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EXHIBIT 10.5
LOAN AND SECURITY AGREEMENT
Dated as of May 14, 1998
Among
BANKAMERICA BUSINESS CREDIT, INC.
as the Lender
and
GLOBESPAN SEMICONDUCTOR INC.
as the Borrower
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TABLE OF CONTENTS
PAGE
1. DEFINITIONS..............................................................................1
1.1 Defined Terms...................................................................1
1.2 Accounting Terms...............................................................15
1.3 Other Terms....................................................................15
2. LOANS AND LETTERS OF CREDIT.............................................................15
2.1 Total Facility.................................................................15
2.2 Revolving Loans................................................................15
2.3 Letters of Credit..............................................................16
2.4 ACH Transactions and Swap Transactions.........................................19
3. INTEREST AND OTHER CHARGES..............................................................19
3.1 Interest.......................................................................19
3.2 Unused Line Fee................................................................19
3.3 Maximum Interest Rate..........................................................20
3.4 Letter of Credit Fee...........................................................20
3.5 Capital Adequacy...............................................................20
4. PAYMENTS AND PREPAYMENTS................................................................21
4.1 Revolving Loans................................................................21
4.2 Place and Form of Payments; Extension of Time..................................21
4.3 Application and Reversal of Payments...........................................21
4.4 Indemnity for Returned Payments................................................21
5. LENDER'S BOOKS AND RECORDS; MONTHLY STATEMENTS..........................................22
6. COLLATERAL..............................................................................22
6.1 Grant of Security Interest.....................................................22
6.2 Perfection and Protection of Security Interest.................................23
6.3 Location of Collateral.........................................................23
6.4 Title to, Liens on, and Sale and Use of Collateral.............................24
6.5 Appraisals.....................................................................24
6.6 Access and Examination.........................................................24
6.7 Insurance......................................................................24
6.8 Collateral Reporting...........................................................25
6.9 Accounts.......................................................................25
6.10 Collection of Accounts; Payments..............................................27
6.11 Inventory.....................................................................27
6.12 Equipment.....................................................................28
6.13 Assigned Contracts............................................................28
6.14 Documents, Instruments, and Chattel Paper.....................................29
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PAGE
6.15 Right to Cure.................................................................29
6.16 Power of Attorney.............................................................29
6.17 Lender's Rights, Duties, and Liabilities......................................30
6.18 Site Visits, Observations and Testing.........................................30
7. BOOKS AND RECORDS; FINANCIAL INFORMATION; NOTICES.......................................31
7.1 Books and Records..............................................................31
7.2 Financial Information..........................................................31
7.3 Notices to Lender..............................................................33
8. GENERAL WARRANTIES AND REPRESENTATIONS..................................................34
8.1 Authorization, Validity, and Enforceability of this Agreement and the Loan
Documents......................................................................34
8.2 Validity and Priority of Security Interest.....................................34
8.3 Organization and Qualification.................................................34
8.4 Corporate Name; Prior Transactions.............................................35
8.5 Subsidiaries and Affiliates....................................................35
8.6 Financial Statements and Projections...........................................35
8.7 Capitalization.................................................................35
8.8 Solvency.......................................................................36
8.9 Debt...........................................................................36
8.10 Distributions.................................................................36
8.11 Title to Property.............................................................36
8.12 Adequate Assets...............................................................36
8.13 Real Property; Leases.........................................................36
8.14 Proprietary Rights............................................................36
8.15 Trade Names and Terms of Sale.................................................36
8.16 Litigation....................................................................36
8.17 Restrictive Agreements........................................................37
8.18 Labor Disputes................................................................37
8.19 Environmental Laws............................................................37
8.20 No Violation of Law...........................................................38
8.21 No Default....................................................................38
8.22 ERISA Compliance..............................................................38
8.23 Taxes.........................................................................39
8.24 Use of Proceeds...............................................................39
8.25 Private Offerings.............................................................39
8.26 Broker's Fees.................................................................40
8.27 No Material Adverse Change....................................................40
8.28 Disclosure....................................................................40
9. AFFIRMATIVE AND NEGATIVE COVENANTS......................................................40
9.1 Taxes and Other Obligations....................................................40
9.2 Corporate Existence and Good Standing..........................................40
9.3 Compliance with Law and Agreements.............................................40
9.4 Maintenance of Property and Insurance..........................................41
9.5 Environmental Laws.............................................................41
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9.6 ERISA..........................................................................41
9.7 Mergers, Consolidations, Acquisitions, or Sales................................41
9.8 Distributions; Capital Changes.................................................41
9.9 Transactions Affecting Collateral or Obligations...............................41
9.10 Guaranties....................................................................42
9.11 Debt..........................................................................42
9.12 Prepayment....................................................................42
9.13 Transactions with Affiliates..................................................42
9.14 Business Conducted............................................................42
9.15 Liens.........................................................................42
9.16 Sale and Leaseback Transactions...............................................42
9.17 New Subsidiaries..............................................................43
9.18 Restricted Investments........................................................43
9.19 Further Assurances............................................................43
10. CONDITIONS TO CLOSING..................................................................43
10.1 Conditions Precedent to Making of Loans and Issuance of Letters of Credit on
the Closing Date...............................................................43
10.2 Conditions Precedent to Each Loan.............................................45
11. DEFAULT................................................................................45
11.1 Events of Default.............................................................45
12. REMEDIES...............................................................................47
13. TERM AND TERMINATION...................................................................48
14. MISCELLANEOUS..........................................................................49
14.1 Cumulative Remedies; No Prior Recourse to Collateral..........................49
14.2 No Implied Waivers............................................................49
14.3 Severability..................................................................49
14.4 Governing Law.................................................................50
14.5 Consent to Jurisdiction and Venue, Service of Process.........................50
14.6 Waiver of Jury Trial..........................................................50
14.7 Arbitration; Reference Proceeding.............................................50
14.8 Survival of Representations and Warranties....................................51
14.9 Other Security and Guaranties.................................................52
14.10 Fees and Expenses............................................................52
14.11 Notices......................................................................52
14.12 Indemnification..............................................................53
14.13 Waiver of Notices............................................................54
14.14 Binding Effect; Assignment...................................................55
14.15 Modification.................................................................55
14.16 Counterparts.................................................................55
14.17 Captions.....................................................................55
14.18 Right of Set-Off.............................................................55
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LOAN AND SECURITY AGREEMENT, dated as of May 14, 1998, by and between
BANKAMERICA BUSINESS CREDIT, INC., a Delaware corporation, with offices at ▇▇
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, (the "Lender") and
GLOBESPAN SEMICONDUCTOR INC., a Delaware corporation, with offices at ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ (the "Borrower")
WITNESSETH
WHEREAS, the Borrower has requested the Lender to make available to the
Borrower a revolving line of credit for loans and letters of credit in an amount
not to exceed $5,000,000 which extensions of credit the Borrower will use for
its working capital needs and general business purposes;
NOW, THEREFORE, in consideration of the mutual conditions and agreements
set forth in this Agreement, and for good and valuable consideration, the
receipt of which is hereby acknowledged, the Borrower and the Lender hereby
agree as follows:
1. DEFINITIONS.
1.1 Defined Terms. As used herein:
"Account" means the Borrower's right to payment for a sale or
lease and delivery of goods or rendition of services.
"Account Debtor" means each Person obligated in any way on or in
connection with an Account.
"ACH Settlement Risk Reserve" means any and all reserves which the
Lender from time to time establishes, in its sole discretion, with respect to
ACH Transactions.
"ACH Transactions" means any cash management or related services
including the automatic clearing house transfer of funds for the account of the
Borrower pursuant to agreement or overdrafts.
"Affiliate" means: (a) a Person which, directly or indirectly,
controls, is controlled by or is under common control with, the Borrower; (b) a
Person which beneficially owns or holds, directly or indirectly, five percent or
more of any class of voting stock of the Borrower; or (c) a Person in which five
percent of any class of the voting stock is beneficially owned or held, directly
or indirectly, by the Borrower. The term control (including the terms
"controlled by" and "under common control with"), means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of the Person in question.
"Aggregate Revolver Outstandings" means, at any time: the sum of (a)
the unpaid balance of Revolving Loans at that time; (b) the aggregate undrawn
face amount of all outstanding Letters of Credit which the Lender has caused to
be issued or obtained for the Borrower's account; and (c) the aggregate amount
of any unpaid reimbursement obligations in respect of Letters of Credit.
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"Anniversary Date" means each anniversary of the Closing Date.
"Assigned Contracts" means, collectively, all of the Borrower's
rights and remedies under, and all moneys and claims for money due or to become
due to the Borrower under any material contracts and any and all amendments,
supplements, extensions, and renewals thereof including, without limitation, all
rights and claims of the Borrower now or hereafter existing: (a) under any
insurance, indemnities, warranties, and guarantees provided for or arising out
of or in connection with the foregoing agreements; (b) for any damages arising
out of or for breach default under or in connection with the foregoing
agreements; (c) to all other amounts from time to time paid or payable under or
in connection with the foregoing agreements; or (d) to exercise or enforce any
and all covenants, remedies, powers and privileges thereunder.
"Availability" means at any time the lesser of:
(a) The amount of five million/100 Dollars ($5,000,000) or
(b) up to eighty-five percent (85%) of the Net Amount of
Eligible Accounts;
provided, however, that at all times Availability shall be reduced by the sum
of:
(a) the Aggregate Revolver Outstandings;
(b) reserves for accrued interest on the Revolving Loans;
(c) the Base Reserve Amount;
(d) the ACH Settlement Risk Reserve and the Swap Reserve; and
(e) all other reserves which the Lender in its reasonable
discretion deems necessary or desirable to maintain with respect to the
Borrower's account, including, without limitation, any amounts which the Lender
may be obligated to pay in the future for the account of the Borrower.
"Bank" means Bank of America National Trust and Savings Association
in San Francisco, California.
"Base Reserve Amount" means $350,000.
"Borrowing Base Certificate" means a certificate by a Responsible
Officer of the Borrower, substantially in the form of Exhibit A (or another form
acceptable to the Lender) setting forth the calculation of the Availability,
including a calculation of each component thereof, as of the close of business
no more than two (2) Business Days prior to the date of such certificate, all in
such detail as shall be satisfactory to the Lender. All calculations of
Availability in connection with the preparation of any Borrowing Base
Certificate shall originally be made by the Borrower and certified to the
Lender; provided, that the Lender shall have the right to review and adjust, in
the exercise of its reasonable credit judgment, any such calculation (1) to
reflect its reasonable estimate of declines in value of any of the Collateral
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described therein, and (2) to the extent that such calculation is not in
accordance with this Agreement.
"Business Day" means any day that is not a Saturday, Sunday, or day
on which banks in San Francisco, California are required or permitted to close.
"Capital Expenditures" means all payments due (whether or not paid)
during a fiscal period in respect of the cost of any fixed asset or improvement,
or replacement, substitution, or addition thereto, which has a useful life of
more than one year, including, without limitation, those arising in connection
with the direct or indirect acquisition of such assets by way of increased
product or service charges or offset items or in connection with Capital Leases.
"Capital Lease" means any lease of Property by the Borrower that, in
accordance with GAAP, should be reflected as a capital lease on the balance
sheet of the Borrower.
"Closing Date" means the date of this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral" has the meaning given to such term in Section 6.1.
"Contaminant" means any waste, pollutant, hazardous substance, toxic
substance, hazardous waste, special waste, petroleum or petroleum-derived
substance or waste, asbestos in any form or condition, polychlorinated biphenyls
("PCBs"), or other substance or material the handling, release, or possession of
which is regulated to protect health, safety or the environment, or any
constituent of any such substance or waste.
"Copyright, Patent and Trademark Assignment" means the Collateral
Assignment of Copyrights (Security Agreement), the Collateral Assignment of
Patents (Security Agreement) and the Collateral Assignment of Trademarks
(Security Agreement), each dated as of the date hereof, executed and delivered
by the Borrower to the Lender to evidence and perfect the Lender's Security
Interest in the Borrower's present and future copyrights, patents, trademarks,
and related licenses and rights.
"Debt" means all liabilities, obligations and indebtedness of the
Borrower to any Person, of any kind or nature, now or hereafter owing, arising,
due or payable, howsoever evidenced, created, incurred, acquired or owing,
whether primary, secondary, direct, contingent, fixed or otherwise, and
including, without in any way limiting the generality of the foregoing: (a) the
Borrower's liabilities and obligations to trade creditors; (b) all Obligations;
(c) all obligations and liabilities of any Person secured by any Lien on the
Borrower's Property, even though the Borrower shall not have assumed or become
liable for the payment thereof; provided, however, that all such obligations and
liabilities which are limited in recourse to such Property shall be included in
Debt only to the extent of the book value of such Property as would be shown on
a balance sheet of the Borrower prepared in accordance with GAAP; (d) all
obligations or liabilities created or arising under any Capital Lease or
conditional sale or other title retention agreement with respect to Property
used or acquired by the Borrower, even if the rights and remedies of the lessor,
seller or lender thereunder are limited to repossession of such Property;
provided, however, that all such obligations and liabilities which are limited
in recourse to such
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Property shall be included in Debt only to the extent of the book value of such
Property as would be shown on a balance sheet of the Borrower prepared in
accordance with GAAP; (e) all accrued pension fund and other employee benefit
plan obligations and liabilities; (f) all obligations and liabilities under
Guaranties; and (g) deferred taxes.
"Distribution" means, in respect of any corporation: (a) the payment
or making of any dividend or other distribution of Property in respect of
capital stock (or any options or warrants for such stock) of such corporation,
other than distributions in capital stock (or any options or warrants for such
stock) of the same class; or (b) the redemption or other acquisition by such
corporation of any capital stock of such corporation.
"DOL" means the United States Department of Labor or any successor
department or agency.
"Eligible Accounts" means those Accounts which are not ineligible as
the basis for Revolving Loans, based on the following criteria and on such other
criteria as the Lender may from time to time establish in its reasonable
commercial discretion taking into account customary lending and commercial
finance practices. Without intending to limit the Lender's discretion to
establish other criteria of eligibility, Eligible Accounts shall not include any
Account:
(a) except for Non-Standard Foreign Accounts, with respect to
which more than 90 days have elapsed since the date of the original invoice
therefor;
(b) that is a Non-Standard Foreign Account and with respect to
which more than 60 days have elapsed since the date of the original invoice
therefor;
(c) with respect to which any of the representations,
warranties, covenants, and agreements contained in this Agreement are not or
have ceased to be complete and correct or have been breached;
(d) with respect to which, in whole or in part, a check,
promissory note, draft, trade acceptance or other instrument for the payment of
money has been received, presented for payment and returned uncollected for any
reason;
(e) which represents a progress billing (as hereinafter defined)
or as to which the Borrower has extended the time for payment beyond the
applicable time periods in (a) and (b) above without the consent of the Lender;
for the purposes hereof, "progress billing" means any invoice for goods sold or
leased or services rendered under a contract or agreement pursuant to which the
Account Debtor's obligation to pay such invoice is conditioned upon the
Borrower's completion of any further performance under the contract or
agreement;
(f) as to which any one or more of the following events has
occurred with respect to the Account Debtor on such Account: death or judicial
declaration of incompetency of an Account Debtor who is an individual; the
filing by or against the Account Debtor of a request or petition for
liquidation, reorganization, arrangement, adjustment of debts, adjudication as a
bankrupt, winding-up, or other relief under the bankruptcy, insolvency, or
similar laws of the United States, any state or territory thereof, or any
foreign jurisdiction, now
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or hereafter in effect; the making of any general assignment by the Account
Debtor for the benefit of creditors; the appointment of a receiver or trustee
for the Account Debtor or for any of the assets of the Account Debtor,
including, without limitation, the appointment of or taking possession by a
"custodian," as defined in the Federal Bankruptcy Code; the institution by or
against the Account Debtor of any other type of insolvency proceeding (under the
bankruptcy laws of the United States or otherwise) or of any formal or informal
proceeding for the dissolution or liquidation of, settlement of claims against,
or winding up of affairs of, the Account Debtor; the sale, assignment, or
transfer of all or any material part of the assets of the Account Debtor; the
nonpayment generally by the Account Debtor of its debts as they become due; or
the cessation of the business of the Account Debtor as a going concern;
(g) which is a Non-Standard Foreign Account which causes the
aggregate amount of all Non-Standard Foreign Accounts to be greater than fifty
percent (50%) of the Net Amount of Eligible Accounts (calculated without regard
to Non-Standard Foreign Accounts) as of any date;
(h) owned by an Account Debtor which is the government of any
foreign country or sovereign state, or of any state, province, municipality, or
other political subdivision thereof, or of any department, agency, public
corporation, or other instrumentality thereof; except to the extent that such
Account is secured or payable by a letter of credit acceptable to Lender;
(i) owed by an Account Debtor which is an Affiliate or employee
of the Borrower;
(j) except as provided in (1) below, as to which either the
perfection, enforceability, or validity of the Security Interest in such
Account, or the Lender's right or ability to obtain direct payment to the Lender
of the Proceeds of such Account, is governed by any federal, state, or local
statutory requirements other than those of the UCC;
(k) which is owed by an Account Debtor to which the Borrower is
indebted in any way, or which is subject to any right of setoff or recoupment by
the Account Debtor, unless the Account Debtor has entered into an agreement
acceptable to the Lender to waive setoff and recoupment rights; or if the
Account Debtor thereon has disputed liability or made any claim with respect to
any other Account due from such Account Debtor to the Borrower; but in each such
case only to the extent of such indebtedness, setoff, recoupment, dispute, or
claim;
(l) which is owed by the government of the United States of
America, or any department, agency, public corporation, or other instrumentality
thereof, unless the Federal Assignment of Claims Act of 1940, as amended, and
any other steps necessary to perfect the Security Interest and protect the
Lender's rights therein, have been complied with to the Lender's satisfaction
with respect to such Account;
(m) which is owed by any state, municipality, or other political
subdivision of the United States of America, or any department, agency, public
corporation, or
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other instrumentality thereof and as to which the Lender determines that its
Security Interest therein is not or cannot be perfected;
(n) which arises out of a sale to an Account Debtor on a
▇▇▇▇-and-hold, guaranteed sale, sale and return, sale on approval, consignment,
or other repurchase or return basis;
(o) which is evidenced by a promissory note or other instrument
or by chattel paper;
(p) if fifty percent (50%) or more of the aggregate dollar
amount of outstanding Accounts owed at such time by the Account Debtor to the
Borrower is classified as ineligible under the other criteria set forth herein;
(q) which arises from cancellation fees assessed by the
Borrower, or which includes such fees but only to the extent so included;
(r) with respect to which the Account Debtor is located in any
state requiring the filing of a Notice of Business Activities Report or similar
report in order to permit the Borrower to seek judicial enforcement in such
state of payment of such Account, unless such Borrower has qualified to do
business in such state or has filed a Notice of Business Activities Report or
equivalent report for the then current year; or
(s) which arises out of a sale not made in the ordinary course
of the Borrower's business;
(t) with respect to which the goods giving rise to such Account
have not been shipped and delivered to and accepted by the Account Debtor or the
services giving rise to such Account have not been performed by the Borrower,
and, if applicable, accepted by the Account Debtor, or the Account debtor
revokes its acceptance of such goods or services (under the Borrower's present
practices invoices are rendered upon shipment and Accounts relating thereto will
be included as Eligible Accounts on Borrowing Base Certificates, but any such
Accounts as to which delivery or acceptance fails to occur, or as to which
acceptance is revoked, shall promptly be excluded from the calculation of
Eligible Accounts);
(u) which is not subject to a first priority and perfected
security interest in favor of the Lender;
(v) if Lender believes in its reasonable credit judgment that
the prospect of collection of such Account is impaired or that the Account may
not be paid by reason of the Account Debtor's financial inability to pay; or
(w) which is owed by an Account Debtor which the Lender, in its
reasonable credit judgment, otherwise deems to be uncreditworthy.
If any Account at any time ceases to be an Eligible Account by
reason of any of the foregoing exclusions or any failure to meet any other
eligibility criteria established by the
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Lender in the exercise of its reasonable discretion then such Account shall
promptly be excluded from the calculation of Eligible Accounts.
"Environmental Laws" means all federal, state and local laws, rules,
regulations, ordinances, programs, permits, guidance, orders and consent decrees
relating to health, safety, hazardous substances, and environmental matters
applicable to the Borrower's business and facilities (whether or not owned by
it). Such laws and regulations include but are not limited to the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq., as amended; the
Comprehensive Environmental Response Compensation and Liability Act, 42 U.S.C.
Section 9601 et seq., as amended; the Toxic Substances Control Act, 15 U.S.C.
Section 2601 et seq., as amended; the Clean Water Act, 33 U.S.C. Section 466 et
seq., as amended; the Clean Air Act, 42 U.S.C. Section 7401 et seq., as amended;
state and federal lien and environmental cleanup programs; and U.S. Department
of Transportation regulations.
"Environmental Lien" means a Lien in favor of any Public Authority
for (a) any liability under any Environmental Laws, or (b) damages arising from,
or costs incurred by such Public Authority in response to, a Release or
threatened Release of a Contaminant into the environment.
"Equipment" means all of the Borrower's now owned and hereafter
acquired machinery, equipment, furniture, furnishings, fixtures, and other
tangible personal property (except Inventory), including, without limitation,
data processing hardware and software, motor vehicles, aircraft, dies, tools,
jigs, and office equipment, as well as all of such types of property leased by
the Borrower and all of the Borrower's rights and interests with respect thereto
under such leases (including, without limitation, options to purchase); together
with all present and future additions and accessions thereto, replacements
therefor, component and auxiliary parts and supplies used or to be used in
connection therewith, and all substitutes for any of the foregoing, and all
manuals, drawings, instructions, warranties and rights with respect thereto;
wherever any of the foregoing is located.
"ERISA" means the Employee Retirement Income Security Act of 1974.,
as amended.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) which is a member of a controlled group or under common control
with the Borrower within the meaning of Section 414(b) or (c) of the Code (and
Sections 414(m) and (o) of the Code for purposes of provisions relating to
Section 412 of the Code).
"ERISA Event" means with respect to the Borrower, any ERISA
Affiliate or any Pension Plan, the occurrence of any of the following: (a) a
Reportable Event; (b) a withdrawal by a substantial employer (as defined in
Section 4001 (a)(12) of ERISA) subject to Section 4063 of ERISA; (c) a cessation
of operations which is treated as a withdrawal under Section 4062(e) of ERISA;
(d) a complete or partial withdrawal under Section 4203 or 4205 of ERISA from a
Multiemployer Plan; (e) a notification that a Multiemployer Plan is in
reorganization under Section 4242 of ERISA; (f) the filing of a notice of intent
to terminate a Pension Plan under 4041 of ERISA; (g) the treatment of an
amendment of a Pension Plan as a termination under 4041 of ERISA; (h) the
termination of a Multiemployer Plan under Section 4041A of ERISA; (i) the
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commencement of proceedings by the PBGC to terminate a Pension Plan under 4042
of ERISA; (j) an event or condition which could reasonably be expected to
constitute grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, a Pension Plan; or (k) the imposition of
any liability under Title IV of ERISA, other than PBGC premiums due but not
delinquent under Section 4007 of ERISA.
"Event" means any event or condition which, with notice, the passage
of time, the happening of any other condition or event, or any combination
thereof, would constitute an Event of Default.
"Event of Default" has the meaning specified in Section 11.1.
"Financial Statements" means, according to the context in which it
is used, the financial statements attached hereto as Exhibit B-1, or any
financial statements required to be given to the Lender pursuant to Section
7.2(a) and (b), or any combination thereof.
"Fiscal Year" means the Borrower's fiscal year for financial
accounting purposes. The current Fiscal Year of the Borrower will end on
December 31, 1998.
"Foreign Account" means an Account with an Account Debtor which (a)
does not maintain its chief executive office in the United States; or (b) is not
organized under the laws of the United States or any state thereof.
"GAAP" means at any particular time generally accepted accounting
principles as in effect at such time.
"Guaranty" by any Person means all obligations of such Person which
in any manner directly or indirectly guarantee or assure, or in effect guarantee
or assure, the payment or performance of any indebtedness, dividend or other
obligation of any other Person (the "guaranteed obligations"), or to assure or
in effect assure the holder of the guaranteed obligations against loss in
respect thereof, including, without limitation, any such obligations incurred
through an agreement, contingent or otherwise: (a) to purchase the guaranteed
obligations or any Property constituting security therefor; (b) to advance or
supply funds for the purchase or payment of the guaranteed obligations or to
maintain a working capital or other balance sheet condition; or (c) to lease
Property or to purchase any debt or equity securities or other Property or
services.
"Intercompany Accounts" means all assets and liabilities, however
arising, which are due to the Borrower from, which are due from the Borrower to,
or which otherwise arise from any transaction by the Borrower with, any
Affiliate.
"Inventory" means all of the Borrower's now owned and hereafter
acquired inventory, goods and merchandise, wherever located, to be furnished
under any contract of service or held for sale or lease, all raw materials,
work-in-process, finished goods, returned goods, and materials and supplies of
any kind, nature or description which are or might be used or consumed in the
Borrower's business or used in connection with the manufacture, packing,
shipping, advertising, selling or finishing of such goods, merchandise and such
other personal property, and all documents of title or other documents
representing them.
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"IRS" means the Internal Revenue Service or any successor agency.
"Latest Projections" means: (a) on the Closing Date and thereafter
until the Lender receives new projections pursuant to Section 7.2(e), the
projections of the Borrower's monthly financial condition, results of
operations, and cash flow for the one-year period ending December 31, 1998,
attached hereto as Exhibit B-2; and (b) thereafter, the projections most
recently received by the Lender pursuant to Section 7.2(e).
"Letter of Credit" has the meaning specified in Section 2.3.
"Letter of Credit Fee" has the meaning specified in Section 3.4.
"Lien" means: (a) any interest in Property securing an obligation
owed to, or a claim by, a Person other than the owner of the Property, whether
such interest is based on the common law, statute, or contract, and including
without limitation, a security interest, charge, claim, or lien arising from a
mortgage, deed of trust, encumbrance, pledge, hypothecation, assignment, deposit
arrangement, agreement, security agreement, conditional sale or trust receipt or
a lease, consignment or bailment for security purposes; and (b) to the extent
not included under clause (a), any reservation, exception, encroachment,
easement, right-of-way, covenant, condition, restriction, lease or other title
exception or encumbrance affecting Property.
"Loans" means, collectively, all loans and advances (including
Letters of Credit) provided for in Section 2.
"Loan Documents" means this Agreement, the Copyright, Patent and
Trademark Assignments, the Post-Closing Letter, the Subordination Agreement, and
all other agreements, instruments and documents heretofore, now or hereafter
evidencing, securing, guaranteeing or otherwise relating to the Obligations, the
Collateral, the Security Interest, or any other aspect of the transactions
contemplated by this Agreement.
"Merchandise Letters of Credit" means such Letters of Credit used in
financing the shipment of goods where the conforming documents may be bills of
lading, inspection certificates, and other documents attesting to the timely
shipment of goods.
"Multiemployer Plan" means a multiemployer plan as defined in
Section 4001(a)(3) of ERISA to which the Borrower or any ERISA Affiliate makes,
is making, made or was at any time during the current year or the immediately
preceding six (6) years obligated to make contributions.
"Net Amount of Eligible Accounts" means, at any time, the gross
amount of Eligible Accounts less sales, excise or similar taxes, and less
returns, discounts, claims, credits and allowances of any nature at any time
issued, owing, granted, outstanding, available or claimed in respect of such
Eligible Accounts.
"Non-Standard Foreign Accounts" means all Foreign Accounts which are
(a) Eligible Accounts; and (b) not backed by letters of credit that are
acceptable to the Lender in its sole discretion.
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"Obligations" means all present and future loans, advances,
liabilities, obligations, covenants, duties, and Debt owing by the Borrower to
the Lender, whether or not arising under this Agreement, whether or not
evidenced by any note, or other instrument or document, whether arising from an
extension of credit, opening of a letter of credit, acceptance, loan, guaranty,
indemnification or otherwise, whether direct or indirect (including, without
limitation, those acquired by assignment from others, and any participation by
the Lender in the Borrower's debts owing to others) absolute or contingent, due
or to become due, primary or secondary, as principal or guarantor, and
including, without limitation, all interest, charges, expenses, fees, attorneys'
fees, filing fees and any other sums chargeable to the Borrower hereunder, under
another Loan Document, or under any other agreement or instrument with the
Lender. "Obligations" includes, without limitation, (a) all debts, liabilities,
and obligations now or hereafter owing from Borrower to Lender under or in
connection with the Letters of Credit and (b) all debts, liabilities and
obligations now or hereafter owing from the Borrower to the Lender arising from
or related to ACH Transactions and Swap Transactions pursuant to the indemnity
provided in Section 2.4 hereof.
"Parent" means Paradyne Partners L.P., a Delaware limited
partnership.
"Parent Loan" means that $5,000,000 line of credit provided by the
Parent to the Borrower pursuant to the Subordinated Revolving Promissory Note.
"Payment Account" means each blocked bank account or bank account
associated with a lock box, established pursuant to Section 6.10, to which the
funds of the Borrower (including, without limitation, Proceeds of Accounts and
other Collateral) are deposited or credited, and which is maintained in the name
of the Lender or the Borrower, as the Lender may determine, on terms acceptable
to the Lender.
"PBGC" means the Pension Benefit Guaranty Corporation or any Person
succeeding to the functions thereof.
"Pension Plan" means a pension plan (as defined in Section 3(2) of
ERISA) subject to Title IV of ERISA which the Borrower or an ERISA Affiliate
sponsors, maintains, or to which it makes, is making, or is obligated to make
contributions or, in the case of a Multiemployer Plan, has made contributions at
any time during the current year or the immediately preceding six (6) plan
years.
"Permitted Liens" means:
(a) Liens for taxes not yet delinquent or Liens for taxes in an
amount not to exceed $250,000 being contested in good faith by appropriate
proceedings diligently pursued, provided that a reserve or other appropriate
provision, if any, as shall be required by GAAP shall have been made therefor on
the applicable Financial Statements and that a stay of enforcement of any such
Lien is in effect;
(b) Liens in favor of the Lender;
(c) Liens arising by operation of law in favor of warehousemen,
landlords, carriers, mechanics, materialmen, laborers, employees or suppliers,
incurred in the
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ordinary course of business of the Borrower and not in connection with the
borrowing of money, for sums not yet delinquent or which are being contested in
good faith and by proper proceedings diligently pursued, provided that a reserve
or other appropriate provision, if any, required by GAAP shall have been made
therefor on the applicable Financial Statements and a stay of enforcement of any
such Lien is in effect;
(d) Liens in connection with workers' compensation or other
unemployment insurance incurred in the ordinary course of the Borrower's
business;
(e) Liens created by deposits of cash to secure performance of
bids, tenders, leases (to the extent permitted under this Agreement), or trade
contracts, incurred in the ordinary course of business of the Borrower and not
in connection with the borrowing of money;
(f) Liens of or resulting from any judgment or award, the time
for the appeal or petition for rehearing of which has not yet expired, or in
respect of which the Borrower is in good faith prosecuting an appeal or
proceeding for a review, and in respect of which a stay of execution pending
such appeal or proceeding for review has been secured;
(g) Liens with respect to the Premises which are exceptions to
the commitments for title insurance issued in connection with the mortgages, as
accepted by the Lender;
(h) Easements, rights of way, zoning and similar covenants and
restrictions and similar encumbrances which customarily exist on real property
and do not materially interfere with or impair the use or operation of the
Collateral by the Borrower or the value of the Lender's Security Interest
therein, or materially interfere with the ordinary conduct of the business of
the Borrower;
(i) purchase money security interests in equipment and liens of
lessors under Capital Leases to the extent that the acquisition or lease of the
underlying asset was permitted under Section 9.11, the security interest or lien
only encumbers the asset purchased or leased, and so long as the security
interest or lien only secures the purchase price of the asset; and
(j) Liens arising by reason of cash deposits for surety or
appeal bonds in the ordinary course of business of the Borrower.
"Person" means any individual, sole proprietorship, partnership,
joint venture, trust, unincorporated organization, association, limited
liability company, corporation, Public Authority, or any other entity.
"Plan" means an employee benefit plan (as defined in Section 3(3) of
ERISA) which the Borrower or an ERISA Affiliate sponsors or maintains or to
which the Borrower or an ERISA Affiliate makes, is making, or is obligated to
make contributions and includes any Pension Plan.
"Premises" means the land identified by addresses on Schedule 8.13
together with all buildings, improvements, and fixtures thereon and all
tenements, hereditaments, and
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appurtenances belonging or in any way appertaining thereto, and which
constitutes all of the real property in which the Borrower has any interests on
the Closing Date.
"Proceeds" means all products and proceeds of any Collateral, and
all proceeds of such proceeds and products, including, without limitation, all
cash and credit balances, all payments under any indemnity, warranty, or
guaranty payable with respect to any Collateral, all awards for taking by
eminent domain, all proceeds of fire or other insurance, and all money and other
Property obtained as a result of any claims against third parties or any legal
action or proceeding with respect to Collateral.
"Property" means any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.
"Proprietary Rights" means all of the Borrower's now owned and
hereafter arising or acquired: licenses, franchises, permits, patents, patent
rights, copyrights, works which are the subject matter of copyrights,
trademarks, trade names, trade styles, patent and trademark applications and
licenses and rights thereunder, including without limitation those patents,
trademarks and copyrights set forth on Schedule 8.14 and all other rights under
any of the foregoing, all extensions, renewals, reissues, divisions,
continuations, and continuations-in-part of any of the foregoing, and all rights
to ▇▇▇ for past, present, and future infringement of any of the foregoing;
inventions, trade secrets, formulae, processes, compounds, drawings, designs,
blueprints, surveys, reports, manuals, and operating standards; goodwill;
customer and other lists in whatever form maintained; and trade secret rights,
copyright rights, rights in works of authorship, and contract rights relating to
computer software programs, in whatever form created or maintained.
"Public Authority" means the government of any country or sovereign
state, or of any state, province, municipality, or other political subdivision
thereof, or any department, agency, public corporation or other instrumentality
of any of the foregoing.
"Receivables" means all of the Borrower's now owned and hereafter
arising or acquired: Accounts (whether or not earned by performance), including
Accounts owed to the Borrower by any of its Subsidiaries or Affiliates, together
with all interest, late charges, penalties, collection fees, and other sums
which shall be due and payable in connection with any Account; proceeds of any
letters of credit naming the Borrower as beneficiary; contract rights, chattel
paper, instruments, documents, investment property, general intangibles
(including without limitation choses in action, causes of action, tax refunds,
tax refund claims, and Reversions and other amounts payable to the Borrower from
or with respect to any Plan) and all forms of obligations owing to the Borrower
(including, without limitation, in respect of loans, advances, and extensions of
credit by the Borrower to its Subsidiaries and Affiliates); guarantees and other
security for any of the foregoing; goods represented by or the sale, lease or
delivery of which gave rise to any of the foregoing; merchandise returned to or
repossessed by the Borrower and rights of stoppage in transit, replevin, and
reclamation; and other rights or remedies of an unpaid vendor, lienor, or
secured party.
"Reference Rate" means the rate of interest publicly announced from
time to time by the Bank as its reference rate. It is a rate set by the Bank
based upon various factors including
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the Bank's costs and desired return, general economic conditions, and other
factors, and is used as a reference point for pricing some loans. However, the
Bank may price loans at, above, or below such announced rate. Any changes in the
Reference Rate shall take effect on the day specified in the public announcement
of such change.
"Release" means a release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration of a
Contaminant into the indoor or outdoor environment or into or out of any real
estate or other property, including the movement of Contaminants through or in
the air, soil, surface water, groundwater or real estate or other property.
"Reportable Event" means any of the events set forth in Section
4043(b) of ERISA or the regulations thereunder, other than any such event for
which the 30-day notice requirement under ERISA has been waived in regulations
issued by the PBGC.
"Responsible Officer" means the chief executive officer, the
president or the chief financial officer of the Borrower, or any other officer
or employee of the Borrower authorized to request and take action with respect
to Loans; or, with respect to compliance with financial covenants and the
preparation of the Borrowing Base Certificate, the chief financial officer, or
the treasurer of the Borrower or any other officer or employee of the Borrower
authorized to prepare and sign the Borrowing Base Certificate.
"Restricted Investment" means any acquisition of Property by the
Borrower or any of its Subsidiaries in exchange for cash or other Property,
whether in the form of an acquisition of stock, debt security, or other
indebtedness or obligation, or the purchase or acquisition of any other
Property, or a loan, advance, capital contribution, or subscription, except
acquisitions of the following: (a) fixed assets to be used in the business of
the Borrower, so long as the acquisition costs thereof constitute Capital
Expenditures permitted hereunder; (b) goods held for sale or lease or to be used
in the rendition of services by the Borrower in the ordinary course of business;
(c) direct obligations of the United States of America, or any agency thereof,
or obligations guaranteed by the United States of America, provided that such
obligations mature within one year from the date of acquisition thereof; (d)
certificates of deposit maturing within one year from the date of acquisition,
bankers acceptances, Eurodollar bank deposits, or overnight bank deposits, in
each case issued by, created by, or with a bank or trust company organized under
the laws of the United States or any state thereof having capital and surplus
aggregating at least $100,000,000; (e) commercial paper given the highest rating
by a national credit rating agency and maturing not more than 270 days from the
date of creation thereof; and (f) transactions with Affiliates by Section 9.13.
"Reversions" means any funds which may become due to the Borrower in
connection with the termination of any Plan or other employee benefit plan.
"Revolving Loans" has the meaning specified in Section 2.2.
"Security Interest" means collectively the Liens granted to the
Lender in the Collateral pursuant to this Agreement, the other Loan Documents,
or any other agreement or instrument.
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"Solvent" means when used with respect to any Person that at the
time of determination:
(i) the assets of such Person, at a fair valuation, are in
excess of the total amount of its debts (including without limitation,
contingent liabilities); and
(ii) the present fair saleable value of its assets is greater
than its probable liability on its existing debts as such debts become absolute
and matured; and
(iii) it is then able and expects to be able to pay its debts
(including, without limitation, contingent debts and other commitments) as they
mature; and
(iv) it has capital sufficient to carry on its business as
conducted and as proposed to be conducted.
For purposes of determining whether a Person is Solvent, the amount of any
contingent liability shall be computed as the amount that, in light of all the
facts and circumstances existing at such time, represents the amount that can
reasonably be expected to become an actual or matured liability.
"Standby Letters of Credit" means such Letters of Credit (that are
not Merchandise Letters of Credit) which are payable by the Lender upon the
execution of a certificate by the beneficiary, attesting to the fact that the
obligation secured by such Letter of Credit is due and remains unpaid.
"Stated Termination Date" has the meaning specified in Section 13.
"Subordination Agreement" means that certain Subordination Agreement
dated of even date herewith between the Lender, the Borrower, and the Parent.
"Subordinated Revolving Promissory Note" means a Subordinated
Revolving Promissory Note dated as of even date herewith between the Borrower
and the Parent.
"Subsidiary" of a Person means any corporation, association,
partnership, joint venture or other business entity of which more than 50% of
the voting stock or other equity interests (in the case of Persons other than
corporations), is owned or controlled directly or indirectly by the Person, or
one or more of the Subsidiaries of the Person, or a combination thereof. Unless
the context otherwise clearly requires, references herein to a "Subsidiary"
refer to a Subsidiary of the Borrower.
"Swap Reserve" means any and all reserves which the Lender from time
to time establishes, in its sole discretion, with respect to Swap Transactions.
"Swap Transactions" means any interest rate swap transaction,
forward rate transaction, treasury lock transaction, interest rate cap, floor or
collar transaction, any similar transaction, any option to enter into any of the
foregoing, or any combination of any of the foregoing.
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"Total Facility" has the meaning specified in Section 2.1.
"TPG" means TPG Partners, L.P., a Delaware limited partnership.
"UCC" means the Uniform Commercial Code (or any successor statute)
of the State of California or of any other state the laws of which are required
by Section 9-103 thereof to be applied in connection with the issue of
perfection of security interests.
"Unused Line Fee" has the meaning specified in Section 3.2.
"Year 2000 Problem" means the risk that computer applications used
by any person may be unable to recognize and perform properly date-sensitive
functions involving certain dates prior to and any date after December 31, 1999.
1.2 Accounting Terms. Any accounting term used in this Agreement
shall have, unless otherwise specifically provided herein, the meaning
customarily given in accordance with GAAP, and all financial computations
hereunder shall be computed, unless otherwise specifically provided herein, in
accordance with GAAP as consistently applied and using the same method for
inventory valuation as used in the preparation of the Financial Statements.
1.3 Other Terms. All other undefined terms contained in this
Agreement shall, unless the context indicates otherwise, have the meanings
provided for by the UCC to the extent the same are used or defined therein.
Wherever appropriate in the context, terms used herein in the singular also
include the plural, and vice versa, and each masculine, feminine, or neuter
pronoun shall also include the other genders.
2. LOANS AND LETTERS OF CREDIT.
2.1 Total Facility. Subject to all of the terms and conditions of
this Agreement, the Lender shall make available a total credit facility of up to
$5,000,000 (the "Total Facility") for the Borrower's use from time to time
during the term of this Agreement. The Total Facility shall be comprised of: a
revolving line of credit up to the limits of the Availability, consisting of
Revolving Loans and Letters of Credit as described in Sections 2.2 and 2.3.
2.2 Revolving Loans. The Lender shall, upon the Borrower's request
from time to time, make revolving loans (the "Revolving Loans") to the Borrower
up to the limits of the Availability. The Lender, in its discretion, may elect
to exceed the limits of the Availability on one or more occasions, but if it
does so, the Lender shall not be deemed thereby to have changed the limits of
the Availability or to be obligated to exceed the limits of the Availability on
any other occasion. If the unpaid balance of the Revolving Loans exceeds the
Availability (with Availability determined for this purpose as if the amount of
the Revolving Loans were zero), then the Lender may refuse to make or otherwise
restrict Revolving Loans on such terms as the Lender determines until such
excess has been eliminated. The Borrower may request Revolving Loans either
telephonically or in writing. Each request for a Revolving Loan shall be
conclusively presumed to be made by a person authorized by the Borrower to do so
and the crediting of a Revolving Loan to the Borrower's deposit account, or
transmittal to such Person as the Borrower shall direct, shall conclusively
establish the obligation of the Borrower to repay
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such Revolving Loan as provided herein. The Lender will charge all Revolving
Loans and other Obligations to a loan account of the Borrower maintained with
the Lender. All fees, commissions, costs, expenses, and other charges under or
pursuant to the Loan Documents, and all payments made and out-of-pocket expenses
incurred by the Lender pursuant to the Loan Documents, will be charged as
Revolving Loans to the Borrower's loan account as of the date due from the
Borrower or the date paid or incurred by the Lender, as the case may be.
2.3 Letters of Credit.
(a) General Conditions. Subject to the terms and conditions of
this Agreement, the Lender shall, upon the Borrower's request from time to time,
cause merchandise or standby letters of credit to be issued for the Borrower's
account (the "Letters of Credit") by providing credit support or other
enhancement to banks, acceptable to the Lender, which issue Letters of Credit
for the account of the Borrower (any such credit support or enhancement being
herein referred to as a "Credit Support"). The Lender shall not have any
obligation to take steps to cause to be issued any Letter of Credit if: (i) the
maximum face amount of the requested Letter of Credit, plus the aggregate
undrawn face amount of all outstanding Letters of Credit, would exceed
$1,000,000; (ii) the maximum face amount of the requested Letter of Credit, and
all commissions, fees, and charges due from Borrower to Lender in connection
with the issuance thereof, would cause the Availability to be exceeded at such
time; or (iii) the expiration date of the Letter of Credit would exceed the
Stated Termination Date or any renewal term or be greater than twelve (12)
months from the date of issuance. All payments made and expenses incurred by the
Lender pursuant to or in connection with the Letters of Credit will be charged
to the Borrower's loan account as Revolving Loans.
(b) Other Conditions. In addition to being subject to the
satisfaction of the applicable conditions precedent contained in Section 10, the
obligation of the Lender to cause to be issued any Letter of Credit or to
provide Credit Support for any Letter of Credit is subject to the following
conditions precedent having been satisfied in a manner satisfactory to the
Lender:
(1) The Borrower shall have delivered to the proposed issuer
of such Letter of Credit, at such times and in such manner as such proposed
issuer may prescribe, an application in form and substance satisfactory to such
proposed issuer and the Lender for the issuance of the Letter of Credit and such
other documents as may be required pursuant to the terms thereof, and the form
and terms of the proposed Letter of Credit shall be satisfactory to the Lender
and such proposed issuer; and
(2) As of the date of issuance, no order of any court,
arbitrator or Public Authority shall purport by its terms to enjoin or restrain
money center banks generally from issuing letters of credit of the type and in
the amount of the proposed Letter of Credit, and no law, rule or regulation
applicable to money center banks generally and no request or directive (whether
or not having the force of law) from any Public Authority with jurisdiction over
money center banks generally shall prohibit, or request that the proposed issuer
of such Letter of Credit refrain from, the issuance of letters of credit
generally or the issuance of such Letters of Credit.
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(c) Issuance of Letters of Credit.
(1) Request for Issuance. The Borrower shall give the Lender
three (3) Business Days' prior written notice of the Borrower's request for the
issuance of a Letter of Credit. Such notice shall be irrevocable and shall
specify the original face amount of the Letter of Credit requested, the
effective date (which date shall be a Business Day) of issuance of such
requested Letter of Credit, whether such Letter of Credit may be drawn in a
single or in partial draws, the date on which such requested Letter of Credit is
to expire (which date shall be a Business Day), the purpose for which such
Letter of Credit is to be issued, and the beneficiary of the requested Letter of
Credit. The Borrower shall attach to such notice the proposed form of the Letter
of Credit.
(2) No Extensions or Amendment. The Lender shall not be
obligated to cause any Letter of Credit to be extended or amended unless the
requirements of this Section 2.3 are met as though a new Letter of Credit were
being requested and issued.
(d) Payments Pursuant to Letters of Credit.
(1) Payment of Letter of Credit Obligations. The Borrower
agrees to reimburse the issuer for any draw under any Letter of Credit and the
Lender upon any payment pursuant to the Credit Support immediately upon demand,
and to pay the issuer of the Letter of Credit amount of all other obligations
and other amounts payable to such issuer under or in connection with any Letter
of Credit immediately when due, irrespective of any claim, setoff, defense or
other right which the Borrower may have at any time against such issuer or any
other Person.
(2) Revolving Loans to Satisfy Reimbursement Obligations. In
the event that the issuer of any Letter of Credit honors a draw under such
Letter of Credit and the Borrower shall not have repaid such amount to the
issuer of such Letter of Credit pursuant to Section 2.3(d)(1), the Lender shall
pay the issuer and such amount when paid shall constitute a Revolving Loan which
shall be deemed to have been requested by the Borrower.
(e) Compensation for Letters of Credit.
(1) Letter of Credit Fee. The Borrower agrees to pay to the
Lender with respect to each Letter of Credit, the Letter of Credit Fee specified
in, and in accordance with the terms of, Section 3.4.
(2) Issuer Fees and Charges. The Borrower shall pay to the
issuer of any Letter of Credit, or to the Lender, for the account of the issuer
of any such Letter of Credit, solely for such issuer's account, such fees and
other charges as are charged by such issuer for letters of credit issued by it,
including, without limitation, its standard fees for issuing, administering,
amending, renewing, paying and canceling letters of credit and all other fees
associated with issuing or servicing letters of credit, as and when assessed.
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(f) Indemnification; Exoneration; Power of Attorney.
(1) Indemnification. In addition payable as elsewhere
provided in this Section 2.3, the Borrower hereby agrees to protect, indemnify,
pay and save the Lender harmless from and against any and all claims, demands,
liabilities, damages, losses, costs, charges and expenses (including reasonable
attorneys' fees) which the Lender may incur or be subject to as a consequence,
direct or indirect, of the issuance of any Letter of Credit or the provision of
any credit support or enhancement in connection therewith. The agreement in this
Section 2.3(f)(1) shall survive payment of all Obligations and the termination
of this Agreement.
(2) Assumption of Risk by the Borrower. As among the
Borrower and the Lender, the Borrower assumes all risks of the acts and
omissions of, or misuse of any of the Letters of Credit by, the respective
beneficiaries of such Letters of Credit. In furtherance and not in limitation of
the foregoing, the Lender shall not be responsible for: (A) the form, validity,
sufficiency, accuracy, genuineness or legal effect of any document submitted by
any Person in connection with the application for and issuance of and
presentation of drafts with respect to any of the Letters of Credit, even if it
should prove to be in any or all respects invalid, insufficient, inaccurate,
fraudulent or forged; (B) the validity or sufficiency of any instrument
transferring or assigning or purporting to transfer or assign any Letter of
Credit or the rights or benefits thereunder or proceeds thereof, in whole or in
part, which may prove to be invalid or ineffective for any reason; (C) the
failure of the beneficiary of any Letter of Credit to comply duly with
conditions required in order to draw upon such Letter of Credit; (D) errors,
omissions, interruptions, or delays in transmission or delivery of any messages,
by mail, cable, telegraph, telex or otherwise, whether or not they be in cipher;
(E) errors in interpretation of technical terms; (F) any loss or delay in the
transmission or otherwise of any document required in order make a drawing under
any Letter of Credit or of the proceeds thereof; (G) the misapplication by the
beneficiary of any Letter of Credit of the proceeds of any drawing under such
Letter of Credit; or (H) any consequences arising from causes beyond the control
of the Lender, including, without limitation, any act or omission, whether
rightful or wrongful, of any present or future de jure or de facto Public
Authority. None of the foregoing shall affect, impair or prevent the vesting of
any rights or powers of the Lender under this Section 2.3.
(3) Exoneration. In furtherance and extension, and not in
limitation, of the specific provisions set forth above, any action taken or
omitted by the Lender under or in connection with any of the Letters of Credit
or any related certificates, if taken or omitted in the absence of gross
negligence or willful misconduct, shall not put the Lender under any resulting
liability to the Borrower or relieve the Borrower of any of its obligations
hereunder to any such Person.
(g) Supporting Letter of Credit; Cash Collateral. If,
notwithstanding the provisions of this Section 2.3 and Section 13 any Letter of
Credit is outstanding upon the termination of this Agreement, then upon such
termination the Borrower shall deposit with the Lender, at its discretion, with
respect to each Letter of Credit then outstanding, either (A) a standby letter
of credit (a "Supporting Letter of Credit") in form and substance satisfactory
to the Lender, issued by an issuer satisfactory to the Lender in an amount equal
to the greatest amount for which such Letter of Credit may be drawn, under which
Supporting Letter of Credit the Lender is entitled to draw amounts necessary to
reimburse the Lender for payments made by the
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Lender under such Letter of Credit or under any credit support or enhancement
provided through the Lender with respect thereto, or (B) cash in amounts
necessary to reimburse the Lender for payments made by the Lender under such
Letter of Credit or under any credit support or enhancement provided through the
Lender. Such Supporting Letter of Credit or deposit of cash shall be held by the
Lender, as security for, and to provide for the payment of, the aggregate
undrawn amount of such Letters of Credit remaining outstanding.
2.4 ACH Transactions and Swap Transactions. The Borrower may request
and the Lender may, in its sole discretion, arrange for the Borrower to obtain
from the Bank or an affiliate of the Bank ACH Transactions and Swap
Transactions. The Borrower agrees to indemnify and hold the Lender harmless from
any and all obligations now or hereafter owing by the Lender to the Bank or an
affiliate of the Bank arising from or related to such ACH Transactions and Swap
Transactions pursuant to the indemnity referred to in clause (c) below. The
Borrower agrees to pay the Bank or an affiliate of the Bank all amounts owing to
the Bank or an affiliate of the Bank pursuant to ACH Transactions and Swap
Transactions. In the event the Borrower shall not have paid to the Bank or an
affiliate of the Bank such amounts, the Lender shall pay the Bank or an
affiliate of the Bank and such amounts when paid by the Lender shall constitute
a Revolving Loan which shall be deemed to have been requested by the Borrower.
The Borrower acknowledges and agrees that the obtaining of ACH Transactions and
Swap Transactions from the Bank or an affiliate of the Bank (a) is in the sole
and absolute discretion of the Bank or an affiliate of the Bank, (b) is subject
to all rules and regulations of the Bank or an affiliate of the Bank, and (c) is
due to the Bank or an affiliate of the Bank relying on the indemnity of the
Lender to the Bank or an affiliate of the Bank with respect to obligations of
the Borrower to the Bank or an affiliate of the Bank in connection with the ACH
Transactions and Swap Transactions.
3. INTEREST AND OTHER CHARGES.
3.1 Interest.
(a) The Borrower shall pay the Lender interest on the unpaid
principal balance of the Revolving Low (including, to the extent permitted by
law, on interest thereon not paid when due) at a fluctuating per annum rate
equal to one percent (1%) plus the Reference Rate. Each change in the Reference
Rate shall be reflected in the foregoing interest rate as of the effective date
of such change. Interest charges shall be computed on the basis of a year of 360
days and actual days elapsed and will be payable to the Lender on the first day
of each month hereafter.
(b) If any Event of Default occurs, then, from the date such
Event of Default occurs until it is cured, or if not cured until all Obligations
are paid and performed in full, the Borrower will pay interest on the unpaid
principal balances of the Revolving Loans at a per annum rate two percent (2%)
greater than the rate of interest otherwise specified herein, and the Letter of
Credit Fee shall be increased by two percent (2%) per annum.
3.2 Unused Line Fee. For every month during the term of this
Agreement, the Borrower shall pay the Lender a fee (the "Unused Line Fee") in an
amount equal to one-half percent (.50%) per annum, multiplied by the average
daily outstanding amount by which
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$5,000,000 exceeds the sum of (i) the average daily outstanding amount of
Revolving Loans during such month and (ii) the average daily undrawn face amount
of all outstanding Letters of Credit during such month, with the outstanding
amount of Revolving Loans calculated for this purpose by applying payments
immediately upon receipt. Such a fee, if any, shall be calculated on the basis
of a year of three hundred sixty (360) days and actual days elapsed, and shall
be payable to the Lender on the first day of each month and on the termination
of this Agreement, in each case, with respect to the prior month or portion
thereof.
3.3 Maximum Interest Rate. In no event shall any interest rate
provided for hereunder exceed the maximum rate permissible for corporate
borrowers under applicable law for loans of the type provided for hereunder (the
"Maximum Rate"). If, in any month, any interest rate, absent such limitation,
would have exceeded the Maximum Rate, then the interest rate for that month
shall be the Maximum Rate, and, if in future months, that interest rate would
otherwise be less than the Maximum Rate, then that interest rate shall remain at
the Maximum Rate until such time as the amount of interest paid hereunder equals
the amount of interest which would have been paid if the same had not been
limited by the Maximum Rate. In the event that, upon payment in full of the
Obligations, the total amount of interest paid or accrued under the terms of
this Agreement is less than the total amount of interest which would, but for
this Section 3.3, have been paid or accrued if the interest rates otherwise set
forth in this Agreement had at all times been in effect, then the Borrower
shall, to the extent permitted by applicable law, pay the Lender, an amount
equal to the excess of (a) the lesser of (i) the amount of interest which would
have beet charged if the Maximum Rate had, at all times, been in effect or (ii)
the amount of interest which would have accrued had the interest rates otherwise
set forth in this Agreement, at all times, been in effect over (b) the amount of
interest actually paid or accrued under this Agreement. In the event that a
court determines that the Lender has received interest and other charges
hereunder in excess of the Maximum Rate, such excess shall be deemed received on
account of, and shall automatically be applied to reduce, the Obligations other
than interest, in the inverse order of maturity, and if there are no Obligations
outstanding, the Lender shall refund to the Borrower such excess.
3.4 Letter of Credit Fee. The Borrower agrees to pay to the Lender a
fee (the "Letter of Credit Fee") equal to: (a) one and one-half percent (1.50%)
per annum of the undrawn face amount of each Standby Letter of Credit issued for
the Borrower's account at the Borrower's request; and (b) three-quarters percent
(.75%) per annum of the undrawn face amount of each Merchandise Letter of Credit
issued for the Borrower's account at the Borrower's request, plus all
out-of-pocket costs, fees and expenses incurred by the Lender in connection with
the application for, issuance of, or amendment to any Letter of Credit, which
costs, fees and expenses could include a "fronting fee" required to be paid by
the Lender to such issuer for the assumption of the settlement risk in
connection with the issuance of such Letter of Credit; The Letter of Credit Fee
shall be payable monthly in arrears on the first day of each month following any
month in which a Letter of Credit was issued and/or in which a Letter of Credit
remains outstanding. The Letter of Credit Fee shall be computed on the basis of
a 360-day year for the actual number of days elapsed.
3.5 Capital Adequacy. If as a result of any regulatory change
directly or indirectly affecting Lender or any of Lender's affiliated companies
there shall hereafter be imposed, modified or deemed applicable any tax,
reserve, special deposit, minimum capital,
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capital ratio, or similar requirement against or with respect to or measured by
reference to loans made or to be made hereunder or participation therein, or to
Letters of Credit issued hereunder, and the result shall be to increase the cost
to Lender or to any of Lender's affiliated companies of making or maintaining
any loan or Letter of Credit hereunder as a result of Lender's or Lender's
affiliated company's reasonable allocation of such increased cost resulting from
such event, then, within ten (10) days after receipt by Borrower of a
certificate from Lender containing the information described in this Section 3.5
which shall be delivered to Borrower, Borrower agrees from time to time to pay
Lender such additional amounts as shall be sufficient to compensate Lender or
any of Lender's affiliated companies for such increased costs or reductions in
amounts which Lender determines in Lender's sole discretion are material.
Notwithstanding the foregoing, all such amounts shall be subject to the
provisions of Section 3.3. The certificate requesting compensation under this
Section 3.5 shall identify the regulatory change which has occurred, the
requirements which have been imposed, modified or deemed applicable, the amounts
of such additional cost or reduction in the amount receivable and the way in
which such amount has been calculated.
4. PAYMENTS AND PREPAYMENTS.
4.1 Revolving Loans. The Borrower shall repay the outstanding
principal balance of the Revolving Loans, plus all accrued but unpaid interest
thereon, upon the termination of this Agreement for any reason. In addition, and
without limiting the generality of the foregoing, the Borrower shall pay to the
Lender, on demand, the amount by which the unpaid principal balance of the
Revolving Loans at any time exceeds the Availability at such time (determined
for this purpose as if the amount of the Revolving Loans were zero).
4.2 Place and Form of Payments; Extension of Time. All payments of
principal, interest, premium, and other sums due to the Lender shall be made at
the Lender's address set forth in Section 14.11. Except for Proceeds received
directly by the Lender, all such payments shall be made in immediately available
funds. If any payment of principal, interest, premium, or other sum to be made
hereunder becomes due and payable on a day other than a Business Day, the due
date of such payment shall be extended to the next succeeding Business Day and
interest thereon shall be payable at the applicable interest rate during such
extension.
4.3 Application and Reversal of Payments. The Lender shall determine
in its sole discretion the order and manner in which Proceeds of Collateral and
other payments that the Lender receives are applied to the Revolving Loans,
interest thereon, and the other Obligations, and the Borrower hereby irrevocably
waives the right to direct the application of any payment or Proceeds. The
Lender shall have the continuing and exclusive right to apply and reverse and
reapply any and all such Proceeds and payments to any portion of the
Obligations.
4.4 Indemnity for Returned Payments. IF AFTER RECEIPT OF ANY PAYMENT
WHICH IS APPLIED TO THE PAYMENT OF ALL OR ANY PART OF THE OBLIGATIONS, THE
LENDER IS FOR ANY REASON COMPELLED TO SURRENDER SUCH PAYMENT TO ANY PERSON
BECAUSE SUCH PAYMENT IS INVALIDATED, DECLARED FRAUDULENT, SET ASIDE, DETERMINED
TO BE VOID OR VOIDABLE AS A PREFERENCE, IMPERMISSIBLE SETOFF, OR A DIVERSION OF
TRUST FUNDS, OR FOR ANY OTHER REASON, THEN: THE
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OBLIGATIONS OR PART THEREOF INTENDED TO BE SATISFIED SHALL BE REVIVED AND
CONTINUE AND THIS AGREEMENT SHALL CONTINUE IN FULL FORCE AS IF SUCH PAYMENT HAD
NOT BEEN RECEIVED BY THE LENDER AND THE BORROWER SHALL BE LIABLE TO PAY TO THE
LENDER AND HEREBY DOES INDEMNIFY THE LENDER AND HOLD THE LENDER HARMLESS FOR THE
AMOUNT OF SUCH PAYMENT SURRENDERED. The provisions of this Section 4.4 shall be
and remain effective notwithstanding any contrary action which may have been
taken by the Lender in reliance upon such payment, and any such contrary action
so taken shall be without prejudice to the Lender's rights under this Agreement
and shall be deemed to have been conditioned upon such payment having become
final and irrevocable. The provisions of this Section 4.4 shall survive the
termination of this Agreement.
5. LENDER'S BOOKS AND RECORDS; MONTHLY STATEMENTS. the Borrower agrees
that the Lender's books and records showing the Obligations and the transactions
pursuant to this Agreement and the other Loan Documents shall be admissible in
any action or proceeding arising therefrom, and shall constitute prima facie
proof thereof, irrespective of whether any Obligation is also evidenced by a
promissory note or other instrument. The Lender will provide to the Borrower a
monthly statement of Loans, payments, and other transactions pursuant to this
Agreement. Such statement shall be deemed correct, accurate, and binding on the
Borrower and as an account stated (except for reversals and reapplications of
payments made as provided in Section 4.3 and corrections of errors discovered by
the lender), unless the Borrower notifies the Lender in writing to the contrary
within thirty (30) days after such statement is rendered. In the event a timely
written notice of objections is given by the Borrower, only the items to which
exception is expressly made will be considered to be disputed by the Borrower.
6. COLLATERAL.
6.1 Grant of Security Interest.
(a) As security for the Obligations, the Borrower hereby grants
to the Lender a continuing security interest in, lien on, and assignment of: (i)
all Receivables, Inventory, Equipment, Assigned Contracts, Proprietary Rights
and Proceeds, wherever located and whether now existing or hereafter arising or
acquired; (ii) all moneys, securities and other property and the Proceeds
thereof, now or hereafter held or received by, or in transit to, the Lender from
or for the Borrower, whether for safekeeping, pledge, custody, transmission,
collection or otherwise, including, without limitation, all of the Borrower's
deposit accounts, credits, and balances with the Lender and all claims of the
Borrower against the Lender at any time existing; (iii) all of Borrower's
deposit accounts with any financial institutions with which Borrower maintains
deposits; and (iv) all books, records and other Property relating to or
referring to any of the foregoing, including, without limitation, all books,
records, ledger cards, data processing records, computer software and other
property and general intangibles at any time evidencing or relating to the
Receivables, Inventory, Equipment, Assigned Contracts, Proprietary Rights,
Proceeds, and other property referred to above (all of the foregoing, and all
other property in which the Lender may at any time be granted a Lien, being
herein collectively referred to as the "Collateral"). The Lender shall have all
of the rights of a secured party with respect to the Collateral under the UCC
and other applicable laws.
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(b) All Obligations shall constitute a single loan secured by
the Collateral. The Lender may, in its sole discretion, subject to the Loan
Documents (i) exchange, waive, or release any of the Collateral, (ii) apply
Collateral and direct the order or manner of sale thereof as the Lender may
determine, and (iii) settle, compromise, collect, or otherwise liquidate any
Collateral in any manner, all without affecting the Obligations or the Lender's
right to take any other action with respect to any other Collateral.
6.2 Perfection and Protection of Security Interest. The Borrower
shall, at its expense, perform all steps requested by the Lender at any time to
perfect, maintain, protect, and enforce the Security Interest including, without
limitation: (a) executing and recording of the Copyright, Patent and Trademark
Assignments and executing and filing financing or continuation statements, and
amendments thereof, in form and substance satisfactory to the Lender; (b)
delivering to the Lender the originals of all instruments, documents, and
chattel paper, and all other Collateral of which the Lender determines it should
have physical possession in order to perfect and protect the Security Interest
therein, duly endorsed or assigned to the Lender without restriction; (c)
delivering to the Lender warehouse receipts covering any portion of the
Collateral located in warehouses and for which warehouse receipts are issued;
(d) following the occurrence of an Event of Default, transferring Inventory to
warehouses designated by the Lender; (e) placing notations on the Borrower's
books of account to disclose the Security Interest; (f) executing and delivering
to the Lender a security agreement relating to the Reversions in form and
substance satisfactory to the Lender; (g) delivering to the Lender all letters
of credit on which the Borrower is named beneficiary; and (h) taking such other
steps as are deemed necessary by the Lender to maintain the Security Interest.
To the extent permitted by applicable law, the Lender may file, without the
Borrower's signature, one or more financing statements disclosing the Security
Interest. The Borrower agrees that a carbon, photographic, photostatic, or other
reproduction of this Agreement or of a financing statement is sufficient as a
financing statement. If any Collateral is at any time in the possession or
control of any warehouseman, bailee or any of the Borrower's agents or
processor, then the Borrower shall notify the Lender thereof and shall notify
such Person of the Security Interest in such Collateral and, upon the Lender's
request if an Event of Default has occurred and is continuing, instruct such
Person to hold all such Collateral for the Lender's account subject to the
Lender's instructions. If at any time any Collateral having a value in excess of
$100,000 in the aggregate is located on any Premises that are not owned by the
Borrower, then the Borrower shall obtain written waivers, in form and substance
satisfactory to the Lender, of all present and future Liens to which the owner
or lessor or any mortgagee of such Premises may be entitled to assert against
the Collateral. From time to time, the Borrower shall, upon Lender's request,
execute and deliver confirmatory written instruments pledging to the Lender the
Collateral, but the Borrower's failure to do so shall not affect or limit the
Security Interest or the Lender's other rights in and to the Collateral. So long
as this Agreement is in effect and until all Obligations have been fully
satisfied, the Security Interest shall continue in full force and effect in all
Collateral (whether or not deemed eligible for the purpose of calculating the
Availability or as the basis for any advance, loan, extension of credit, or
other financial accommodation).
6.3 Location of Collateral. The Borrower represents and warrants to
the Lender that as of the closing date: (a) Schedule 6.3 hereto is a correct and
complete list of the Borrower's chief executive office, the location of its
books and records, the locations of the Collateral, and the locations of all of
its other places of business and (b) Schedule 6.3 correctly
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identifies any of such facilities and locations that are not owned by the
Borrower and sets forth the names of the owners and lessors or sub-lessors of,
and, to the best of the Borrower's knowledge, the holders of any mortgages on,
such facilities and locations. The Borrower covenants and agrees that it will
not maintain any Collateral at any location other than those listed on Schedule
6.3, and it will not otherwise change or add to any of such locations, unless it
gives the Lender at least 30 days prior written notice thereof and executes any
and all financing statements and other documents that the Lender requests in
connection therewith.
6.4 Title to, Liens on, and Sale and Use of Collateral. The Borrower
represents and warrants to the Lender that: (a) all Collateral is and will
continue to be owned by the Borrower free and clear of all Liens whatsoever,
except for the Security Interest and other Permitted Liens; (b) the Security
Interest will not be subject to any prior Lien except for the Liens described in
(b), (c), (e), (h), (i) and (j) of the definition of Permitted Liens; (c) the
Borrower will use, store, and maintain the Collateral with all reasonable care
and will use the Collateral for lawful purposes only; and (d) the Borrower will
not, without the Lender's prior written approval, sell, lease, or dispose of or
permit the sale or disposition of the Collateral or any portion thereof, except
for sales of Inventory in the ordinary course of business and except for the
granting of licenses with respect to patents, trademarks and copyrights (or
amendments thereto) in the ordinary course of business on customary industry
terms. The inclusion of Proceeds in the Collateral shall not be deemed the
Lender's consent to any sale or other disposition of the Collateral except as
expressly permitted herein.
6.5 Appraisals. Whenever an Event or Event of Default exists, and at
such other times not more frequently than once a year as the Lender requests,
the Borrower shall, at its expense and upon the Lender's request, provide the
Lender with appraisals or updates thereof of any or all of the Collateral from
an appraiser.
6.6 Access and Examination. The Lender may at all reasonable times
and upon reasonable notice have access to, examine, audit, make extracts from
and inspect the Borrower's records, files, and books of account and the
Collateral and may discuss the Borrower's affairs with the Borrower's officers
and management. The Borrower will deliver to the Lender any instrument necessary
for the Lender to obtain records from any service bureau maintaining records for
the Borrower. The Lender may, at any time when an Event of Default exists and at
the Borrower's expense, make copies of all of the Borrower's books and records,
or require the Borrower to deliver such copies to the Lender. The Lender may,
without expense to the Lender, use such of the Borrower's personnel, supplies,
and Premises as may be reasonably necessary for maintaining or enforcing the
Security Interest. The Lender shall have the right, at any time, in Lender's
name or in the name of a nominee of the Lender, to verify the validity, amount
or any other matter relating to the Accounts, by mail, telephone, or otherwise.
6.7 Insurance. The Borrower shall insure the Collateral against loss
or damage by fire with extended coverage, theft, burglary, pilferage, loss in
transit, and such other hazards as the Lender shall specify, in amounts, under
policies and by insurers acceptable to the Lender. Borrower shall also maintain
flood insurance for real estate and for any Equipment and Inventory located on
such real estate, in the event of a designation of the area in which real estate
is located as a "flood prone" or a "flood risk area," (hereinafter "SFHA") as
defined by the Flood Disaster Protection Act of 1973, in an amount to be
reasonably determined by the Lender, and
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shall comply with the additional requirements of the National Flood Insurance
Program as set forth therein. Upon the Lender's request, the Borrower shall also
maintain flood insurance for its Inventory and Equipment which is located at any
time in an SFHA. The Borrower shall cause the Lender to be named in each such
policy as secured party or mortgagee and loss payee or additional insured, in a
manner acceptable to the Lender. Each policy of insurance shall contain a clause
or endorsement requiring the insurer to give not less than thirty (30) days
prior written notice to the Lender in the event of cancellation of the policy
for any reason whatsoever and a clause or endorsement stating that the interest
of the Lender shall not be impaired or invalidated by any act or neglect of the
Borrower or the owner of any premises where Collateral is located nor by the
occupation of such premises for purposes more hazardous than are permitted by
such policy. The Borrower shall pay, upon Lender's request, all fees incurred by
the Lender to determine whether any of the real estate and other Collateral is
located in a SFHA. The Borrower shall also pay all premiums for such insurance
when due, and shall deliver to the Lender certificates of insurance and, if
requested, photocopies of the policies. If the Borrower fails to pay such fees
or to procure such insurance or the premiums therefor when due, the Lender may
(but shall not be required to) do so and charge the costs thereof to the
Borrower's loan account as a Revolving Loan. The Borrower shall promptly notify
the Lender of any loss, damage, or destruction to the Collateral or arising from
its use, whether or not covered by insurance. The Lender is hereby authorized to
collect all insurance proceeds directly. After deducting from such proceeds the
expenses, if any, incurred by Lender in the collection or handling thereof, the
Lender may apply such proceeds to the reduction of the Obligations in such order
as Lender determines, or at the Lender's option may permit or require the
Borrower to use such money, or any part thereof, to replace, repair, restore or
rebuild the Collateral in a diligent and expeditious manner with materials and
workmanship of substantially the same quality as existed before the loss, damage
or destruction.
6.8 Collateral Reporting. The Borrower will provide the Lender with
the following documents at the following times in form satisfactory to the
Lender: (a) at least three (3) times per week, a schedule of credit memos and
reports, a schedule of collections of accounts receivable, a schedule of
Accounts created since the last such schedule and a Borrowing Base Certificate;
(b) request, copies of invoices, credit memos, shipping and delivery documents;
(c) monthly agings of accounts receivable to be delivered no later than the l5th
day of each month respecting the immediately preceding month; (d) upon request,
monthly perpetual inventory reports; (e) upon request, copies of purchase
orders, invoices, and delivery documents for Inventory and Equipment acquired by
the Borrower, (f) such other reports as to the Collateral as the Lender shall
request from time to time; and (g) certificates of an officer of the Borrower
certifying as to the foregoing. If any of the Borrower's records or reports of
the Collateral are prepared by an accounting service or other agent, the
Borrower hereby authorizes such service or agent to deliver such records,
reports, and related documents to the Lender.
6.9 Accounts.
(a) The Borrower hereby represents and warrants to the Lender
and agrees with the Lender, with respect to the Borrower's Accounts reflected on
any Borrowing Base Certificate, that: (i) each existing Account represents, and
each future Account will represent, a bona fide sale or lease and delivery of
goods by the Borrower, or rendition of services by the Borrower, in the ordinary
course of the Borrower's business; (ii) each existing
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Account is, and each future Account will be, for a liquidated amount payable by
the Account Debtor thereon on the terms set forth in the invoice therefor or in
the schedule thereof delivered to the Lender, without offset, deduction,
defense, or counterclaim; (iii) no payment will be received with respect to any
Account, and no credit, discount, or extension, or agreement therefor will be
granted on any Account, except as reported to the Lender in accordance with this
Agreement; (iv) each copy of an invoice delivered to the Lender by the Borrower
will be a genuine copy of the original invoice sent to the Account Debtor named
therein; and (v) all goods described in any invoice representing a sale of goods
will have been delivered to the Account Debtor and all services of the Borrower
described in any invoice will have been performed.
(b) The Borrower shall not re-date any invoice or sale or make
sales on extended dating beyond that customary in the Borrower's business or
extend or modify any Account. If the Borrower becomes aware of any matter
materially adversely affecting any Account in excess of $100,000, including
information regarding the Account Debtor's creditworthiness, the Borrower will
promptly so advise the Lender.
(c) The Borrower shall not accept any note or other instrument
(except a check or other instrument for the immediate payment of money) with
respect to any Account without the Lender's written consent. If the Lender
consents to the acceptance of any such note or other instrument, it shall be
considered as evidence of the Account and not payment thereof, and the Borrower
will promptly deliver such note or instrument to the Lender appropriately
endorsed. Regardless of the form of presentment, demand, notice of dishonor,
protest, and notice of protest with respect thereto, the Borrower will remain
liable thereon until such note or instrument is paid in full.
(d) The Borrower shall notify the Lender promptly of all
disputes and claims in excess of $100,000 with Account Debtors and settle or
adjust them at no expense to the Lender, but no discount, credit or allowance
shall be granted to any Account Debtor without the Lender's consent, except for
discounts, credits and allowances made or given in the ordinary course of the
Borrower's business when no Event of Default exists hereunder. The Borrower
shall send the Lender a copy of each credit memorandum in excess of $100,000 as
soon as issued and copies of all credit memorandum on a weekly basis. The Lender
may at all times when an Event of Default exists hereunder settle or adjust
disputes and claims directly with customers or Account Debtors for amounts and
upon terms which the Lender considers advisable and, in all cases, the Lender
will credit the Borrower's loan account with only the net amounts received by
the Lender in payment of any Accounts.
(e) If an Account Debtor returns any Inventory to the Borrower
when no Event of Default exists, then the Borrower shall promptly determine the
reason for such return and shall issue a credit memorandum to the Account Debtor
in the appropriate amount. The Borrower shall immediately report to the Lender
any return involving an amount in excess of $100,000 and shall report all
returns to the Lender on a weekly basis. Each such report shall indicate the
reasons for the returns and the locations and condition of the returned
Inventory. In the event any Account Debtor returns Inventory to the Borrower
when an Event of Default exists, the Borrower shall: (i) hold the returned
Inventory in trust for the Lender; (ii) segregate all returned Inventory from
all of its other Property; (iii) dispose of the returned Inventory solely
according to the Lender's written instructions; and (iv) not issue any credits
or allowances with
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respect thereto without the Lender's prior written consent. All returned
Inventory shall remain subject to the Security Interest. Whenever any Inventory
is returned, the related Account shall be deemed ineligible and will be so
reflected on subsequent Borrowing Base Certificates.
6.10 Collection of Accounts; Payments.
(a) Until the Lender notifies the Borrower to the contrary, the
Borrower shall make collection of all Accounts and other Collateral for the
Lender, shall receive all payments as the Lender's trustee, and shall
immediately deliver all payments to the Lender in their original form duly
endorsed in blank or deposit them into a Payment Account established at the
Lender's request, as the Lender may direct. If the Lender requests, the Borrower
shall establish a lock-box service for collections of Accounts at a bank
mutually acceptable to the Lender and the Borrower and pursuant to documentation
satisfactory to the Lender. If such lock-box service is established, the
Borrower shall instruct all Account Debtors to make all payments directly to the
address established for such service. If, notwithstanding such instructions, the
Borrower receives any Proceeds of Accounts, it shall receive such payments as
the Lender's trustee, and shall immediately deliver such payments to the Lender
in their original form duly endorsed in blank or deposit them into a Payment
Account, as the Lender may direct. All collections received in any such lock box
or Payment Account or directly by the Borrower or the Lender, and all funds in
any Payment Account or other account to which such collections are deposited,
shall be the sole property of the Lender and subject to the Lender's sole
control. The Lender or the Lender's designee may, at any time after the
occurrence of an Event of Default, notify obligers that the Accounts have been
assigned to the Lender and of the Security Interest therein, and may collect
them directly and charge the collection costs and expenses to the Borrower's
loan account as a Revolving Loan. At the Lender's request, the Borrower shall
execute and deliver to the Lender such documents as the Lender shall require to
grant the Lender access to any post office box in which collections of Accounts
are received.
(b) If sales of Inventory are made or services are rendered for
cash, the Borrower shall immediately deliver to the Lender the identical checks,
cash, or other forms of payment which the Borrower receives.
(c) All payments received by the Lender on account of Accounts
or as Proceeds of other Collateral will be the Lender's sole property and will
be credited to the Borrower's loan account (conditional upon final collection)
after allowing two (2) Business Days for collection.
(d) In the event the Borrower repays all of the Obligations upon
the termination of this Agreement, other than through the Lender's receipt of
payments on account of Accounts or Proceeds of other Collateral, such payment
will be credited (conditional upon final collection) to the Borrower's loan
account two (2) Business Days after the Lender's receipt thereof.
6.11 Inventory. The Borrower represents and warrants to the Lender
that all of the Inventory is and will be held for sale or lease, or to be
furnished in connection with the rendition of services in the ordinary course of
the Borrower's business and is and will be fit for such purposes. The Borrower
will keep the Inventory in good and marketable condition, at its
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own expense. The Borrower will not, without prior written notice to the Lender,
acquire or accept any Inventory on consignment or approval. The Borrower agrees
that all Inventory will be produced in accordance with the Federal Fair Labor
Standards Act of 1938, as amended, and all rules, regulations, and orders
thereunder. The Borrower will conduct a physical count of the Inventory at least
once per Fiscal Year, and shall promptly, upon completion, supply the Lender
with a copy of such count accompanied by a report of the value of such Inventory
(valued at the lower of cost, on a first-in, first-out basis, or market value).
The Borrower will not without the Lender's prior written consent, sell any
Inventory on a ▇▇▇▇-and-hold, guaranteed sale, sale and return, sale on
approval, consignment, or other repurchase or return basis.
6.12 Equipment. The Borrower represents and warrants to the Lender
that all of the Equipment is and will be used or held for use in the Borrower's
business and is and will be fit for such purposes. The Borrower shall keep and
maintain the Equipment in good operating condition and repair (ordinary wear and
tear excepted) and shall make all necessary replacements thereof. The Borrower
shall promptly inform the Lender of any material additions to or deletions from
the Equipment.
6.13 Assigned Contracts. The Borrower shall fully perform all of its
obligations under each of the Assigned Contracts, and shall enforce all of its
rights and remedies thereunder, in each case, as it deems appropriate in its
business judgment, provided, however, the Borrower shall not take any action or
fail to take any action with respect to the Assigned Contracts that would result
in a waiver or other loss of any material right or remedy of the Borrower
thereunder. Without limiting the generality of the foregoing, the Borrower shall
take all action necessary or appropriate to permit, and shall not take any
action which would have any adverse effect upon, the full enforcement of all
indemnification rights under the Assigned Contracts. The Borrower shall not,
without the Lender's prior written consent, modify, amend, supplement,
compromise, satisfy, release, or discharge any of the Assigned Contracts, any
collateral securing the same, any Person liable directly or indirectly with
respect thereto, or any agreement relating to any of the Assigned Contracts or
the collateral therefor if any such modification or other action would
materially adversely affect the business, operations or financial condition of
the Borrower. The Borrower shall notify the Lender in writing, promptly after it
becomes aware thereof, of any event or fact which could give rise to a claim by
it for indemnification under any of the Assigned Contracts and shall diligently
pursue such right and report to the Lender on all further developments with
respect thereto. The Borrower shall remit directly to the Lender, for
application to the Obligations in such order as the Lender determines, all
amounts received by the Borrower as indemnification or otherwise pursuant to the
Assigned Contracts. If the Borrower shall fail after the Lender's demand to
diligently pursue any right under the Assigned Contracts, or if an Event of
Default exists, then the Lender may directly enforce such right in its own or
the Borrower's name and may enter into such settlements or other agreements with
respect thereto as the Lender determines. All amounts thereby recovered by the
Lender, after deducting Lender's costs and expenses in connection therewith,
shall be applied to the Obligations in such order as the Lender determines. In
any suit, proceeding or action brought by the Lender under any Assigned Contract
for any sum owing thereunder or to enforce any provision thereof, the Borrower
shall indemnify and hold the Lender harmless from and against all expense, loss
or damage suffered by reason of any defense, setoff, counterclaim, recoupment,
or reduction of liability whatsoever of the obligor thereunder arising out of a
breach by the Borrower of any obligation thereunder or arising out of any other
agreement, indebtedness
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or liability at any time owing from the Borrower to or in favor of such obligor
or its successors: All such obligations of the Borrower shall be and remain
enforceable only against the Borrower and shall not be enforceable against the
Lender. Notwithstanding any provision hereof to the contrary, the Borrower shall
at all times remain liable to observe and perform all of its duties and
obligations under the Assigned Contracts and the Lender's exercise of any of its
rights with respect to the Collateral shall not release the Borrower from any of
such duties and obligations. The Lender shall not be obligated to perform or
fulfill any of the Borrower's duties or obligations under the Assigned Contracts
or to make any payment thereunder or to make any inquiry as to the nature or
sufficiency of any payment or Property received by it thereunder or the
sufficiency of performance by any party thereunder, or to present or file any
claim, or to take any action to collect or enforce any performance or payment of
any amounts due.
6.14 Documents, Instruments, and Chattel Paper. The Borrower
represents and warrants to the Lender that: (a) all documents, instruments, and
chattel paper describing, evidencing, or constituting Collateral, and all
signatures and endorsements thereon, are and will be complete, valid, and
genuine; and (b) all goods evidenced by such documents, instruments, and chattel
paper are and will be owned by the Borrower free and clear of all Liens other
than Permitted Liens.
6.15 Right to Cure. The Lender may, in its sole discretion and at
any time, pay any amount or do any act required of the Borrower hereunder to
preserve, protect, maintain or enforce the Obligations, the Collateral or the
Security Interest, which the Borrower fails to pay or do, including, without
limitation, payment of any judgment against the Borrower, any insurance premium,
any warehouse charge, any finishing or processing charge, any landlord's claim,
and any other Lien upon or with respect to the Collateral. All payments that the
Lender makes under this Section 6.15 and all out-of-pocket costs and expenses
that the Lender pays or incurs in connection with any action taken by it
hereunder shall be charged to the Borrower's loan account as a Revolving Loan.
Any payment made or other action taken by the Lender under this Section 6.15
shall be without prejudice to any right to assert an Event of Default hereunder.
6.16 Power of Attorney. The Borrower hereby appoints the Lender and
the Lender's designees as the Borrower's attorney, with power: (a) to endorse
the Borrower's name on any checks, notes, acceptances, money orders, or other
forms of payment or security that come into the Lender's possession; (b) to sign
the Borrower's name on any invoice, ▇▇▇▇ of lading, or other document of title
relating to any Collateral, on drafts against customers, on assignments of
Accounts, on notices of assignment, financing statements and other public
records, on verifications of Accounts and on notices to Account Debtors and to
file any such financing statements by electronic means with or without a
signature as authorized or required by applicable law or filing procedure; (c)
to notify the post office authorities, when an Event of Default exists, to
change the address for delivery of the Borrower's mail to an address designated
by the Lender and to receive, open and dispose of all mail addressed to the
Borrower; (d) to send requests for verification of Accounts to Account Debtors;
and (e) to do all things necessary to carry out this Agreement. The Borrower
ratifies and approves all acts of such attorney. Neither the Lender nor the
attorney will be liable for any acts or omissions or for any error of judgment
or mistake of fact or law. This power, being coupled with an interest, is
irrevocable until this Agreement has been terminated and the Obligations have
been fully satisfied.
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6.17 Lender's Rights, Duties, and Liabilities. The Borrower assumes
all responsibility and liability arising from or relating to the use, sale, or
other disposition of the Collateral. The Obligations shall not be affected by
any failure of the Lender to take any steps to perfect the Security Interest or
to collect or realize upon the Collateral, nor shall loss of or damage to the
Collateral release the Borrower from any of the Obligations. Following the
occurrence of and continuation of an Event of Default, the Lender may (but shall
not be required to), without notice to or consent from the Borrower, ▇▇▇ upon or
otherwise collect, extend the time for payment of, modify or amend the terms of,
compromise or settle for cash, credit, or otherwise upon any terms, grant other
indulgences, extensions, renewals, compositions, or releases, and take or omit
to take any other action with respect to the Collateral, any security therefor,
any agreement relating thereto, any insurance applicable thereto, or any Person
liable directly or indirectly in connection with any of the foregoing, without
discharging or otherwise affecting the liability of the Borrower for the
Obligations or under this Agreement or any other agreement now or hereafter
existing between the Lender and the Borrower.
6.18 Site Visits, Observations and Testing. The Lender and its
agents and representatives will have the right at any reasonable time and upon
reasonable notice to enter and visit the Premises and any other place where any
property of the Borrower is located for the purposes of observing the Premises,
taking and removing soil or groundwater samples, and conducting tests on any
part of the Premises. The Lender is under no duty, however, to visit or observe
the Premises or to conduct tests, and any such acts by the Lender will be solely
for the purposes of protecting the Lender's security and preserving the Lender's
rights under this Agreement. No site visit, observation or testing by the Lender
will result in a waiver of any default of the Borrower or impose any liability
on the Lender. In no event will any site visit, observation or testing by the
Lender be a representation that hazardous substances are or are not present in,
on or under the Premises, or that there has been or will be compliance with any
law, regulation or ordinance pertaining to hazardous substances or any other
applicable governmental law. Neither the Borrower nor any other party is
entitled to rely on any site visit, observation or testing by the Lender. The
Lender owes no duty of care to protect the Borrower or any other party against,
or to inform the Borrower or any other party of, any hazardous substances or any
other adverse condition affecting the Premises. The Lender may in its discretion
disclose to the Borrower or any other party any report or findings made as a
result of, or in connection with, any site visit, observation or testing by the
Lender. The Borrower understands and agrees that the Lender makes no warranty or
representation to the Borrower or any other party regarding the truth, accuracy
or completeness of any such report or findings that may be disclosed. The
Borrower also understands that depending on the results of any site visit,
observation or testing by the Lender and disclosed to the Borrower, the Borrower
may have a legal obligation to notify one or more environmental agencies of the
results, that such reporting requirements are site specific, and are to be
evaluated by the Borrower without advice or assistance from the Lender. In each
instance, the Lender will give the Borrower reasonable notice before entering
the Premises or any other place the Lender is permitted to enter under this
Section 6.18. The Lender will make reasonable efforts to avoid interfering with
the Borrower's use of the Premises or any other property in exercising any
rights provided hereunder.
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7. BOOKS AND RECORDS; FINANCIAL INFORMATION; NOTICES.
7.1 Books and Records. The Borrower shall maintain, at all times,
correct and complete books, records and accounts in which complete, correct and
timely entries are made of its transactions in accordance with GAAP consistent
with those applied in the preparation of the Financial Statements. The Borrower
shall, by means of appropriate entries, reflect in such accounts and in all
Financial Statements proper liabilities and reserves for all taxes and proper
provision for depreciation and amortization of Property and bad debts, all in
accordance with GAAP. The Borrower shall maintain at all times books and records
pertaining to the Collateral in such detail, form, and scope as the Lender shall
reasonably require, including without limitation records of: (a) all payments
received and all credits and extensions granted with respect to the Accounts;
(b) the return, rejection repossession, stoppage in transit, loss, damage, or
destruction of any Inventory; and (c) all other dealings affecting the
Collateral.
7.2 Financial Information. The Borrower shall promptly furnish to
the Lender or its agents all such financial information as the Lender shall
reasonably request, and notify its auditors and accountants that the Lender is
authorized to obtain such information directly from them. Without limiting the
foregoing, the Borrower and its Subsidiaries will furnish to the Lender, in such
detail as the Lender shall request, the following:
(a) As soon as available, but in any event not later than 90
days after the close of each Fiscal Year, consolidated and consolidating audited
balance sheets, and statements of income and expense, retained earnings, cash
flow and stockholders equity for the Borrower and its consolidated Subsidiaries
for such Fiscal Year, and the accompanying notes thereto, setting forth in each
case in comparative form figures for the previous Fiscal Year, all in reasonable
detail, fairly presenting the financial position and the results of operations
of the Borrower and its consolidated Subsidiaries as at the date thereof and for
the Fiscal Year then ended, and prepared in accordance with GAAP. Such
statements shall be examined in accordance with generally accepted auditing
standards by and accompanied by a report thereon unqualified as to scope by
independent certified public accountants selected by the Borrower and reasonably
satisfactory to the Lender.
(b) As soon as available, but in any event not later than 30
days after the end of each month, consolidated and consolidating unaudited
balance sheets of the Borrower and its consolidated Subsidiaries as at the end
of such month, and consolidated and consolidating unaudited statements of income
and expenses and of cash flow for the Borrower and its consolidated Subsidiaries
for such month and for the period from the beginning of the Fiscal Year to the
end of such month, all in reasonable detail, fairly presenting the financial
position and results of operation of the Borrower and its consolidated
Subsidiaries as at the date thereof and for such periods, and prepared in
accordance with GAAP consistent with the audited Financial Statements required
pursuant to Section 7.2(a). Such statements shall be certified to be correct by
the chief financial or accounting officer of the Borrower, subject to normal
year-end adjustments.
(c) With each of the audited Financial Statements delivered
pursuant to Section 7.2(a), a certificate of the independent certified public
accountants that examined such statements to the effect that they have reviewed
and are familiar with the Loan Documents and
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that, in examining such Financial Statements, they did not become aware of any
fact or condition which then constituted an Event or Event of Default, except
for those, if any, described in reasonable detail in such certificate.
(d) With each of the annual audited Financial Statements
delivered pursuant to Section 7.2(a) and each of the unaudited Financial
Statements delivered pursuant to Section 7.2(b), at the end of the month
succeeding the close of each fiscal quarter, a certificate of a Responsible
Officer (i) stating that, except as explained in reasonable detail in such
certificate, (A) all of the representations and warranties of the Borrower
contained in this Agreement and the other Loan Documents are correct and
complete as at the date of such certificate as if made at such time, (B) no
Event or Event of Default then exists or existed during the period covered by
such Financial Statements and (ii) describing and analyzing in reasonable detail
all material trends, changes and developments in such Financial Statements. If
such certificate discloses that a representation or warranty is not correct or
complete, or that a covenant has not been complied with, or that an Event or
Event of Default existed or exists, such certificate shall set forth what action
the Borrower has taken or proposes to take with respect thereto.
(e) No sooner than 90 days and no later than 30 days prior to
the beginning of each Fiscal Year, consolidated and consolidating projected
balance sheets, statements of income and expense, statements of cash flow, and
projected Availability for the Borrower and its Subsidiaries as at the end of
and for each month of such Fiscal Year.
(f) Within 30 days after the end of each Fiscal Year, a report
of the Capital Expenditures of the Borrower and its Subsidiaries for such
quarter and a statement of cash flow for the Borrower and its Subsidiaries for
the period from the beginning of the then current Fiscal Year to the end of such
quarter, prepared in accordance with GAAP consistent with the audited Financial
Statements required pursuant to Section 7.2(a).
(g) Promptly after their preparation, copies of any and all
proxy statements, financial statements, and reports which the Borrower makes
available to its stockholders.
(h) Promptly after filing with the PBGC, DOL, or IRS, a copy of
each annual report or other filing or notice filed with respect to each Plan of
the Borrower or any ERISA Affiliate.
(i) Such additional information as the Lender may from time to
time reasonably request regarding the financial and business affairs of the
Borrower or any Subsidiary, including, without limitation, projections of future
operations on both a consolidated and consolidating basis.
7.3 Notices to Lender. The Borrower shall notify the Lender in
writing of the following matters at the following times:
(a) Immediately after becoming aware of the existence of any
Event or Event of Default.
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(b) Immediately after becoming aware that the holder of any
capital stock of the Borrower or of any Debt has given notice or taken any
action with respect to a claimed default.
(c) Immediately after becoming aware of any material adverse
change in the Borrower's Property, business, operations, or condition (financial
or otherwise).
(d) Immediately after becoming aware of any pending or
threatened action, suit, proceeding, or counterclaim by any Person, or any
pending or threatened investigation by a Public Authority, which may materially
and adversely affect the Collateral, the repayment of the Obligations, the
Lender's rights under the Loan Documents, or the Borrower's Property, business,
operations, or condition (financial or otherwise).
(e) Immediately after becoming aware of any pending or
threatened strike, work stoppage, material unfair labor practice claim, or other
material labor dispute affecting the Borrower or any of its Subsidiaries.
(f) Immediately after becoming aware of any violation of any law
statute, regulation, or ordinance of a Public Authority applicable to Borrower,
any Subsidiary, or their respective Properties which may materially and
adversely affect the Collateral, the repayment of the Obligations, the Lender's
rights under the Loan Documents, or the Borrower's Property, business,
operations, or condition (financial or otherwise).
(g) Immediately after becoming aware of any violation by the
Borrower of Environmental Laws or immediately upon receipt of any notice that a
Public Authority has asserted that the Borrower is not in compliance with
Environmental Laws or that its compliance is being investigated.
(h) Thirty (30) days prior to the Borrower changing its name or
the address of its chief executive office.
(i) Immediately after becoming aware of any ERISA Event,
accompanied by any materials required to be filed with the PBGC with respect
thereto; immediately after the Borrower's receipt of any notice concerning the
imposition of any withdrawal liability under Section 4042 of ERISA with respect
to a Plan; immediately upon the establishment of any Pension Plan not existing
at the Closing Date or the commencement of contributions by the Borrower to any
Pension Plan to which the Borrower was not contributing at the Closing Date; and
immediately upon becoming aware of any other event or condition regarding a Plan
or the Borrower's or an ERISA Affiliate's compliance with ERISA, which may
materially and adversely affect the Borrower's business, operation, or condition
(financial or otherwise).
Each notice given under this Section 7.3 shall describe the subject matter
thereof in reasonable detail and shall set forth the action that the Borrower
has taken or proposes to take with respect thereto.
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8. GENERAL WARRANTIES AND REPRESENTATIONS.
The Borrower continuously warrants and represents to the Lender,
at all times during the term of this Agreement and until all Obligations have
been satisfied, that, except as hereafter disclosed to and accepted by the
Lender in writing:
8.1 Authorization, Validity, and Enforceability of this Agreement
and the Loan Documents. The Borrower has the corporate power and authority to
execute, deliver and perform this Agreement and the other Loan Documents, to
incur the Obligations, and to grant the Security Interest. The Borrower has
taken all necessary corporate action (including, without limitation, obtaining
approval of its stockholders) to authorize its execution, delivery, and
performance of this Agreement and the other Loan Documents. No consent,
approval, or authorization of, or declaration or filing with, any Public
Authority, and no consent of any other Person, is required in connection with
the Borrower's execution, delivery, and performance of this Agreement and the
other Loan Documents, except for those already duly obtained. This Agreement and
the other Loan Documents have been duly executed and delivered by the Borrower
and constitute the legal, valid and binding obligations of the Borrower,
enforceable against it in accordance with their respective terms without
defense, setoff, or counterclaim. The Borrower's execution, delivery, and
performance of this Agreement and the other Loan Documents do not and will not
conflict with, or constitute a violation or breach of, or constitute a default
under, or result in the creation or imposition of any Lien upon the Property of
the Borrower or any of its Subsidiaries (except as contemplated by this
Agreement and the other Loan Documents) by reason of the terms of (a) any
mortgage, lease, agreement, or instrument to which the Borrower or any of its
Subsidiaries is a party or which is binding upon it, (b) any judgment, law,
statute, rule or governmental regulation applicable to the Borrower or any of
its Subsidiaries, or (c) the certificate or articles of incorporation or bylaws
of the Borrower or any of its Subsidiaries.
8.2 Validity and Priority of Security Interest. The provisions of
this Agreement and the other Loan Documents create legal and valid Liens on all
the Collateral in the Lender's favor, and when all proper filings, recordings,
and other actions necessary to perfect such Liens have been made or taken, such
Liens will constitute perfected and continuing Liens on all the Collateral,
having priority over all other Liens on the Collateral except for the Permitted
Liens identified in Section 6.4 and enforceable against the Borrower and all
third parties.
8.3 Organization and Qualification. The Borrower: (a) is duly
incorporated and organized and validly existing in good standing under the laws
of the State of Delaware; (b) is qualified to do business as a foreign
corporation and is in good standing in the States of Florida and New Jersey,
which are the only states in which qualification is necessary in order for it to
own or lease its Property and conduct its business; and (c) has all requisite
power and authority to conduct its business and to own its Property.
8.4 Corporate Name; Prior Transactions. The Borrower has not, during
the past five years, been known by or used any other corporate or fictitious
name, or been a party to any merger or consolidation, or acquired all or
substantially all of the assets of any Person, or
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acquired any of its Property out of the ordinary course of business, except as
set forth on Schedule 8.4.
8.5 Subsidiaries and Affiliates. Schedule 8.5 is a correct and
complete list of the name and relationship to the Borrower of each and all of
the Borrower's Subsidiaries and other Affiliates (other than Affiliates under
common control with the Borrower). Each Subsidiary is (a) duly incorporated and
organized and validly existing in good standing under the laws of its state of
incorporation set forth on Schedule 8.5, and (b) qualified to do business as a
foreign corporation and in good standing in the states set forth opposite its
name on Schedule 8.5, which are the only states in which such qualification is
necessary in order for it to own or lease its Property and conduct its business.
8.6 Financial Statements and Projections.
(a) The Borrower has delivered to the Lender the audited balance
sheet and related statements of income, retained earnings, cash flows, and
changes in stockholders equity for the Borrower as of December 31, 1996 and for
the five months then ended, accompanied by the report thereon of the Borrower's
independent certified public accountants, Price Waterhouse LLP. The Borrower has
also delivered to the Lender the unaudited balance sheet and related statements
of income and cash flows for the Borrower, as of March 31, 1998 and for the
three months then ended. Such financial statements are attached hereto as
Exhibit B-1. All such financial statements have been prepared in accordance with
GAAP and present accurately and fairly the Borrower's financial position as at
the dates thereof and its results of operations for the periods then ended.
(b) The Latest Projections represent the Borrower's best
estimate of the Borrower's future financial performance for the periods set
forth therein. The Latest Projections have been prepared on the basis of the
assumptions set forth therein, which the Borrower believes are fair and
reasonable in light of current and reasonably foreseeable business conditions.
8.7 Capitalization. The Borrower's authorized capital stock consists
of 46,665,900 shares of common stock, par value $.001 per share, of which
36,860,022 shares are validly issued and outstanding, fully paid and
non-assessable.
8.8 Solvency. The Borrower is Solvent prior to and after giving
effect to each Revolving Loan.
8.9 Debt. The Borrower has no Debt, except (a) the Obligations, (b)
the obligations under the Parent Loan, (c) Debt set forth in the most recent
Financial Statements delivered to the Lender, or the notes thereto, (d) trade
payables and other contractual obligations arising in the ordinary course of
business since the date of such Financial Statements, and (e) Debt incurred
since the date of such Financial Statements to finance Capital Expenditures
permitted hereby.
8.10 Distributions. Since inception, no Distribution has been
declared, paid, or made upon or in respect of any capital stock or other
securities of the Borrower.
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8.11 Title to Property. Except for Property which the Borrower
leases, the Borrower has good and marketable title in fee simple to the Premises
and good, indefeasible, and merchantable title to all of its other Property
including, without limitation, the assets reflected on the most recent Financial
Statements delivered to the Lender, except as disposed of since the date thereof
in the ordinary course of business.
8.12 Adequate Assets. The Borrower possesses adequate assets for the
conduct of its business.
8.13 Real Property; Leases. Schedule 8.13 contains a correct and
complete list of all real property owned by the Borrower, all leases and
subleases of real or personal property by the Borrower as lessee or sublessee,
and all leases and subleases of real or personal property by the Borrower as
lessor or sublessor. Each of such leases and subleases is valid and enforceable
in accordance with its tempos and is in full force and effect and no default by
any party to any such lease or sublease exists.
8.14 Proprietary Rights. Schedule 8.14 contains a correct and
complete list of all the Proprietary Rights. None of the Proprietary Rights are
subject to any licensing agreement or similar arrangement except as set forth on
Schedule 8.14. None of the Proprietary Rights infringe on or conflict with any
other Person's Property and no other Person's Property infringes on or conflicts
with, in any material respects, the Proprietary Rights. The Proprietary Rights
described on Schedule 8.14 constitute all of the Property of such type necessary
to the current and anticipated future conduct of the Borrower's business.
8.15 Trade Names and Terms of Sale. All trade names or styles under
which the Borrower will sell Inventory or create Accounts, or to which
instruments in payment of Accounts may be made payable, are listed on Schedule
8.15.
8.16 Litigation. There is no pending or, to the best of the
Borrower's knowledge, threatened action, suit, proceeding, or counterclaim by
any Person, or investigation by any Public Authority, or any basis for any of
the foregoing, which may materially and adversely affect the Collateral, the
repayment of the Obligations, the Lender's rights under the Loan Documents, or
the Borrower's Property, business, operations, or condition (financial or
otherwise).
8.17 Restrictive Agreements. The Borrower is not a party to any
contract or agreement, and is not subject to any charter or other corporate
restriction, which affects its ability to execute, deliver, and perform the Loan
Documents and repay the Obligations or which materially and adversely affects
the Borrower's Property, business, operations, or condition (financial or
otherwise).
8.18 Labor Disputes. (a) There is no collective bargaining agreement
or other labor contract covering employees of the Borrower or any of its
Subsidiaries; (b) such collective bargaining agreement or other labor contract
is scheduled to expire during the term of this Agreement; (c) no union of other
labor organization is seeking to organize, or to be recognized as, a collective
bargaining unit of employees of the Borrower or any of its Subsidiaries or for
any similar purpose; and (d) there is no pending or, to the best of the
Borrower's knowledge,
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threatened strike, work stoppage, material unfair labor practice claim, or other
material labor dispute against or affecting the Borrower, or any of its
Subsidiaries or their respective employees.
8.19 Environmental Laws.
(a) The Borrower and its Subsidiaries have complied in all
material respects with all Environmental Laws applicable to its Premises and
business, and neither the Borrower nor any Subsidiary nor any of its present
Premises or operations, nor its past property or operations, is subject to any
enforcement order from or liability agreement with any Public Authority or
private Person respecting (i) compliance with any Environmental Law or (ii) any
potential liabilities and costs or remedial action arising from the Release or
threatened Release of a Contaminant.
(b) The Borrower and its Subsidiaries have obtained all permits
necessary for their current operations under Environmental Laws, and all such
permits are in good standing and the Borrower and its Subsidiaries are in
compliance with all terms and conditions of such permits.
(c) Neither the Borrower nor any of its Subsidiaries, nor, to
the best of the Borrower's knowledge, any of its predecessors in interest, has,
in violation of applicable law, stored, treated or disposed of any Contaminant
on any Premises, as defined pursuant to 40 CFR Part 261 or any equivalent
Environmental Law.
(d) Neither the Borrower nor any of its Subsidiaries has
received any summons, complaint, order or similar written notice that it is not
currently in compliance with or that any Public Authority is investigating its
compliance with, any Environmental Laws or that it is or may be liable to any
other Person as a result of a Release or threatened Release of a Contaminant.
(e) None of the present or past operations of the Borrower and
its Subsidiaries is the subject of any investigation by any Public Authority
evaluating whether any remedial action is needed to respond to a Release or
threatened Release of a Contaminant.
(f) To the best of the Borrower's knowledge there is not now,
nor has there ever been on or in the Premises:
(i) any underground storage tanks or surface impoundments,
(ii) any asbestos-containing material, or
(iii) any polychlorinated biphenyls (PCB's) used in
hydraulic oils, electrical transformers or other equipment.
(g) Neither the Borrower nor any of its Subsidiaries has filed
any notice under any requirement of Environmental Law reporting a spill or
accidental and unpermitted release or discharge of a Contaminant into the
environment.
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(h) Neither the Borrower nor any of its Subsidiaries has entered
into any negotiations or settlement agreements with any Person (including,
without limitation, the prior owner of its property) imposing material
obligations or liabilities on the Borrower or any of its Subsidiaries with
respect to any remedial action in response to the Release of a Contaminant or
environmentally related claim.
(i) None of the products manufactured, distributed or sold by
the Borrower or any of its Subsidiaries contains asbestos material.
(j) No Environmental Lien has attached to any Premises of the
Borrower or any of its Subsidiaries.
8.20 No Violation of Law. The Borrower is not in violation of any
law, statute, regulation, ordinance, judgment, order, or decree applicable to it
which violation would in any respect materially and adversely affect the
Collateral, the repayment of the Obligations, the Lender's rights under the Loan
Documents, or the Borrower's Property, business, operations, or condition
(financial or otherwise).
8.21 No Default. The Borrower is not in default with respect to any
note, indenture, loan agreement, mortgage, lease, deed, or other agreement to
which the Borrower is a party or bound, which default could reasonably be
expected to materially and adversely affect the Collateral, the repayment of the
Obligations, the Lender's rights under the Loan Documents, or the Borrower's
Property, business, operations, or condition (financial or otherwise).
8.22 ERISA Compliance.
(a) Each Plan is in compliance in all material respects with the
applicable provisions of ERISA, the Code and other federal or state law. Each
Plan which is intended to qualify under Section 401(a) of the Code has received
a favorable determination letter from the IRS and to the best knowledge of the
Borrower, nothing has occurred which would cause the loss of such qualification.
The Borrower and each ERISA Affiliate has made all required contributions to any
Plan subject to Section 412 of the Code, and no application for a funding waiver
or an extension of any amortization period pursuant to Section 412 of the Code
has been made with respect to any Plan.
(b) There are no pending or, to the best knowledge of Borrower,
threatened claims, actions or lawsuits, or action by any Public Authority, with
respect to any Plan which has resulted or could reasonably be expected to result
in a material adverse effect on the Borrower's business or operations. There has
been no prohibited transaction or violation of the fiduciary responsibility
rules with respect to any Plan which has resulted or could reasonably be
expected to result in a material adverse effect on the Borrower's business or
operations.
(c) (i) No ERISA Event has occurred or is reasonably expected to
occur; (ii) no Pension Plan has any unfunded liability; (iii) neither the
Borrower nor any ERISA Affiliate has incurred, or reasonably expects to incur,
any liability under Title IV of ERISA with respect to any Pension Plan (other
than premiums due and not delinquent under Section 4007 of ERISA); (iv) neither
the Borrower nor any ERISA Affiliate has incurred, or reasonably expects to
incur, any liability (and no event has occurred which, with the giving of notice
under
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Section 4219 of ERISA, would result in such liability) under Section 4201
or 4243 of ERISA with respect to a Multi-employer Plan; and (v) neither the
Borrower nor any ERISA Affiliate has engaged in a transaction that could subject
any person to Section 4069 or 4212(c) of ERISA.
8.23 Taxes. The Borrower and its Subsidiaries have filed all tax
returns and other reports required to be filed and have paid all taxes,
assessments, fees and other governmental charges levied or imposed upon them or
their properties, income or assets that are otherwise due and payable, except to
the extent that any failure to file or pay such taxes, assessments, fees and
charges does not result in any liens attaching to Property of the Borrower or
does not have a material adverse effect on the business, operations or financial
condition of the Borrower.
8.24 Use of Proceeds. None of the transactions contemplated in this
Agreement (including, without limitation, the use of proceeds from the Loans)
will violate or result in the violation of Section 7 of the Securities Exchange
Act of 1934, as amended, or any regulations issued pursuant thereto, including
without limitation, Regulations G, T, U and X of the Board of Governors of the
Federal Reserve System ("Federal Reserve Board"), 12 CFR, Chapter II. Borrower
does not own or intend to carry or purchase any "margin stock" within the
meaning of said Regulation U or G. None of the proceed of the loans will be
used, directly or indirectly, to purchase or carry (or refinance any borrowing,
the proceeds of which were used to purchase or carry) any "security" within the
meaning of the Securities Exchange Act of 1934, as amended.
8.25 Private Offerings. Borrower has not, directly or indirectly,
offered the Loans for sale to, or solicited offers to buy part thereof from, or
otherwise approached or negotiated with respect thereto with any prospective
purchaser other than Lender. Borrower hereby agrees that neither it nor anyone
acting on its behalf has offered or will offer the Loans or any part thereof or
any similar securities for issue or sale to or solicit any offer to acquire any
of the same from anyone so as to bring the issuance thereof within the
provisions of Section 5 of the Securities Act of 1933, as amended.
8.26 Broker's Fees. No Person is entitled to any brokerage or
finder's fee with respect to the transactions described in this Agreement.
8.27 No Material Adverse Change. No material adverse change has
occurred in the Borrower's Property, business, operations, or conditions
(financial or otherwise) since the date of the Financial Statements delivered to
the Lender. On the basis of a comprehensive review and assessment undertaken by
Borrower of Borrower's computer applications Borrower reasonably believes that
the Year 2000 Problem will not result in a material adverse change in the
operations, business, properties, or condition (financial or otherwise) of the
Borrower.
8.28 Disclosure. Neither this Agreement nor any document or
statement furnished to the Lender by or on behalf of the Borrower hereunder
contains any untrue statement of a material fact or omits to state any material
fact necessary in order to make the statements contained herein or therein not
misleading.
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9. AFFIRMATIVE AND NEGATIVE COVENANTS. The Borrower covenants that, so
long as any of the Obligations remain outstanding or this Agreement is in
effect:
9.1 Taxes and Other Obligations. The Borrower and each of its
Subsidiaries shall: (a) file when due all tax returns and other reports which it
is required to file, pay, or provide for the payment, when due, of all taxes,
fees, assessments and other governmental charges against it or upon its
Property, income, and franchises, make all required withholding and other tax
deposits, and establish adequate reserves for the payment of all such items, and
shall provide to the Lender, upon request, satisfactory evidence of its timely
compliance with the foregoing; and (b) pay when due all material Debt owed by it
and perform and discharge in a timely manner all other material obligations
undertaken by it; provided, however that the Borrower and its Subsidiaries need
not pay any tax, fee, assessment, governmental charge, or Debt, or perform or
discharge any other obligation, that it is contesting in good faith by
appropriate proceedings diligently pursued. For purposes of this Section 9.1(b),
"material Debt" shall mean Debt in an aggregate amount in excess of $500,000 and
"material obligations" shall mean obligations the breach of which could
reasonably be expected to result in damages in an aggregate amount in excess of
$500,000.
9.2 Corporate Existence and Good Standing. The Borrower and each of
its Subsidiaries shall maintain its corporate existence and its qualification
and good standing in all states necessary to conduct its business and own its
Property, and shall obtain and maintain all licenses, permits, franchises and
governmental authorizations necessary to conduct its business and own its
Property.
9.3 Compliance with Law and Agreements. The Borrower and each of its
Subsidiaries shall comply with the terms and provisions of each judgment, law,
statute, rule, and governmental regulation applicable to it and each contract,
mortgage, lien, lease, indenture, order, instrument, agreement, or document to
which it is a party or by which it is bound.
9.4 Maintenance of Property and Insurance. The Borrower and each of
its Subsidiaries shall: (a) maintain all of its Property necessary and useful in
its business in good operating condition and repair, ordinary wear and tear
excepted; and (b) in addition to the insurance required by Section 6.7, maintain
with financially sound and reputable insurers such other insurance with respect
to its Property and business against casualties and contingencies of such types
(including, without limitation, business interruption, environmental liability,
public liability, product liability, and larceny, embezzlement or other criminal
misappropriation) and in such amounts as is customary for Persons of established
reputation engaged in the same or a similar business and similarly situated,
naming the Lender, at its request, as additional insured under each such policy.
9.5 Environmental Laws. The Borrower shall conduct its business in
full compliance with all Environmental Laws applicable to it, including, without
limitation, those relating to the Borrower's generation, handling, use, storage,
and disposal of Contaminants. The Borrower shall take prompt and appropriate
action to respond and remediate to any noncompliance with Environmental Laws and
shall regularly report to the Lender on such response and remediation. Without
limiting the generality of the foregoing, whenever the Borrower gives notice to
the Lender pursuant to Section 7.3(g) the Borrower shall, at the
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Lender's request and the Borrower's expense: (a) cause an independent
environmental engineer acceptable to the Lender to conduct such tests of the
site where the Borrower's noncompliance or alleged noncompliance with
Environmental Laws has occurred and prepare and deliver to the Lender a report
setting forth the results of such tests, a proposed plan for responding to any
environmental problems described therein, and an estimate of the costs thereof;
and (b) provide to the Lender a supplemental report of such engineer whenever
the scope of the environmental problems, or the Borrower's response thereto or
the estimated costs thereof, shall change.
9.6 ERISA. The Borrower shall cause each Plan, which has been
designated to be so, to be qualified within the meaning of Section 401(a) of the
Code and to be administered in all respects in compliance with Section 401(a) of
the Code. The Borrower shall cause each Plan to be administrated in compliance
with ERISA.
9.7 Mergers, Consolidations, Acquisitions, or Sales. Neither the
Borrower nor any of its Subsidiaries shall enter into any transaction of merger,
reorganization, or consolidation, or transfer, sell, assign, lease, or otherwise
dispose of all or any part of its Property, or wind up, liquidate or dissolve,
or agree to do any of the foregoing, except dispositions of Property permitted
under Section 6.4.
9.8 Distributions; Capital Changes. Neither the Borrower nor any of
its Subsidiaries shall: (a) directly or indirectly declare or make, or incur any
liability to make, any Distribution, except Distributions to the Borrower by a
Subsidiary wholly owned by the Borrower; or (b) make any change in its capital
structure which could adversely affect the repayment of the Obligations.
9.9 Transactions Affecting Collateral or Obligations. Neither the
Borrower nor any of its Subsidiaries shall enter into any transaction which
materially and adversely affects the Collateral or the Borrower's ability to
repay the Obligations.
9.10 Guaranties. Neither the Borrower nor any of its Subsidiaries
shall make, issue, or become liable on any Guaranty, except Guaranties in favor
of the Lender and endorsements of instruments for deposit.
9.11 Debt. Neither the Borrower nor any of its Subsidiaries shall
incur or maintain any Debt, other than: (a) the Obligations; (b) the obligations
under the Parent Loan; (c) trade payables and contractual obligations to
suppliers and customers incurred in the ordinary course of business; (d) Capital
Leases or other purchase money Debt incurred in connection with Capital
Expenditures; (e) other Debt existing on the Closing Date and reflected in the
Financial Statements attached as Exhibit B-1; and (f) other Debt not exceeding
in the aggregate $500,000 at any one time outstanding.
9.12 Prepayment. Neither the Borrower nor any of its Subsidiaries
shall voluntarily prepay any Debt, except the Obligations and the Parent Loan in
accordance with their terms, provided that no payment of principal or interest
may be made on the Parent Loan if an Event of Default has occurred and is
continuing.
9.13 Transactions with Affiliates. Except as set forth below,
neither the Borrower nor any of its Subsidiaries shall: (a) sell, transfer,
distribute, or pay any money or
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Property to any Affiliate, (b) lend or advance money or Property to any
Affiliate, (c) invest in (by capital contribution or otherwise) or purchase or
repurchase any stock or indebtedness or any Property of any Affiliate, or (d)
become liable on any Guaranty of the indebtedness, dividends, or other
obligations of any Affiliate. Notwithstanding the foregoing, if no Event of
Default has occurred and is continuing, the Borrower and its Subsidiaries may
engage in transactions with Affiliates in the ordinary course of business in
amounts and upon terms fully disclosed to the Lender or upon terms no less
favorable to the Borrower and its Subsidiaries than would obtain in a comparable
arm's length transaction with a third party who is not an Affiliate.
9.14 Business Conducted. The Borrower and its Subsidiaries shall not
engage, directly or indirectly, in any line of business other than the
businesses in which the Borrower and its Subsidiaries are engaged on the Closing
Date.
9.15 Liens. Neither the Borrower nor any of its Subsidiaries shall
create, incur, assume, or permit to exist any Lien on any Property now owned or
hereafter acquired by any of them, except Permitted Liens.
9.16 Sale and Leaseback Transactions. Neither the Borrower nor any
of its Subsidiaries shall, directly or indirectly, enter into any arrangement
with any Person providing for the Borrower or a Subsidiary to lease or rent
Property that the Borrower or a Subsidiary has or will sell or otherwise
transfer to such Person.
9.17 New Subsidiaries. The Borrower shall not, directly or
indirectly, organize or acquire any Subsidiary other than those listed on
Schedule 8.5 and a Subsidiary to engage in the XDSL modem and associated product
business (the "Broadband Subsidiary"); provided, however, that upon the
formation of the Broadband Subsidiary this Agreement may be amended at the sole
discretion of the Lender to include the Broadband Subsidiary either as a
co-borrower hereunder or as a guarantor of the Obligations as the Lender may
elect, all on terms and conditions (including, without limitation, Liens on its
assets in favor of the Lender) and pursuant documentation in form and substance
satisfactory to the Lender.
9.18 Restricted Investments. Neither the Borrower nor any of its
Subsidiaries shall make any Restricted Investment.
9.19 Further Assurances. The Borrower shall execute and deliver, or
cause to be executed and delivered, to the Lender such documents and agreements,
and shall take or cause to be taken such actions, as the Lender may, from time
to time, request to carry out the terms and conditions of this Agreement and the
other Loan Documents.
10. CONDITIONS TO CLOSING. The Lender will not be obligated to make the
initial Loans or to issue or obtain any Letters of Credit on the Closing Date,
unless the following conditions precedent have been satisfied in a manner
satisfactory to Lender:
10.1 Conditions Precedent to Making of Loans and Issuance of Letters
of Credit on the Closing Date.
(a) Representations and Warranties; Covenants; Events. The
Borrower's representations and warranties contained in this Agreement and the
other Loan
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Documents shall be correct and complete; the Borrower shall have performed and
complied with all covenants, agreements, and conditions contained herein and in
the other Loan Documents which are required to have been performed or complied
with.
(b) Delivery of Documents. The Borrower shall have delivered, or
caused to be delivered, to the Lender such documents, instruments and agreements
as the Lender shall request in connection herewith, duly executed by all parties
thereto other than the Lender, and in form and substance satisfactory to the
Lender and its counsel, including, without limitation the following:
(i) This Agreement;
(ii) The Copyright, Patent and Trademark Assignments;
(iii) The Commitment Agreement;
(iv) The Subordination Agreement;
(v) The Payment Account agreements required to be delivered
by the Lender pursuant to Section 6.10.
(vi) Duly executed copies of all financing statements and
other documents, instruments and agreements, properly executed, deemed necessary
or appropriate by the Lender to create in favor of the Lender a first priority
perfected security interest in and lien upon the Collateral;
(vii) Certified copies of resolutions of the Board of
Directors of the Borrower approving the execution and delivery of the Loan
Documents, the performance of the Obligations and the consummation of the
transactions contemplated thereby;
(viii) A certificate of the Secretary or an Assistant
Secretary of the Borrower certifying the names and true signatures of the
officers of the Borrower, as applicable, authorized to sign the Loan Documents;
(ix) An opinion of counsel for the Borrower, which counsel
shall be satisfactory to the Lender and its counsel, in form and substance
acceptable to the Lender and its counsel;
(x) A copy of the Certificate of Incorporation of the
Borrower certified by the Secretary of State of the State of Delaware as of a
recent date;
(xi) A copy of the Bylaws of the Borrower, certified by the
Secretary or an Assistant Secretary of the Borrower, as applicable, as of the
date of this Agreement as being accurate and complete; and
(xii) A Certificate of the Secretary of State of the States
of Delaware, Florida and New Jersey certifying that the Borrower is in good
standing as of a recent date.
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(c) Termination of Liens. The Lender shall have received duly
executed UCC-3 Termination Statements and other instruments, in form and
substance satisfactory to the Lender, as shall be necessary to terminate and
satisfy all Liens on the Property of the Borrower and its Subsidiaries except
Permitted Liens.
(d) Environmental Compliance. The Lender shall have received
evidence satisfactory to it that there does not exist on the Premises or in
connection with the operation thereof or of the Borrower's business, any
violation of any Environmental Laws.
(e) Payment of Fees and Expenses. The Borrower shall have paid
all fees and expenses of the Lender's outside counsel, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
and all other fees and expenses of the Lender incurred in connection with any of
the Loan Documents and the transactions contemplated thereby.
(f) Required Approvals. The Lender shall have received certified
copies of all consents or approvals of any Public Authority or other Person
which the Lender determines is required in connection with the transactions
contemplated by this Agreement.
(g) No Material Adverse Change. There shall have occurred no
material adverse change in the Borrower's business or financial condition or in
the Collateral since February 28, 1998, and the Lender shall have received a
certificate of the Borrower's chief executive officer to such effect.
(h) Proceedings. All proceedings to be taken in connection with
the transactions contemplated by this Agreement, and all documents, contemplated
in connection herewith, shall be satisfactory in form and substance to the
Lender and its counsel.
10.2 Conditions Precedent to Each Loan. The obligation of the Lender
to make each Loan or to provide for the issuance of any Letter of Credit, shall
be subject to the conditions precedent that on the date of any such extension of
credit the following statements shall be true, and the acceptance by the
Borrower of any extension of credit shall be deemed to be a statement to the
effect set forth in clauses (a) and (b), the same effect as the delivery to the
Lender of a certificate signed by the chief executive officer and chief
financial officer of the Borrower, dated the date of such extension of credit,
stating that:
(a) The representations and warranties contained in this
Agreement and the other Loan Documents are 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 the Lender has been notified by the Borrower that any
representation or warranty is not correct and the Lender has explicitly waived
in writing compliance with such representation or warranty; and
(b) No Event or Event of Default has occurred and is continuing,
or would result from such extension of credit.
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11. DEFAULT.
11.1 Events of Default. It shall constitute an event of default
("Event of Default") if any one or more of the following shall occur for any
reason:
(a) failure to make payment of principal, interest, fees or
premium on any of the Obligations when due;
(b) any representation or warranty made or deemed made by the
Borrower in this Agreement, any of the other Loan Documents, any Financial
Statement, or any certificate furnished by the Borrower or any Subsidiary at any
time to the Lender shall prove to be untrue in any material respect as of the
date when made, deemed made, or furnished;
(c) default shall occur in the observance or performance by the
Borrower of any of the covenants and agreements contained in this Agreement (or
in the case of any default under Sections 9.1(a) and 9.4, such default shall
continue for a period of 30 days; or in the case of a default under Section 6.8,
such default shall continue for a period of 10 days; or in the case of any
default under Section 7.2, such default shall continue for a period of 15 days;
provided, however, that with respect to defaults under Section 7.2 there shall
be no more than (i) three cure periods exercised in any twelve-month period and
(ii) two cure periods exercised in any ninety-day period; and, provided,
further, that with respect to defaults under Section 6.8 and without limiting
the other provisions of this Agreement that may become applicable on account of
any of such defaults, the Lender has the right not to make advances during any
such 10-day cure period and until such default is cured, but all Account and
Collateral collections shall at all times continue to be made on a daily basis
as required by Section 6.10), other Loan Documents, or any other agreement
entered into at any time to which the Borrower and the Lender are party, or if
any Loan Document or any such other agreement shall terminate (other than in
accordance with its terms or with the written consent of the Lender) or become
void or unenforceable without the written consent of the Lender;
(d) default shall occur by the Borrower in the payment of any
principal interest on any indebtedness for borrowed money (other than the
Obligations) beyond any period of grace provided with respect thereto;
(e) the Borrower or any Subsidiary shall: (i) file a voluntary
petition in bankruptcy or file a voluntary petition or an answer or otherwise
commence any action or proceeding seeking reorganization, arrangement or
readjustment of its debts or for any other relief under the Federal Bankruptcy
Code, as amended, or under any other bankruptcy or insolvency act or law, state
or federal, now or hereafter existing, or consent to, approve of, or acquiesce
in, any such petition, action or proceeding; (ii) apply for or acquiesce in the
appointment of a receiver, assignee, liquidator, sequestrator, custodian,
trustee or similar officer for it or for all or any part of its Property; (iii)
make an assignment for the benefit of creditors; or (iv) be unable generally to
pay its debts as they become due;
(f) an involuntary petition shall be filed or an action or
proceeding otherwise commenced seeking reorganization, arrangement or
readjustment of the Borrower's or any Subsidiary's debts or for any other relief
under the Federal Bankruptcy Code, as amended, or
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under any other bankruptcy or insolvency act or law, state or federal, now or
hereafter existing and such petition or action or proceeding shall remain
undismissed or undischarged for a period of 45 days;
(g) a receiver, assignee, liquidator, sequestrator, custodian,
trustee or similar officer for the Borrower or any Subsidiary or for all or any
part of their Property shall be appointed involuntarily and shall remain in
place for a period of 45 days; or a warrant of attachment, execution or similar
process shall be issued against any part of the Property of the Borrower or any
Subsidiary and shall not have been vacated, discharged, stayed, satisfied or
bonded pending appeal within 45 days from entry thereof;
(h) the Borrower or any Subsidiary shall file a certificate of
dissolution under applicable state law or shall be liquidated, dissolved or
wound-up or shall commence or have commenced against it any action or proceeding
for dissolution, winding-up or liquidation, or shall take any corporate action
in furtherance thereof;
(i) all or any material part of the Property of the Borrower
shall be nationalized, expropriated or condemned, seized or otherwise
appropriated, or custody or control of such Property or of the Borrower shall be
assumed by any Public Authority or any court of competent jurisdiction at the
instance of any Public Authority, except where contested in good faith by proper
proceedings diligently pursued where a stay of enforcement is in effect;
(j) any guaranty of the Obligations shall be terminated, revoked
or declared void or invalid, or the Subordinated Revolving Promissory Note shall
be amended, terminated or declared void or invalid without the consent of the
Lender;
(k) one or more final judgments for the payment of money
aggregating in excess of $500,000 (whether or not covered by insurance) shall be
rendered against the Borrower or any Subsidiary and the Borrower or such
Subsidiary shall fail to discharge the same within thirty (30) days from the
date of notice of entry thereof or to appeal therefrom;
(l) any loss, theft, damage or destruction of any item or items
of Collateral occurs which: (i) materially and adversely affects the operation
of the Borrower's business or (ii) is material in amount and is not adequately
covered by insurance;
(m) (i) TPG ceases to own a majority of the limited partnership
interest in the Parent, (ii) TPG ceases to own and control a majority of the
outstanding capital stock of the general partner of the Parent (the "General
Partner"), (iii) the General Partner ceases to be the sole General Partner of
the Parent; (iv) TPG shall cease to have the ability to elect a majority of the
Board of Directors (or other equivalent governing body) of the General Partner
and, if applicable, the Parent or (v) the Parent shall cease to own and control
seventy percent (70%) of the outstanding stock of the Borrower,
(n) any event or condition shall occur or exist with respect to
a Plan that could, in the Lender's reasonable judgment, subject the Borrower or
any Subsidiary to any tax, penalty or liabilities under ERISA, the Code, or
otherwise which in the aggregate is material in relation to the business,
operations, Property or financial or other condition of the Borrower; or
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(o) there occurs any material adverse change in the Borrower's
Property, business, operations, or financial condition.
12. REMEDIES.
(a) If an Event of Default has occurred and is continuing, the
Lender may, without notice to or demand on the Borrower, do one or more of the
following at any time or times and in any order: (i) reduce the Availability or
one or more of the elements thereof; (ii) restrict the amount of or refuse to
make Revolving Loans and restrict or refuse to arrange for Letters of Credit;
(iii) terminate this Agreement; (iv) declare any or all Obligations to be
immediately due and payable (provided however that upon the occurrence of any
Event of Default described in Sections 11.1(e), 11.1(f), 11.1(g), or 11.1(h),
all Obligations shall automatically become immediately due and payable); and (v)
pursue its other rights and remedies under the Loan Documents and applicable
law.
(b) If an Event of Default has occurred and is continuing: (i) the
Lender shall have, in addition to all other rights, the rights and remedies of a
secured party under the UCC; (ii) the Lender may, at any time, take possession
of the Collateral and keep it on the Borrower's Premises, at no cost to the
Lender, or remove any part of it to such other place or places as the Lender may
desire, or the Borrower shall, upon the Lender's demand, at the Borrower's cost,
assemble the Collateral and make it available to the Lender at a place
reasonably convenient to the Lender; and (iii) the Lender may sell and deliver
any Collateral at public or private sales, for cash, upon credit or otherwise,
at such prices and upon such terms as the Lender deems advisable, in its sole
discretion, and may, if the Lender deems it reasonable, postpone or adjourn any
sale of the Collateral by an announcement at the time and place of sale or of
such postponed or adjourned sale without giving a new notice of sale. Without in
any way requiring notice to be given in the following manner, the Borrower
agrees that any notice by the Lender of sale, disposition or other intended
action hereunder or in connection herewith whether required by the UCC or
otherwise, shall constitute reasonable notice to the Borrower if such notice is
mailed by registered or certified mail, return receipt requested, postage
prepaid or is delivered personally against receipt, at least five (5) days prior
to such action to the Borrower's address specified in or pursuant to Section
14.11. If any Collateral is sold on terms other than payment in full at the time
of sale, no credit shall be given against the Obligations until the Lender
receives payment, and if the buyer defaults in payment, the Lender may resell
the Collateral without further notice to the Borrower. In the event the Lender
seeks to take possession of all or any portion of the Collateral by judicial
process, the Borrower irrevocably waives: (a) the posting of any bond, surety or
security with respect thereto which might otherwise be required; (b) any demand
for possession prior to the commencement of any suit or action to recover the
Collateral; and (c) any requirement that the Lender retain possession and not
dispose of any Collateral until after trial or final judgment. The Borrower
agrees that the Lender has no obligation to preserve rights to the Collateral or
marshal any Collateral for the benefit of any Person. The Lender is hereby
granted a license or other right to use, without charge, the Borrower's labels,
patents, copyrights, name, trade secrets, trade names, trademarks, and
advertising matter, or any similar property, in completing production of,
advertising or selling any Collateral, and the Borrower's rights under all
licenses and all franchise agreements shall inure to the Lender's benefit. The
proceeds of sale shall be applied first to all expenses of sale, including
attorneys fees, and second, in whatever order the Lender elects, to all
Obligations.
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The Lender will return any excess to the Borrower or such other Person as shall
be legally entitled thereto and the Borrower shall remain liable for any
deficiency.
(c) If an Event of Default occurs, the Borrower hereby waives (i)
all rights to notice and hearing prior to the exercise by the Lender of the
Lender's rights to repossess the Collateral without judicial process or to
replevy, attach or levy upon the Collateral without notice or hearing, and (ii)
all rights of set-off and counterclaim against Lender.
(d) If the Lender terminates this Agreement upon an Event of
Default, the Borrower shall pay the Lender, immediately upon termination, an
early termination penalty equal to the early termination fee that would have
been payable under Section 13 if this Agreement had been terminated on that date
pursuant to the Borrower's election.
13. TERM AND TERMINATION. This Agreement shall expire on January 31,
2000 (the "Stated Termination Date") unless earlier terminated or automatically
extended as provided in this Section. This Agreement shall automatically be
renewed on the Stated Termination Date and at the end of any renewal term for
successive one-year terms, unless this Agreement is terminated as provided
below. The Lender and the Borrower shall have the right to terminate this
Agreement, without premium or penalty, on the Stated Termination Date at the end
of any renewal term by giving the other written notice not less than sixty (60)
days prior to the end of such term by registered or certified mail. The Borrower
may also terminate this Agreement at any time prior to the Stated Termination
Date or during any renewal term if: (a) it gives the Lender sixty (60) days
prior written notice of termination by registered or certified mail; (b) it pays
and performs all Obligations on or prior to the effective date of termination;
and (c) it pays the Lender, on or prior to the effective of termination, and in
addition to any other prepayment premium required hereunder, (i) one percent
(1.0%) of the average amount of the Revolving Loans and Letters of Credit
outstanding during the prior 180 day period (or lesser period if within 180 days
of the Closing Date) if such termination is made on or prior to the first
Anniversary Date; (ii) one-half percent (.50%) of the average amount of the
Revolving Loans and Letters of Credit outstanding during the prior 180-day
period if such termination is after the first Anniversary Date but prior to the
Stated Termination Date; provided, however, if such termination occurs after the
First Anniversary Date due to the Borrower refinancing the credit facility with
the Bank, then the prepayment premium would be waived. The Lender may also
terminate this Agreement without notice while an Event of Default exists. Upon
the effective date of termination of this Agreement for any reason whatsoever,
all Obligations shall become immediately due and payable and Borrower shall
immediately arrange for the cancellation of Letters of Credit then outstanding.
Notwithstanding the termination of this Agreement, until all Obligations are
paid and performed in full, the Lender shall retain all its rights and remedies
hereunder (including, without limitation, in all then existing and after-arising
Collateral).
14. MISCELLANEOUS.
14.1 Cumulative Remedies; No Prior Recourse to Collateral. The
enumeration herein of the Lender's rights and remedies is not intended to be
exclusive, and such rights and remedies are in addition to and not by way of
limitation of any other rights or remedies that the Lender may have under the
UCC or other applicable law. The Lender shall have the right, in its sole
discretion, to determine which rights and remedies are to be exercised and in
which order.
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The exercise of one right or remedy shall not preclude the exercise of any
others, all of which shall be cumulative. The Lender may, without limitation,
proceed directly against the Borrower to collect the Obligations without any
prior recourse to the Collateral.
14.2 No Implied Waivers. No act, failure or delay by the Lender
shall constitute a waiver of any of its rights and remedies. No single or
partial waiver by the Lender of any provision of this Agreement or any other
Loan Document, or of breach or default hereunder or thereunder, or of any right
or remedy which the Lender may have, shall operate as a waiver of any other
provision, breach, default, right or remedy or of the same provision, breach,
default, right or remedy on a future occasion. No waiver by the Lender shall
affect its rights to require strict performance of this Agreement.
14.3 Severability. If any provision of this Agreement shall be
prohibited or invalid, under applicable law, it shall be is effective only to
such extent, without invalidating the remainder of this Agreement.
14.4 Governing Law. This Agreement shall be deemed to have been made
in the State of California and shall be governed by and interpreted in
accordance with the laws of such state, except that no doctrine of choice of law
shall be used to apply the laws of any other state or jurisdiction.
14.5 Consent to Jurisdiction and Venue, Service of Process. THE
BORROWER AGREES THAT, IN ADDITION TO ANY OTHER COURTS THAT MAY HAVE JURISDICTION
UNDER APPLICABLE LAWS, ANY ACTION OR PROCEEDING TO ENFORCE OR ARISING OUT OF
THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS MAY BE COMMENCED IN THE
SUPERIOR COURT OF THE STATE OF CALIFORNIA FOR LOS ANGELES COUNTY, OR IN THE
UNITED STATES DISTRICT COURT FOR THE CENTRAL DISTRICT OF CALIFORNIA, AND THE
BORROWER CONSENTS AND SUBMITS IN ADVANCE TO SUCH JURISDICTION AND AGREES THAT
VENUE WILL BE PROPER IN SUCH COURTS ON ANY SUCH MATTER. THE BORROWER HEREBY
WAIVES PERSONAL SERVICE OF PROCESS AND AGREES THAT A SUMMONS AND COMPLAINT
COMMENCING AN ACTION OR PROCEEDING IN ANY SUCH COURT SHALL BE PROPERLY SERVED
AND SHALL CONFER PERSONAL JURISDICTION IF SERVED BY REGISTERED OR CERTIFIED MAIL
TO THE BORROWER SHOULD THE BORROWER FAIL TO APPEAR OR ANSWER ANY SUMMONS,
COMPLAINT, PROCESS OR PAPERS SO SERVED WITHIN THIRTY (30) DAYS AFTER THE MAILING
OR OTHER SERVICE THEREOF, IT SHALL BE DEEMED IN DEFAULT AND AN ORDER OR JUDGMENT
MAY BE ENTERED AGAINST IT AS DEMANDED OR PRAYED FOR IN SUCH SUMMONS, COMPLAINT,
PROCESS OR PAPERS. THE CHOICE OF FORUM SET FORTH IN THIS SECTION SHALL NOT BE
DEEMED TO PRECLUDE THE ENFORCEMENT OF ANY JUDGMENT OBTAINED IN SUCH FORUM, OR
THE TAKING OF ANY ACTION UNDER THIS AGREEMENT TO ENFORCE THE SAME, IN ANY
APPROPRIATE JURISDICTION.
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54
14.6 Waiver of Jury Trial. THE BORROWER HEREBY WAIVES TRIAL BY JURY,
RIGHTS OF SETOFF, AND THE RIGHT TO IMPOSE COUNTERCLAIMS IN ANY LITIGATION IN ANY
COURT WITH RESPECT TO, IN CONNECTION WITH, OR ARISING OUT OF THIS AGREEMENT, THE
OTHER LOAN DOCUMENTS, THE OBLIGATIONS OR THE COLLATERAL, OR ANY INSTRUMENT OR
DOCUMENT DELIVERED PURSUANT HERETO OR THERETO, OR ANY OTHER CLAIM OR DISPUTE
HOWSOEVER ARISING, BETWEEN THE BORROWER AND THE LENDER. THE BORROWER CONFIRMS
THAT THE FOREGOING WAIVERS ARE INFORMED AND FREELY MADE.
14.7 Arbitration; Reference Proceeding.
(a) ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE PARTIES,
INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF OR RELATING TO THIS AGREEMENT
OR ANY AGREEMENTS OR INSTRUMENTS RELATING HERETO OR DELIVERED IN CONNECTION
HEREWITH AND ANY CLAIM BASED ON OR ARISING FROM AN ALLEGED TORT, SHALL AT THE
REQUEST OF ANY PARTY BE DETERMINED BY ARBITRATION. THE ARBITRATION SHALL BE
CONDUCTED IN ACCORDANCE WITH THE UNITED STATES ARBITRATION ACT (TITLE 9, U.S.
CODE), NOTWITHSTANDING ANY CHOICE OF LAW PROVISION IN THIS AGREEMENT, AND UNDER
THE COMMERCIAL RULES OF THE AMERICAN ARBITRATION ASSOCIATION ("AAA"). THE
ARBITRATION SHALL BE CONDUCTED WITHIN LOS ANGELES COUNTY, CALIFORNIA. THE
ARBITRATOR(S) SHALL GIVE EFFECT TO STATUTES OF LIMITATION IN DETERMINING ANY
CLAIM. ANY CONTROVERSY CONCERNING WHETHER AN ISSUE IS ARBITRABLE SHALL BE
DETERMINED BY THE ARBITRATOR(S). JUDGMENT UPON THE ARBITRATION AWARD MAY BE
ENTERED IN ANY COURT HAVING JURISDICTION. THE INSTITUTION AND MAINTENANCE OF AN
ACTION FOR JUDICIAL RELIEF OR PURSUIT OF A PROVISIONAL OR ANCILLARY REMEDY SHALL
NOT CONSTITUTE A WAIVER OF THE RIGHT OF ANY PARTY, INCLUDING THE PLAINTIFF, TO
SUBMIT THE CONTROVERSY OR CLAIM TO ARBITRATION IF ANY OTHER PARTY CONTESTS SUCH
ACTION FOR JUDICIAL RELIEF.
(b) Notwithstanding the provisions of subparagraph (a), no
controversy or claim shall be submitted to arbitration without the consent of
all parties if, at the time of the proposed submission, such controversy or
claim arises from or relates to an obligation to the Lender which is secured by
real property collateral located in California. If all parties do not consent to
submission of such a controversy or claim to arbitration, the controversy or
claim shall be determined as provided in subparagraph (c).
(c) A controversy or claim which is not submitted to arbitration
as provided and limited in subparagraphs (a) and (b) shall, at the request of
any party, be determined by a reference in accordance with California Code of
Civil Procedure Section 638 et al. If such an election is made, the parties
shall designate to the court a referee or referees selected under the auspices
of the AAA in the same manner as arbitrators are selected in AAA-sponsored
proceedings. The presiding referee of the panel, or the referee if there is a
50
55
single referee, shall be an active attorney or retired judge. Judgment upon the
award rendered by such referee or referees shall be entered in the court in
which such proceeding was commenced in accordance with California Code of Civil
Procedure Sections 644 and 645.
(d) No provision of this paragraph shall limit the right of any
party to this Agreement to exercise self-help remedies such as setoff, to
foreclose against or sell any real or personal property collateral or security,
or to obtain provisional or ancillary remedies from a court of competent
jurisdiction before, after, or during the pendency of any arbitration or other
proceeding. The exercise of a remedy does not waive the right of either party to
resort to arbitration or reference. At the Lender's option, foreclosure under a
deed of trust or mortgage may be accomplished either by exercise of power of
sale under the deed of trust or mortgage or by judicial foreclosure.
14.8 Survival of Representations and Warranties. All of the
Borrower's representations and warranties contained in this Agreement shall
survive the execution, delivery, and acceptance thereof by the parties,
notwithstanding any investigation by the Lender or its agents.
14.9 Other Security and Guaranties. The Lender may, without notice
or demand and without affecting the Borrower's obligations hereunder, from time
to time: (a) take from any Person and hold collateral (other than the
Collateral) for the payment of all or any part of the Obligations and exchange,
enforce or release such collateral or any part thereof; and (b) accept and hold
any endorsement or guaranty of payment of all or any part of the Obligations and
release or substitute any such endorser or guarantor, or any Person who has
given any Lien in any other collateral as security for the payment of all or any
part of the Obligations or any other Person in any way obligated to pay all or
any part of the Obligations.
14.10 Fees and Expenses. The Borrower shall pay to the Lender on
demand all costs and expenses that the Lender pays or incurs in connection with
the negotiation, preparation, consummation, administration, enforcement, and
termination of this Agreement and the other Loan Documents, including, without
limitation: (a) attorneys' and paralegal's fees and disbursements of counsel to
the Lender (including, without limitation, a reasonable estimate of the
allocable cost of in-house counsel and staff); (b) costs and expenses including
attorneys' and paralegals' fees and disbursements (including, without
limitation, a reasonable estimate of the allocable cost of in-house counsel and
staff) for any amendment, supplement, waiver, consent, or subsequent closing in
connection with the Loan Documents and the transactions contemplated thereby;
(c) costs and expenses of lien and title searches and title insurance; (d)
taxes, fees and other charges for recording the mortgages, filing financing
statements and continuations, and other actions to perfect, protect, and
continue the Security Interest; (e) sums paid or incurred to pay any amount or
take any action required of the Borrower under the Loan Documents that the
Borrower fails to pay or take; (f) costs of appraisals, inspections, and
verifications of the Collateral, including, without limitation, travel, lodging,
meals, and other expenses together with an allocated charge of $500 per day for
each auditor employed by the Lender for inspections of the Collateral and the
Borrower's operations; (g) costs and expenses of forwarding loan proceeds,
collecting checks and other items of payment, and establishing and maintaining
Payment Accounts and lock boxes; (h) all amounts that the Borrower is required
to pay in connection with the Letters of Credit; (i) costs and expenses of
preserving and protecting the
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56
Collateral; and (j) costs and expenses including attorneys' and paralegals' fees
and disbursements (including, without limitation, a reasonable estimate of the
allocable cost of in-house counsel and staff) paid or incurred to obtain payment
of the Obligations, enforce the Security Interest, sell or otherwise realize
upon the Collateral, and otherwise enforce the provisions of the Loan Documents,
or to defend any claims made or threatened against the Lender arising out of the
transactions contemplated hereby (including without limitation, preparations for
and consultations concerning any such matters). The foregoing shall not be
construed to limit any other provisions of the Loan Documents regarding costs
and expenses to be paid by the Borrower. All of the foregoing costs and expenses
shall be charged to the Borrower's loan account as Revolving Loans.
14.11 Notices. Except as otherwise provided herein, all notices,
demands, and requests that either party is required or elects to give to the
other shall be in writing, shall be delivered personally against receipt, or
sent by recognized overnight courier services, or mailed by registered or
certified mail, return receipt requested, postage prepaid, and shall be
addressed to the party to be notified as follows:
If to the Lender: BankAmerica Business Credit, Inc.
▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Division Manager
with a copy to: Bank of America N.T. & S.A., Legal Department
▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Assistant General Counsel
If to the Borrower: Globespan Semiconductor Inc.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Mr. ▇▇▇ ▇▇▇▇▇▇
with a copy to: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
or to such other address as each party may designate for itself by like notice.
Any such notice, demand, or request shall be deemed given when received if
personally delivered or sent by overnight courier, or when deposited in the
United States mails, postage paid, if sent by registered or certified mail.
14.12 Indemnification.
(a) THE BORROWER HEREBY INDEMNIFIES, DEFENDS AND HOLDS THE
LENDER, AND ITS DIRECTORS, OFFICERS, AGENTS, EMPLOYEES AND COUNSEL, HARMLESS
FROM AND AGAINST ANY AND ALL LOSSES, CLAIMS, DAMAGES, LIABILITIES, DEFICIENCIES,
JUDGMENTS,
52
57
PENALTIES OR EXPENSES IMPOSED ON, INCURRED BY OR ASSERTED AGAINST ANY
OF THEM, WHETHER DIRECT, INDIRECT OR CONSEQUENTIAL ARISING OUT OF OR BY REASON
OF ANY LITIGATION, INVESTIGATIONS, CLAIMS, OR PROCEEDINGS WHETHER BASED ON ANY
FEDERAL, STATE OR LOCAL LAWS OR OTHER STATUTES OR REGULATIONS, INCLUDING,
WITHOUT LIMITATION, SECURITIES, ENVIRONMENTAL, OR COMMERCIAL LAWS AND
REGULATIONS, UNDER COMMON LAW OR AT EQUITY, OR ON CONTRACT OR OTHERWISE)
COMMENCED OR THREATENED, WHICH ARISE OUT OF OR ARE IN ANY WAY BASED UPON THE
NEGOTIATION, PREPARATION, EXECUTION, DELIVERY, ENFORCEMENT, PERFORMANCE OR
ADMINISTRATION OF THIS AGREEMENT, ANY OTHER LOAN DOCUMENT, OR ANY UNDERTAKING OR
PROCEEDING RELATED TO ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR ANY ACT,
OMISSION TO ACT, EVENT OR TRANSACTION RELATED OR ATTENDANT THERETO, INCLUDING,
WITHOUT LIMITATION, AMOUNTS PAID IN SETTLEMENT, COURT COSTS, AND THE FEES AND
EXPENSES OF COUNSEL REASONABLY INCURRED IN CONNECTION WITH ANY SUCH LITIGATION,
INVESTIGATION, CLAIM OR PROCEEDING AND FURTHER INCLUDING, WITHOUT LIMITATION,
ALL LOSSES, DAMAGES (INCLUDING CONSEQUENTIAL DAMAGES), EXPENSES OR LIABILITIES
SUSTAINED BY THE LENDER IN CONNECTION WITH ANY ENVIRONMENTAL INSPECTION,
MONITORING, SAMPLING, OR CLEANUP OF THE ENCUMBERED REAL ESTATE REQUIRED OR
MANDATED BY ANY ENVIRONMENTAL LAW; PROVIDED, HOWEVER, THAT THE BORROWER SHALL
NOT INDEMNIFY THE LENDER, ITS DIRECTORS, OFFICERS, AGENTS, EMPLOYEES AND COUNSEL
FROM SUCH DAMAGES RESULTING FROM THEIR GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
(b) The Borrower hereby indemnifies, defends and holds harmless
the Lender from any loss or liability directly or indirectly arising out of the
use, generation, manufacture, production, storage, release, threatened release,
discharge, disposal or presence of a hazardous substance. This indemnity will
apply whether the hazardous substance is on, under or about the Borrower's
property or operations or property leased to the Borrower. The indemnity
includes but is not limited to attorneys' fees (including the reasonable
estimate of the allocated cost of in-house counsel and staff). The indemnity
extends to the Lender, its parent, subsidiaries and all of their directors,
officers, employees, agents, successors, attorneys and assigns. "Hazardous
substances" means any substance, material or waste that is or becomes designated
or regulated as "toxic," "hazardous," "pollutant," or "contaminant" or a similar
designation or regulation under any federal, state or local law (whether under
common law, statute, regulation or otherwise) or judicial or administrative
interpretation of such, including without limitation petroleum or natural gas.
(c) Without limiting the foregoing, if, by reason of any suit or
proceeding of any kind, nature, or description against the Borrower, or by the
Borrower or any other party against the Lender, which in the Lender's sole
discretion makes it advisable for the Lender to seek counsel for protection and
preservation of its liens and security assets, or to defend its own interest,
such expenses and counsel fees shall be allowed to the Lender. To the extent
that the undertaking to indemnify, pay and hold harmless set forth in this
Section 14.12
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may be unenforceable because it is violative of any law or public policy, the
Borrower shall contribute the maximum portion which it is permitted to pay and
satisfy under applicable law, to the payment and satisfaction of all indemnified
matters incurred by the Lender. The indemnity contained in Section 14.12 shall
survive the payment of the Obligations and the termination of this Agreement.
All of the foregoing costs and expenses shall be part of the Obligations and
secured by the Collateral.
14.13 Waiver of Notices. Unless otherwise expressly provided herein,
the Borrower waives presentment, protest and notice of demand or dishonor and
protest as to any instrument, as well as any and all other notices to which it
might otherwise be entitled. No notice to or demand on the Borrower which the
Lender may elect to give shall entitle the Borrower to any or further notice or
demand in the same, similar or other circumstances.
14.14 Binding Effect; Assignment. The provisions of this Agreement
shall be binding upon and inure to the benefit of the respective
representatives, successors and assigns of the parties hereto; provided,
however, that no interest herein may be assigned by the Borrower without the
prior written consent of the Lender. The rights and benefits of the Lender
hereunder shall, if the Lender so agrees, inure to any assignee of the
Obligations or any part thereof.
14.15 Modification. This Agreement is intended by the Borrower and
the Lender to be the final, complete, and exclusive expression of the agreement
between them. This Agreement supersedes any and all prior oral or written
agreements relating to the subject matter hereof and may not be contradicted by
evidence of prior, contemporaneous or subsequent oral agreements of the parties.
There are no oral agreements between the parties. No modification, rescission,
waiver, release, or amendment of any provision of this Agreement shall be made,
except by a written agreement signed by the Borrower and a duly authorized
officer of the Lender.
14.16 Counterparts. This Agreement may be executed in any number of
counterparts, and by the Lender and the Borrower in separate counterparts, each
of which shall be an original, but all of which shall together constitute one
and the same agreement.
14.17 Captions. The captions contained in this Agreement are for
convenience only are without substantive meaning and should not be construed to
modify, enlarge, or restrict any provision.
14.18 Right of Set-Off. Whenever an Event of Default exists, the
Lender is hereby authorized at any time and from time to time, to the fullest
extent permitted by law, to set off and apply any and all deposits (general or
special, time or demand, provisional or final) at any time held and other
indebtedness at any time owing by the Lender or any affiliate of the Lender to
or for the credit or the account of the Borrower against any and all of the
Obligations, whether or not then due and payable. The Lender agrees promptly to
notify the Borrower after any such set-off and application made by the Lender,
provided that the failure to give such notice shall not affect the validity of
such set-off end application.
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IN WITNESS WHEREOF, the parties have entered into this Agreement
on the date first above written.
GLOBESPAN SEMICONDUCTOR INC.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
BANKAMERICA BUSINESS CREDIT, INC.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
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60
LIST OF EXHIBITS/SCHEDULES
Exhibit A Borrowing Base Certificate
Exhibit B Financial Statements and Projections
-- Exhibit B-1 Financial Statement
-- Exhibit B-2 Projections
Schedule 6.3 Locations of Borrower
Schedule 8.4 Names of Borrower and Trade Styles
Schedule 8.5 Subsidiaries and Affiliates and states of
incorporation and qualification
Schedule 8.13 Real Estate - Owned and Leased
Schedule 8.14 Proprietary Rights Collateral (patents, trademarks,
and copyrights)
Schedule 8.15 Trade Names
Schedule 8.16 Litigation
Schedule 8.18 Labor Disputes
Schedule 8.19 Environmental Laws
Schedule 8.22 ERISA Compliance
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61
EXHIBIT A
Borrowing Base Certificate
BA BUSINESS CREDIT, INC.
CONSOLIDATED CERTIFICATE DATE 04/20/98 BABC USE ONLY
ACTIVITY
----------------------------------------------------------------------------------------------------------
ACCOUNTS RECEIVABLE
-------------------------------------------
1. BEGINNING BALANCE LINE 5 LAST REPORT
---------
2. PLUS SALES AS OF ___________
--------- ----------------
3. LESS CREDITS AS OF ___________
--------- ----------------
4. LESS GROSS COLLECTIONS AS OF ___________
--------- ----------------
5. ADJUSTMENTS
--------- ----------------
6. ENDING BALANCE
--------- ----------------
7. INELIGIBLE
--------- ----------------
8. ELIGIBLE NOT TO EXCEED ___________
--------- --------- --------
----------------
----------------------------------------------------------------------------------------------------------
PERPETUAL INVENTORY
-------------------------------------------
9. RAW MATERIAL
----------------
---------
10. LESS: INELIGIBLE
----------------
---------
11. ELIGIBLE
--------- --------- -------- ----------------
12. WIP
--------- ----------------
13. LESS: INELIGIBLE
--------- ----------------
14. ELIGIBLE
--------- --------- -------- ----------------
15. FINISHED GOODS
--------- ----------------
16. LESS: INELIGIBLE ___________
--------- ----------------
17. ELIGIBLE
--------- --------- --------
----------------
18. TOTAL INV. AVAILABILITY NOT TO EXCEED
----------------------------------------------------------------------------------------------------------
19. MERCHANDISE L/C NOT TO EXCEED:
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
20. TOTAL AVAILABILITY
----------------------------------------------------------------------------------------------------------
LOAN ACTIVITY
------------------------------------------- ----------------
21. BALANCE AS SHOWN ON LAST REPORT (LINE 29)
-------- ----------------
22. LESS: REMITTANCES
-------- ----------------
23. PLUS: ADVANCE REQUEST AS OF ___________
-------- ----------------
24. PLUS: WIRE CHARGE
-------- ----------------
25. PLUS: FEES
-------- ----------------
26. PLUS: INTEREST
-------- ----------------
27. PLUS: TERM LOAN PRINCIPAL PAYMENT
-------- ----------------
28. ADJUSTMENTS
--------
----------------
29. OUTSTANDING LOAN BALANCE
----------------------------------------------------------------------------------------------------------
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62
BA BUSINESS CREDIT, INC.
CONSOLIDATED CERTIFICATE DATE 04/20/98 BABC USE ONLY
ACTIVITY
----------------------------------------------------------------------------------------------------------
ACCOUNTS RECEIVABLE
-------------------------------------------
----------------------------------------------------------------------------------------------------------
REVOLVING LOAN AVAILABILITY
------------------------------------------- ----------------
30. CALCULATED AVAILABILITY (LINE 20)
-------- ----------------
31. LESS: OUTSTANDING LOAN BALANCE (LINE 29)
-------- ----------------
32. LESS: MERCHANDISE L/C
-------- ----------------
33. LESS: STANDBY L/C
-------- ----------------
34. LESS: BANKERS ACCEPTANCES
-------- ----------------
35. LESS: OTHER RESERVES
--------
----------------
36. NET AVAILABLE
----------------------------------------------------------------------------------------------------------
THE UNDERSIGNED REPRESENTS AND WARRANTS THAT THE INFORMATION SET FORTH ABOVE IS
TRUE AND COMPLETE THE UNDERSIGNED GRANTS A SECURITY INTEREST IN THE COLLATERAL
REFLECTED ABOVE TO BA BUSINESS CREDIT, INC. AND REPRESENTS AND WARRANTS THAT
SAID COLLATERAL COMPLIES WITH THE REPRESENTATIONS, WARRANTIES AND COVENANTS
CONTAINED IN THE LOAN AND SECURITY AGREEMENT BETWEEN BA BUSINESS CREDIT, INC.
AND THE UNDERSIGNED.
BORROWER: BA BUSINESS CREDIT, INC.
------------------------------
AUTHORIZED RECEIVED BY:
----------------------
SIGNATURE:
-----------------------------
TITLE:
---------------------------------
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63
EXHIBIT ▇-▇
FINANCIAL STATEMENT
(already received by Lender and to be attached)
64
EXHIBIT B-2
PROJECTIONS
(already received by Lender and to be attached)