be disbursed to Administrative
Borrower under staged payment terms reasonably satisfactory to the Required
Lenders for application to the cost of repairs,
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replacements, or restorations. Any such repairs, replacements, or restorations
shall be effected with reasonable promptness and shall be of a value at least
equal to the value of the items or property destroyed prior to such damage or
destruction.
(c) Borrowers shall not take out separate insurance
concurrent in form or contributing in the event of loss with that required to be
maintained under this SECTION 6.8, unless Agent is included thereon as named
insured with the loss payable to Agent under a lender's loss payable endorsement
or its equivalent. Administrative Borrower immediately shall notify Agent
whenever such separate insurance is taken out, specifying the insurer thereunder
and full particulars as to the policies evidencing the same, and copies of such
policies promptly shall be provided to Agent.
6.9 LOCATION OF INVENTORY AND EQUIPMENT. Keep the Inventory
and Equipment only at the locations identified on Schedule 5.5; PROVIDED,
HOWEVER, that Administrative Borrower may amend Schedule 5.5 so long as such
amendment occurs by written notice to Agent not less than 30 days prior to the
date on which the Inventory or Equipment is moved to such new location, so long
as such new location is within the continental United States, and so long as, at
the time of such written notification, the applicable Borrower provides any
financing statements or fixture filings necessary to perfect and continue
perfected the Agent's Liens on such assets and also provides to Agent a
Collateral Access Agreement.
6.10 COMPLIANCE WITH LAWS. Comply with the requirements of all
applicable laws, rules, regulations, and orders of any Governmental Authority,
including the Fair Labor Standards Act and the Americans With Disabilities Act,
other than laws, rules, regulations, and orders the non-compliance with which,
individually or in the aggregate, would not result in and reasonably could not
be expected to result in a Material Adverse Change.
6.11 LEASES. Pay when due all rents and other amounts payable
under any leases to which any Borrower is a party or by which any Borrower's
properties and assets are bound, unless such payments are the subject of a
Permitted Protest.
6.12 BROKERAGE COMMISSIONS. Pay any and all brokerage
commission or finders fees incurred in connection with or as a result of
Borrowers' obtaining financing from the Lender Group under this Agreement.
Borrowers agree and acknowledge that payment of all such brokerage commissions
or finders fees shall be the sole responsibility of Borrowers, and each Borrower
agrees to indemnify, defend, and hold Agent and the Lender Group harmless from
and against any claim of any broker or finder arising out of Borrowers'
obtaining financing from the Lender Group under this Agreement.
6.13 EXISTENCE. At all times preserve and keep in full force
and effect each Borrower's valid existence and good standing and any rights and
franchises material to Borrowers' businesses, except that brightwhite shall be
merged with and into the Parent on or before September 30, 2001.
6.14 ENVIRONMENTAL.
(a) Keep any property either owned or operated by any
Borrower free of any Environmental Liens or post bonds or other financial
assurances sufficient to satisfy the
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obligations or liability evidenced by such Environmental Liens, (b) comply, in
all material respects, with Environmental Laws and provide to Agent
documentation of such compliance which Agent reasonably requests, (c) promptly
notify Agent of any release of a Hazardous Material of any reportable quantity
from or onto property owned or operated by any Borrower and take any Remedial
Actions required to ▇▇▇▇▇ said release or otherwise to come into compliance with
applicable Environmental Law, and (d) promptly provide Agent with written notice
within 10 days of the receipt of any of the following: (i) notice that an
Environmental Lien has been filed against any of the real or personal property
of any Borrower, (ii) commencement of any Environmental Action or notice that an
Environmental Action will be filed against any Borrower, and (iii) notice of a
violation, citation, or other administrative order which reasonably could be
expected to result in a Material Adverse Change.
6.15 DISCLOSURE UPDATES. Promptly and in no event later than 5
Business Days after obtaining knowledge thereof, (a) notify Agent if any written
information, exhibit, or report furnished to the Lender Group contained any
untrue statement of a material fact or omitted to state any material fact
necessary to make the statements contained therein not misleading in light of
the circumstances in which made, and (b) correct any material defect or error
that may be discovered therein or in any Loan Document or in the execution,
acknowledgement, filing, or recordation thereof.
6.16 INTELLECTUAL PROPERTY. Comply with its continuing
obligations described in SECTION 5.16, the Copyright Security Agreement and the
Trademark Security Agreement.
6.17 COPYRIGHT REGISTRATIONS; DEPOSIT MATERIALS.
(a) No less frequently than once per calendar quarter,
but in any event prior to the generation of any Accounts from the marketing,
sale, license or distribution of computer software products or other Copyrights,
unless Agent in Agent's sole discretion agrees otherwise, each Borrower shall
(i) cause all domestic Copyrights that are used in or related to any Marketed
Software owned by a Borrower that are not already the subject of a registration
with the Copyright Office to be registered with the Copyright Office in a manner
sufficient to impart constructive notice of such Borrower's ownership thereof
which obligation may be satisfied by such Borrower by filing applications for
registration in proper form for filing with the Copyright Office and otherwise
making proper application for, and paying all fees necessary to obtain,
expedited treatment from the Copyright Office for registration of the Copyrights
related to such applications for registration, and (ii) cause to be prepared,
executed, and filed with the Copyright Office, an amendment to Copyright
Security Agreement substantially in the form of Schedule C to the Copyright
Security Agreement, with supplemental schedules reflecting the security interest
of Agent in such new copyrights, which shall be in form and content suitable for
registration with the Copyright Office so as to give constructive notice of the
transfer by such Borrower to Agent of a security interest in such Copyrights
and, in any event, substantially in the form of Schedule C to the Copyright
Security Agreement. Agent agrees to file the amendment to Copyright Security
Agreement encumbering specific copyrights with the Copyright Office promptly
upon receipt of notice by a Borrower of all information necessary to file such
amendment to Copyright Security Agreement.
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(b) Prior to the generation of any Accounts from the
marketing, sale, license or distribution of any Software (including any new
version of any Marketed Software), each Borrower shall cause all versions of
such Software to be deposited in escrow with DSI in accordance with Section 1.7
of the Source Code Escrow Agreement.
6.18 MAINTENANCE CONTRACTS. Enter into Maintenance Contracts
that are substantially in the form attached hereto as EXHIBIT M-1.
7. NEGATIVE COVENANTS.
Each Borrower covenants and agrees that, so long as any credit
hereunder shall be available and until full and final payment of the
Obligations, Borrowers will not and will not permit any of their respective
Subsidiaries to do any of the following:
7.1 INDEBTEDNESS. Create, incur, assume, permit, guarantee, or
otherwise become or remain, directly or indirectly, liable with respect to any
Indebtedness, except:
(a) Indebtedness evidenced by this Agreement and the other
Loan Documents, together with Indebtedness owed to Underlying Issuers with
respect to Underlying Letters of Credit;
(b) Indebtedness set forth on SCHEDULE 5.20;
(c) Permitted Purchase Money Indebtedness;
(d) refinancings, renewals, or extensions of Indebtedness
permitted under clauses (b) and (c) of this SECTION 7.1 (and continuance or
renewal of any Permitted Liens associated therewith) so long as: (i) the terms
and conditions of such refinancings, renewals, or extensions do not, in Agent's
judgment, materially impair the prospects of repayment of the Obligations by
Borrowers or materially impair Borrowers' creditworthiness, (ii) such
refinancings, renewals, or extensions do not result in an increase in the
principal amount of, or interest rate with respect to, the Indebtedness so
refinanced, renewed, or extended, (iii) such refinancings, renewals, or
extensions do not result in a shortening of the average weighted maturity of the
Indebtedness so refinanced, renewed, or extended, nor are they on terms or
conditions, that, taken as a whole, are materially more burdensome or
restrictive to the applicable Borrower, (iv) if the Indebtedness that is
refinanced, renewed, or extended was subordinated in right of payment to the
Obligations, then the terms and conditions of the refinancing, renewal, or
extension Indebtedness must be include subordination terms and conditions that
are at least as favorable to the Lender Group as those that were applicable to
the refinanced, renewed, or extended Indebtedness, and (v) no Indebtedness owing
to Softech is refinanced, renewed or extended by Softech or any Affiliate
thereof;
(e) Indebtedness owing by a Borrower to another Borrower,
provided that such Indebtedness is subject to the terms of the Intercompany
Subordination Agreement; and
(f) Indebtedness outstanding under the PSI Notes in an
aggregate principal amount not to exceed $1,573,413 at any one time outstanding,
provided that Parent shall not make any payments of principal or interest on the
PSI Notes if, at the time of making
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any such payment and immediately after giving effect thereto, a Default or Event
of Default shall exist; and
(g) Indebtedness comprising Permitted Investments.
7.2 LIENS. Create, incur, assume, or permit to exist, directly
or indirectly, any Lien on or with respect to any of its assets, of any kind,
whether now owned or hereafter acquired, or any income or profits therefrom,
except for Permitted Liens (including Liens that are replacements of Permitted
Liens to the extent that the original Indebtedness is refinanced, renewed, or
extended under SECTION 7.1(d) and so long as the replacement Liens only encumber
those assets that secured the refinanced, renewed, or extended Indebtedness).
7.3 RESTRICTIONS ON FUNDAMENTAL CHANGES.
(a) Enter into any merger, consolidation, reorganization,
or recapitalization, or reclassify its Stock.
(b) Liquidate, wind up, or dissolve itself (or suffer any
liquidation or dissolution).
(c) Convey, sell, lease, license, assign, transfer, or
otherwise dispose of, in one transaction or a series of transactions, all or any
substantial part of its assets.
Clauses (a), (b) and (c) of this SECTION 7.3 shall not apply to the merger or
consolidation of brightwhite with and into the Parent in accordance with SECTION
6.13.
7.4 DISPOSAL OF ASSETS. Other than Permitted Dispositions,
convey, sell, lease, license, assign, transfer, or otherwise dispose of any of
the assets of any Borrower.
7.5 CHANGE NAME. Change any Borrower's name, FEIN, corporate
structure or identity, or add any new fictitious name; PROVIDED, HOWEVER, that a
Borrower may change its name upon at least 30 days prior written notice by
Administrative Borrower to Agent of such change and so long as, at the time of
such written notification, such Borrower provides any financing statements or
fixture filings necessary to perfect and continue perfected Agent's Liens.
7.6 GUARANTEE. Guarantee or otherwise become in any way liable
with respect to the obligations of any third Person except (a) by endorsement of
instruments or items of payment for deposit to the account of Borrowers or which
are transmitted or turned over to Agent and (b) for guarantees of Indebtedness
permitted under SECTION 7.1.
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7.7 NATURE OF BUSINESS. Engage in any business other than the
business of providing integrated enterprise software solutions for mid-sized
manufacturing and distribution companies and business units of larger companies,
including e-commerce, e-procurement, enterprise resource planning, supply chain
and CRM solutions and other activities necessary to conduct the foregoing.
7.8 PREPAYMENTS AND AMENDMENTS.
(a) Except in connection with a refinancing permitted by
SECTION 7.1(d), prepay, redeem, defease, purchase, or otherwise acquire any
Indebtedness of any Borrower, other than the Obligations in accordance with this
Agreement; provided, however, any Borrower or any of its Subsidiaries may prepay
Indebtedness owing by such Person to any Borrower, and
(b) Except in connection with a refinancing permitted by
SECTION 7.1(d), directly or indirectly, amend, modify, alter, increase, or
change any of the terms or conditions of any agreement, instrument, document,
indenture, or other writing evidencing or concerning Indebtedness permitted
under SECTIONS 7.1(b), (c), (e) OR (f).
(c) Amend, modify or otherwise change (i) the Governing
Documents of any Borrower, including, without limitation, by the filing or
modification of any certificate of designation, or (ii) any agreement or
arrangement entered into by it with respect to any of its Stock (including any
shareholders' agreement), or enter into any new agreement with respect to the
Stock of any Borrower, except any such amendments, modifications or changes or
any such new agreements or arrangements pursuant to clause (ii) of this
paragraph (c) that either individually or in the aggregate, could not reasonably
be expected (A) to have a Material Adverse Effect, (B) to have an adverse impact
on the Warrants or the Registration Rights Agreement, or (C) to impair any
Borrower's ability to conduct any aspect of its business or perform or satisfy
any representation, warranty or covenant contained in this Agreement or any
other Loan Document.
7.9 CHANGE OF CONTROL. Cause, permit, or suffer, directly or
indirectly, any Change of Control.
7.10 CONSIGNMENTS. Consign any Inventory or sell any Inventory
on ▇▇▇▇ and hold, sale or return, sale on approval, or other conditional terms
of sale.
7.11 DISTRIBUTIONS. Make any distribution or declare or pay
any dividends (in cash or other property, other than Common Stock) on, or
purchase, acquire, redeem, or retire any of any Borrower's Stock, of any class,
whether now or hereafter outstanding, other than (a) distributions or
declaration and payment of dividends by a Borrower to another Borrower or by a
Subsidiary of a Borrower to any Borrower, (b) the issuance of Common Stock
pursuant to Parent's employee compensation or benefit plans which have been
approved by Parent's Board of Directors, (c) the conversion of Parent's
preferred Stock into shares of its Common Stock or (d) the issuance of shares of
Parent's Common Stock upon the exercise of Parent's warrants outstanding as of
the Closing Date (including the Warrants).
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7.12 ACCOUNTING METHODS. Modify or change its method of
accounting (other than as may be required to conform to GAAP) or enter into,
modify, or terminate any agreement currently existing, or at any time hereafter
entered into with any third party accounting firm or service bureau for the
preparation or storage of Borrowers' accounting records without said accounting
firm or service bureau agreeing to provide Agent information regarding the
Collateral or Borrowers' financial condition.
7.13 INVESTMENTS. Except for Permitted Investments, directly
or indirectly, make or acquire any Investment, or incur any liabilities
(including contingent obligations) for or in connection with any Investment;
PROVIDED, HOWEVER, that Borrowers shall not have Permitted Investments (other
than in the Cash Management Accounts) in excess of $500,000 outstanding at any
one time unless the applicable Borrower and the applicable securities
intermediary or bank have entered into Control Agreements or similar
arrangements governing such Permitted Investments, as Agent shall determine in
its Permitted Discretion, to perfect (and further establish) the Agent's Liens
in such Permitted Investments.
7.14 TRANSACTIONS WITH AFFILIATES. Except for agreements set
forth on Schedule 7.14 or transactions among the Borrowers, directly or
indirectly enter into or permit to exist any transaction with any Affiliate of
any Borrower except for transactions that are in the ordinary course of
Borrowers' business, upon fair and reasonable terms, that are fully disclosed to
Agent, and that are no less favorable to Borrowers than would be obtained in an
arm's length transaction with a non-Affiliate.
7.15 SUSPENSION. Suspend or go out of a substantial portion of
its business.
7.16 COMPENSATION. Increase the annual fee or per-meeting fees
paid to the members of its Board of Directors during any year by more than 15%
over the prior year; pay or accrue total cash compensation, during any year, to
its officers and senior management employees in an aggregate amount in excess of
115% of that paid or accrued in the prior year except pursuant to employee
compensation packages approved by Parent's Board of Directors or the
compensation committee of Parent's Board of Directors that are either (i)
disclosed in filings made by Parent with the SEC, if required, copies of which
have been furnished to Agent in accordance with SECTION 6.3(d) or (ii) in the
event any such compensation package is not disclosed in filings made by Parent
with the SEC, copies of such compensation package have been furnished by Parent
to Agent.
7.17 USE OF PROCEEDS. Use the proceeds of the Advances and the
Term Loan for any purpose other than (a) on the Closing Date, (i) to repay in
full the outstanding principal, accrued interest, and accrued fees and expenses
owing to Existing Lender, (ii) to pay amounts due and payable under the PSI
Notes to the extent permitted hereunder, and (iii) to pay transactional fees,
costs, and expenses incurred in connection with this Agreement, the other Loan
Documents, and the transactions contemplated hereby and thereby, and (b)
thereafter, consistent with the terms and conditions hereof, for its lawful and
permitted purposes.
7.18 CHANGE IN LOCATION OF CHIEF EXECUTIVE OFFICE; INVENTORY
AND EQUIPMENT WITH BAILEES. Relocate its chief executive office to a new
location without Administrative Borrower providing 30 days prior written
notification thereof to Agent and so
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long as, at the time of such written notification, the applicable Borrower
provides any financing statements or fixture filings necessary to perfect and
continue perfected the Agent's Liens and also provides to Agent a Collateral
Access Agreement with respect to such new location. The Inventory and Equipment
shall not at any time now or hereafter be stored with a bailee, warehouseman, or
similar party without Agent's prior written consent.
7.19 SECURITIES ACCOUNTS. Establish or maintain any Securities
Account unless Agent shall have received a Control Agreement in respect of such
Securities Account. Borrowers agree to not transfer assets out of any Securities
Account; PROVIDED, HOWEVER, that, so long as no Event of Default has occurred
and is continuing or would result therefrom, Borrowers may use such assets (and
the proceeds thereof) to the extent not prohibited by this Agreement.
7.20 FINANCIAL COVENANTS.
(a) Fail to maintain:
(i) MINIMUM EBITDA. EBITDA, measured on a fiscal
quarter-end basis, of not less than the required amount set forth in
the following table for the applicable period set forth opposite
thereto:
----------------------------------------------------------------------------------------------------
APPLICABLE AMOUNT APPLICABLE PERIOD
----------------------------------------------------------------------------------------------------
$(20,500,000) For the 12 month period ending
June 30, 2001
----------------------------------------------------------------------------------------------------
$3,000,000 For the 3 month period ending
September 30, 2001
----------------------------------------------------------------------------------------------------
$6,600,000 For the 6 month period ending
December 31, 2001
----------------------------------------------------------------------------------------------------
$8,500,000 For the 9 month period ending
March 31, 2002
----------------------------------------------------------------------------------------------------
$11,300,000 For the 12 month period ending
June 30, 2002
----------------------------------------------------------------------------------------------------
$12,000,000 For the 12 month period ending
each fiscal quarter thereafter
----------------------------------------------------------------------------------------------------
(ii) TANGIBLE NET WORTH. Tangible Net Worth of at
least the required amount set forth in the following table as of the
applicable date set forth opposite thereto:
----------------------------------------------------------------------------------------------------
APPLICABLE AMOUNT APPLICABLE DATE
----------------------------------------------------------------------------------------------------
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----------------------------------------------------------------------------------------------------
APPLICABLE AMOUNT APPLICABLE DATE
----------------------------------------------------------------------------------------------------
$10,100,000 June 30, 2001
----------------------------------------------------------------------------------------------------
$12,500,000 September 30, 2001
----------------------------------------------------------------------------------------------------
$14,500,000 December 31, 2001
----------------------------------------------------------------------------------------------------
$15,400,000 March 31, 2002
----------------------------------------------------------------------------------------------------
$17,000,000 June 30, 2002 and each
fiscal quarter end thereafter
----------------------------------------------------------------------------------------------------
(iii) LEVERAGE RATIO. Permit the ratio of (i) the
aggregate amount of the Indebtedness of Parent and its Subsidiaries
divided by (ii) EBITDA, for the applicable period set forth below to be
less than the applicable ratio set forth below:
----------------------------------------------------------------------------------------------------
LEVERAGE RATIO APPLICABLE PERIOD
----------------------------------------------------------------------------------------------------
5.40:1 For the 3 month period ending
September 30, 2001
----------------------------------------------------------------------------------------------------
2.20:1 For the 6 month period ending
December 31, 2001
----------------------------------------------------------------------------------------------------
1.50:1 For the 9 month period ending
March 31, 2002
----------------------------------------------------------------------------------------------------
1.00:1 For the 12 month period ending
June 30, 2002
----------------------------------------------------------------------------------------------------
0.85:1 For the 12 month period ending
each fiscal quarter thereafter
----------------------------------------------------------------------------------------------------
(b) Make:
(i) CAPITAL EXPENDITURES. Capital expenditures (excluding
expenditures relating to capitalized Software) in any fiscal year in
excess of the amount set forth in the following table for the
applicable period:
----------------------------------------------------------------------------------------------------
Fiscal Year 2002 Fiscal Year 2003 Fiscal Year 2004
----------------------------------------------------------------------------------------------------
$2,600,000 $3,500,000 $4,600,000
----------------------------------------------------------------------------------------------------
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8. EVENTS OF DEFAULT.
Any one or more of the following events shall constitute an
event of default (each, an "Event of Default") under this Agreement:
8.1 If Borrowers fail to pay when due and payable or when
declared due and payable (a) all or any portion of the principal amount of any
Advance or the Term Loan or (b) all or any portion of the other Obligations
(whether of interest (including any interest which, but for the provisions of
the Bankruptcy Code, would have accrued on such amounts), fees and charges due
the Lender Group, reimbursement of Lender Group Expenses, or other amounts
constituting Obligations), in the case of this clause (b), within 3 days after
the due date for such Obligations ;
8.2 If Borrowers fail to perform, keep, or observe any term,
provision, condition, covenant, or agreement contained in SECTIONS 6.1, 6.2 (but
only up to three times during any 12-month period), 6.3, 6.6, 6.9, 6.10, 6.11
and 6.15 of this Agreement, or comparable provisions of the other Loan
Documents, within 15 days of the date when required (or within 5 days of the
date when required in the case of SECTION 6.2 or SECTION 6.3), or if a Borrower
otherwise fails to perform, keep, or observe any other term, provision,
condition, covenant, or agreement contained in this Agreement or in any of the
other Loan Documents (to the extent not otherwise provided for in SECTION 8.1 or
this SECTION 8.2);
8.3 If any material portion of any Borrower's or any of its
Subsidiaries' assets is attached, seized, subjected to a writ or distress
warrant, levied upon, or comes into the possession of any third Person;
8.4 If an Insolvency Proceeding is commenced by any Borrower
or any of its Subsidiaries;
8.5 If an Insolvency Proceeding is commenced against any
Borrower, or any of its Subsidiaries, and any of the following events occur: (a)
the applicable Borrower or the Subsidiary consents to the institution of the
Insolvency Proceeding against it, (b) the petition commencing the Insolvency
Proceeding is not timely controverted, (c) the petition commencing the
Insolvency Proceeding is not dismissed within 60 calendar days of the date of
the filing thereof; PROVIDED, HOWEVER, that, during the pendency of such period,
Agent (including any successor agent) and each other member of the Lender Group
shall be relieved of their obligation to extend credit hereunder, (d) an interim
trustee is appointed to take possession of all or any substantial portion of the
properties or assets of, or to operate all or any substantial portion of the
business of, any Borrower or any of its Subsidiaries, or (e) an order for relief
shall have been entered therein;
8.6 If any Borrower or any of its Subsidiaries is enjoined,
restrained, or in any way prevented by court order from continuing to conduct
all or any material part of its business affairs;
8.7 If a notice of Lien, levy, or assessment securing or
otherwise with respect to Indebtedness or an obligation for the payment of money
in an aggregate amount in excess of $100,000 is filed of record with respect to
any Borrower's or any of its Subsidiaries' assets by the
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United States, or any department, agency, or instrumentality thereof, or by any
state, county, municipal, or governmental agency, or if any taxes or debts owing
at any time hereafter to any one or more of such entities becomes a Lien,
whether ▇▇▇▇▇▇ or otherwise, upon any Borrower's or any of its Subsidiaries'
assets and the same is not paid on the payment date thereof;
8.8 If a judgment or other claim becomes a Lien or encumbrance
upon any material portion of any Borrower's or any of its Subsidiaries'
properties or assets;
8.9 If there is a default in any material agreement to which
any Borrower or any of its Subsidiaries is a party and such default (a) occurs
at the final maturity of the obligations thereunder, or (b) results in a right
by the other party thereto, irrespective of whether exercised, to accelerate the
maturity of the applicable Borrower's or its Subsidiaries' obligations
thereunder, to terminate such agreement, or to refuse to renew such agreement
pursuant to an automatic renewal right therein;
8.10 If any Borrower or any of its Subsidiaries makes any
payment on account of Indebtedness that has been contractually subordinated in
right of payment to the payment of the Obligations, except to the extent such
payment is permitted by the terms of the subordination provisions applicable to
such Indebtedness;
8.11 If any material misstatement or misrepresentation exists
now or hereafter in any warranty, representation, statement, or Record made to
the Lender Group by any Borrower, its Subsidiaries, or any officer, employee,
agent, or director of any Borrower or any of its Subsidiaries;
8.12 [Intentionally Omitted];
8.13 If this Agreement or any other Loan Document that
purports to create a Lien, shall, for any reason, fail or cease to create a
valid and perfected and, except to the extent permitted by the terms hereof or
thereof, first priority Lien on or security interest in the Collateral covered
hereby or thereby; or
8.14 Any provision of any Loan Document shall at any time for
any reason be declared to be null and void, or the validity or enforceability
thereof shall be contested by any Borrower, or a proceeding shall be commenced
by any Borrower, or by any Governmental Authority having jurisdiction over any
Borrower, seeking to establish the invalidity or unenforceability thereof, or
any Borrower shall deny that any Borrower has any liability or obligation
purported to be created under any Loan Document.
9. THE LENDER GROUP'S RIGHTS AND REMEDIES.
9.1 RIGHTS AND REMEDIES. Upon the occurrence, and during the
continuation, of an Event of Default, the Required Lenders (at their election
but without notice of their election and without demand) may authorize and
instruct Agent to do any one or more of the following on behalf of the Lender
Group (and Agent, acting upon the instructions of the Required Lenders, shall do
the same on behalf of the Lender Group), all of which are authorized by
Borrowers:
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(a) Declare all Obligations, whether evidenced by this
Agreement, by any of the other Loan Documents, or otherwise, immediately due and
payable;
(b) Cease advancing money or extending credit to or for
the benefit of Borrowers under this Agreement, under any of the Loan Documents,
or under any other agreement between Borrowers and the Lender Group;
(c) Terminate this Agreement and any of the other Loan
Documents as to any future liability or obligation of the Lender Group, but
without affecting any of the Agent's Liens in the Collateral and without
affecting the Obligations;
(d) Settle or adjust disputes and claims directly with
Account Debtors for amounts and upon terms which Agent considers advisable, and
in such cases, Agent will credit the Loan Account with only the net amounts
received by Agent in payment of such disputed Accounts after deducting all
Lender Group Expenses incurred or expended in connection therewith;
(e) Cause Borrowers to hold all returned Inventory in
trust for the Lender Group, segregate all returned Inventory from all other
assets of Borrowers or in Borrowers' possession and conspicuously label said
returned Inventory as the property of the Lender Group;
(f) Without notice to or demand upon any Borrower, make
such payments and do such acts as Agent considers necessary or reasonable to
protect its security interests in the Collateral. Each Borrower agrees to
assemble the Collateral if Agent so requires, and to make the Collateral
available to Agent at a place that Agent may designate which is reasonably
convenient to both parties. Each Borrower authorizes Agent to enter the premises
where the Collateral is located, to take and maintain possession of the
Collateral, or any part of it, and to pay, purchase, contest, or compromise any
Lien that in Agent's determination appears to conflict with the Agent's Liens
and to pay all expenses incurred in connection therewith and to charge
Borrowers' Loan Account therefor. With respect to any of Borrowers' owned or
leased premises, each Borrower hereby grants Agent a license to enter into
possession of such premises and to occupy the same, without charge, in order to
exercise any of the Lender Group's rights or remedies provided herein, at law,
in equity, or otherwise;
(g) Without notice to any Borrower (such notice being
expressly waived), and without constituting a retention of any collateral in
satisfaction of an obligation (within the meaning of the Code), set off and
apply to the Obligations any and all (i) balances and deposits of any Borrower
held by the Lender Group (including any amounts received in the Cash Management
Accounts), or (ii) Indebtedness at any time owing to or for the credit or the
account of any Borrower held by the Lender Group;
(h) Hold, as cash collateral, any and all balances and
deposits of any Borrower held by the Lender Group, and any amounts received in
the Cash Management Accounts, to secure the full and final repayment of all of
the Obligations;
(i) Ship, reclaim, recover, store, finish, maintain,
repair, prepare for sale, advertise for sale, and sell (in the manner provided
for herein) the Collateral. Each
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Borrower hereby grants to Agent a license or other right to use, without charge,
such Borrower's labels, patents, copyrights, trade secrets, trade names,
trademarks, service marks, and advertising matter, or any property of a similar
nature, as it pertains to the Collateral, in completing production of,
advertising for sale, and selling any Collateral and such Borrower's rights
under all licenses and all franchise agreements shall inure to the Lender
Group's benefit;
(j) Sell the Collateral at either a public or private
sale, or both, by way of one or more contracts or transactions, for cash or on
terms, in such manner and at such places (including Borrowers' premises) as
Agent determines is commercially reasonable. It is not necessary that the
Collateral be present at any such sale;
(k) Agent shall give notice of the disposition of the
Collateral as follows:
(i) Agent shall give Administrative Borrower (for the
benefit of the applicable Borrower) a notice in writing of the time and
place of public sale, or, if the sale is a private sale or some other
disposition other than a public sale is to be made of the Collateral,
the time on or after which the private sale or other disposition is to
be made; and
(ii) The notice shall be personally delivered or
mailed, postage prepaid, to Administrative Borrower as provided in
SECTION 12, at least 10 days before the earliest time of disposition
set forth in the notice; no notice needs to be given prior to the
disposition of any portion of the Collateral that is perishable or
threatens to decline speedily in value or that is of a type customarily
sold on a recognized market;
(l) Agent, on behalf of the Lender Group may credit bid
and purchase at any public sale;
(m) Agent may seek the appointment of a receiver or keeper
to take possession of all or any portion of the Collateral or to operate same
and, to the maximum extent permitted by law, may seek the appointment of such a
receiver without the requirement of prior notice or a hearing;
(n) The Lender Group shall have all other rights and
remedies available to it at law or in equity pursuant to any other Loan
Documents; and
(o) Any deficiency that exists after disposition of the
Collateral as provided above will be paid immediately by Borrowers. Any excess
will be returned, without interest and subject to the rights of third Persons,
by Agent to Administrative Borrower (for the benefit of the applicable
Borrower).
9.2 REMEDIES CUMULATIVE. The rights and remedies of the Lender
Group under this Agreement, the other Loan Documents, and all other agreements
shall be cumulative. The Lender Group shall have all other rights and remedies
not inconsistent herewith as provided under the Code, by law, or in equity. No
exercise by the Lender Group of one right or remedy shall be deemed an election,
and no waiver by the Lender Group of any Event of Default shall be
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deemed a continuing waiver. No delay by the Lender Group shall constitute a
waiver, election, or acquiescence by it.
10. TAXES AND EXPENSES.
If any Borrower fails to pay any monies (whether taxes,
assessments, insurance premiums, or, in the case of leased properties or assets,
rents or other amounts payable under such leases) due to third Persons, or fails
to make any deposits or furnish any required proof of payment or deposit, all as
required under the terms of this Agreement, then, Agent, in its sole discretion
and without prior notice to any Borrower, may do any or all of the following:
(a) make payment of the same or any part thereof, (b) set up such reserves in
Borrowers' Loan Account as Agent deems necessary to protect the Lender Group
from the exposure created by such failure, or (c) in the case of the failure to
comply with SECTION 6.8 hereof, obtain and maintain insurance policies of the
type described in SECTION 6.8 and take any action with respect to such policies
as Agent deems prudent. Any such amounts paid by Agent shall constitute Lender
Group Expenses and any such payments shall not constitute an agreement by the
Lender Group to make similar payments in the future or a waiver by the Lender
Group of any Event of Default under this Agreement. Agent need not inquire as
to, or contest the validity of, any such expense, tax, or Lien and the receipt
of the usual official notice for the payment thereof shall be conclusive
evidence that the same was validly due and owing.
11. WAIVERS; INDEMNIFICATION.
11.1 DEMAND; PROTEST; ETC. Except as provided in this
Agreement or in the other Loan Documents, each Borrower waives demand, protest,
notice of protest, notice of default or dishonor, notice of payment and
nonpayment, nonpayment at maturity, release, compromise, settlement, extension,
or renewal of documents, instruments, chattel paper, and guarantees at any time
held by the Lender Group on which each such Borrower may in any way be liable.
11.2 THE LENDER GROUP'S LIABILITY FOR COLLATERAL. Each
Borrower hereby agrees that: (a) so long as the Lender Group complies with its
obligations, if any, under the Code, Agent shall not in any way or manner be
liable or responsible for: (i) the safekeeping of the Collateral, (ii) any loss
or damage thereto occurring or arising in any manner or fashion from any cause,
(iii) any diminution in the value thereof, or (iv) any act or default of any
carrier, warehouseman, bailee, forwarding agency, or other Person, and (b) all
risk of loss, damage, or destruction of the Collateral shall be borne by
Borrowers.
11.3 INDEMNIFICATION. Each Borrower shall pay, indemnify,
defend, and hold the Agent-Related Persons, the Lender-Related Persons with
respect to each Lender, each Participant, and each of their respective officers,
directors, employees, agents, and attorneys-in-fact (each, an "Indemnified
Person") harmless (to the fullest extent permitted by law) from and against any
and all claims, demands, suits, actions, investigations, proceedings, and
damages, and all reasonable attorneys fees and disbursements and other costs and
expenses actually incurred in connection therewith (as and when they are
incurred and irrespective of whether suit is brought), at any time asserted
against, imposed upon, or incurred by any of them (a) in connection with or as a
result of or related to the execution, delivery, enforcement, performance,
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or administration of this Agreement, any of the other Loan Documents, or the
transactions contemplated hereby or thereby, and (b) with respect to any
investigation, litigation, or proceeding related to this Agreement, any other
Loan Document, or the use of the proceeds of the credit provided hereunder
(irrespective of whether any Indemnified Person is a party thereto), or any act,
omission, event, or circumstance in any manner related thereto (all the
foregoing, collectively, the "Indemnified Liabilities"). The foregoing to the
contrary notwithstanding, Borrowers shall have no obligation to any Indemnified
Person under this SECTION 11.3 with respect to any Indemnified Liability that a
court of competent jurisdiction finally determines to have resulted from the
gross negligence or willful misconduct of such Indemnified Person. This
provision shall survive the termination of this Agreement and the repayment of
the Obligations. If any Indemnified Person makes any payment to any other
Indemnified Person with respect to an Indemnified Liability as to which
Borrowers were required to indemnify the Indemnified Person receiving such
payment, the Indemnified Person making such payment is entitled to be
indemnified and reimbursed by Borrowers with respect thereto. WITHOUT
LIMITATION, THE FOREGOING INDEMNITY SHALL APPLY TO EACH INDEMNIFIED PERSON WITH
RESPECT TO INDEMNIFIED LIABILITIES WHICH IN WHOLE OR IN PART CAUSED BY OR ARISE
OUT OF ANY NEGLIGENT ACT OR OMISSION OF SUCH INDEMNIFIED PERSON OR OF ANY OTHER
PERSON.
12. NOTICES.
Unless otherwise provided in this Agreement, all notices or
demands by Borrowers or Agent to the other relating to this Agreement or any
other Loan Document shall be in writing and (except for financial statements and
other informational documents which may be sent by first-class mail, postage
prepaid) shall be personally delivered or sent by registered or certified mail
(postage prepaid, return receipt requested), overnight courier, electronic mail
(at such email addresses as the Administrative Borrower or Agent, as applicable,
may designate to each other in accordance herewith), or telefacsimile to
Borrowers in care of Administrative Borrower or to Agent, as the case may be, at
its address set forth below:
If to Administrative FRONTSTEP, INC.
Borrower: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Fax No. ▇▇▇-▇▇▇-▇▇▇▇
with copies to: VORYS, ▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Fax No. ▇▇▇-▇▇▇-▇▇▇▇
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If to Agent: FOOTHILL CAPITAL CORPORATION
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: Business Finance Division
Manager
Fax No. ▇▇▇-▇▇▇-▇▇▇▇
with copies to: ▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Fax No. ▇▇▇-▇▇▇-▇▇▇▇
Agent and Borrowers may change the address at which they are
to receive notices hereunder, by notice in writing in the foregoing manner given
to the other party. All notices or demands sent in accordance with this SECTION
12, other than notices by Agent in connection with enforcement rights against
the Collateral under the provisions of the Code, shall be deemed received on the
earlier of the date of actual receipt or 3 Business Days after the deposit
thereof in the mail. Each Borrower acknowledges and agrees that notices sent by
the Lender Group in connection with the exercise of enforcement rights against
Collateral under the provisions of the Code shall be deemed sent when deposited
in the mail or personally delivered, or, where permitted by law, transmitted by
telefacsimile or any other method set forth above.
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
(a) THE VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS (UNLESS EXPRESSLY PROVIDED TO THE CONTRARY IN ANOTHER LOAN DOCUMENT IN
RESPECT OF SUCH OTHER LOAN DOCUMENT), THE CONSTRUCTION, INTERPRETATION, AND
ENFORCEMENT HEREOF AND THEREOF, AND THE RIGHTS OF THE PARTIES HERETO AND THERETO
WITH RESPECT TO ALL MATTERS ARISING HEREUNDER OR THEREUNDER OR RELATED HERETO OR
THERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK.
(b) THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS
ARISING IN CONNECTION WITH THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE
TRIED AND LITIGATED ONLY IN THE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY
OF NEW YORK, STATE OF NEW YORK, PROVIDED, HOWEVER, THAT ANY SUIT SEEKING
ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT AGENT'S
OPTION, IN THE COURTS OF ANY JURISDICTION WHERE AGENT ELECTS TO BRING SUCH
ACTION OR WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND. BORROWERS AND
THE LENDER GROUP WAIVE, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT
EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM
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NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN
ACCORDANCE WITH THIS SECTION 13(b).
BORROWERS AND THE LENDER GROUP HEREBY WAIVE THEIR RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN,
INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER
COMMON LAW OR STATUTORY CLAIMS. BORROWERS AND THE LENDER GROUP REPRESENT THAT
EACH HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF
LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A
TRIAL BY THE COURT.
14. ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS.
14.1 ASSIGNMENTS AND PARTICIPATIONS.
(a) Any Lender may, with the written consent of Agent
(provided that no written consent of Agent shall be required in connection with
any assignment and delegation by a Lender to an Eligible Transferee), assign and
delegate to one or more assignees (each an "Assignee") all, or any ratable part
of all, of the Obligations, the Commitments and the other rights and obligations
of such Lender hereunder and under the other Loan Documents, in a minimum amount
of $5,000,000; PROVIDED, HOWEVER, that Borrowers and Agent may continue to deal
solely and directly with such Lender in connection with the interest so assigned
to an Assignee until (i) written notice of such assignment, together with
payment instructions, addresses, and related information with respect to the
Assignee, have been given to Administrative Borrower and Agent by such Lender
and the Assignee, (ii) such Lender and its Assignee have delivered to
Administrative Borrower and Agent an Assignment and Acceptance in form and
substance satisfactory to Agent, and (iii) the assignor Lender or Assignee has
paid to Agent for Agent's separate account a processing fee in the amount of
$5,000. Anything contained herein to the contrary notwithstanding, the consent
of Agent shall not be required (and payment of any fees shall not be required)
if such assignment is in connection with any merger, consolidation, sale,
transfer, or other disposition of all or any substantial portion of the business
or loan portfolio of such Lender.
(b) From and after the date that Agent notifies the
assignor Lender (with a copy to Administrative Borrower) that it has received an
executed Assignment and Acceptance and payment of the above-referenced
processing fee, (i) the Assignee thereunder shall be a party hereto and, to the
extent that rights and obligations hereunder have been assigned to it pursuant
to such Assignment and Acceptance, shall have the rights and obligations of a
Lender under the Loan Documents, and (ii) the assignor Lender shall, to the
extent that rights and obligations hereunder and under the other Loan Documents
have been assigned by it pursuant to such Assignment and Acceptance, relinquish
its rights (except with respect to SECTION 11.3 hereof) and be released from its
obligations under this Agreement (and in the case of an Assignment and
Acceptance covering all or the remaining portion of an assigning Lender's rights
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and obligations under this Agreement and the other Loan Documents, such Lender
shall cease to be a party hereto and thereto), and such assignment shall affect
a novation between Borrowers and the Assignee.
(c) By executing and delivering an Assignment and
Acceptance, the assigning Lender thereunder and the Assignee thereunder confirm
to and agree with each other and the other parties hereto as follows: (1) other
than as provided in such Assignment and Acceptance, such assigning Lender makes
no representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement or any other Loan Document furnished
pursuant hereto, (2) such assigning Lender makes no representation or warranty
and assumes no responsibility with respect to the financial condition of
Borrowers or the performance or observance by Borrowers of any of their
obligations under this Agreement or any other Loan Document furnished pursuant
hereto, (3) such Assignee confirms that it has received a copy of this
Agreement, together with such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such
Assignment and Acceptance, (4) such Assignee will, independently and without
reliance upon Agent, such assigning Lender or any other Lender, and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement, (5) such Assignee appoints and authorizes Agent to take such
actions and to exercise such powers under this Agreement as are delegated to
Agent, by the terms hereof, together with such powers as are reasonably
incidental thereto, and (6) such Assignee agrees that it will perform all of the
obligations which by the terms of this Agreement are required to be performed by
it as a Lender.
(d) Immediately upon each Assignee's making its
processing fee payment under the Assignment and Acceptance and receipt and
acknowledgment by Agent of such fully executed Assignment and Acceptance, this
Agreement shall be deemed to be amended to the extent, but only to the extent,
necessary to reflect the addition of the Assignee and the resulting adjustment
of the Commitments arising therefrom. The Commitment allocated to each Assignee
shall reduce such Commitments of the assigning Lender pro tanto.
(e) Any Lender may at any time, with the written consent
of Agent, sell to one or more commercial banks, financial institutions, or other
Persons not Affiliates of such Lender (a "Participant") participating interests
in its Obligations, the Commitment, and the other rights and interests of that
Lender (the "Originating Lender") hereunder and under the other Loan Documents
(provided that no written consent of Agent shall be required in connection with
any sale of any such participating interests by a Lender to an Eligible
Transferee); PROVIDED, HOWEVER, that (i) the Originating Lender shall remain a
"Lender" for all purposes of this Agreement and the other Loan Documents and the
Participant receiving the participating interest in the Obligations, the
Commitments, and the other rights and interests of the Originating Lender
hereunder shall not constitute a "Lender" hereunder or under the other Loan
Documents and the Originating Lender's obligations under this Agreement shall
remain unchanged, (ii) the Originating Lender shall remain solely responsible
for the performance of such obligations, (iii) Borrowers, Agent, and the Lenders
shall continue to deal solely and directly with the Originating Lender in
connection with the Originating Lender's rights and obligations under this
Agreement
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and the other Loan Documents, (iv) no Lender shall transfer or grant any
participating interest under which the Participant has the right to approve any
amendment to, or any consent or waiver with respect to, this Agreement or any
other Loan Document, except to the extent such amendment to, or consent or
waiver with respect to this Agreement or of any other Loan Document would (A)
extend the final maturity date of the Obligations hereunder in which such
Participant is participating, (B) reduce the interest rate applicable to the
Obligations hereunder in which such Participant is participating, (C) release
all or a material portion of the Collateral or guaranties (except to the extent
expressly provided herein or in any of the Loan Documents) supporting the
Obligations hereunder in which such Participant is participating, (D) postpone
the payment of, or reduce the amount of, the interest or fees payable to such
Participant through such Lender, or (E) change the amount or due dates of
scheduled principal repayments or prepayments or premiums; and (v) all amounts
payable by Borrowers hereunder shall be determined as if such Lender had not
sold such participation; except that, if amounts outstanding under this
Agreement are due and unpaid, or shall have been declared or shall have become
due and payable upon the occurrence of an Event of Default, each Participant
shall be deemed to have the right of set-off in respect of its participating
interest in amounts owing under this Agreement to the same extent as if the
amount of its participating interest were owing directly to it as a Lender under
this Agreement. The rights of any Participant only shall be derivative through
the Originating Lender with whom such Participant participates and no
Participant shall have any rights under this Agreement or the other Loan
Documents or any direct rights as to the other Lenders, Agent, Borrowers, the
Collections, the Collateral, or otherwise in respect of the Obligations. No
Participant shall have the right to participate directly in the making of
decisions by the Lenders among themselves.
(f) In connection with any such assignment or
participation or proposed assignment or participation, a Lender may disclose all
documents and information which it now or hereafter may have relating to
Borrowers or Borrowers' business.
(g) Any other provision in this Agreement
notwithstanding, any Lender may at any time create a security interest in, or
pledge, all or any portion of its rights under and interest in this Agreement in
favor of any Federal Reserve Bank in accordance with Regulation A of the Federal
Reserve Bank or U.S. Treasury Regulation 31 CFR Section 203.14, and such Federal
Reserve Bank may enforce such pledge or security interest in any manner
permitted under applicable law.
14.2 SUCCESSORS. This Agreement shall bind and inure to the
benefit of the respective successors and assigns of each of the parties;
PROVIDED, HOWEVER, that Borrowers may not assign this Agreement or any rights or
duties hereunder without the Lenders' prior written consent and any prohibited
assignment shall be absolutely void ab initio. No consent to assignment by the
Lenders shall release any Borrower from its Obligations. A Lender may assign
this Agreement and the other Loan Documents and its rights and duties hereunder
and thereunder pursuant to SECTION 14.1 hereof and, except as expressly required
pursuant to SECTION 14.1 hereof, no consent or approval by any Borrower is
required in connection with any such assignment.
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15. AMENDMENTS; WAIVERS.
15.1 AMENDMENTS AND WAIVERS. No amendment or waiver of any
provision of this Agreement or any other Loan Document, and no consent with
respect to any departure by Borrowers therefrom, shall be effective unless the
same shall be in writing and signed by the Required Lenders (or by Agent at the
written request of the Required Lenders) and Administrative Borrower (on behalf
of all Borrowers) and then any such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given; PROVIDED,
HOWEVER, that no such waiver, amendment, or consent shall, unless in writing and
signed by all of the Lenders affected thereby and Administrative Borrower (on
behalf of all Borrowers) and acknowledged by Agent, do any of the following:
(a) increase or extend any Commitment of any Lender,
(b) postpone or delay any date fixed by this Agreement or
any other Loan Document for any payment of principal, interest, fees, or other
amounts due hereunder or under any other Loan Document,
(c) reduce the principal of, or the rate of interest on,
any loan or other extension of credit hereunder, or reduce any fees or other
amounts payable hereunder or under any other Loan Document,
(d) change the percentage of the Commitments that is
required to take any action hereunder,
(e) amend this Section or any provision of the Agreement
providing for consent or other action by all Lenders,
(f) release Collateral other than as permitted by SECTION
16.12,
(g) change the definition of "Required Lenders",
(h) contractually subordinate any of the Agent's Liens,
(i) release any Borrower from any obligation for the
payment of money, or
(j) change the definition of Borrowing Base or the
definitions of Eligible Accounts, Maximum Revolver Amount, Term Loan Amount, or
change SECTION 2.1(b); or
(k) amend any of the provisions of SECTION 16.
and, PROVIDED FURTHER, HOWEVER, that no amendment, waiver or consent shall,
unless in writing and signed by Agent, Issuing Lender, or Swing Lender, affect
the rights or duties of Agent, Issuing Lender, or Swing Lender, as applicable,
under this Agreement or any other Loan Document. The foregoing notwithstanding,
any amendment, modification, waiver, consent, termination, or release of, or
with respect to, any provision of this Agreement or any other Loan
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Document that relates only to the relationship of the Lender Group among
themselves, and that does not affect the rights or obligations of Borrowers,
shall not require consent by or the agreement of Borrowers.
15.2 REPLACEMENT OF HOLDOUT LENDER. If any action to be taken
by the Lender Group or Agent hereunder requires the unanimous consent,
authorization, or agreement of all Lenders, and a Lender ("Holdout Lender")
fails to give its consent, authorization, or agreement, then Agent, upon at
least 5 Business Days prior irrevocable notice to the Holdout Lender, may
permanently replace the Holdout Lender with one or more substitute Lenders
(each, a "Replacement Lender"), and the Holdout Lender shall have not right to
refuse to be replaced hereunder. Such notice to replace the Holdout Lender shall
specify an effective date for such replacement, which date shall not be later
than 15 Business Days after the date such notice is given.
Prior to the effective date of such replacement, the Holdout
Lender and each Replacement Lender shall execute and deliver an Assignment and
Acceptance Agreement, subject only to the Holdout Lender being repaid its share
of the outstanding Obligations (including an assumption of its Pro Rata Share of
the Risk Participation Liability) without any premium or penalty of any kind
whatsoever. If the Holdout Lender shall refuse or fail to execute and deliver
any such Assignment and Acceptance Agreement prior to the effective date of such
replacement, the Holdout Lender shall be deemed to have executed and delivered
such Assignment and Acceptance Agreement. The replacement of any Holdout Lender
shall be made in accordance with the terms of SECTION 14.1. Until such time as
the Replacement Lenders shall have acquired all of the Obligations, the
Commitments, and the other rights and obligations of the Holdout Lender
hereunder and under the other Loan Documents, the Holdout Lender shall remain
obligated to make the Holdout Lender's Pro Rata Share of Advances and to
purchase a participation in each Letter of Credit, in an amount equal to its Pro
Rata Share of the Risk Participation Liability of such Letter of Credit.
15.3 NO WAIVERS; CUMULATIVE REMEDIES. No failure by Agent or
any Lender to exercise any right, remedy, or option under this Agreement or, any
other Loan Document, or delay by Agent or any Lender in exercising the same,
will operate as a waiver thereof. No waiver by Agent or any Lender will be
effective unless it is in writing, and then only to the extent specifically
stated. No waiver by Agent or any Lender on any occasion shall affect or
diminish Agent's and each Lender's rights thereafter to require strict
performance by Borrowers of any provision of this Agreement. Agent's and each
Lender's rights under this Agreement and the other Loan Documents will be
cumulative and not exclusive of any other right or remedy that Agent or any
Lender may have.
16. AGENT; THE LENDER GROUP.
16.1 APPOINTMENT AND AUTHORIZATION OF AGENT. Each Lender
hereby designates and appoints Foothill as its representative under this
Agreement and the other Loan Documents and each Lender hereby irrevocably
authorizes Agent to take such action on its behalf under the provisions of this
Agreement and each other Loan Document and to exercise such powers and perform
such duties as are expressly delegated to Agent by the terms of this Agreement
or any other Loan Document, together with such powers as are reasonably
incidental
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thereto. Agent agrees to act as such on the express conditions contained in this
SECTION 16. The provisions of this SECTION 16 are solely for the benefit of
Agent, and the Lenders, and Borrowers shall have no rights as a third party
beneficiary of any of the provisions contained herein. Any provision to the
contrary contained elsewhere in this Agreement or in any other Loan Document
notwithstanding, Agent shall not have any duties or responsibilities, except
those expressly set forth herein, nor shall Agent have or be deemed to have any
fiduciary relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Loan Document or otherwise exist against Agent; it being
expressly understood and agreed that the use of the word "Agent" is for
convenience only, that Foothill is merely the representative of the Lenders, and
only has the contractual duties set forth herein. Except as expressly otherwise
provided in this Agreement, Agent shall have and may use its sole discretion
with respect to exercising or refraining from exercising any discretionary
rights or taking or refraining from taking any actions that Agent expressly is
entitled to take or assert under or pursuant to this Agreement and the other
Loan Documents. Without limiting the generality of the foregoing, or of any
other provision of the Loan Documents that provides rights or powers to Agent,
Lenders agree that Agent shall have the right to exercise the following powers
as long as this Agreement remains in effect: (a) maintain, in accordance with
its customary business practices, ledgers and records reflecting the status of
the Obligations, the Collateral, the Collections, and related matters, (b)
execute or file any and all financing or similar statements or notices,
amendments, renewals, supplements, documents, instruments, proofs of claim,
notices and other written agreements with respect to the Loan Documents, (c)
make Advances, for itself or on behalf of Lenders as provided in the Loan
Documents, (d) exclusively receive, apply, and distribute the Collections as
provided in the Loan Documents, (e) open and maintain such bank accounts and
cash management accounts as Agent deems necessary and appropriate in accordance
with the Loan Documents for the foregoing purposes with respect to the
Collateral and the Collections, (f) perform, exercise, and enforce any and all
other rights and remedies of the Lender Group with respect to Borrowers, the
Obligations, the Collateral, the Collections, or otherwise related to any of
same as provided in the Loan Documents, and (g) incur and pay such Lender Group
Expenses as Agent may deem necessary or appropriate for the performance and
fulfillment of its functions and powers pursuant to the Loan Documents.
16.2 DELEGATION OF DUTIES. Agent may execute any of its duties
under this Agreement or any other Loan Document by or through agents, employees
or attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. Agent shall not be responsible for the
negligence or misconduct of any agent or attorney-in-fact that it selects as
long as such selection was made without gross negligence or willful misconduct.
16.3 LIABILITY OF AGENT. None of the Agent-Related Persons
shall (i) be liable for any action taken or omitted to be taken by any of them
under or in connection with this Agreement or any other Loan Document or the
transactions contemplated hereby (except for its own gross negligence or willful
misconduct), or (ii) be responsible in any manner to any of the Lenders for any
recital, statement, representation or warranty made by any Borrower or any
Subsidiary or Affiliate of any Borrower, or any officer or director thereof,
contained in this Agreement or in any other Loan Document, or in any
certificate, report, statement or other document referred to or provided for in,
or received by Agent under or in connection with, this Agreement or any other
Loan Document, or the validity, effectiveness, genuineness,
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enforceability or sufficiency of this Agreement or any other Loan Document, or
for any failure of any Borrower or any other party to any Loan Document to
perform its obligations hereunder or thereunder. No Agent-Related Person shall
be under any obligation to any Lender to ascertain or to inquire as to the
observance or performance of any of the agreements contained in, or conditions
of, this Agreement or any other Loan Document, or to inspect the Books or
properties of Borrowers or the books or records or properties of any of
Borrowers' Subsidiaries or Affiliates.
16.4 RELIANCE BY AGENT. Agent shall be entitled to rely, and
shall be fully protected in relying, upon any writing, resolution, notice,
consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone
message, statement or other document or conversation believed by it to be
genuine and correct and to have been signed, sent, or made by the proper Person
or Persons, and upon advice and statements of legal counsel (including counsel
to Borrowers or counsel to any Lender), independent accountants and other
experts selected by Agent. Agent shall be fully justified in failing or refusing
to take any action under this Agreement or any other Loan Document unless Agent
shall first receive such advice or concurrence of the Lenders as it deems
appropriate and until such instructions are received, Agent shall act, or
refrain from acting, as it deems advisable. If Agent so requests, it shall first
be indemnified to its reasonable satisfaction by Lenders against any and all
liability and expense that may be incurred by it by reason of taking or
continuing to take any such action. Agent shall in all cases be fully protected
in acting, or in refraining from acting, under this Agreement or any other Loan
Document in accordance with a request or consent of the Lenders and such request
and any action taken or failure to act pursuant thereto shall be binding upon
all of the Lenders.
16.5 NOTICE OF DEFAULT OR EVENT OF DEFAULT. Agent shall not be
deemed to have knowledge or notice of the occurrence of any Default or Event of
Default, except with respect to defaults in the payment of principal, interest,
fees, and expenses required to be paid to Agent for the account of the Lenders,
except with respect to Events of Default of which Agent has actual knowledge,
unless Agent shall have received written notice from a Lender or Administrative
Borrower referring to this Agreement, describing such Default or Event of
Default, and stating that such notice is a "notice of default." Agent promptly
will notify the Lenders of its receipt of any such notice or of any Event of
Default of which Agent has actual knowledge. If any Lender obtains actual
knowledge of any Event of Default, such Lender promptly shall notify the other
Lenders and Agent of such Event of Default. Each Lender shall be solely
responsible for giving any notices to its Participants, if any. Subject to
SECTION 16.4, Agent shall take such action with respect to such Default or Event
of Default as may be requested by the Required Lenders in accordance with
SECTION 9; PROVIDED, HOWEVER, that unless and until Agent has received any such
request, Agent may (but shall not be obligated to) take such action, or refrain
from taking such action, with respect to such Default or Event of Default as it
shall deem advisable.
16.6 CREDIT DECISION. Each Lender acknowledges that none of
the Agent-Related Persons has made any representation or warranty to it, and
that no act by Agent hereinafter taken, including any review of the affairs of
Borrowers and their Subsidiaries or Affiliates, shall be deemed to constitute
any representation or warranty by any Agent-Related Person to any Lender. Each
Lender represents to Agent that it has, independently and without reliance upon
any Agent-Related Person and based on such documents and information as it has
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deemed appropriate, made its own appraisal of and investigation into the
business, prospects, operations, property, financial and other condition and
creditworthiness of Borrowers and any other Person (other than the Lender Group)
party to a Loan Document, and all applicable bank regulatory laws relating to
the transactions contemplated hereby, and made its own decision to enter into
this Agreement and to extend credit to Borrowers. Each Lender also represents
that it will, independently and without reliance upon any Agent-Related Person
and based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit analysis, appraisals and decisions in
taking or not taking action under this Agreement and the other Loan Documents,
and to make such investigations as it deems necessary to inform itself as to the
business, prospects, operations, property, financial and other condition and
creditworthiness of Borrowers and any other Person (other than the Lender Group)
party to a Loan Document. Except for notices, reports, and other documents
expressly herein required to be furnished to the Lenders by Agent, Agent shall
not have any duty or responsibility to provide any Lender with any credit or
other information concerning the business, prospects, operations, property,
financial and other condition or creditworthiness of Borrowers and any other
Person party to a Loan Document that may come into the possession of any of the
Agent-Related Persons.
16.7 COSTS AND EXPENSES; INDEMNIFICATION. Agent may incur and
pay Lender Group Expenses to the extent Agent reasonably deems necessary or
appropriate for the performance and fulfillment of its functions, powers, and
obligations pursuant to the Loan Documents, including court costs, reasonable
attorneys fees and expenses, costs of collection by outside collection agencies
and auctioneer fees and costs of security guards or insurance premiums paid to
maintain the Collateral, whether or not Borrowers are obligated to reimburse
Agent or Lenders for such expenses pursuant to the Loan Agreement or otherwise.
Agent is authorized and directed to deduct and retain sufficient amounts from
Collections received by Agent to reimburse Agent for such out-of-pocket costs
and expenses prior to the distribution of any amounts to Lenders. In the event
Agent is not reimbursed for such costs and expenses from Collections received by
Agent, each Lender hereby agrees that it is and shall be obligated to pay to or
reimburse Agent for the amount of such Lender's Pro Rata Share thereof. Whether
or not the transactions contemplated hereby are consummated, the Lenders shall
indemnify upon demand the Agent-Related Persons (to the extent not reimbursed by
or on behalf of Borrowers and without limiting the obligation of Borrowers to do
so), according to their Pro Rata Shares, from and against any and all
Indemnified Liabilities; PROVIDED, HOWEVER, that no Lender shall be liable for
the payment to any Agent-Related Person of any portion of such Indemnified
Liabilities resulting solely from such Person's gross negligence or willful
misconduct nor shall any Lender be liable for the obligations of any Defaulting
Lender in failing to make an Advance or other extension of credit hereunder.
Without limitation of the foregoing, each Lender shall reimburse Agent upon
demand for such Lender's ratable share of any costs or out-of-pocket expenses
(including attorneys fees and expenses) incurred by Agent in connection with the
preparation, execution, delivery, administration, modification, amendment, or
enforcement (whether through negotiations, legal proceedings or otherwise) of,
or legal advice in respect of rights or responsibilities under, this Agreement,
any other Loan Document, or any document contemplated by or referred to herein,
to the extent that Agent is not reimbursed for such expenses by or on behalf of
Borrowers. The undertaking in this Section shall survive the payment of all
Obligations hereunder and the resignation or replacement of Agent.
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16.8 AGENT IN INDIVIDUAL CAPACITY. Foothill and its Affiliates
may make loans to, issue letters of credit for the account of, accept deposits
from, acquire equity interests in, and generally engage in any kind of banking,
trust, financial advisory, underwriting, or other business with Borrowers and
their Subsidiaries and Affiliates and any other Person (other than the Lender
Group) party to any Loan Documents as though Foothill were not Agent hereunder,
and, in each case, without notice to or consent of the other members of the
Lender Group. The other members of the Lender Group acknowledge that, pursuant
to such activities, Foothill or its Affiliates may receive information regarding
Borrowers or their Affiliates and any other Person (other than the Lender Group)
party to any Loan Documents that is subject to confidentiality obligations in
favor of Borrowers or such other Person and that prohibit the disclosure of such
information to the Lenders, and the Lenders acknowledge that, in such
circumstances (and in the absence of a waiver of such confidentiality
obligations, which waiver Agent will use its reasonable best efforts to obtain),
Agent shall not be under any obligation to provide such information to them. The
terms "Lender" and "Lenders" include Foothill in its individual capacity.
16.9 SUCCESSOR AGENT. Agent may resign as Agent upon 45 days
notice to the Lenders. If Agent resigns under this Agreement, the Required
Lenders shall appoint a successor Agent for the Lenders. If no successor Agent
is appointed prior to the effective date of the resignation of Agent, Agent may
appoint, after consulting with the Lenders, a successor Agent. If Agent has
materially breached or failed to perform any material provision of this
Agreement or of applicable law, the Required Lenders may agree in writing to
remove and replace Agent with a successor Agent from among the Lenders. In any
such event, upon the acceptance of its appointment as successor Agent hereunder,
such successor Agent shall succeed to all the rights, powers, and duties of the
retiring Agent and the term "Agent" shall mean such successor Agent and the
retiring Agent's appointment, powers, and duties as Agent shall be terminated.
After any retiring Agent's resignation hereunder as Agent, the provisions of
this SECTION 16 shall inure to its benefit as to any actions taken or omitted to
be taken by it while it was Agent under this Agreement. If no successor Agent
has accepted appointment as Agent by the date which is 45 days following a
retiring Agent's notice of resignation, the retiring Agent's resignation shall
nevertheless thereupon become effective and the Lenders shall perform all of the
duties of Agent hereunder until such time, if any, as the Lenders appoint a
successor Agent as provided for above.
16.10 LENDER IN INDIVIDUAL CAPACITY. Any Lender and its
respective Affiliates may make loans to, issue letters of credit for the account
of, accept deposits from, acquire equity interests in and generally engage in
any kind of banking, trust, financial advisory, underwriting or other business
with Borrowers and their Subsidiaries and Affiliates and any other Person (other
than the Lender Group) party to any Loan Documents as though such Lender were
not a Lender hereunder without notice to or consent of the other members of the
Lender Group. The other members of the Lender Group acknowledge that, pursuant
to such activities, such Lender and its respective Affiliates may receive
information regarding Borrowers or their Affiliates and any other Person (other
than the Lender Group) party to any Loan Documents that is subject to
confidentiality obligations in favor of Borrowers or such other Person and that
prohibit the disclosure of such information to the Lenders, and the Lenders
acknowledge that, in such circumstances (and in the absence of a waiver of such
confidentiality obligations, which waiver such Lender will use its reasonable
best efforts to obtain), such Lender not shall be under any
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obligation to provide such information to them. With respect to the Swing Loans
and Agent Advances, Swing Lender shall have the same rights and powers under
this Agreement as any other Lender and may exercise the same as though it were
not the sub-agent of the Agent.
16.11 WITHHOLDING TAXES.
(a) If any Lender is a "foreign corporation, partnership
or trust" within the meaning of the IRC and such Lender claims exemption from,
or a reduction of, U.S. withholding tax under Sections 1441 or 1442 of the IRC,
such Lender agrees with and in favor of Agent and Borrowers, to deliver to Agent
and Administrative Borrower:
(i) if such Lender claims an exemption from
withholding tax pursuant to its portfolio interest exception, (a) a
statement of the Lender, signed under penalty of perjury, that it is
not a (I) a "bank" as described in Section 881(c)(3)(A) of the IRC,
(II) a 10% shareholder (within the meaning of Section 881(c)(3)(B) of
the IRC), or (III) a controlled foreign corporation described in
Section 881(c)(3)(C) of the IRC, and (B) a properly completed IRS Form
W-8BEN, before the first payment of any interest under this Agreement
and at any other time reasonably requested by Agent or Administrative
Borrower;
(ii) if such Lender claims an exemption from, or a
reduction of, withholding tax under a United States tax treaty,
properly completed IRS Form W-8BEN before the first payment of any
interest under this Agreement and at any other time reasonably
requested by Agent or Administrative Borrower;
(iii) if such Lender claims that interest paid under
this Agreement is exempt from United States withholding tax because it
is effectively connected with a United States trade or business of such
Lender, two properly completed and executed copies of IRS Form W-8ECI
before the first payment of any interest is due under this Agreement
and at any other time reasonably requested by Agent or Administrative
Borrower;
(iv) such other form or forms as may be required
under the IRC or other laws of the United States as a condition to
exemption from, or reduction of, United States withholding tax.
Such Lender agrees promptly to notify Agent and Administrative
Borrower of any change in circumstances which would modify or render invalid any
claimed exemption or reduction.
(b) If any Lender claims exemption from, or reduction of,
withholding tax under a United States tax treaty by providing IRS Form W-8BEN
and such Lender sells, assigns, grants a participation in, or otherwise
transfers all or part of the Obligations of Borrowers to such Lender, such
Lender agrees to notify Agent of the percentage amount in which it is no longer
the beneficial owner of Obligations of Borrowers to such Lender. To the extent
of such percentage amount, Agent will treat such Lender's IRS Form W-8BEN as no
longer valid.
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(c) If any Lender is entitled to a reduction in the applicable
withholding tax, Agent may withhold from any interest payment to such Lender an
amount equivalent to the applicable withholding tax after taking into account
such reduction. If the forms or other documentation required by subsection (a)
of this Section are not delivered to Agent, then Agent may withhold from any
interest payment to such Lender not providing such forms or other documentation
an amount equivalent to the applicable withholding tax.
(d) If the IRS or any other Governmental Authority of the
United States or other jurisdiction asserts a claim that Agent did not properly
withhold tax from amounts paid to or for the account of any Lender (because the
appropriate form was not delivered, was not properly executed, or because such
Lender failed to notify Agent of a change in circumstances which rendered the
exemption from, or reduction of, withholding tax ineffective, or for any other
reason) such Lender shall indemnify and hold Agent harmless for all amounts
paid, directly or indirectly, by Agent as tax or otherwise, including penalties
and interest, and including any taxes imposed by any jurisdiction on the amounts
payable to Agent under this Section, together with all costs and expenses
(including attorneys fees and expenses). The obligation of the Lenders under
this subsection shall survive the payment of all Obligations and the resignation
or replacement of Agent.
(e) All payments made by Borrowers hereunder or under any note
or other Loan Document will be made without setoff, counterclaim, or other
defense, except as required by applicable law other than for Taxes (as defined
below). All such payments will be made free and clear of, and without deduction
or withholding for, any present or future taxes, levies, imposts, duties, fees,
assessments or other charges of whatever nature now or hereafter imposed by any
jurisdiction (other than the United States) or by any political subdivision or
taxing authority thereof or therein (other than of the United States) with
respect to such payments (but excluding, any tax imposed by any jurisdiction or
by any political subdivision or taxing authority thereof or therein (i) measured
by or based on the net income or net profits of a Lender, or (ii) to the extent
that such tax results from a change in the circumstances of the Lender,
including a change in the residence, place of organization, or principal place
of business of the Lender, or a change in the branch or lending office of the
Lender participating in the transactions set forth herein) and all interest,
penalties or similar liabilities with respect thereto (all such non-excluded
taxes, levies, imposts, duties, fees, assessments or other charges being
referred to collectively as "Taxes"). If any Taxes are so levied or imposed,
each Borrower agrees to pay the full amount of such Taxes, and such additional
amounts as may be necessary so that every payment of all amounts due under this
Agreement or under any note, including any amount paid pursuant to this SECTION
16.11(e) after withholding or deduction for or on account of any Taxes, will not
be less than the amount provided for herein; PROVIDED, HOWEVER, that Borrowers
shall not be required to increase any such amounts payable to Agent or any
Lender (i) that is not organized under the laws of the United States, if such
Person fails to comply with the other requirements of this SECTION 16.11, or
(ii) if the increase in such amount payable results from Agent's or such
Lender's own willful misconduct or gross negligence. Borrowers will furnish to
Agent as promptly as possible after the date the payment of any Taxes is due
pursuant to applicable law certified copies of tax receipts evidencing such
payment by Borrowers.
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16.12 COLLATERAL MATTERS.
(a) The Lenders hereby irrevocably authorize Agent, at
its option and in its sole discretion, to release any Lien on any Collateral (i)
upon the termination of the Commitments and payment and satisfaction in full by
Borrowers of all Obligations, (ii) constituting property being sold or disposed
of if a release is required or desirable in connection therewith and if
Administrative Borrower certifies to Agent that the sale or disposition is
permitted under SECTION 7.4 of this Agreement or the other Loan Documents (and
Agent may rely conclusively on any such certificate, without further inquiry),
(iii) constituting property in which no Borrower owned any interest at the time
the security interest was granted or at any time thereafter, or (iv)
constituting property leased to a Borrower under a lease that has expired or is
terminated in a transaction permitted under this Agreement. Except as provided
above, Agent will not execute and deliver a release of any Lien on any
Collateral without the prior written authorization of (y) if the release is of
all or substantially all of the Collateral, all of the Lenders, or (z)
otherwise, the Required Lenders. Upon request by Agent or Administrative
Borrower at any time, the Lenders will confirm in writing Agent's authority to
release any such Liens on particular types or items of Collateral pursuant to
this SECTION 16.12; PROVIDED, HOWEVER, that (1) Agent shall not be required to
execute any document necessary to evidence such release on terms that, in
Agent's opinion, would expose Agent to liability or create any obligation or
entail any consequence other than the release of such Lien without recourse,
representation, or warranty, and (2) such release shall not in any manner
discharge, affect, or impair the Obligations or any Liens (other than those
expressly being released) upon (or obligations of Borrowers in respect of) all
interests retained by Borrowers, including, the proceeds of any sale, all of
which shall continue to constitute part of the Collateral.
(b) Agent shall have no obligation whatsoever to any of
the Lenders to assure that the Collateral exists or is owned by Borrowers or is
cared for, protected, or insured or has been encumbered, or that the Agent's
Liens have been properly or sufficiently or lawfully created, perfected,
protected, or enforced or are entitled to any particular priority, or to
exercise at all or in any particular manner or under any duty of care,
disclosure or fidelity, or to continue exercising, any of the rights,
authorities and powers granted or available to Agent pursuant to any of the Loan
Documents, it being understood and agreed that in respect of the Collateral, or
any act, omission, or event related thereto, subject to the terms and conditions
contained herein, Agent may act in any manner it may deem appropriate, in its
sole discretion given Agent's own interest in the Collateral in its capacity as
one of the Lenders and that Agent shall have no other duty or liability
whatsoever to any Lender as to any of the foregoing, except as otherwise
provided herein.
16.13 RESTRICTIONS ON ACTIONS BY LENDERS; SHARING OF PAYMENTS.
(a) Each of the Lenders agrees that it shall not,
without the express consent of Agent, and that it shall, to the extent it is
lawfully entitled to do so, upon the request of Agent, set off against the
Obligations, any amounts owing by such Lender to Borrowers or any deposit
accounts of Borrowers now or hereafter maintained with such Lender. Each of the
Lenders further agrees that it shall not, unless specifically requested to do so
by Agent, take or cause to be taken any action, including, the commencement of
any legal or equitable proceedings, to foreclose any Lien on, or otherwise
enforce any security interest in, any of the
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Collateral the purpose of which is, or could be, to give such Lender any
preference or priority against the other Lenders with respect to the Collateral.
(b) If, at any time or times any Lender shall receive
(i) by payment, foreclosure, setoff, or otherwise, any proceeds of Collateral or
any payments with respect to the Obligations arising under, or relating to, this
Agreement or the other Loan Documents, except for any such proceeds or payments
received by such Lender from Agent pursuant to the terms of this Agreement, or
(ii) payments from Agent in excess of such Lender's ratable portion of all such
distributions by Agent, such Lender promptly shall (1) turn the same over to
Agent, in kind, and with such endorsements as may be required to negotiate the
same to Agent, or in immediately available funds, as applicable, for the account
of all of the Lenders and for application to the Obligations in accordance with
the applicable provisions of this Agreement, or (2) purchase, without recourse
or warranty, an undivided interest and participation in the Obligations owed to
the other Lenders so that such excess payment received shall be applied ratably
as among the Lenders in accordance with their Pro Rata Shares; PROVIDED,
HOWEVER, that if all or part of such excess payment received by the purchasing
party is thereafter recovered from it, those purchases of participations shall
be rescinded in whole or in part, as applicable, and the applicable portion of
the purchase price paid therefor shall be returned to such purchasing party, but
without interest except to the extent that such purchasing party is required to
pay interest in connection with the recovery of the excess payment.
16.14 AGENCY FOR PERFECTION. Agent hereby appoints each other
Lender as its agent (and each Lender hereby accepts such appointment) for the
purpose of perfecting the Agent's Liens in assets which, in accordance with
Article 9 of the UCC can be perfected only by possession. Should any Lender
obtain possession of any such Collateral, such Lender shall notify Agent
thereof, and, promptly upon Agent's request therefor shall deliver such
Collateral to Agent or in accordance with Agent's instructions.
16.15 PAYMENTS BY AGENT TO THE LENDERS. All payments to be
made by Agent to the Lenders shall be made by bank wire transfer or internal
transfer of immediately available funds pursuant to such wire transfer
instructions as each party may designate for itself by written notice to Agent.
Concurrently with each such payment, Agent shall identify whether such payment
(or any portion thereof) represents principal, premium, or interest of the
Obligations.
16.16 CONCERNING THE COLLATERAL AND RELATED LOAN DOCUMENTS.
Each member of the Lender Group authorizes and directs Agent to enter into this
Agreement and the other Loan Documents relating to the Collateral, for the
benefit of the Lender Group. Each member of the Lender Group agrees that any
action taken by Agent in accordance with the terms of this Agreement or the
other Loan Documents relating to the Collateral and the exercise by Agent of its
powers set forth therein or herein, together with such other powers that are
reasonably incidental thereto, shall be binding upon all of the Lenders.
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16.17 FIELD AUDITS AND EXAMINATION REPORTS; CONFIDENTIALITY;
DISCLAIMERS BY LENDERS; OTHER REPORTS AND INFORMATION. By becoming a party to
this Agreement, each Lender:
(a) is deemed to have requested that Agent furnish such
Lender, promptly after it becomes available, a copy of each field audit or
examination report (each a "Report" and collectively, "Reports") prepared by
Agent, and Agent shall so furnish each Lender with such Reports,
(b) expressly agrees and acknowledges that Agent does
not (i) make any representation or warranty as to the accuracy of any Report,
and (ii) shall not be liable for any information contained in any Report,
(c) expressly agrees and acknowledges that the Reports
are not comprehensive audits or examinations, that Agent or other party
performing any audit or examination will inspect only specific information
regarding Borrowers and will rely significantly upon the Books, as well as on
representations of Borrowers' personnel,
(d) agrees to keep all Reports and other material,
non-public information regarding Borrowers and their Subsidiaries and their
operations, assets, and existing and contemplated business plans in a
confidential manner; it being understood and agreed by Borrowers that in any
event such Lender may make disclosures (a) to counsel for and other advisors,
accountants, and auditors to such Lender, (b) reasonably required by any bona
fide potential or actual Assignee or Participant in connection with any
contemplated or actual assignment or transfer by such Lender of an interest
herein or any participation interest in such Lender's rights hereunder, provided
that such Assignee or Participant agrees to hold such information confidential
on terms consistent with those set forth in this SECTION 16.17(b), (c) of
information that has become public by disclosures made by Persons other than
such Lender, its Affiliates, assignees, transferees, or Participants, or (d) as
required or requested by any court, governmental or administrative agency,
pursuant to any subpoena or other legal process, or by any law, statute,
regulation, or court order; PROVIDED, HOWEVER, that, unless prohibited by
applicable law, statute, regulation, or court order, such Lender shall notify
Administrative Borrower of any request by any court, governmental or
administrative agency, or pursuant to any subpoena or other legal process for
disclosure of any such non-public material information concurrent with, or where
practicable, prior to the disclosure thereof, and
(e) without limiting the generality of any other
indemnification provision contained in this Agreement, agrees: (i) to hold Agent
and any such other Lender preparing a Report harmless from any action the
indemnifying Lender may take or conclusion the indemnifying Lender may reach or
draw from any Report in connection with any loans or other credit accommodations
that the indemnifying Lender has made or may make to Borrowers, or the
indemnifying Lender's participation in, or the indemnifying Lender's purchase
of, a loan or loans of Borrowers; and (ii) to pay and protect, and indemnify,
defend and hold Agent, and any such other Lender preparing a Report harmless
from and against, the claims, actions, proceedings, damages, costs, expenses,
and other amounts (including, attorneys fees and costs) incurred by Agent and
any such other Lender preparing a Report as the direct or indirect result of any
third parties who might obtain all or part of any Report through the
indemnifying Lender.
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(f) In addition to the foregoing: (x) any Lender may
from time to time request of Agent in writing that Agent provide to such Lender
a copy of any report or document provided by Borrowers to Agent that has not
been contemporaneously provided by Borrowers to such Lender, and, upon receipt
of such request, Agent shall provide a copy of same to such Lender, (y) to the
extent that Agent is entitled, under any provision of the Loan Documents, to
request additional reports or information from Borrowers, any Lender may, from
time to time, reasonably request Agent to exercise such right as specified in
such Lender's notice to Agent, whereupon Agent promptly shall request of
Administrative Borrower the additional reports or information reasonably
specified by such Lender, and, upon receipt thereof from Administrative
Borrower, Agent promptly shall provide a copy of same to such Lender, and (z)
any time that Agent renders to Administrative Borrower a statement regarding the
Loan Account, Agent shall send a copy of such statement to each Lender.
16.18 SEVERAL OBLIGATIONS; NO LIABILITY. Notwithstanding that
certain of the Loan Documents now or hereafter may have been or will be executed
only by or in favor of Agent in its capacity as such, and not by or in favor of
the Lenders, any and all obligations on the part of Agent (if any) to make any
credit available hereunder shall constitute the several (and not joint)
obligations of the respective Lenders on a ratable basis, according to their
respective Commitments, to make an amount of such credit not to exceed, in
principal amount, at any one time outstanding, the amount of their respective
Commitments. Nothing contained herein shall confer upon any Lender any interest
in, or subject any Lender to any liability for, or in respect of, the business,
assets, profits, losses, or liabilities of any other Lender. Each Lender shall
be solely responsible for notifying its Participants of any matters relating to
the Loan Documents to the extent any such notice may be required, and no Lender
shall have any obligation, duty, or liability to any Participant of any other
Lender. Except as provided in SECTION 16.7, no member of the Lender Group shall
have any liability for the acts or any other member of the Lender Group. No
Lender shall be responsible to any Borrower or any other Person for any failure
by any other Lender to fulfill its obligations to make credit available
hereunder, nor to advance for it or on its behalf in connection with its
Commitment, nor to take any other action on its behalf hereunder or in
connection with the financing contemplated herein.
17. GENERAL PROVISIONS.
17.1 EFFECTIVENESS. This Agreement shall be binding and deemed
effective when executed by Borrowers, Agent, and each Lender whose signature is
provided for on the signature pages hereof.
17.2 SECTION HEADINGS. Headings and numbers have been set
forth herein for convenience only. Unless the contrary is compelled by the
context, everything contained in each Section applies equally to this entire
Agreement.
17.3 INTERPRETATION. Neither this Agreement nor any
uncertainty or ambiguity herein shall be construed or resolved against the
Lender Group or Borrowers, whether under any rule of construction or otherwise.
On the contrary, this Agreement has been reviewed by all parties and shall be
construed and interpreted according to the ordinary meaning of the words used so
as to accomplish fairly the purposes and intentions of all parties hereto.
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17.4 SEVERABILITY OF PROVISIONS. Each provision of this
Agreement shall be severable from every other provision of this Agreement for
the purpose of determining the legal enforceability of any specific provision.
17.5 AMENDMENTS IN WRITING. This Agreement only can be amended
by a writing in accordance with SECTION 15.1.
17.6 COUNTERPARTS; TELEFACSIMILE EXECUTION. This Agreement may
be executed in any number of counterparts and by different parties on separate
counterparts, each of which, when executed and delivered, shall be deemed to be
an original, and all of which, when taken together, shall constitute but one and
the same Agreement. Delivery of an executed counterpart of this Agreement by
telefacsimile shall be equally as effective as delivery of an original executed
counterpart of this Agreement. Any party delivering an executed counterpart of
this Agreement by telefacsimile also shall deliver an original executed
counterpart of this Agreement but the failure to deliver an original executed
counterpart shall not affect the validity, enforceability, and binding effect of
this Agreement. The foregoing shall apply to each other Loan Document mutatis
mutandis.
17.7 REVIVAL AND REINSTATEMENT OF OBLIGATIONS. If the
incurrence or payment of the Obligations by any Borrower or the transfer to the
Lender Group of any property should for any reason subsequently be declared to
be void or voidable under any state or federal law relating to creditors'
rights, including provisions of the Bankruptcy Code relating to fraudulent
conveyances, preferences, or other voidable or recoverable payments of money or
transfers of property (collectively, a "Voidable Transfer"), and if the Lender
Group is required to repay or restore, in whole or in part, any such Voidable
Transfer, or elects to do so upon the reasonable advice of its counsel, then, as
to any such Voidable Transfer, or the amount thereof that the Lender Group is
required or elects to repay or restore, and as to all reasonable costs,
expenses, and attorneys fees of the Lender Group related thereto, the liability
of Borrowers automatically shall be revived, reinstated, and restored and shall
exist as though such Voidable Transfer had never been made.
17.8 INTEGRATION. This Agreement, together with the other Loan
Documents, reflects the entire understanding of the parties with respect to the
transactions contemplated hereby and shall not be contradicted or qualified by
any other agreement, oral or written, before the date hereof.
17.9 PARENT AS AGENT FOR BORROWERS. Each Borrower hereby
irrevocably appoints Parent as the borrowing agent and attorney-in-fact for all
Borrowers (the "Administrative Borrower") which appointment shall remain in full
force and effect unless and until Agent shall have received prior written notice
signed by each Borrower that such appointment has been revoked and that another
Borrower has been appointed Administrative Borrower. Each Borrower hereby
irrevocably appoints and authorizes the Administrative Borrower (i) to provide
Agent with all notices with respect to Advances and Letters of Credit obtained
for the benefit of any Borrower and all other notices and instructions under
this Agreement and (ii) to take such action as the Administrative Borrower deems
appropriate on its behalf to obtain Advances and Letters of Credit and to
exercise such other powers as are reasonably incidental thereto to carry out the
purposes of this Agreement. It is understood that
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the handling of the Loan Account and Collateral of Borrowers in a combined
fashion, as more fully set forth herein, is done solely as an accommodation to
Borrowers in order to utilize the collective borrowing powers of Borrowers in
the most efficient and economical manner and at their request, and that Lender
Group shall not incur liability to any Borrower as a result hereof. Each
Borrower expects to derive benefit, directly or indirectly, from the handling of
the Loan Account and the Collateral in a combined fashion since the successful
operation of each Borrower is dependent on the continued successful performance
of the integrated group. To induce the Lender Group to do so, and in
consideration thereof, each Borrower hereby jointly and severally agrees to
indemnify each member of the Lender Group and hold each member of the Lender
Group harmless against any and all liability, expense, loss or claim of damage
or injury, made against the Lender Group by any Borrower or by any third party
whosoever, arising from or incurred by reason of (a) the handling of the Loan
Account and Collateral of Borrowers as herein provided, (b) the Lender Group's
relying on any instructions of the Administrative Borrower, or (c) any other
action taken by the Lender Group hereunder or under the other Loan Documents,
except that Borrowers will have no liability to the relevant Agent-Related
Person or Lender-Related Person under this SECTION 17.9 with respect to any
liability that has been finally determined by a court of competent jurisdiction
to have resulted solely from the gross negligence or willful misconduct of such
Agent-Related Person or Lender-Related Person, as the case may be.
17.10 CURRENCY; JUDGMENT. This is an international financial
transaction in which the specification of a currency and payment in New York
City is of the essence. Unrestricted and transferable Dollars shall be the
currency of account in the case of all payments pursuant to or arising under
this Agreement or under any other Loan Document, and all such payments shall be
transferred to the Agent's Account in immediately available funds. The
obligations of Borrowers to the Agent and the Lenders under this Agreement and
under the other Loan Documents shall not be discharged by any amount paid in any
other currency to the extent that the amount so paid after conversion under this
Agreement and transfer to New York City does not yield the amount of Dollars in
New York City due under this Agreement and under the other Loan Documents. If,
for the purposes of obtaining judgment in any court, it is necessary to convert
a sum due hereunder in Dollars into another currency (the "OTHER Currency"), the
rate of exchange used shall be that at which Agent could, in accordance with
normal banking procedures, purchase Dollars with the Other Currency on the
business day preceding that on which final judgment is given. The obligation of
Borrowers in respect of any such sum due from it to the Agent or the Lenders
hereunder shall, notwithstanding any judgment in such Other Currency, be
discharged only to the extent that, on the business day immediately following
the date on which the Agent receives any sum adjudged to be so due in the Other
Currency, the Agent may, in accordance with normal banking procedures, purchase
Dollars with the Other Currency. If the Dollars so purchased are less than the
sum originally due to the Agent and the Lenders in Dollars, each Borrower
agrees, as a separate obligation and notwithstanding any such judgment, to
indemnify the Agent and the Lenders against such loss, and if the Dollars so
purchased exceed the sum originally due to the Agent and the Lenders in Dollars,
the Agent and the Lenders agree to remit to the Borrowers such excess.
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18. ISSUANCE OF EQUITY INTERESTS TO FOOTHILL.
18.1 AUTHORIZATION AND ISSUANCE OF WARRANTS. On the Closing
Date, the Parent shall issue to Foothill one or more warrant certificates
covering the purchase of 550,000 shares of the Common Stock of the Parent
substantially in the form of EXHIBIT W-1 hereto (such certificates, together
with the rights to purchase Common Stock provided thereby and all warrant
certificates covering such stock issued upon transfer, division or combination
of, or in substitution for, any thereof, being herein called the "WARRANTS").
The exercise price thereof shall be an amount equal to $3.36. It is understood
and agreed that the Warrants contain provisions affecting the number of shares
of Common Stock that may be acquired by the holder of such Warrant or issued by
the Parent, which provisions are set forth in the Warrants.
18.2 SECURITIES ACT MATTERS. (a) Foothill represents and
warrants to the Parent that:
(i) Foothill is acquiring the Warrants hereunder for
its own account, without a view to the distribution thereof, all
without prejudice, however, to the right of Foothill at any time, in
accordance with this Agreement, lawfully to sell or otherwise to
dispose of all or any part of the Warrants or Warrant Stock held by it.
(ii) Foothill is an "accredited investor" within the
meaning of Regulation D under the Securities Act and was not organized
for the specific purpose of acquiring the Warrant or the Warrant Stock.
(iii) Foothill has sufficient knowledge and
experience in investing in companies similar to Parent so as to be able
to evaluate the risks and merits of its investment in Parent and is
able financially to bear the risks thereof; and
(iv) Foothill understands that (A) this Warrant and
the Warrant Stock have not been registered under the Securities Act in
reliance upon an exemption from the registration requirements of the
Securities Act pursuant to Section 4(2) thereof or Rule 506 promulgated
under such act and under applicable state securities laws, (B) this
Warrant and the Warrant Stock must be held indefinitely unless a
subsequent disposition thereof is registered under the Securities Act
and under applicable state securities laws or is exempt from such
registration, (C) this Warrant and the Warrant Stock will bear a legend
to such effect, and (D) Parent will make a notation on its transfer
books to such effect..
(b) The Parent represents and warrants to Foothill that:
(i) Assuming the truth and accuracy of Foothill's
representations and warranties contained in the immediately preceding
paragraphs, the issuance of the Warrants to Foothill hereunder and the
issuance of shares of Common Stock to Foothill pursuant to the Warrants
are exempt from the registration and prospectus delivery requirements
of the Securities Act.
(ii) All stock and securities of the Parent heretofore
issued and sold by the Parent were, and all securities of the Parent
issued and sold by the Parent on
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and after the date hereof are or will be issued and sold in accordance
with, or are or will be exempt from, the registration and prospectus
delivery requirements of the Securities Act.
(iii) The Parent agrees that neither it nor any Person
acting on its behalf has offered or will offer the Warrants or Warrant
Stock or any part thereof or any similar securities for issue or sale
to, or has solicited or will solicit any offer to acquire any of the
same from, any Person so as to bring the issuance and sale of the
Warrants or Warrant Stock hereunder within the provisions of the
registration and prospectus delivery requirements of the Securities
Act.
18.3 CERTAIN TAXES. The Parent shall pay all taxes (other than
Federal, state or local income taxes) which may be payable in connection with
the execution and delivery of this Agreement or the issuance of the Warrants or
Warrant Stock hereunder or in connection with any modification of this Agreement
or the Warrants and shall hold the Lenders and Foothill harmless without
limitation as to time against any and all liabilities with respect to all such
taxes. The obligations of the Parent under this SECTION 18.3 shall survive any
redemption, repurchase or acquisition of Warrants or Warrant Stock by the
Parent, any termination of this Agreement, and any cancellation or termination
of the Warrants.
18.4 CANCELLATION AND ISSUANCE. If Foothill assigns or
otherwise transfers all or any of its portion of the Advances or the Term Loan
(including by selling participations therein) to any Person, Foothill may
request (upon 10 days' prior notice to the Parent) that (a) a number of Warrants
held by Foothill be canceled on the date of such assignment and transfer and (b)
a like number of Warrants be issued by the Parent to the Person to whom such
Obligations are being assigned or otherwise transferred. Upon the date specified
in such request:
(i) The Parent shall issue, and Foothill shall
surrender (or cause to be surrendered) for cancellation, such number of
Warrants as aforesaid, provided that such issuance shall not violate
the Securities Act or any applicable state securities laws;
(ii) The Parent will deliver to each Person that
receives a certificate for Warrants a favorable legal opinion from
counsel to the Parent acceptable to such Person, covering the matters
set forth in the opinion of counsel to the Parent and its Subsidiaries
delivered to the Agent on the Closing Date (to the extent relating to
the Warrants);
(iii) each Person that receives Warrants will deliver
a certificate to the Parent affirming the representations and
warranties contained in SECTION 18.2(a) hereof as applied to such
Person as of such date; and
(iv) The Parent will deliver a certificate to each
Person that receives Warrants affirming the representations and
warranties contained in SECTION 18.2(b) hereof as of such date.
[Signature page to follow.]
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and delivered as of the date first above written.
FRONTSTEP, INC.
an Ohio corporation
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President & CFO
FRONTSTEP SOLUTIONS GROUP, INC.
an Ohio corporation
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President & CFO
brightwhite solutions, inc.
an Ohio corporation
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President & CFO
FRONTSTEP CANADA, INC.
an Ontario corporation
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President & CFO
FOOTHILL CAPITAL CORPORATION,
a California corporation, as Agent and as a Lender
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: VP
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9062208.6
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1. DEFINITIONS AND CONSTRUCTION..........................................................................1
1.1 DEFINITIONS...........................................................................................1
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1.2 ACCOUNTING TERMS.....................................................................................24
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1.3 CODE.................................................................................................24
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1.4 CONSTRUCTION.........................................................................................24
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1.5 SCHEDULES AND EXHIBITS...............................................................................25
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2. LOAN AND TERMS OF PAYMENT............................................................................25
2.1 REVOLVER ADVANCES....................................................................................25
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2.2 TERM LOAN............................................................................................26
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2.3 BORROWING PROCEDURES AND SETTLEMENTS.................................................................26
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2.4 PAYMENTS.............................................................................................32
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2.5 OVERADVANCES.........................................................................................35
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2.6 INTEREST RATES AND LETTER OF CREDIT FEE: RATES, PAYMENTS, AND CALCULATIONS..........................35
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2.7 CASH MANAGEMENT......................................................................................37
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2.8 CREDITING PAYMENTS; FLOAT CHARGE.....................................................................38
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2.9 DESIGNATED ACCOUNT...................................................................................38
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2.10 MAINTENANCE OF LOAN ACCOUNT; STATEMENTS OF OBLIGATIONS...............................................39
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2.11 FEES.................................................................................................39
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2.12 LETTERS OF CREDIT....................................................................................40
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2.13 LIBOR OPTION.........................................................................................43
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2.14 CAPITAL REQUIREMENTS.................................................................................45
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2.15 JOINT AND SEVERAL LIABILITY OF BORROWERS.............................................................45
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3. CONDITIONS; TERM OF AGREEMENT........................................................................48
3.1 CONDITIONS PRECEDENT TO THE INITIAL EXTENSION OF CREDIT..............................................48
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3.2 CONDITIONS SUBSEQUENT TO THE INITIAL EXTENSION OF CREDIT.............................................51
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3.3 CONDITIONS PRECEDENT TO ALL EXTENSIONS OF CREDIT.....................................................52
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3.4 TERM.................................................................................................52
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3.5 EFFECT OF TERMINATION................................................................................53
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3.6 EARLY TERMINATION BY BORROWERS.......................................................................53
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4. CREATION OF SECURITY INTEREST........................................................................53
4.1 GRANT OF SECURITY INTEREST...........................................................................53
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4.2 NEGOTIABLE COLLATERAL................................................................................54
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4.3 COLLECTION OF ACCOUNTS, GENERAL INTANGIBLES, AND NEGOTIABLE COLLATERAL...............................54
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4.4 DELIVERY OF ADDITIONAL DOCUMENTATION REQUIRED........................................................54
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4.5 POWER OF ATTORNEY....................................................................................55
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4.6 RIGHT TO INSPECT.....................................................................................55
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105
4.7 CONTROL AGREEMENTS...................................................................................55
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5. REPRESENTATIONS AND WARRANTIES.......................................................................55
5.1 NO ENCUMBRANCES......................................................................................56
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5.2 ELIGIBLE ACCOUNTS....................................................................................56
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5.3 [Intentionally Omitted]..............................................................................56
5.4 EQUIPMENT............................................................................................56
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5.5 LOCATION OF INVENTORY AND EQUIPMENT..................................................................57
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5.6 INVENTORY RECORDS....................................................................................57
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5.7 LOCATION OF CHIEF EXECUTIVE OFFICE; FEIN.............................................................57
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5.8 DUE ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.....................................................57
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5.9 DUE AUTHORIZATION; NO CONFLICT.......................................................................58
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5.10 LITIGATION...........................................................................................58
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5.11 NO MATERIAL ADVERSE CHANGE...........................................................................58
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5.12 FRAUDULENT TRANSFER..................................................................................59
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5.13 EMPLOYEE BENEFITS....................................................................................59
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5.14 ENVIRONMENTAL CONDITION..............................................................................59
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5.15 BROKERAGE FEES.......................................................................................59
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5.16 INTELLECTUAL PROPERTY................................................................................59
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5.17 LEASES...............................................................................................61
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5.18 DDAS.................................................................................................61
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5.19 COMPLETE DISCLOSURE..................................................................................61
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5.20 INDEBTEDNESS.........................................................................................62
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5.21 MAINTENANCE CONTRACTS................................................................................62
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6. AFFIRMATIVE COVENANTS................................................................................62
6.1 ACCOUNTING SYSTEM....................................................................................62
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6.2 COLLATERAL REPORTING.................................................................................62
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6.3 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES..........................................................63
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6.4 [INTENTIONALLY OMITTED]..............................................................................65
6.5 RETURN...............................................................................................65
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6.6 MAINTENANCE OF PROPERTIES............................................................................66
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6.7 TAXES................................................................................................66
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6.8 INSURANCE............................................................................................66
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6.9 LOCATION OF INVENTORY AND EQUIPMENT..................................................................67
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6.10 COMPLIANCE WITH LAWS.................................................................................67
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6.11 LEASES...............................................................................................67
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6.12 BROKERAGE COMMISSIONS................................................................................67
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6.13 EXISTENCE............................................................................................67
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6.14 ENVIRONMENTAL........................................................................................67
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6.15 DISCLOSURE UPDATES...................................................................................68
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6.16 INTELLECTUAL PROPERTY................................................................................68
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6.17 COPYRIGHT REGISTRATIONS; DEPOSIT MATERIALS...........................................................68
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6.18 MAINTENANCE CONTRACTS................................................................................69
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106
7. NEGATIVE COVENANTS...................................................................................69
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7.1 INDEBTEDNESS.........................................................................................69
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7.2 LIENS................................................................................................70
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7.3 RESTRICTIONS ON FUNDAMENTAL CHANGES..................................................................70
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7.4 DISPOSAL OF ASSETS...................................................................................70
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7.5 CHANGE NAME..........................................................................................70
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7.6 GUARANTEE............................................................................................70
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7.7 NATURE OF BUSINESS...................................................................................71
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7.8 PREPAYMENTS AND AMENDMENTS...........................................................................71
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7.9 CHANGE OF CONTROL....................................................................................71
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7.10 CONSIGNMENTS.........................................................................................71
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7.11 DISTRIBUTIONS........................................................................................71
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7.12 ACCOUNTING METHODS...................................................................................72
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7.13 INVESTMENTS..........................................................................................72
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7.14 TRANSACTIONS WITH AFFILIATES.........................................................................72
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7.15 SUSPENSION...........................................................................................72
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7.16 COMPENSATION.........................................................................................72
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7.17 USE OF PROCEEDS......................................................................................72
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7.18 CHANGE IN LOCATION OF CHIEF EXECUTIVE OFFICE; INVENTORY AND EQUIPMENT WITH BAILEES...................72
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7.19 SECURITIES ACCOUNTS..................................................................................73
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7.20 FINANCIAL COVENANTS..................................................................................73
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8. EVENTS OF DEFAULT....................................................................................75
9. THE LENDER GROUP'S RIGHTS AND REMEDIES...............................................................76
9.1 RIGHTS AND REMEDIES..................................................................................76
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9.2 REMEDIES CUMULATIVE..................................................................................78
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10. TAXES AND EXPENSES...................................................................................79
11. WAIVERS; INDEMNIFICATION.............................................................................79
11.1 DEMAND; PROTEST; ETC.................................................................................79
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11.2 THE LENDER GROUP'S LIABILITY FOR COLLATERAL..........................................................79
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11.3 INDEMNIFICATION......................................................................................79
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12. NOTICES..............................................................................................80
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER...........................................................81
14. ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS...........................................................82
14.1 ASSIGNMENTS AND PARTICIPATIONS.......................................................................82
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14.2 SUCCESSORS...........................................................................................84
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15. AMENDMENTS; WAIVERS..................................................................................85
15.1 AMENDMENTS AND WAIVERS...............................................................................85
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15.2 REPLACEMENT OF HOLDOUT LENDER........................................................................86
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15.3 NO WAIVERS; CUMULATIVE REMEDIES......................................................................86
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16. AGENT; THE LENDER GROUP..............................................................................86
16.1 APPOINTMENT AND AUTHORIZATION OF AGENT...............................................................86
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16.2 DELEGATION OF DUTIES.................................................................................87
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16.3 LIABILITY OF AGENT...................................................................................87
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16.4 RELIANCE BY AGENT....................................................................................88
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16.5 NOTICE OF DEFAULT OR EVENT OF DEFAULT................................................................88
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16.6 CREDIT DECISION......................................................................................88
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16.7 COSTS AND EXPENSES; INDEMNIFICATION..................................................................89
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16.8 AGENT IN INDIVIDUAL CAPACITY.........................................................................90
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16.9 SUCCESSOR AGENT......................................................................................90
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16.10 LENDER IN INDIVIDUAL CAPACITY.....................................................................90
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16.11 WITHHOLDING TAXES.................................................................................91
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16.12 COLLATERAL MATTERS................................................................................93
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16.13 RESTRICTIONS ON ACTIONS BY LENDERS; SHARING OF PAYMENTS...........................................93
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16.14 AGENCY FOR PERFECTION.............................................................................94
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16.15 PAYMENTS BY AGENT TO THE LENDERS..................................................................94
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16.16 CONCERNING THE COLLATERAL AND RELATED LOAN DOCUMENTS..............................................94
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16.17 FIELD AUDITS AND EXAMINATION REPORTS; CONFIDENTIALITY; DISCLAIMERS BY LENDERS;
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OTHER REPORTS AND INFORMATION.....................................................................95
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16.18 SEVERAL OBLIGATIONS; NO LIABILITY.................................................................96
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17. GENERAL PROVISIONS...................................................................................96
17.1 EFFECTIVENESS........................................................................................96
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17.2 SECTION HEADINGS.....................................................................................96
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17.3 INTERPRETATION.......................................................................................96
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17.4 SEVERABILITY OF PROVISIONS...........................................................................97
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17.5 AMENDMENTS IN WRITING................................................................................97
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17.6 COUNTERPARTS; TELEFACSIMILE EXECUTION................................................................97
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17.7 REVIVAL AND REINSTATEMENT OF OBLIGATIONS.............................................................97
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17.8 INTEGRATION..........................................................................................97
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17.9 PARENT AS AGENT FOR BORROWERS........................................................................97
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17.10 CURRENCY; JUDGMENT................................................................................98
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18. ISSUANCE OF EQUITY INTERESTS TO FOOTHILL.............................................................99
18.1 AUTHORIZATION AND ISSUANCE OF WARRANTS...............................................................99
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18.2 SECURITIES ACT MATTERS...............................................................................99
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18.3 CERTAIN TAXES.......................................................................................100
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18.4 CANCELLATION AND ISSUANCE...........................................................................100
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Exhibit A-1 Form of Assignment and Acceptance
Exhibit B-1 Form of Borrowing Base Certificate
Exhibit C-1 Form of Compliance Certificate
Exhibit L-1 Form of LIBOR Notice
Exhibit M-1 Form of Maintenance Contract
Exhibit S-1 Form of Source Code Escrow Agreement
Exhibit W-1 Form of Warrant
Schedule C-1 Commitments
Schedule E-1 Eligible Inventory Locations
Schedule P-1 Permitted Liens
Schedule 2.8(a) Cash Management Banks
Schedule 5.5 Locations of Inventory and Equipment
Schedule 5.7 Chief Executive Office; FEIN
Schedule 5.8(b) Capitalization of Borrowers
Schedule 5.8(c) Capitalization of Borrowers' Subsidiaries
Schedule 5.10 Litigation
Schedule 5.14 Environmental Matters
Schedule 5.16(a) Intellectual Property
Schedule 5.16(d) Syteline Software
Schedule 5.16(e) Breakdown of Maintenance Revenues
Schedule 5.18 Demand Deposit Accounts
Schedule 5.20 Permitted Indebtedness
Schedule 7.13 Permitted Investments
Schedule 7.14 Affiliate Transactions
*The Registrant has filed separately Exhibit W-1, the Form of Warrant, as
Exhibit 4(g) to this Annual Report on Form 10-K. The Registrant has omitted all
other listed Exhibits and Schedules from this filing. The Registrant will
furnish a copy of any such omitted Exhibit or Schedule to the Securities and
Exchange Commission upon request.