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EXHIBIT 1
LOAN AND SECURITY AGREEMENT
BY AND BETWEEN
CONGRESS FINANCIAL CORPORATION (NEW ENGLAND)
AS LENDER
AND
PICTURETEL CORPORATION AND
CERTAIN OF ITS SUBSIDIARIES
AS BORROWERS
DATED: AUGUST 22, 2000
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TABLE OF CONTENTS
Page
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1. DEFINITIONS.................................................................................................1
2. CREDIT FACILITIES...........................................................................................8
2.1 Revolving Loans...........................................................................................8
2.2 Letter of Credit Accommodations...........................................................................9
2.3 Availability Reserves....................................................................................10
3. INTEREST AND FEES..........................................................................................10
3.1 Interest.................................................................................................10
3.2 Commitment Fee...........................................................................................12
3.3 Servicing Fee............................................................................................12
3.4 Unused Line Fee..........................................................................................12
3.5 Changes in Laws and Increased Costs of Loans.............................................................12
4. CONDITIONS PRECEDENT.......................................................................................13
4.1 Conditions Precedent to Initial Loans and Letter of Credit Accommodations................................13
4.2 Conditions Precedent to All Loans and Letter of Credit Accommodations....................................14
5. GRANT OF SECURITY INTEREST.................................................................................14
6. COLLECTION AND ADMINISTRATION..............................................................................15
6.1 Borrowers' Loan Account..................................................................................15
6.2 Statements...............................................................................................15
6.3 Collection of Accounts...................................................................................15
6.4 Payments.................................................................................................16
6.5 Authorization to Make Loans..............................................................................17
6.6 Use of Proceeds..........................................................................................17
6.7 Appointment of Company as Agent for Borrowers............................................................17
7. COLLATERAL REPORTING AND COVENANTS.........................................................................17
7.1 Collateral Reporting.....................................................................................17
7.2 Accounts Covenants.......................................................................................18
7.3 Inventory Covenants......................................................................................19
7.4 Equipment Covenants......................................................................................19
7.5 Power of Attorney........................................................................................19
7.6 Right to Cure............................................................................................20
7.7 Access to Premises.......................................................................................20
7.8 Escrow Deposit Covenants.................................................................................20
8. REPRESENTATIONS AND WARRANTIES.............................................................................21
8.1 Corporate Existence, Power and Authority; Subsidiaries...................................................21
8.2 Financial Statements; No Material Adverse Change.........................................................22
8.3 Chief Executive Office; Collateral Locations.............................................................22
8.4 Priority of Liens; Title to Properties...................................................................22
8.5 Tax Returns..............................................................................................22
8.6 Litigation...............................................................................................22
8.7 Compliance with Other Agreements and Applicable Laws.....................................................22
8.8 Bank Accounts............................................................................................23
8.9 Accuracy and Completeness of Information.................................................................23
(i)
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8.10 Employee Benefits........................................................................................23
8.11 Environmental Compliance.................................................................................23
8.12 Interdependent Businesses and Operations.................................................................24
8.13 Survival of Warranties; Cumulative.......................................................................24
9. AFFIRMATIVE AND NEGATIVE COVENANTS.........................................................................24
9.1 Maintenance of Existence.................................................................................24
9.2 New Collateral Locations.................................................................................24
9.3 Compliance with Laws, Regulations, Etc...................................................................24
9.4 Payment of Taxes and Claims..............................................................................25
9.5 Insurance................................................................................................26
9.6 Financial Statements and Other Information...............................................................26
9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc..................................................27
9.8 Encumbrances.............................................................................................27
9.9 Indebtedness.............................................................................................27
9.10 Loans, Investments, Guarantees, Etc......................................................................28
9.11 Dividends and Redemptions................................................................................28
9.12 Transactions with Affiliates.............................................................................28
9.13 Additional Bank Accounts.................................................................................28
9.14 Working Capital..........................................................................................28
9.15 Adjusted Net Worth.......................................................................................28
9.16 Costs and Expenses.......................................................................................29
9.17 Compliance with ERISA....................................................................................29
9.18 Further Assurances.......................................................................................29
10. EVENTS OF DEFAULT AND REMEDIES.............................................................................30
10.1 Events of Default........................................................................................30
10.2 Remedies.................................................................................................31
11. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW...............................................32
11.1 Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver....................................32
11.2 Waiver of Notices........................................................................................33
11.3 Amendments and Waivers...................................................................................33
11.4 Waiver of Counterclaims..................................................................................33
11.5 Indemnification..........................................................................................33
12. TERM OF AGREEMENT; MISCELLANEOUS...........................................................................34
12.1 Term.....................................................................................................34
12.2 Notices..................................................................................................35
12.3 Partial Invalidity.......................................................................................35
12.4 Successors...............................................................................................35
12.5 Joint and Several Liability..............................................................................35
12.6 Suretyship Waivers and Consents..........................................................................35
12.7 Contribution Agreement...................................................................................37
12.8 Confidentiality..........................................................................................37
12.9 Judgment Currency........................................................................................38
12.10 Termination of Prior Credit Agreement...................................................................38
12.11 Entire Agreement........................................................................................38
(ii)
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INDEX TO
EXHIBITS AND SCHEDULES
Exhibit A Information Certificate
Schedule 8.4 Existing Liens
Schedule 8.8 Bank Accounts
Schedule 8.11 Environmental Matters
Schedule 9.9 Existing Indebtedness
Schedule 9.10 Existing Loans, Advances and Guarantees
(iii)
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LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement dated August 22, 2000 is entered into by
and between Congress Financial Corporation (New England), a Massachusetts
corporation ("Lender") and PictureTel Corporation, a Delaware corporation
("Company") and the subsidiaries of the Company that are from time to time
parties to this Agreement (collectively, the "Subsidiary Borrowers" and with the
Company, the "Borrowers" and each individually a "Borrower").
WITNESSETH:
WHEREAS, Borrowers have requested that Lender enter into certain financing
arrangements with Borrowers pursuant to which Lender may make loans and provide
other financial accommodations to Borrowers; and
WHEREAS, Lender is willing to make such loans and provide such financial
accommodations on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual conditions and agreements
set forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. DEFINITIONS
All terms used herein which are defined in Article 1 or Article 9 of the
Uniform Commercial Code shall have the meanings given therein unless otherwise
defined in this Agreement. All references to the plural herein shall also mean
the singular and to the singular shall also mean the plural unless the context
otherwise requires. All references to Borrowers and Lender pursuant to the
definitions set forth in the recitals hereto, or to any other person herein,
shall include their respective successors and assigns. The words "hereof",
"herein", "hereunder", "this Agreement" and words of similar import when used in
this Agreement shall refer to this Agreement as a whole and not any particular
provision of this Agreement and as this Agreement now exists or may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced. The
word "including" when used in this Agreement shall mean "including, without
limitation". An Event of Default shall exist or continue or be continuing until
such Event of Default is waived in accordance with Section 11.3 or is cured in a
manner satisfactory to Lender, if such Event of Default is capable of being
cured as determined by Lender. Any accounting term used herein unless otherwise
defined in this Agreement shall have the meanings customarily given to such term
in accordance with GAAP. For purposes of this Agreement, the following terms
shall have the respective meanings given to them below:
1.1 "Accounts" shall mean all present and future rights of each Borrower
to payment for goods sold or leased or for services rendered, which are not
evidenced by instruments or chattel paper, and whether or not earned by
performance.
1.2 Intentionally Omitted
1.3 "Adjusted Eurodollar Rate" shall mean, with respect to each Interest
Period for any Eurodollar Rate Loan, the rate per annum (rounded upwards, if
necessary, to the next one-sixteenth (1/16) of one (1%) percent) determined by
dividing (a) the Eurodollar Rate for such Interest Period by (b) a percentage
equal to: (i) one (1) minus (ii) the Reserve Percentage. For purposes hereof,
"Reserve Percentage" shall mean the reserve percentage, expressed as a decimal,
prescribed by any United States or foreign banking authority for determining the
reserve requirement which is or would be applicable to deposits of United States
dollars in a non-United States or an international banking office of Reference
Bank used to fund a Eurodollar Rate Loan or any Eurodollar Rate Loan
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made with the proceeds of such deposit, whether or not the Reference Bank
actually holds or has made any such deposits or loans. The Adjusted Eurodollar
Rate shall be adjusted on and as of the effective day of any change in the
Reserve Percentage.
1.4 "Adjusted Net Worth" shall mean as to any Person, at any time, in
accordance with GAAP (except as otherwise specifically set forth below), on a
consolidated basis for such Person and its subsidiaries (if any), the amount
equal to: (a) the difference between: (i) the aggregate net book value of all
assets of such Person and its subsidiaries, calculating the book value of
inventory for this purpose on a first-in-first-out basis, after deducting from
such book values all appropriate reserves in accordance with GAAP (including all
reserves for doubtful receivables, obsolescence, depreciation and amortization)
and (ii) the aggregate amount of the indebtedness and other liabilities of such
Person and its subsidiaries (including tax and other proper accruals) PLUS (b)
the items classified as redeemable preferred stock on such Person's balance
sheet plus indebtedness of such Person and its subsidiaries which is
subordinated in right of payment to the full and final payment of all of the
Obligations on terms and conditions acceptable to Lender.
1.5 "Availability Reserves" shall mean, as of any date of determination,
the Permanent Availability Reserve and such additional amounts as Lender may
from time to time establish and revise in good faith reducing the amount of
Revolving Loans and Letter of Credit Accommodations which would otherwise be
available to Borrowers under the lending formula(s) provided for herein: (a) to
reflect events, conditions, contingencies or risks which, as determined by
Lender in good faith, do or may affect either (i) the Collateral or any other
property which is security for the Obligations or its value, (ii) the assets,
business or prospects of any Borrower or any Obligor or (iii) the security
interests and other rights of Lender in the Collateral (including the
enforceability, perfection and priority thereof) or (b) to reflect Lender's good
faith belief that any collateral report or financial information furnished by or
on behalf of any Borrower or any Obligor to Lender is or may have been
incomplete, inaccurate or misleading in any material respect or (c) to reflect
outstanding Letter of Credit Accommodations as provided in Section 2.2 hereof
(if Cash Collateral is not pledged therefore as provided in Section 2.2) or (d)
in respect of any state of facts which Lender determines in good faith
constitutes an Event of Default or may, with notice or passage of time or both,
constitute an Event of Default.
1.6 "Blocked Accounts" shall have the meaning set forth in Section 6.3
hereof.
1.7 "Business Day" shall mean any day other than a Saturday, Sunday, or
other day on which commercial banks are authorized or required to close under
the laws of the State of New York or the Commonwealth of Pennsylvania, and a day
on which the Reference Bank and Lender are open for the transaction of business,
except that if a determination of a Business Day shall relate to any Eurodollar
Rate Loans, the term Business Day shall also exclude any day on which banks are
closed for dealings in dollar deposits in the London interbank market or other
applicable Eurodollar Rate market.
1.8 "Cash Collateral" shall mean all cash and cash equivalents held by and
pledged to Lender and in which Lender has at all times a first priority, valid
and perfected security interest, subject to no other security interests or
liens.
1.9 "Change of Control" shall be deemed to have occurred at such time as
(i) a "person" or "group" (within the meaning of Section 13(d) or 14(d)(2) of
the Securities Exchange Act of 1934, as amended) other than Intel Corporation
and the Wisconsin Investment Board becomes the beneficial owner (as defined in
Rule 13a-3 of the Securities Exchange Act of 1934, as amended), directly or
indirectly, of more than twenty (20%) percent of the total voting power of all
classes of stock of the Company entitled to vote in the election of directors
(provided that such person or Group was not the beneficial owner of at least
such percentage of such stock on the date of this Agreement), or (ii) a change
in the Board of Directors of the Company in which the individuals who
constituted the Board of Directors at the beginning of the two year period
immediately preceding such change (together with any other director whose
nomination for election by the shareholders of the Company was approved by a
vote of at least seventy-five (75%) percent of the directors then in office who
either were directors at the beginning of such period or whose nomination and
election was previously so approved) cease for any reason to constitute a
majority of directors therein office.
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1.10 "Code" shall mean the Internal Revenue Code of 1986, as the same now
exists or may from time to time hereafter be amended, modified, recodified or
supplemented, together with all rules, regulations and interpretations
thereunder or related thereto.
1.11 "Collateral" shall have the meaning set forth in Section 5 hereof.
1.12 "Eligible Accounts" shall mean Accounts created by Borrowers which are
and continue to be acceptable to Lender based on the criteria set forth below.
In general, Accounts shall be Eligible Accounts if:
(a) such Accounts arise from the actual and BONA FIDE sale and
delivery of goods by a Borrower or rendition of services by a Borrower in the
ordinary course of its business which transactions are completed in accordance
with the terms and provisions contained in any documents related thereto;
(b) such Accounts are not unpaid more than ninety (90) days after the
date of the original invoice for them;
(c) such Accounts comply with the terms and conditions contained in
Section 7.2(c) of this Agreement;
(d) such Accounts do not arise from sales on consignment, guaranteed
sale, sale and return, sale on approval, or other terms under which payment by
the account debtor may be conditional or contingent;
(e) the chief executive office of the account debtor with respect to
such Accounts is located in the United States of America, Canada or the United
Kingdom, or, at Lender's option, if either: (i) the account debtor has delivered
to a Borrower an irrevocable letter of credit issued or confirmed by a bank
satisfactory to Lender and payable only in the United States of America and in
U.S. dollars, Canadian dollars or U.K. Pounds Sterling, sufficient to cover such
Account, in form and substance satisfactory to Lender and, if required by
Lender, the original of such letter of credit has been delivered to Lender or
Lender's agent and the issuer thereof notified of the assignment of the proceeds
of such letter of credit to Lender, or (ii) such Account is subject to credit
insurance payable to Lender issued by an insurer and on terms and in an amount
acceptable to Lender, or (iii) such Account is otherwise acceptable in all
respects to Lender (subject to such lending formula with respect thereto as
Lender may determine);
(f) such Accounts do not consist of progress ▇▇▇▇▇▇▇▇, ▇▇▇▇ and hold
invoices or retainage invoices, except as to ▇▇▇▇ and hold invoices, if Lender
shall have received an agreement in writing from the account debtor, in form and
substance satisfactory to Lender, confirming the unconditional obligation of the
account debtor to take the goods related thereto and pay such invoice;
(g) the account debtor with respect to such Accounts has not asserted
a counterclaim, defense or dispute and does not have, and does not engage in
transactions which may give rise to, any right of setoff against such Accounts
(but the portion of the Accounts of such account debtor in excess of the amount
at any time and from time to time owed by a Borrower to such account debtor or
claimed owed by such account debtor may be deemed Eligible Accounts);
(h) there are no facts, events or occurrences which would impair the
validity, enforceability or collectability of such Accounts or reduce the amount
payable or delay payment thereunder;
(i) such Accounts are subject to the first priority, valid and
perfected security interest of Lender and any goods giving rise thereto are not,
and were not at the time of the sale thereof, subject to any liens except those
permitted in this Agreement;
(j) neither the account debtor nor any officer or employee of the
account debtor with respect to such Accounts is an officer, employee or agent of
or affiliated with a Borrower directly or indirectly by virtue of family
membership, ownership, control, management or otherwise;
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(k) the account debtors with respect to such Accounts are not any
foreign government, the United States of America, any State, political
subdivision, department, agency or instrumentality thereof, unless, if the
account debtor is the United States of America, any State, political
subdivision, department, agency or instrumentality thereof, upon Lender's
request, the Federal Assignment of Claims Act of 1940, as amended or any similar
State or local law, if applicable, has been complied with in a manner
satisfactory to Lender;
(l) there are no proceedings or actions which are threatened or
pending against the account debtors with respect to such Accounts which might
result in any material adverse change in any such account debtor's financial
condition;
(m) such Accounts of a single account debtor or its affiliates do not
constitute more than twenty (20%) percent of all otherwise Eligible Accounts
(but the portion of the Accounts not in excess of such percentage may be deemed
Eligible Accounts);
(n) such Accounts are not owed by an account debtor who has Accounts
unpaid more than ninety (90) days after the date of the original invoice for
them which constitute more than fifty (50%) percent of the total Accounts of
such account debtor;
(o) such Accounts are owed by account debtors whose total
indebtedness to any Borrower does not exceed the credit limit with respect to
such account debtors as determined by Lender from time to time (but the portion
of the Accounts not in excess of such credit limit may be deemed Eligible
Accounts); and
(p) such Accounts are owed by account debtors deemed creditworthy at
all times by Lender, as determined by Lender.
General criteria for Eligible Accounts may be established and revised from time
to time by Lender in good faith. All Accounts payable in Canadian dollars or in
U.K. Pounds Sterling shall be valued by Lender in United States dollars by using
the spot prices for such currencies in U.S. Dollars as provided to Lender by the
Bank on or about the business day that Lender receives any report from Borrowers
containing Accounts payable in such currencies. Any such valuation by Lender
shall be final and binding on Borrowers absent manifest errors or omissions. Any
Accounts which are not Eligible Accounts shall nevertheless be part of the
Collateral.
1.13 "Environmental Law" shall mean all foreign, Federal, State and local
laws (including common law), legislation, rules, codes, licenses, permits
(including conditions imposed therein), authorizations, judicial or
administrative decisions, injunctions or agreements between any Borrower and any
governmental authority: relating to pollution and the protection, preservation
or restoration of the environment (including air, water vapor, surface water,
ground water, drinking water, drinking water supply, surface land, subsurface
land, plant and animal life or any other natural resource), or to human health
or safety, (b) relating to the exposure to, or the use, storage, recycling,
treatment, generation, manufacture, processing, distribution, transportation,
handling, labeling, production, release or disposal, or threatened release, of
Hazardous Materials, or (c) relating to all laws with regard to recordkeeping,
notification, disclosure and reporting requirements respecting Hazardous
Materials. The term "Environmental Laws" includes (i) the Federal Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the Federal
Superfund Amendments and Reauthorization Act, the Federal Water Pollution
Control Act of 1972, the Federal Clean Water Act, the Federal Clean Air Act, the
Federal Resource Conservation and Recovery Act of 1976 (including the Hazardous
and Solid Waste Amendments thereto), the Federal Solid Waste Disposal and the
Federal Toxic Substances Control Act, the Federal Insecticide, Fungicide and
Rodenticide Act, and the Federal Safe Drinking Water Act of 1974, (ii)
applicable state counterparts to such laws, and (iii) any common law or
equitable doctrine that may impose liability or obligations for injuries or
damages due to, or threatened as a result of, the presence of or exposure to any
Hazardous Materials.
1.14 "Equipment" shall mean all of each Borrower's now owned and hereafter
acquired equipment, machinery, computers and computer hardware and software
(whether owned or licensed), vehicles, tools, furniture, fixtures, all
attachments, accessions and property now or hereafter affixed thereto or used in
connection therewith, and substitutions and replacements thereof, wherever
located.
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1.15 "ERISA" shall mean the United States Employee Retirement Income
Security Act of 1974, as the same now exists or may hereafter from time to time
be amended, modified, recodified or supplemented, together with all rules,
regulations and interpretations thereunder or related thereto.
1.16 "ERISA Affiliate" shall mean any person required to be aggregated with
any Borrower or any of its subsidiaries under Sections 414(b), 414(c), 414(m) or
414(o) of the Code.
1.17 "Eurodollar Rate" shall mean with respect to the Interest Period for a
Eurodollar Rate Loan, the interest rate per annum equal to the arithmetic
average of the rates of interest per annum (rounded upwards, if necessary, to
the next one-sixteenth (1/16) of one (1%) percent) at which Reference Bank is
offered deposits of United States dollars in the London interbank market (or
other Eurodollar Rate market selected by Borrowers and approved by Lender) on or
about 9:00 a.m. (New York time) two (2) Business Days prior to the commencement
of such Interest Period in amounts substantially equal to the principal amount
of the Eurodollar Rate Loans requested by and available to Borrowers in
accordance with this Agreement, with a maturity of comparable duration to the
Interest Period selected by Borrowers.
1.18 "Eurodollar Rate Loans" shall mean any Loans or portion thereof on
which interest is payable based on the Adjusted Eurodollar Rate in accordance
with the terms hereof.
1.19 "Event of Default" shall mean the occurrence or existence of any event
or condition described in Section 10.1 hereof.
1.20 "Excess Availability" shall mean the amount, as determined by Lender,
calculated at any time, equal to the sum of: (i) the amount of the Revolving
Loans available to Borrowers as of such time based on the applicable lending
formulas multiplied by the Net Amount of Eligible Accounts, as determined by
Lender, and subject to the sublimits and Availability Reserves from time to time
established by Lender hereunder, plus (ii) the amount of the Cash Collateral as
of such date that is pledged to Lender to secure Letter of Credit Accommodations
plus unencumbered cash, cash equivalents and highly rated investment securities,
as determined by Lender, MINUS the sum of: (i) the amount of all then
outstanding and unpaid Obligations, plus (ii) the aggregate amount of all then
outstanding and unpaid trade payables of Borrowers which are more than sixty
(60) days past due as of such time (excluding bona fide claims disputed in good
faith), plus (iii) the amount of checks issued by Borrowers to pay trade
payables, but not yet sent and the book overdraft of Borrowers.
1.21 "Financing Agreements" shall mean, collectively, this Agreement and
all notes, guarantees, security agreements and other agreements, documents and
instruments now or at any time hereafter executed and/or delivered by any
Borrower or any Obligor in connection with this Agreement, as the same now exist
or may hereafter be amended, modified, supplemented, extended, renewed, restated
or replaced.
1.22 "GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time as set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and the statements and pronouncements
of the Financial Accounting Standards Board which are applicable to the
circumstances as of the date of determination consistently applied, except that,
for purposes of Sections 9.14 and 9.15 hereof, GAAP shall be determined on the
basis of such principles in effect on the date hereof and consistent with those
used in the preparation of the audited financial statements delivered to Lender
prior to the date hereof.
1.23 "Hazardous Materials" shall mean any hazardous, toxic or dangerous
substances, materials and wastes, including hydrocarbons (including naturally
occurring or man-made petroleum and hydrocarbons), flammable explosives,
asbestos, urea formaldehyde insulation, radioactive materials, biological
substances, polychlorinated biphenyls, pesticides, herbicides and any other kind
and/or type of pollutants or contaminants (including materials which include
hazardous constituents), sewage, sludge, industrial slag, solvents and/or any
other similar substances, materials, or wastes and including any other
substances, materials or wastes that are or become regulated under any
Environmental Law (including any that are or become classified as hazardous or
toxic under any Environmental Law).
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1.24 "Information Certificate" shall mean the Information Certificates of
Borrowers constituting Exhibit A hereto containing material information with
respect to Borrowers, their business and assets provided by or on behalf of
Borrowers to Lender in connection with the preparation of this Agreement and the
other Financing Agreements and the financing arrangements provided for herein.
1.25 "Interest Period" shall mean for any Eurodollar Rate Loan, a period of
approximately one (1), two (2), or three (3) months duration as Borrowers may
elect, the exact duration to be determined in accordance with the customary
practice in the applicable Eurodollar Rate market; PROVIDED, THAT, Borrowers may
not elect an Interest Period which will end after the last day of the
then-current term of this Agreement.
1.26 "Interest Rate" shall mean, as to Prime Rate Loans, a rate of one (1%)
percent per annum in excess of the Prime Rate and, as to Eurodollar Rate Loans,
a rate of three and one quarter (3.25%) percent per annum in excess of the
Adjusted Eurodollar Rate (based on the Eurodollar Rate applicable for the
Interest Period selected by Borrowers as in effect three (3) Business Days after
the date of receipt by Lender of the request of Borrowers for such Eurodollar
Rate Loans in accordance with the terms hereof, whether such rate is higher or
lower than any rate previously quoted to Borrowers); PROVIDED, THAT, the
Interest Rate shall mean the rate of four (4%) percent per annum in excess of
the Prime Rate as to Prime Rate Loans and the rate of six and one quarter
(6.25%) percent per annum in excess of the Adjusted Eurodollar Rate as to
Eurodollar Rate Loans, at Lender's option, without notice, (a) for the period
(i) from and after the date of termination or non-renewal hereof until Lender
has received full and final payment of all obligations (notwithstanding entry of
a judgment against Borrowers) and (ii) from and after the date of the occurrence
of an Event of Default for so long as such Event of Default is continuing as
determined by Lender, and (b) on the Revolving Loans at any time outstanding in
excess of the amounts available to Borrowers under Section 2 (whether or not
such excess(es), arise or are made with or without Lender's knowledge or consent
and whether made before or after an Event of Default). In the event that the
Company's audited financial statements for any fiscal year ending after December
31, 2000 delivered to Lender in accordance with Section 9.6(a)(ii) hereof
evidence that the Company achieved Net Income of $1.00 or more during such
fiscal year, the foregoing rates shall be subject to a one time of adjustment
to, as to Prime Rate Loans, a rate of three quarters of one (3/4%) percent per
annum in excess of the Prime Rate and, as to Eurodollar Rate Loans, a rate of
three (3%) percent per annum in excess of the Adjusted Eurodollar Rate (for the
applicable Interest Period). In the event that such audited financial statements
evidence that the Company had Net Income of less than $1.00 and no Event of
Default then exists, the foregoing rates shall be subject to a one time
adjustment to, as to Prime Rate Loans, a rate of one and one quarter (1 1/4%)
percent per annum in excess of the Prime Rate, and as to Eurodollar Rate Loans,
a rate of three and one half (3 1/2%) percent per annum in excess of the
Adjusted Eurodollar Rate (for the applicable Interest Period). The foregoing
adjustments shall be effective as of the first day of the calendar month after
the first to occur of receipt by Lender of the Company's audited financial
statements or the date when such financial statements are required to be
delivered hereunder.
1.27 "Inventory" shall mean all of each Borrower's now owned and hereafter
existing or acquired raw materials, work in process, finished goods and all
other inventory of whatsoever kind or nature, wherever located.
1.28 "Investment Property" shall mean all of each Borrower's now owned and
hereafter existing or acquired securities, financial assets, securities
accounts, securities entitlements and all other investment property of
whatsoever kind or nature, wherever located, including, without limitation,
securities issued by any subsidiary of any Borrower.
1.29 "Letter of Credit Accommodations" shall mean the letters of credit,
merchandise purchase or other guaranties which are from time to time either (a)
issued or opened by Lender for the account of each Borrower or any Obligor or
(b) with respect to which Lender has agreed to indemnify the issuer or
guaranteed to the issuer the performance by Borrowers of their obligations to
such issuer.
1.30 "Loans" shall mean the Revolving Loans.
1.31 "Maximum Credit" shall mean the amount of $35,000,000.00.
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1.32 "Net Amount of Eligible Accounts" shall mean the gross amount of
Eligible Accounts less (a) sales, excise or similar taxes included in the amount
thereof and (b) returns, discounts, claims, credits and allowances of any nature
at any time issued, owing, granted, outstanding, available or claimed with
respect thereto.
1.33 "Net Income" shall mean for any period, the net after-tax consolidated
income (loss) of the Company and its subsidiaries, determined in accordance with
GAAP, but excluding: (i) any gain or loss arising from the sale of capital
assets to the extent that any such gains or losses exceed the aggregate sum of
$100,000; (ii) any gain arising from any write-up of assets; (iii) earnings of
any subsidiary accrued prior to the date it became a subsidiary; (iv) earnings
of any corporation, substantially all the assets of which have been acquired in
any manner by the Company, realized by such corporation prior to the date of
such acquisition; (v) net earnings of any business entity (including a
subsidiary) in which the Company has an ownership interest unless such net
earnings shall have actually been received by the Company in the form of cash
distributions; (vi) any portion of the net earnings of any subsidiary which for
any reason is unavailable for payment of dividends to the Company; (vii) the
earnings of any Person to which any assets of the Company shall have been sold,
transferred or disposed of, or into which the Company shall have merged, or been
a party to any consolidation or other form of reorganization, prior to the date
of such transaction; (viii) any gain arising from the acquisition of any
securities of the Company or any subsidiary thereof; and (ix) any gain arising
from extraordinary or nonrecurring items.
1.34 "Obligations" shall mean any and all Revolving Loans, Letter of Credit
Accommodations and all other obligations, liabilities and indebtedness of every
kind, nature and description owing by any Borrower to Lender and/or its
affiliates, including principal, interest, charges, fees, costs and expenses,
however evidenced, whether as principal, surety, endorser, guarantor or
otherwise, whether arising under this Agreement or otherwise, whether now
existing or hereafter arising, whether arising before, during or after the
initial or any renewal term of this Agreement or after the commencement of any
case with respect to any Borrower under the United States Bankruptcy Code or any
similar statute (including the payment of interest and other amounts which would
accrue and become due but for the commencement of such case, whether or not such
amounts are allowed or allowable in whole or in part in such case), whether
direct or indirect, absolute or contingent, joint or several, due or not due,
primary or secondary, liquidated or unliquidated, secured or unsecured, and
however acquired by Lender.
1.35 "Obligor" shall mean any guarantor, endorser, acceptor, surety or
other person liable on or with respect to the Obligations or who is the owner of
any property which is security for the Obligations, other than Borrowers.
1.36 "Payment Account" shall have the meaning set forth in Section 6.3
hereof.
1.37 "Permanent Availability Reserve" shall mean an Availability Reserve in
the amount of $10,000,000. The Permanent Availability Reserve may be reduced, in
the sole discretion of Lender, upon the written request from time to time of the
Company, provided the Borrowers acknowledge that Lender has made no commitment
or agreement to reduce the Permanent Availability Reserve.
1.38 "Person" or "person" shall mean any individual, sole proprietorship,
partnership, corporation (including any corporation which elects subchapter S
status under the Internal Revenue Code of 1986, as amended), limited liability
company, limited liability partnership, business trust, unincorporated
association, joint stock corporation, trust, joint venture or other entity or
any government or any agency or instrumentality or political subdivision
thereof.
1.39 "PictureTel UK" shall mean PictureTel UK Limited, a limited liability
company organized under the laws of England.
1.40 "Prime Rate" shall mean the rate announced by First Union National
Bank, or its successors, from time to time as its prime rate, whether or not
such announced rate is the best rate available at such bank.
1.41 "Prime Rate Loans" shall mean any Loans or portion thereof on which
interest is payable based on the Prime Rate in accordance with the terms
thereof.
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1.42 "Records" shall mean all of each Borrower's present and future books
of account of every kind or nature, purchase and sale agreements, invoices,
ledger cards, bills of lading and other shipping evidence, statements,
correspondence, memoranda, credit files and other data relating to the
Collateral or any account debtor, together with the tapes, disks, diskettes and
other data and software storage media and devices, file cabinets or containers
in or on which the foregoing are stored (including any rights of any Borrower
with respect to the foregoing maintained with or by any other person).
1.43 "Reference Bank" shall mean First Union National Bank, or such other
bank as Lender may from time to time designate.
1.44 "Revolving Loans" shall mean the loans now or hereafter made by Lender
to or for the benefit of Borrowers on a revolving basis (involving advances,
repayments and readvances) as set forth in Section 2.1 hereof.
1.45 "Working Capital" shall mean as to any Person, at any time, in
accordance with GAAP, on a consolidated basis for such Person and its
subsidiaries (if any), the amount equal to the difference between: (a) the
aggregate net book value of all current assets of such Person and its
subsidiaries (as determined in accordance with GAAP), calculating the book value
of inventory for this purpose on a first-in-first-out basis and including, Cash
Collateral (included on such Person's balance sheet in long term assets as
restricted cash) as a current asset (whether or not classified as a current
asset in accordance with GAAP), and (b) all current liabilities of such Person
and its subsidiaries (as determined in accordance with GAAP), PROVIDED, THAT, as
to Borrowers, for purposes of Section 9.14, the liabilities of Borrowers and
their subsidiaries to Lender under this Agreement shall not be considered
current liabilities (whether or not classified as current liabilities in
accordance with GAAP).
2. CREDIT FACILITIES
2.1 REVOLVING LOANS.
(a) Subject to and upon the terms and conditions contained herein,
Lender agrees to make Revolving Loans to Borrowers from time to time in amounts
requested by Borrowers up to the amount equal to the sum of:
(i) seventy (70%) percent of the Net Amount of Eligible
Accounts, MINUS
(ii) any Availability Reserves.
(b) Lender may, in its discretion, from time to time, upon not less
than five (5) days prior notice to Borrowers, reduce the lending formula with
respect to Eligible Accounts to the extent that Lender determines in good faith
that: (i) the dilution with respect to the Accounts for any period (based on the
ratio of (A) the aggregate amount of reductions in Accounts other than as a
result of payments in cash to (B) the aggregate amount of total sales) has
increased in any material respect or may be reasonably anticipated to increase
in any material respect above historical levels, or (ii) the general
creditworthiness of account debtors has materially declined. In determining
whether to reduce the lending formula(s), Lender may consider events,
conditions, contingencies or risks which are also considered in determining
Eligible Accounts or in establishing Availability Reserves.
(c) Except in Lender's discretion, the aggregate amount of the Loans
and the Letter of Credit Accommodations outstanding at any time shall not exceed
the Maximum Credit. In the event that the outstanding amount of any component of
the Loans, or the aggregate amount of the outstanding Loans and Letter of Credit
Accommodations, exceed the amounts available under the lending formulas, the
sublimits for Letter of Credit Accommodations set forth in Section 2.2(d), or
the Maximum Credit, as applicable, such event shall not limit, waive or
otherwise affect any rights of Lender in that circumstance or on any future
occasions and Borrowers shall, upon demand by Lender, which may be made at any
time or from time to time, immediately repay to Lender the entire amount of any
such excess(es) for which payment is demanded.
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2.2 LETTER OF CREDIT ACCOMMODATIONS.
(a) Subject to and upon the terms and conditions contained herein, at
the request of Borrowers, Lender agrees to provide or arrange for Letter of
Credit Accommodations for the account of Borrowers containing terms and
conditions acceptable to Lender and the issuer thereof. Any payments made by
Lender to any issuer thereof and/or related parties in connection with the
Letter of Credit Accommodations shall constitute additional Revolving Loans to
Borrowers pursuant to this Section 2.
(b) In addition to any charges, fees or expenses charged by any bank
or issuer in connection with the Letter of Credit Accommodations, Borrowers
shall pay to Lender a letter of credit fee at a rate equal to two and one
quarter (2.25%) percent per annum on the daily outstanding balance of the Letter
of Credit Accommodations for the immediately preceding month (or part thereof),
payable in arrears as of the first day of each succeeding month, except that
Borrowers shall pay to Lender such letter of credit fee, at Lender's option,
without notice, at a rate equal to five and one quarter (5.25%) percent per
annum on such daily outstanding balance for: (i) the period from and after the
date of termination or non-renewal hereof until Lender has received full and
final payment of all Obligations (notwithstanding entry of a judgment against
any Borrower) and (ii) the period from and after the date of the occurrence of
an Event of Default for so long as such Event of Default is continuing as
determined by Lender. Such letter of credit fee shall be calculated on the basis
of a three hundred sixty (360) day year and actual days elapsed and the
obligation of Borrowers to pay such fee shall survive the termination or
non-renewal of this Agreement.
(c) No Letter of Credit Accommodations shall be available unless on
the date of the proposed issuance of any Letter of Credit Accommodations, either
(i) Cash Collateral is pledged to Lender in an amount equal to one hundred five
(105%) percent of the face amount thereof and all other commitments and
obligations made by Lender with respect thereto, or (ii) the Revolving Loans
available to Borrowers (subject to the Maximum Credit and any Availability
Reserves) are equal to or greater than an amount equal to one hundred (100%)
percent of the face amount thereof and all other commitments and obligations
made or incurred by Lender with respect thereto. Effective on the issuance of
each Letter of Credit Accommodation, if Cash Collateral is not available to be
pledged to secure such Letter of Credit Accommodation at the aforementioned
formula, an Availability Reserve shall be established at the one hundred percent
(100%) amount.
(d) Except in Lender's discretion, the amount of all outstanding
Letter of Credit Accommodations and all other commitments and obligations made
or incurred by Lender in connection therewith shall not at any time exceed
$35,000,000.00. At any time an Event of Default exists or has occurred and is
continuing, upon Lender's request, to the extent that Letter of Credit
Accommodations are not secured by Cash Collateral pledged to Lender, Borrowers
will either furnish additional Cash Collateral to secure the reimbursement
obligations to the issuer in connection with any Letter of Credit Accommodations
or furnish additional Cash Collateral to Lender for the Letter of Credit
Accommodations, and in either case, the Revolving Loans otherwise available to
Borrowers shall not be reduced as provided in Section 2.2(c) to the extent of
such cash collateral.
(e) Borrowers shall indemnify and hold Lender harmless from and
against any and all losses, claims, damages, liabilities, costs and expenses
which Lender may suffer or incur in connection with any Letter of Credit
Accommodations and any documents, drafts or acceptances relating thereto,
including any losses, claims, damages, liabilities, costs and expenses due to
any action taken by any issuer or correspondent with respect to any Letter of
Credit Accommodation. Borrowers assume all risks with respect to the acts or
omissions of the drawer under or beneficiary of any Letter of Credit
Accommodation and for such purposes the drawer or beneficiary shall be deemed
Borrowers' agent. Borrowers assume all risks for, and agrees to pay, all
foreign, Federal, State and local taxes, duties and levies relating to any goods
subject to any Letter of Credit Accommodations or any documents, drafts or
acceptances thereunder. Borrowers hereby release and hold Lender harmless from
and against any acts, waivers, errors, delays or omissions, whether caused by
any Borrower, by any issuer or correspondent or otherwise with respect to or
relating to any Letter of Credit Accommodation. The provisions of this Section
2.2(e) shall survive the payment of Obligations and the termination or
non-renewal of this Agreement.
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(f) Nothing contained herein shall be deemed or construed to grant
any Borrower any right or authority to pledge the credit of Lender in any
manner. Lender shall have no liability of any kind with respect to any Letter of
Credit Accommodation provided by an issuer other than Lender unless Lender has
duly executed and delivered to such issuer the application or a guarantee or
indemnification in writing with respect to such Letter of Credit Accommodation.
Borrowers shall be bound by any interpretation made in good faith by Lender, or
any other issuer or correspondent under or in connection with any Letter of
Credit Accommodation or any documents, drafts or acceptances thereunder,
notwithstanding that such interpretation may be inconsistent with any
instructions of Borrowers. Lender shall have the sole and exclusive right and
authority to, and Borrowers shall not: (i) at any time an Event of Default
exists or has occurred and is continuing, (A) approve or resolve any questions
of non-compliance of documents, (B) give any instructions as to acceptance or
rejection of any documents or goods or (C) execute any and all applications for
steamship or airway guaranties, indemnities or delivery orders, and (ii) at all
times, (A) grant any extensions of the maturity of, time of payment for, or time
of presentation of, any drafts, acceptances, or documents, and (B) agree to any
amendments, renewals, extensions, modifications, changes or cancellations of any
of the terms or conditions of any of the applications, Letter of Credit
Accommodations, or documents, drafts or acceptances thereunder or any letters of
credit included in the Collateral. Lender may take such actions either in its
own name or in any Borrower's name.
(g) Any rights, remedies, duties or obligations granted or undertaken
by any Borrower to any issuer or correspondent in any application for any Letter
of Credit Accommodation, or any other agreement in favor of any issuer or
correspondent relating to any Letter of Credit Accommodation, shall be deemed to
have been granted or undertaken by Borrowers to Lender. Any duties or
obligations undertaken by Lender to any issuer or correspondent in any
application for any Letter of Credit Accommodation, or any other agreement by
Lender in favor of any issuer or correspondent relating to any Letter of Credit
Accommodation, shall be deemed to have been undertaken by Borrowers to Lender
and to apply in all respects to Borrowers.
2.3 AVAILABILITY RESERVES. All Revolving Loans otherwise available to
Borrowers pursuant to the lending formulas and subject to the Maximum Credit and
other applicable limits hereunder shall be subject to the Permanent Availability
Reserve and to Lender's continuing right to establish and revise additional
Availability Reserves.
3. INTEREST AND FEES
3.1 INTEREST.
(a) Borrowers shall pay to Lender interest on the outstanding
principal amount of the non-contingent Obligations at the Interest Rate. All
interest accruing hereunder on and after the date of any Event of Default or
termination or non-renewal hereof shall be payable on demand.
(b) Borrowers may from time to time request that Prime Rate Loans be
converted to Eurodollar Rate Loans or that any existing Eurodollar Rate Loans
continue for an additional Interest Period. Such request from Borrowers shall
specify the amount of the Prime Rate Loans which will constitute Eurodollar Rate
Loans (subject to the limits set forth below) and the Interest Period to be
applicable to such Eurodollar Rate Loans. Subject to the terms and conditions
contained herein, three (3) Business Days after receipt by Lender of such a
request from Borrowers, such Prime Rate Loans shall be converted to Eurodollar
Rate Loans or such Eurodollar Rate Loans shall continue, as the case may be,
PROVIDED, THAT, (i) no Event of Default, or event which with notice or passage
of time or both would constitute an Event of Default exists or has occurred and
is continuing, (ii) no party hereto shall have sent any notice of termination or
non-renewal of this Agreement, (iii) Borrowers shall have complied with such
customary procedures as are established by Lender and specified by Lender to
Borrowers from time to time for requests by Borrowers for Eurodollar Rate Loans,
(iv) no more than four (4) Interest Periods may be in effect at any one time,
(v) the aggregate amount of the Eurodollar Rate Loans must be in an amount not
less than $3,000,000 or an integral multiple of $1,000,000 in excess thereof,
(vi) the maximum amount of the Eurodollar Rate Loans at any time requested by
Borrowers shall not exceed the amount equal to eighty (80%) percent of the
lowest principal amount of the Revolving Loans which it is anticipated will be
outstanding during the applicable Interest Period, in
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each case as determined by Lender (but with no obligation of Lender to make such
Revolving Loans) and (vii) Lender shall have determined that the Interest Period
or Adjusted Eurodollar Rate is available to Lender through the Reference Bank
and can be readily determined as of the date of the request for such Eurodollar
Rate Loan by Borrowers. Any request by Borrowers to convert Prime Rate Loans to
Eurodollar Rate Loans or to continue any existing Eurodollar Rate Loans shall be
irrevocable. Notwithstanding anything to the contrary contained herein, Lender
and Reference Bank shall not be required to purchase United States Dollar
deposits in the London interbank market or other applicable Eurodollar Rate
market to fund any Eurodollar Rate Loans, but the provisions hereof shall be
deemed to apply as if Lender and Reference Bank had purchased such deposits to
fund the Eurodollar Rate Loans.
(c) Any Eurodollar Rate Loans shall automatically convert to Prime
Rate Loans upon the last day of the applicable Interest Period, unless Lender
has received and approved a request to continue such Eurodollar Rate Loan at
least three (3) Business Days prior to such last day in accordance with the
terms hereof. Any Eurodollar Rate Loans shall, at Lender's option, upon notice
by Lender to Borrowers, convert to Prime Rate Loans in the event that (i) an
Event of Default or event which, with the notice or passage of time, or both,
would constitute an Event of Default, shall exist, (ii) this Agreement shall
terminate or not be renewed, or (iii) the aggregate principal amount of the
Prime Rate Loans which have previously been converted to Eurodollar Rate Loans
or existing Eurodollar Rate Loans continued, as the case may be, at the
beginning of an Interest Period shall at any time during such Interest Period
exceed either (A) the aggregate principal amount of the Loans then outstanding,
or (B) the sum of the then outstanding principal amount of the Revolving Loans
then available to Borrowers under Section 2 hereof. Borrowers shall pay to
Lender, upon demand by Lender (or Lender may, at its option, charge any loan
account(s) of Borrowers) any amounts required to compensate Lender, the
Reference Bank or any participant with Lender for any loss (including loss of
anticipated profits), cost or expense incurred by such person, as a result of
the conversion of Eurodollar Rate Loans to Prime Rate Loans pursuant to any of
the foregoing.
(d) Interest shall be payable by Borrowers to Lender monthly in
arrears not later than the first day of each calendar month and shall be
calculated on the basis of a three hundred sixty (360) day year and actual days
elapsed. The interest rate on non-contingent Obligations (other than Eurodollar
Rate Loans) shall increase or decrease by an amount equal to each increase or
decrease in the Prime Rate effective on the first day of the month after any
change in such Prime Rate is announced based on the Prime Rate in effect on the
last day of the month in which any such change occurs. In no event shall charges
constituting interest payable by Borrowers to Lender exceed the maximum amount
or the rate permitted under any applicable law or regulation, and if any such
part or provision of this Agreement is in contravention of any such law or
regulation, such part or provision shall be deemed amended to conform thereto.
(e) (i) Otherwise than pursuant to this Section 3.1(e), PictureTel
UK shall not be liable to pay any amount for taxes imposed by the UK
Inland Revenue by virtue of Lender being a "person whose usual place
of abode is outside the United Kingdom" and not a bank for the
purposes of Section 349 of the "Income and Corporation Taxes Act"
(1988).
(ii) Where, pursuant to Section 3.1(e)(i) above, PictureTel UK
makes a deduction (a "Required Deduction") in respect of any interest
payment to Lender, PictureTel UK shall, on the date on which such
interest is due to be paid to Lender, advance to Lender an interest
free, unsecured loan in an amount equal to the amount of such Required
Deduction (an "Interest Advance") repayable in accordance with Section
3.1(e)(iii).
(iii) Each Interest Advance shall be repayable to PictureTel UK
immediately following payment by the Inland Revenue, to the Lender, of
an amount equal to the Required Deduction.
(iv) PictureTel UK agrees to provide to Lender (and, for the
avoidance of doubt, Lender shall be under no obligation to repay any
Interest Advance unless PictureTel UK complies with the provisions of
this Section 3.1(e)(iv)):
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(A) a tax deduction certificate in relation to the Required
Deduction; and
(B) such other documents as are required by Lender to
enable it to obtain a repayment equal to the amount of the
Required Deduction.
(v) In the event that PictureTel UK receives any written
notification from the Inland Revenue requiring it to make payments in
respect of any Required Deduction otherwise than in the manner
provided for in this Section 3.1(e), then the parties shall make such
amendments to this Section 3.1(e) as may be necessary to comply with
the terms of such notification from the Inland Revenue and so far as
possible to put the parties in the same position as they would have
been had the provisions of Sections 3.1(e)(ii), (iii), and (iv) been
implemented.
3.2 COMMITMENT FEE. Borrowers have paid to Lender a commitment fee in the
amount of $350,000, which was fully earned as of and payable on the date
Lender's commitment letter dated July 24, 2000 was accepted by the Company.
3.3 SERVICING FEE. Borrowers shall pay to Lender monthly a servicing fee
in an amount equal to $5,000 in respect of Lender's services for each month (or
part thereof) while this Agreement remains in effect and for so long thereafter
as any of the Obligations are outstanding, which fee shall be fully earned as of
and payable in advance on the date hereof and on the first day of each month
hereafter.
3.4 UNUSED LINE FEE. Borrowers shall pay to Lender monthly an unused line
fee at a rate equal to one quarter of one (.25%) percent per annum calculated
upon the amount by which the Maximum Credit exceeds the average daily principal
balance of the outstanding Revolving Loans and Letter of Credit Accommodations
during the immediately preceding month (or part thereof) while this Agreement is
in effect and for so long thereafter as any of the Obligations are outstanding,
which fee shall be payable on the first day of each month in arrears.
3.5 CHANGES IN LAWS AND INCREASED COSTS OF LOANS.
(a) Notwithstanding anything to the contrary contained herein, all
Eurodollar Rate Loans shall, upon notice by Lender to Borrowers, convert to
Prime Rate Loans in the event that (i) any change in applicable law or
regulation (or the interpretation or administration thereof) shall either (A)
make it unlawful for Lender, Reference Bank or any participant to make or
maintain Eurodollar Rate Loans or to comply with the terms hereof in connection
with the Eurodollar Rate Loans, or (B) shall result in the increase in the costs
to Lender, Reference Bank or any participant of making or maintaining any
Eurodollar Rate Loans by an amount deemed by Lender to be material, or (C)
reduce the amounts received or receivable by Lender in respect thereof, by an
amount deemed by Lender to be material or (ii) the cost to Lender, Reference
Bank or any participant of making or maintaining any Eurodollar Rate Loans shall
otherwise increase by an amount deemed by Lender to be material. Borrowers shall
pay to Lender, upon demand by Lender (or Lender may, at its option, charge any
loan account(s) of Borrowers) any amounts required to compensate Lender, the
Reference Bank or any participant with Lender for any loss (including loss of
anticipated profits), cost or expense incurred by such person as a result of the
foregoing, including, without limitation, any such loss, cost or expense
incurred by reason of the liquidation or reemployment of deposits or other funds
acquired by such person to make or maintain the Eurodollar Rate Loans or any
portion thereof. A certificate of Lender setting forth the basis for the
determination of such amount necessary to compensate Lender as aforesaid shall
be delivered to Borrowers and shall be conclusive, absent manifest error.
(b) If any payments or prepayments in respect of the Eurodollar Rate
Loans are received by Lender other than on the last day of the applicable
Interest Period (whether pursuant to acceleration, upon maturity or otherwise),
including any payments pursuant to the application of collections under Section
6.3 or any other payments made with the proceeds of Collateral, Borrowers shall
pay to Lender upon demand by Lender (or Lender may, at its option, charge any
loan account of Borrowers) any amounts required to compensate Lender, the
Reference Bank or any participant with Lender for any additional loss (including
loss of anticipated profits), cost or expense incurred by such person as a
result of such prepayment or payment, including, without limitation, any loss,
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cost or expense incurred by reason of the liquidation or reemployment of
deposits or other funds acquired by such person to make or maintain such
Eurodollar Rate Loans or any portion thereof.
4. CONDITIONS PRECEDENT
4.1 CONDITIONS PRECEDENT TO INITIAL LOANS AND LETTER OF CREDIT
ACCOMMODATIONS. Each of the following is a condition precedent to Lender making
the initial Loans and providing the initial Letter of Credit Accommodations
hereunder:
(a) Lender shall have received, in form and substance satisfactory to
Lender, all releases, terminations and such other documents as Lender may
request to evidence and effectuate the termination by the existing lender or
lenders to Borrowers of their respective financing arrangements with Borrowers
and the termination and release by it or them, as the case may be, of any
interest in and to any assets and properties of each Borrower and each Obligor,
duly authorized, executed and delivered by it or each of them, including, but
not limited to, (i) UCC termination statements for all UCC financing statements
previously filed by it or any of them or their predecessors, as secured party
and any Borrower or any Obligor, as debtor and (ii) satisfactions and discharges
of any mortgages, deeds of trust or deeds to secure debt by any Borrower or any
Obligor in favor of such existing lender or lenders, in form acceptable for
recording in the appropriate government office;
(b) Lender shall have received evidence, in form and substance
satisfactory to Lender, that Lender has valid perfected and first priority
security interests in and liens upon the Collateral and any other property which
is intended to be security for the Obligations or the liability of any Obligor
in respect thereof, subject only to the security interests and liens permitted
herein or in the other Financing Agreements;
(c) all requisite corporate action and proceedings in connection with
this Agreement and the other Financing Agreements shall be satisfactory in form
and substance to Lender, and Lender shall have received all information and
copies of all documents, including records of requisite corporate action and
proceedings which Lender may have requested in connection therewith, such
documents where requested by Lender or its counsel to be certified by
appropriate corporate officers or governmental authorities;
(d) except as previously disclosed to Lender in writing and accepted
by Lender, no material adverse change shall have occurred in the assets,
business or prospects of any Borrower since the date of Lender's latest field
examination and no change or event shall have occurred which would impair the
ability of any Borrower or any Obligor to perform its obligations hereunder or
under any of the other Financing Agreements to which it is a party or of Lender
to enforce the Obligations or realize upon the Collateral;
(e) Lender shall have completed a field review of the Records and
such other information with respect to the Collateral as Lender may require to
determine the amount of Revolving Loans available to Borrowers, the results of
which shall be satisfactory to Lender, not more than three (3) business days
prior to the date hereof;
(f) Lender shall have received, in form and substance satisfactory to
Lender, all consents, waivers, acknowledgments and other agreements from third
persons which Lender may deem necessary or desirable in order to permit, protect
and perfect its security interests in and liens upon the Collateral or to
effectuate the provisions or purposes of this Agreement and the other Financing
Agreements, including acknowledgments by lessors, mortgagees and warehousemen of
Lender's security interests in the Collateral, waivers by such persons of any
security interests, liens or other claims by such persons to the Collateral and
agreements permitting Lender access to, and the right to remain on, the premises
to exercise its rights and remedies and otherwise deal with the Collateral;
(g) the Excess Availability as determined by Lender, as of the date
hereof, shall be not less than $18,000,000 after giving effect to the initial
Loans made or to be made and Letter of Credit Accommodations issued or to be
issued in connection with the initial transactions hereunder;
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(h) Lender shall have received evidence of insurance and loss payee
endorsements required hereunder and under the other Financing Agreements, in
form and substance satisfactory to Lender, and certificates of insurance
policies and/or endorsements naming Lender as loss payee;
(i) Lender shall have received evidence of the receipt by the Company
of at least $21,800,000 in proceeds from the issuance of equity securities on
terms and conditions satisfactory to Lender;
(j) Lender shall have received evidence, in form and substance
satisfactory to Lender, that all obligations of the Company and the other
Borrowers to Ableco Finance LLC have been paid and satisfied in full;
(k) PictureTel UK Limited shall execute and deliver to Lender a deed
of debenture, share mortgage and such other documents and instruments as may be
necessary, in the Lender's discretion, to ensure that Lender has valid and
enforceable fixed and floating charges on substantially all of the assets
thereof in the United Kingdom;
(l) Lender shall have received, in form and substance satisfactory to
Lender, such opinion letters of counsel to Borrowers and Obligors with respect
to the Financing Agreements and such other matters as Lender may request; and
(m) the other Financing Agreements and all instruments and documents
hereunder and thereunder shall have been duly executed and delivered to Lender,
in form and substance satisfactory to Lender.
4.2 CONDITIONS PRECEDENT TO ALL LOANS AND LETTER OF CREDIT ACCOMMODATIONS.
Each of the following is an additional condition precedent to Lender making
Loans and/or providing Letter of Credit Accommodations to Borrowers, including
the initial Loans and Letter of Credit Accommodations and any future Loans and
Letter of Credit Accommodations:
(a) all representations and warranties contained herein and in the
other Financing Agreements shall be true and correct in all material respects
with the same effect as though such representations and warranties had been made
on and as of the date of the making of each such Loan or providing each such
Letter of Credit Accommodation and after giving effect thereto; and
(b) no Event of Default and no event or condition which, with notice
or passage of time or both, would constitute an Event of Default, shall exist or
have occurred and be continuing on and as of the date of the making of such Loan
or providing each such Letter of Credit Accommodation and after giving effect
thereto.
5. GRANT OF SECURITY INTEREST
To secure payment and performance of all Obligations, each Borrower hereby
grants to Lender a continuing security interest in, a lien upon, and a right of
set off against, and hereby assigns to Lender as security, the following
property and interests in property of each Borrower, whether now owned or
hereafter acquired or existing, and wherever located (collectively, the
"Collateral"):
5.1 Accounts;
5.2 all present and future contract rights, general intangibles (including
tax and duty refunds, registered and unregistered patents, trademarks, service
marks, copyrights, trade names, applications for the foregoing, trade secrets,
goodwill, processes, drawings, blueprints, customer lists, licenses, whether as
licensor or licensee, choses in action and other claims and existing and future
leasehold interests in equipment, real estate and fixtures), chattel paper,
documents, instruments, securities and other investment property, letters of
credit, bankers' acceptances and guaranties;
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5.3 all present and future monies, securities, credit balances, deposits,
deposit accounts and other property of each Borrower now or hereafter held or
received by or in transit to Lender or its affiliates or at any other depository
or other institution from or for the account of any Borrower, whether for
safekeeping, pledge, custody, transmission, collection or otherwise, and all
present and future liens, security interests, rights, remedies, title and
interest in, to and in respect of Accounts and other Collateral, including (a)
rights and remedies under or relating to guaranties, contracts of suretyship,
letters of credit and credit and other insurance related to the Collateral, (b)
rights of stoppage in transit, replevin, repossession, reclamation and other
rights and remedies of an unpaid vendor, lienor or secured party, (c) goods
described in invoices, documents, contracts or instruments with respect to, or
otherwise representing or evidencing, Accounts or other Collateral, including
returned, repossessed and reclaimed goods, and (d) deposits by and property of
account debtors or other persons securing the obligations of account debtors;
5.4 Inventory;
5.5 Equipment;
5.6 Investment Property;
5.7 Records; and
5.8 all products and proceeds of the foregoing, in any form, including
insurance proceeds and all claims against third parties for loss or damage to or
destruction of any or all of the foregoing.
6. COLLECTION AND ADMINISTRATION
6.1 BORROWERS' LOAN ACCOUNT. Lender shall maintain one or more loan
account(s) on its books in which shall be recorded (a) all Loans, Letter of
Credit Accommodations and other Obligations and the Collateral, (b) all payments
made by or on behalf of Borrowers and (c) all other appropriate debits and
credits as provided in this Agreement, including fees, charges, costs, expenses
and interest. All entries in the loan account(s) shall be made in accordance
with Lender's customary practices as in effect from time to time.
6.2 STATEMENTS. Lender shall render to Borrowers each month a statement
setting forth the balance in the Borrowers' loan account(s) maintained by Lender
for Borrowers pursuant to the provisions of this Agreement, including principal,
interest, fees, costs and expenses. Each such statement shall be subject to
subsequent adjustment by Lender but shall, absent manifest errors or omissions,
be considered correct and deemed accepted by Borrowers and conclusively binding
upon Borrowers as an account stated except to the extent that Lender receives a
written notice from Borrowers of any specific exceptions of Borrowers thereto
within thirty (30) days after the date such statement has been mailed by Lender.
Until such time as Lender shall have rendered to Borrowers a written statement
as provided above, the balance in Borrowers' loan account(s) shall be
presumptive evidence of the amounts due and owing to Lender by Borrowers.
6.3 COLLECTION OF ACCOUNTS.
(a) Borrowers shall establish and maintain, at their expense, blocked
accounts or lockboxes and related blocked accounts (in either case, "Blocked
Accounts"), as Lender may specify, with such banks as are acceptable to Lender
into which Borrowers shall promptly deposit and direct its account debtors to
directly remit all payments on Accounts and all payments constituting proceeds
of Inventory or other Collateral in the identical form in which such payments
are made, whether by cash, check or other manner. The banks at which the Blocked
Accounts are established shall enter into an agreement, in form and substance
satisfactory to Lender, providing that all items received or deposited in the
Blocked Accounts are the property of Lender, that the depository bank has no
lien upon, or right to setoff against, the Blocked Accounts, the items received
for deposit therein, or the funds from time to time on deposit therein and that
the depository bank will wire, or otherwise transfer, in immediately available
funds, on a daily basis, all funds received or deposited into the Blocked
Accounts to such bank account of Lender as Lender may from time to time
designate for such purpose ("Payment Account") or, with respect to
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PictureTel UK, until such time as an Event of Default exists, or an event or
condition which with notice or the passage of time or both might constitute an
Event of Default exists, or Lender, in its sole discretion, directs otherwise,
funds received from the Blocked Account maintained by PictureTel UK will be
transferred to the operating account of PictureTel UK on the business day when
deposited (subject to the policies and procedures of the UK bank where such
accounts are maintained). Borrowers agree that all payments made to such Blocked
Accounts or other funds received and collected by Lender, whether on the
Accounts or as proceeds of Inventory or other Collateral or otherwise shall be
the property of Lender.
(b) For purposes of calculating the amount of the Loans available to
Borrowers, such payments will be applied (conditional upon final collection) to
the Obligations on the business day of receipt by Lender of immediately
available funds in the Payment Account provided such payments and notice thereof
are received in accordance with Lender's usual and customary practices as in
effect from time to time and within sufficient time to credit Borrowers' loan
account on such day, and if not, then on the next business day. For the purposes
of calculating interest on the Obligations, such payments or other funds
received will be applied (conditional upon final collection) to the Obligations
one (1) business day(s) following the date of receipt of immediately available
funds by Lender in the Payment Account provided such payments or other funds and
notice thereof are received in accordance with Lender's usual and customary
practices as in effect from time to time and within sufficient time to credit
Borrowers' loan account on such day, and if not, then on the next business day.
(c) Borrowers and all of their affiliates, subsidiaries,
shareholders, directors, employees or agents shall, acting as trustee for
Lender, receive, as the property of Lender, any monies, checks, notes, drafts or
any other payment relating to and/or proceeds of Accounts or other Collateral
which come into their possession or under their control and immediately upon
receipt thereof, shall deposit or cause the same to be deposited in the Blocked
Accounts, or remit the same or cause the same to be remitted, in kind, to
Lender. In no event shall the same be commingled with Borrowers' own funds.
Borrowers agree to reimburse Lender on demand for any amounts owed or paid to
any bank at which a Blocked Account is established or any other bank or person
involved in the transfer of funds to or from the Blocked Accounts arising out of
Lender's payments to or indemnification of such bank or person. The obligation
of Borrowers to reimburse Lender for such amounts pursuant to this Section 6.3
shall survive the termination or non-renewal of this Agreement.
(d) So long as no Revolving Loans are outstanding, Borrowers maintain
sufficient Cash Collateral and Availability Reserves as required hereunder with
respect to the Letter of Credit Accommodations and no Event of Default or event
or condition which with the passage of time or notice or both might constitute
an Event of Default exists, the balance of the funds received by Lender from the
Blocked Account will be transferred to the Company on each business day at the
Company's cost and pursuant to the Company's and written direction.
6.4 PAYMENTS. All Obligations shall be payable to the Payment Account as
provided in Section 6.3 or such other place as Lender may designate from time to
time in United States dollars. Lender may apply payments received or collected
from Borrowers or for the account of Borrowers (including the monetary proceeds
of collections or of realization upon any Collateral) to such of the
Obligations, whether or not then due, in such order and manner as Lender
determines. At Lender's option, all principal, interest, fees, costs, expenses
and other charges provided for in this Agreement or the other Financing
Agreements may be charged directly to the loan account(s) of Borrowers.
Borrowers shall make all payments to Lender on the Obligations free and clear
of, and without deduction or withholding for or on account of, any setoff,
counterclaim, defense, duties, taxes, levies, imposts, fees, deductions,
withholding, restrictions or conditions of any kind. If after receipt of any
payment of, or proceeds of Collateral applied to the payment of, any of the
Obligations, Lender is required to surrender or return such payment or proceeds
to any Person for any reason, then the Obligations intended to be satisfied by
such payment or proceeds shall be reinstated and continue and this Agreement
shall continue in full force and effect as if such payment or proceeds had not
been received by Lender. Borrowers shall be liable to pay to Lender, and do
hereby indemnify and hold Lender harmless for the amount of any payments or
proceeds surrendered or returned. This Section 6.4 shall remain effective
notwithstanding any contrary action which may be taken by Lender in reliance
upon such payment or proceeds. This Section 6.4 shall survive the payment of the
Obligations and the termination or non-renewal of this Agreement. Any payments
or collections received by Lender denominated in Canadian dollars or U.K. Pounds
Sterling may be converted by Lender to United States dollars by using the spot
prices for such
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currencies in U.S. dollars as provided to Lender by the Bank on or about the
business day of receipt of such payments or collections, subject to any costs or
expenses incurred by Lender in effecting such conversion. Any such conversion
shall be final and binding on Borrowers absent manifest errors or omissions.
6.5 AUTHORIZATION TO MAKE LOANS. Lender is authorized to make the Loans
and provide the Letter of Credit Accommodations based upon telephonic or other
instructions received from anyone purporting to be an officer or employee of any
Borrower or other authorized person listed in the Information Certificates or,
at the discretion of Lender, if such Loans are necessary to satisfy any
Obligations. All requests for Loans or Letter of Credit Accommodations hereunder
shall specify the date on which the requested advance is to be made or Letter of
Credit Accommodations established (which day shall be a business day) and the
amount of the requested Loan. Requests received after 11:00 a.m. Boston,
Massachusetts time on any day shall be deemed to have been made as of the
opening of business on the immediately following business day. All Loans and
Letter of Credit Accommodations under this Agreement shall be conclusively
presumed to have been made to, and at the request of and for the benefit of,
Borrowers when deposited to the credit of Borrowers or otherwise disbursed or
established in accordance with the instructions of Borrowers or in accordance
with the terms and conditions of this Agreement.
6.6 USE OF PROCEEDS. Borrowers shall use the initial proceeds of the Loans
provided by Lender to Borrowers hereunder only for: (a) payments to each of the
persons listed in the disbursement direction letter furnished by Borrowers to
Lender on or about the date hereof and (b) costs, expenses and fees in
connection with the preparation, negotiation, execution and delivery of this
Agreement and the other Financing Agreements. All other Loans made or Letter of
Credit Accommodations provided by Lender to Borrowers pursuant to the provisions
hereof shall be used by Borrowers only for general operating, working capital
and other proper corporate purposes of Borrowers not otherwise prohibited by the
terms hereof. None of the proceeds will be used, directly or indirectly, for the
purpose of purchasing or carrying any margin security or for the purposes of
reducing or retiring any indebtedness which was originally incurred to purchase
or carry any margin security or for any other purpose which might cause any of
the Loans to be considered a "purpose credit" within the meaning of Regulation U
of the Board of Governors of the Federal Reserve System, as amended.
6.7 APPOINTMENT OF COMPANY AS AGENT FOR BORROWERS. Each Borrower hereby
irrevocably appoints and constitutes Company as its agent to (a) request Loans,
(b) take all actions required or permitted of the Borrowers hereunder, and (c)
receive all notices to the Borrowers hereunder, in the name and on behalf of
each and all the Borrowers including, without limitation, requesting the
conversion to or continuation of Eurodollar Rate Loans. This appointment shall
include, without limitation, the designation of Company as the agent of the
Borrowers to furnish all notices, financial statements and other information to
the Lender and to receive all notices from the Lender including, without
limitation, all statements of the loan account(s) of the Borrowers. This
appointment is coupled with an interest and is irrevocable by the Borrowers
until such time as this Agreement is terminated and all Obligations are
indefeasibly paid in full, provided that Lender may terminate this agency at any
time that an Event of Default or an event or condition which with notice or the
passage of time or both could constitute an Event of Default exists or has
occurred and is continuing. Each Borrower hereby authorizes and directs Lender
to make all Loans to Company for the joint and several benefit of the Borrowers.
7. COLLATERAL REPORTING AND COVENANTS
7.1 COLLATERAL REPORTING. Borrowers shall provide Lender with the
following documents in a form satisfactory to Lender: (a) on a regular basis as
required by Lender, a schedule of Accounts, sales made, credits issued and cash
received; (b) on a monthly basis or more frequently as Lender may request, (i)
perpetual inventory reports, (ii) inventory reports by category and (iii) agings
of accounts payable, (c) upon Lender's request, (i) copies of customer
statements and credit memos, remittance advices and reports, and copies of
deposit slips and bank statements, (ii) copies of shipping and delivery
documents, and (iii) copies of purchase orders, invoices and delivery documents
for Inventory and Equipment acquired by Borrowers; (d) agings of accounts
receivable on a weekly basis or more frequently as Lender may request; and (e)
such other reports as to the Collateral as Lender shall request from time to
time. If any of Borrowers' records or reports of the Collateral are prepared or
maintained by an accounting service, contractor, shipper or other agent,
Borrowers hereby irrevocably authorize such service, contractor, shipper or
agent to deliver such records, reports, and related documents to Lender and to
follow Lender's
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instructions with respect to further services at any time that an Event of
Default exists or has occurred and is continuing.
7.2 ACCOUNTS COVENANTS.
(a) Borrowers shall notify Lender promptly of: (i) any material delay
in any Borrower's performance of any of its obligations to any account debtor or
the assertion of any claims, offsets, defenses or counterclaims by any account
debtor, or any disputes with account debtors, or any settlement, adjustment or
compromise thereof, (ii) all material adverse information relating to the
financial condition of any account debtor and (iii) any event or circumstance
which, to Borrowers' knowledge would cause Lender to consider any then existing
Accounts as no longer constituting Eligible Accounts. No credit, discount,
allowance or extension or agreement for any of the foregoing shall be granted to
any account debtor without Lender's consent, except in the ordinary course of
Borrowers' business in accordance with practices and policies previously
disclosed in writing to Lender. So long as no Event of Default exists or has
occurred and is continuing, Borrowers shall settle, adjust or compromise any
claim, offset, counterclaim or dispute with any account debtor. At any time that
an Event of Default exists or has occurred and is continuing, Lender shall, at
its option, have the exclusive right to settle, adjust or compromise any claim,
offset, counterclaim or dispute with account debtors or grant any credits,
discounts or allowances.
(b) Without limiting the obligation of Borrowers to deliver any other
information to Lender, Borrowers shall promptly report to Lender any return of
Inventory by any one account debtor if the inventory so returned in such case
has a value in excess of $100,000. At any time that Inventory is returned,
reclaimed or repossessed, the Account (or portion thereof) which arose from the
sale of such returned, reclaimed or repossessed Inventory shall not be deemed an
Eligible Account. In the event any account debtor returns Inventory when an
Event of Default exists or has occurred and is continuing, Borrowers shall, upon
Lender's request, (i) hold the returned Inventory in trust for Lender, (ii)
segregate all returned Inventory from all of its other property, (iii) dispose
of the returned Inventory solely according to Lender's instructions, and (iv)
not issue any credits, discounts or allowances with respect thereto without
Lender's prior written consent.
(c) With respect to each Account: (i) the amounts shown on any
invoice delivered to Lender or schedule thereof delivered to Lender shall be
true and complete, (ii) no payments shall be made thereon except payments
immediately delivered to Lender pursuant to the terms of this Agreement, (iii)
no credit, discount, allowance or extension or agreement for any of the
foregoing shall be granted to any account debtor except as reported to Lender in
accordance with this Agreement and except for credits, discounts, allowances or
extensions made or given in the ordinary course of Borrowers' business in
accordance with practices and policies previously disclosed to Lender, (iv)
there shall be no setoffs, deductions, contras, defenses, counterclaims or
disputes existing or asserted with respect thereto except as reported to Lender
in accordance with the terms of this Agreement, (v) none of the transactions
giving rise thereto will violate any applicable State or Federal laws or
regulations, all documentation relating thereto will be legally sufficient under
such laws and regulations and all such documentation will be legally enforceable
in accordance with its terms.
(d) Lender shall have the right at any time or times, in Lender's
name or in the name of a nominee of Lender, to verify the validity, amount or
any other matter relating to any Account or other Collateral, by mail,
telephone, facsimile transmission or otherwise.
(e) Borrowers shall deliver or cause to be delivered to Lender, with
appropriate endorsement and assignment, with full recourse to Borrowers, all
chattel paper and instruments which any Borrower now owns or may at any time
acquire immediately upon any Borrower's receipt thereof, except as Lender may
otherwise agree.
(f) Lender may, at any time or times that an Event of Default exists
or has occurred and is continuing, (i) notify any or all account debtors that
the Accounts have been assigned to Lender and that Lender has a security
interest therein and Lender may direct any or all accounts debtors to make
payment of Accounts directly to Lender, (ii) extend the time of payment of,
compromise, settle or adjust for cash, credit, return of merchandise or
otherwise, and upon any terms or conditions, any and all Accounts or other
obligations included in the Collateral
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and thereby discharge or release the account debtor or any other party or
parties in any way liable for payment thereof without affecting any of the
Obligations, (iii) demand, collect or enforce payment of any Accounts or such
other obligations, but without any duty to do so, and Lender shall not be liable
for its failure to collect or enforce the payment thereof nor for the negligence
of its agents or attorneys with respect thereto and (iv) take whatever other
action Lender may deem necessary or desirable for the protection of its
interests. At any time that an Event of Default exists or has occurred and is
continuing, at Lender's request, all invoices and statements sent to any account
debtor shall state that the Accounts and such other obligations have been
assigned to Lender and are payable directly and only to Lender and Borrowers
shall deliver to Lender such originals of documents evidencing the sale and
delivery of goods or the performance of services giving rise to any Accounts as
Lender may require.
7.3 INVENTORY COVENANTS. With respect to the Inventory: (a) Borrowers
shall at all times maintain inventory records reasonably satisfactory to Lender,
keeping correct and accurate records itemizing and describing the kind, type,
quality and quantity of Inventory, Borrowers' cost therefor and daily
withdrawals therefrom and additions thereto; (b) Borrowers shall conduct a
physical count of the Inventory at least once each year, but at any time or
times as Lender may request on or after an Event of Default, and promptly
following such physical inventory shall supply Lender with a report in the form
and with such specificity as may be reasonably satisfactory to Lender concerning
such physical count; (c) Borrowers shall not remove any Inventory from the
locations set forth or permitted herein, without the prior written consent of
Lender, except for sales of Inventory in the ordinary course of Borrowers'
business and except to move Inventory directly from one location set forth or
permitted herein to another such location; (d) upon Lender's request, Borrowers
shall, at their expense, at any time or times as Lender may request on or after
an Event of Default, deliver or cause to be delivered to Lender written reports
or appraisals as to the Inventory in form, scope and methodology acceptable to
Lender and by an appraiser acceptable to Lender, addressed to Lender or upon
which Lender is expressly permitted to rely; (e) Borrowers shall produce, use,
store and maintain the Inventory with all reasonable care and caution and in
accordance with applicable standards of any insurance and in conformity with
applicable laws (including the requirements of the Federal Fair Labor Standards
Act of 1938, as amended and all rules, regulations and orders related thereto);
(f) Borrowers assume all responsibility and liability arising from or relating
to the production, use, sale or other disposition of the Inventory; (g)
Borrowers shall not sell Inventory to any customer on approval, or any other
basis which entitles the customer to return or may obligate Borrowers to
repurchase such Inventory; (h) Borrowers shall keep the Inventory in good and
marketable condition; and (i) Borrowers shall not, without prior written notice
to Lender, acquire or accept any Inventory on consignment or approval.
7.4 EQUIPMENT COVENANTS. With respect to the Equipment: (a) upon Lender's
request, Borrowers shall, at their expense, at any time or times as Lender may
request on or after an Event of Default, deliver or cause to be delivered to
Lender written reports or appraisals as to the Equipment in form, scope and
methodology acceptable to Lender and by an appraiser acceptable to Lender; (b)
Borrowers shall keep the Equipment in good order, repair, running and marketable
condition (ordinary wear and tear excepted); (c) Borrowers shall use the
Equipment with all reasonable care and caution and in accordance with applicable
standards of any insurance and in conformity with all applicable laws; (d) the
Equipment is and shall be used in Borrowers' business and not for personal,
family, household or farming use; (e) Borrowers shall not remove any Equipment
from the locations set forth or permitted herein, except to the extent necessary
to have any Equipment repaired or maintained in the ordinary course of the
business of Borrowers or to move Equipment directly from one location set forth
or permitted herein to another such location and except for the movement of
motor vehicles used by or for the benefit of Borrowers in the ordinary course of
business; (f) the Equipment is now and shall remain personal property and
Borrowers shall not permit any of the Equipment to be or become a part of or
affixed to real property; and (g) Borrowers assume all responsibility and
liability arising from the use of the Equipment.
7.5 POWER OF ATTORNEY. Each Borrower hereby irrevocably designates and
appoints Lender (and all persons designated by Lender) as such Borrower's true
and lawful attorney-in-fact, and authorizes Lender, in any Borrower's or
Lender's name, to: (a) at any time an Event of Default or event which with
notice or passage of time or both would constitute an Event of Default exists or
has occurred and is continuing (i) demand payment on Accounts or other proceeds
of Inventory or other Collateral, (ii) enforce payment of Accounts by legal
proceedings or otherwise, (iii) exercise all of Borrowers' rights and remedies
to collect any Account or other Collateral, (iv) sell or assign any Account upon
such terms, for such amount and at such time or times as the Lender deems
advisable,
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(v) settle, adjust, compromise, extend or renew an Account, (vi) discharge and
release any Account, (vii) prepare, file and sign any Borrower's name on any
proof of claim in bankruptcy or other similar document against an account
debtor, (viii) notify the post office authorities to change the address for
delivery of any Borrower's mail to an address designated by Lender, and open and
dispose of all mail addressed to Borrowers, and (ix) do all acts and things
which are necessary, in Lender's determination, to fulfill Borrowers'
obligations under this Agreement and the other Financing Agreements and (b) at
any time to (i) take control in any manner of any item of payment or proceeds
thereof, (ii) have access to any lockbox or postal box into which any Borrower's
mail is deposited, (iii) endorse any Borrower's name upon any items of payment
or proceeds thereof and deposit the same in the Lender's account for application
to the Obligations, (iv) endorse any Borrower's name upon any chattel paper,
document, instrument, invoice, or similar document or agreement relating to any
Account or any goods pertaining thereto or any other Collateral, (v) sign any
Borrower's name on any verification of Accounts and notices thereof to account
debtors and (vi) execute in any Borrower's name and file any UCC financing
statements or amendments thereto. Each Borrower hereby releases Lender and its
officers, employees and designees from any liabilities arising from any act or
acts under this power of attorney and in furtherance thereof, whether of
omission or commission, except as a result of Lender's own gross negligence or
willful misconduct as determined pursuant to a final non-appealable order of a
court of competent jurisdiction.
7.6 RIGHT TO CURE. Lender may, at its option, (a) cure any default by any
Borrower under any agreement with a third party or pay or bond on appeal any
judgment entered against any Borrower, (b) discharge taxes, liens, security
interests or other encumbrances at any time levied on or existing with respect
to the Collateral and (c) pay any amount, incur any expense or perform any act
which, in Lender's judgment, is necessary or appropriate to preserve, protect,
insure or maintain the Collateral and the rights of Lender with respect thereto.
Lender may add any amounts so expended to the Obligations and charge any
Borrower's account therefor, such amounts to be repayable by Borrowers on
demand. Lender shall be under no obligation to effect such cure, payment or
bonding and shall not, by doing so, be deemed to have assumed any obligation or
liability of Borrowers. Any payment made or other action taken by Lender under
this Section shall be without prejudice to any right to assert an Event of
Default hereunder and to proceed accordingly.
7.7 ACCESS TO PREMISES. From time to time as requested by Lender, at the
cost and expense of Borrowers, (a) Lender or its designee shall have complete
access to all of Borrowers' premises during normal business hours and after
notice to Borrowers, or at any time and without notice to Borrowers if an Event
of Default exists or has occurred and is continuing, for the purposes of
inspecting, verifying and auditing the Collateral and all of Borrowers' books
and records, including the Records, and (b) Borrowers shall promptly furnish to
Lender such copies of such books and records or extracts therefrom as Lender may
request, and (c) use during normal business hours such of Borrowers' personnel,
equipment, supplies and premises as may be reasonably necessary for the
foregoing and if an Event of Default exists or has occurred and is continuing
for the collection of Accounts and realization of other Collateral.
7.8 ESCROW DEPOSIT COVENANTS.
(a) If Borrowers are required, during the normal ordinary course of
business and in accordance with accepted industry business practices, to place
any part of its proprietary technology and/or other information and materials
("Deposit Materials") with an escrow deposit service (an "Escrow Deposit
Service"), it may place Deposit Materials in an Escrow Deposit Service that is
recognized within its industry for the benefit of its customers. In addition to
the foregoing, Borrowers shall place all such Deposit Materials for the benefit
of Lender pursuant to an Escrow Deposit Service acceptable to Lender. Borrowers
shall continue to be the sole and exclusive owner of the entire legal and
beneficial right, title and interest in and to the Deposit Materials and shall
designate Lender as having a primary beneficial interest in Deposit Materials
maintained for the benefit of Borrowers' customers. Lender shall receive notice
of Borrowers' establishing each escrow of Deposit Materials and of any change
thereto. The placement of Deposit Materials shall be free and clear of any lien,
charge, security interest or other encumbrance, except for the security interest
and conditional assignment granted to Lender under this Agreement and the other
Loan Documents.
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(b) Unless otherwise requested by the Lender, Borrowers shall update
the Deposit Materials within 60 days of each release of a new version of any
proprietary technology and/or other information and materials which is subject
to an Escrow Deposit Service. Such updates, will be added to the existing
Deposit Materials. All deposit updates shall be processed in a manner that
requires the Lender, as primary beneficiary, to be notified.
(c) From time to time as requested by Lender, and at the cost and
expense of Borrowers, Lender or its designee shall have the right, to cause a
verification of any Deposit Materials. The Deposit Materials may be removed,
exchanged, and or made part of any subsequent third party escrow agreement only
upon written instructions signed by the Lender or its designee.
(d) Notwithstanding the provisions of any agreement for the benefit
of Lender with any Escrow Deposit Service to the contrary, Borrowers shall grant
to any such Escrow Deposit Service the right to transfer the Deposit Materials
to Lender upon the occurrence and during the continuance of an Event of Default
and the acceleration of the Obligations. Borrowers agree that if the Lender
determines that an Event of Default has occurred and is continuing and the
Obligations have been accelerated, Lender may obtain the Deposit Materials held
for Lender's benefit by providing to the Escrow Deposit Service an affidavit,
from an officer of Lender, certifying the occurrence of the Event of Default and
the acceleration of the Obligations. Upon receipt of said affidavit, the Escrow
Deposit Service is authorized and shall release the Deposit Materials held for
Lender's benefit to Lender. Lender shall be under no obligation to effect the
release of Deposit Materials held for Lender's benefit and shall not, by
effecting such release, be deemed to have assumed any obligation or liability of
Borrowers. Lender shall have no liability or obligation to any Borrower, any
Escrow Deposit Service or any customer of any Borrower for the Deposit Materials
deposited with the Escrow Deposit Service for the benefit of any such customers
or for any act or omission of Lender with respect thereto.
(e) With respect to all Deposit Materials, Borrowers shall place for
deposit only materials that are readable and useable in their current form or,
if any portion of the Deposit Materials are encrypted, the decryption tools and
decryption keys have also been deposited.
(f) Each Borrower shall indemnify and hold harmless Lender, its
directors, officers, employees, agents, invitees, representatives, successors
and assigns, from and against any and all losses, claims, damages, liabilities,
costs, and expenses (including attorney's fees and legal expenses) directly or
indirectly arising out of or attributable to any Escrow Deposit Service, the
Deposit Materials and any and all actions or omissions of Lender with respect
thereto. This Indemnity shall survive the repayment of the Obligations and the
termination or non-renewal of this Agreement.
8. REPRESENTATIONS AND WARRANTIES
Each Borrower hereby jointly and severally represents and warrants to
Lender the following (which shall survive the execution and delivery of this
Agreement), the truth and accuracy of which are a continuing condition of the
making of Loans and providing Letter of Credit Accommodations by Lender to
Borrowers:
8.1 CORPORATE EXISTENCE, POWER AND AUTHORITY; SUBSIDIARIES. Each Borrower
is a corporation duly organized and in good standing under the laws of its state
of incorporation and is duly qualified as a foreign corporation and in good
standing in all states or other jurisdictions where the nature and extent of the
business transacted by it or the ownership of assets makes such qualification
necessary, except for those jurisdictions in which the failure to so qualify
would not have a material adverse effect on any such Borrower's financial
condition, results of operation or business or the rights of Lender in or to any
of the Collateral. The execution, delivery and performance of this Agreement,
the other Financing Agreements and the transactions contemplated hereunder and
thereunder are all within each Borrower's corporate powers, have been duly
authorized and are not in contravention of law or the terms of any Borrower's
certificate of incorporation, by-laws, or other organizational documentation, or
any indenture, agreement or undertaking to which any Borrower is a party or by
which any Borrower or its property are bound. This Agreement and the other
Financing Agreements constitute legal, valid and binding
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obligations of each Borrower enforceable in accordance with their respective
terms. Borrowers do not have any subsidiaries except as set forth on the
Information Certificate.
8.2 FINANCIAL STATEMENTS; NO MATERIAL ADVERSE CHANGE. All financial
statements relating to Borrowers which have been or may hereafter be delivered
by Borrower to Lender have been prepared in accordance with GAAP and fairly
present the financial condition and the results of operation of Borrowers as at
the dates and for the periods set forth therein. Except as disclosed in any
interim financial statements furnished by Borrowers to Lender prior to the date
of this Agreement or otherwise disclosed in writing to and accepted by Lender,
there has been no material adverse change in the assets, liabilities, properties
and condition, financial or otherwise, of Borrowers, since the date of the most
recent audited financial statements furnished by Borrowers to Lender prior to
the date of this Agreement.
8.3 CHIEF EXECUTIVE OFFICE; COLLATERAL LOCATIONS. The chief executive
office of each Borrower and each Borrower's Records concerning Accounts are
located only at the address set forth below and its only other places of
business and the only other locations of Collateral, if any, are the addresses
set forth in the Information Certificate, subject to the right of Borrowers to
establish new locations in accordance with Section 9.2 below. The Information
Certificate correctly identifies any of such locations which are not owned by
Borrowers and sets forth the owners and/or operators thereof and to the best of
Borrowers' knowledge, the holders of any mortgages on such locations.
8.4 PRIORITY OF LIENS; TITLE TO PROPERTIES. The security interests and
liens granted to Lender under this Agreement and the other Financing Agreements
constitute valid and perfected first priority liens and security interests in
and upon the Collateral subject only to the liens indicated on Schedule 8.4
hereto and the other liens permitted under Section 9.8 hereof. Each Borrower has
good and marketable title to all of its properties and assets subject to no
liens, mortgages, pledges, security interests, encumbrances or charges of any
kind, except those granted to Lender and such others as are specifically listed
on Schedule 8.4 hereto or permitted under Section 9.8 hereof.
8.5 TAX RETURNS. Borrowers have filed, or caused to be filed, in a timely
manner all tax returns, reports and declarations which are required to be filed
by them (without requests for extension except as previously disclosed in
writing to Lender). All information in such tax returns, reports and
declarations is complete and accurate in all material respects. Borrowers have
paid or caused to be paid all taxes due and payable or claimed due and payable
in any assessment received by it, except taxes the validity of which are being
contested in good faith by appropriate proceedings diligently pursued and
available to Borrowers and with respect to which adequate reserves have been set
aside on its books. Adequate provision has been made for the payment of all
accrued and unpaid Federal, State, county, local, foreign and other taxes
whether or not yet due and payable and whether or not disputed.
8.6 LITIGATION. Except as set forth on the Information Certificate, there
is no present investigation by any governmental agency pending, or to the best
of any Borrowers' knowledge threatened, against or affecting any Borrower, its
assets or business and there is no action, suit, proceeding or claim by any
Person pending, or to the best of Borrowers' knowledge threatened, against any
Borrower or its assets or goodwill, or against or affecting any transactions
contemplated by this Agreement, which if adversely determined against any
Borrower would result in any material adverse change in the assets, business or
prospects of any Borrower or would impair the ability of any Borrower to perform
its obligations hereunder or under any of the other Financing Agreements to
which it is a party or of Lender to enforce any Obligations or realize upon any
Collateral.
8.7 COMPLIANCE WITH OTHER AGREEMENTS AND APPLICABLE LAWS. No Borrower is
in default in any material respect under, or in violation in any material
respect of any of the terms of, any agreement, contract, instrument, lease or
other commitment to which it is a party or by which it or any of its assets are
bound and each Borrower is in compliance in all material respects with all
applicable provisions of laws, rules, regulations, licenses, permits, approvals
and orders of any foreign, Federal, State or local governmental authority.
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8.8 BANK ACCOUNTS. All of the deposit accounts, investment accounts or
other accounts in the name of or used by any Borrower maintained at any bank or
other financial institution are set forth on Schedule 8.8 hereto, subject to the
right of Borrowers to establish new accounts in accordance with Section 9.13
below.
8.9 ACCURACY AND COMPLETENESS OF INFORMATION. All information furnished by
or on behalf of Borrowers in writing to Lender in connection with this Agreement
or any of the other Financing Agreements or any transaction contemplated hereby
or thereby, including all information on the Information Certificate is true and
correct in all material respects on the date as of which such information is
dated or certified and does not omit any material fact necessary in order to
make such information not misleading. No event or circumstance has occurred
which has had or could reasonably be expected to have a material adverse affect
on the business, assets or prospects of Borrowers, which has not been fully and
accurately disclosed to Lender in writing.
8.10 EMPLOYEE BENEFITS.
(a) Borrowers have not engaged in any transaction in connection with
which Borrowers or any of their ERISA Affiliates could be subject to either a
civil penalty assessed pursuant to Section 502(i) of ERISA or a tax imposed by
Section 4975 of the Code, including any accumulated funding deficiency described
in Section 8.10(c) hereof and any deficiency with respect to vested accrued
benefits described in Section 8.10(d) hereof.
(b) No liability to the Pension Benefit Guaranty Corporation has been
or is expected by Borrowers to be incurred with respect to any employee benefit
plan of Borrowers or any of their ERISA Affiliates. There has been no reportable
event (within the meaning of Section 4043(b) of ERISA) or any other event or
condition with respect to any employee pension benefit plan of Borrowers or any
of their ERISA Affiliates which presents a risk of termination of any such plan
by the Pension Benefit Guaranty Corporation.
(c) Full payment has been made of all amounts which Borrowers or any
of their ERISA Affiliates is required under Section 302 of ERISA and Section 412
of the Code to have paid under the terms of each employee benefit plan as
contributions to such plan as of the last day of the most recent fiscal year of
such plan ended prior to the date hereof, and no accumulated funding deficiency
(as defined in Section 302 of ERISA and Section 412 of the Code), whether or not
waived, exists with respect to any employee benefit plan, including any penalty
or tax described in Section 8.10(a) hereof and any deficiency with respect to
vested accrued benefits described in Section 8.10(d) hereof.
(d) The current value of all vested accrued benefits under all
employee benefit plans maintained by Borrowers that are subject to Title IV of
ERISA does not exceed the current value of the assets of such plans allocable to
such vested accrued benefits, including any penalty or tax described in Section
8.10(a) hereof and any accumulated funding deficiency described in Section
8.10(c) hereof. The terms "current value" and "accrued benefit" have the
meanings specified in ERISA.
(e) Neither Borrowers nor any of their ERISA Affiliates is or has
ever been obligated to contribute to any "multiemployer plan" (as such term is
defined in Section 4001(a)(3) of ERISA) that is subject to Title IV of ERISA.
8.11 ENVIRONMENTAL COMPLIANCE.
(a) Except as set forth on Schedule 8.11 hereto, Borrowers have not
generated, used, stored, treated, transported, manufactured, handled, produced
or disposed of any Hazardous Materials, on or off its premises (whether or not
owned by any of them) in any manner which at any time violates any applicable
Environmental Law or any license, permit, certificate, approval or similar
authorization thereunder and the operations of Borrowers comply in all material
respects with all Environmental Laws and all licenses, permits, certificates,
approvals and similar authorizations thereunder.
(b) Except as set forth on Schedule 8.11 hereto, there has been no
investigation, proceeding, complaint, order, directive, claim, citation or
notice by any governmental authority or any other person nor is any
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pending or to the best of Borrowers' knowledge threatened, with respect to any
non-compliance with or violation of the requirements of any Environmental Law by
any Borrower or the release, spill or discharge, threatened or actual, of any
Hazardous Material or the generation, use, storage, treatment, transportation,
manufacture, handling, production or disposal of any Hazardous Materials or any
other environmental, health or safety matter, which affects any Borrower or its
business, operations or assets or any properties at which any Borrower has
transported, stored or disposed of any Hazardous Materials.
(c) Borrowers have no material liability (contingent or otherwise) in
connection with a release, spill or discharge, threatened or actual, of any
Hazardous Materials or the generation, use, storage, treatment, transportation,
manufacture, handling, production or disposal of any Hazardous Materials.
(d) Borrowers have all licenses, permits, certificates, approvals or
similar authorizations required to be obtained or filed in connection with the
operations of Borrowers under any Environmental Law and all of such licenses,
permits, certificates, approvals or similar authorizations are valid and in full
force and effect.
8.12 INTERDEPENDENT BUSINESSES AND OPERATIONS. Each of the Borrowers
acknowledges and agrees that it acts interdependently with the other Borrowers,
relies upon the other Borrowers in its operations and business and will derive
substantial direct and indirect economic benefits from the Loans made and to be
made hereunder by Lender. Each Borrower acknowledges that the Loans and Letter
of Credit Accommodations it will obtain under the Financing Agreements as a
result of its joint and several liability exceeds the loans and credit that
would be available to it singly.
8.13 SURVIVAL OF WARRANTIES; CUMULATIVE. All representations and warranties
contained in this Agreement or any of the other Financing Agreements shall
survive the execution and delivery of this Agreement and shall be deemed to have
been made again to Lender on the date of each additional borrowing or other
credit accommodation hereunder and shall be conclusively presumed to have been
relied on by Lender regardless of any investigation made or information
possessed by Lender. The representations and warranties set forth herein shall
be cumulative and in addition to any other representations or warranties which
Borrowers shall now or hereafter give, or cause to be given, to Lender.
9. AFFIRMATIVE AND NEGATIVE COVENANTS
9.1 MAINTENANCE OF EXISTENCE. Each Borrower shall at all times preserve,
renew and keep in full, force and effect its corporate existence and rights and
franchises with respect thereto and maintain in full force and effect all
permits, licenses, trademarks, tradenames, approvals, authorizations, leases and
contracts necessary to carry on the business as presently or proposed to be
conducted. Each Borrower shall give Lender thirty (30) days prior written notice
of any proposed change in its corporate name, which notice shall set forth the
new name and each such Borrower shall deliver to Lender a copy of the amendment
to the Certificate of Incorporation of such Borrower providing for the name
change certified by the Secretary of State of the jurisdiction of incorporation
of such Borrower as soon as it is available.
9.2 NEW COLLATERAL LOCATIONS. Each Borrower may open any new location
within the continental United States provided Borrowers (a) give Lender thirty
(30) days prior written notice of the intended opening of any such new location
and (b) execute and deliver, or cause to be executed and delivered, to Lender
such agreements, documents, and instruments as Lender may deem reasonably
necessary or desirable to protect its interests in the Collateral at such
location, including UCC financing statements.
9.3 COMPLIANCE WITH LAWS, REGULATIONS, ETC.
(a) Borrowers shall, at all times, comply in all material respects
with all laws, rules, regulations, licenses, permits, approvals and orders
applicable to it and duly observe all requirements of any Federal, State or
local governmental authority, including the Employee Retirement Security Act of
1974, as amended, the Occupational Safety and Health Act of 1970, as amended,
the Fair Labor Standards Act of 1938, as amended, and
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all statutes, rules, regulations, orders, permits and stipulations relating to
environmental pollution and employee health and safety, including all of the
Environmental Laws.
(b) Borrowers shall establish and maintain, at their expense, a
system to assure and monitor its continued compliance with all Environmental
Laws in all of their operations, which system shall include annual reviews of
such compliance by employees or agents of Borrowers who are familiar with the
requirements of the Environmental Laws. Copies of all environmental surveys,
audits, assessments, feasibility studies and results of remedial investigations
shall be promptly furnished, or caused to be furnished, by Borrowers to Lender.
Borrowers shall take prompt and appropriate action to respond to any
non-compliance with any of the Environmental Laws and shall regularly report to
Lender on such response.
(c) Borrowers shall give both oral and written notice to Lender
immediately upon any Borrower's receipt of any notice of, or any Borrower's
otherwise obtaining knowledge of, (i) the occurrence of any event involving the
release, spill or discharge, threatened or actual, of any Hazardous Material or
(ii) any investigation, proceeding, complaint, order, directive, claims,
citation or notice with respect to: (A) any non-compliance with or violation of
any Environmental Law by any Borrower or (B) the release, spill or discharge,
threatened or actual, of any Hazardous Material or (C) the generation, use,
storage, treatment, transportation, manufacture, handling, production or
disposal of any Hazardous Materials or (D) any other environmental, health or
safety matter, which affects any Borrower or its business, operations or assets
or any properties at which any Borrower transported, stored or disposed of any
Hazardous Materials.
(d) Without limiting the generality of the foregoing, whenever Lender
reasonably determines that there is non-compliance, or any condition which
requires any action by or on behalf of any Borrower in order to avoid any
material non-compliance, with any Environmental Law, Borrowers shall, at
Lender's request and Borrowers' expense: (i) cause an independent environmental
engineer acceptable to Lender to conduct such tests of the site where any
Borrower's non-compliance or alleged non-compliance with such Environmental Laws
has occurred as to such non-compliance and prepare and deliver to Lender a
report as to such non-compliance 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 (ii) provide to Lender a supplemental
report of such engineer whenever the scope of such non-compliance, or Borrowers'
response thereto or the estimated costs thereof, shall change in any material
respect.
(e) Each Borrower shall indemnify and hold harmless Lender, its
directors, officers, employees, agents, invitees, representatives, successors
and assigns, from and against any and all losses, claims, damages, liabilities,
costs, and expenses (including attorneys' fees and legal expenses) directly or
indirectly arising out of or attributable to the use, generation, manufacture,
reproduction, storage, release, threatened release, spill, discharge, disposal
or presence of a Hazardous Material, including the costs of any required or
necessary repair, cleanup or other remedial work with respect to any property of
any Borrower and the preparation and implementation of any closure, remedial or
other required plans. All representations, warranties, covenants and
indemnifications in this Section 9.3 shall survive the payment of the
Obligations and the termination or non-renewal of this Agreement.
9.4 PAYMENT OF TAXES AND CLAIMS. Borrowers shall duly pay and discharge
all taxes, assessments, contributions and governmental charges upon or against
it or its properties or assets, except for taxes the validity of which are being
contested in good faith by appropriate proceedings diligently pursued and
available to Borrowers and with respect to which adequate reserves have been set
aside on its books. Borrowers shall be liable for any tax or penalties imposed
on Lender as a result of the financing arrangements provided for herein and
Borrowers agree to indemnify and hold Lender harmless with respect to the
foregoing, and to repay to Lender on demand the amount thereof, and until paid
by Borrowers such amount shall be added and deemed part of the Loans, PROVIDED,
THAT, nothing contained herein shall be construed to require Borrowers to pay
any income or franchise taxes attributable to the income of Lender from any
amounts charged or paid hereunder to Lender. The foregoing indemnity shall
survive the payment of the Obligations and the termination or non-renewal of
this Agreement.
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9.5 INSURANCE. Borrowers shall, at all times, maintain with financially
sound and reputable insurers insurance with respect to the Collateral against
loss or damage and all other insurance of the kinds and in the amounts
customarily insured against or carried by corporations of established reputation
engaged in the same or similar businesses and similarly situated. Said policies
of insurance shall be satisfactory to Lender as to form, amount and insurer.
Borrowers shall furnish certificates, policies or endorsements to Lender as
Lender shall require as proof of such insurance, and, if Borrowers fail to do
so, Lender is authorized, but not required, to obtain such insurance at the
expense of Borrowers. All policies shall provide for at least thirty (30) days
prior written notice to Lender of any cancellation or reduction of coverage and
that Lender may act as attorney for Borrowers in obtaining, and at any time an
Event of Default exists or has occurred and is continuing, adjusting, settling,
amending and canceling such insurance. Borrowers shall cause Lender to be named
as a loss payee and an additional insured (but without any liability for any
premiums) under such insurance policies and Borrowers shall obtain
non-contributory lender's loss payable endorsements to all insurance policies in
form and substance satisfactory to Lender. Such lender's loss payable
endorsements shall specify that the proceeds of such insurance shall be payable
to Lender as its interests may appear and further specify that Lender shall be
paid regardless of any act or omission by any Borrower or any of its affiliates.
At its option, Lender may apply any insurance proceeds received by Lender at any
time to the cost of repairs or replacement of Collateral and/or to payment of
the Obligations, whether or not then due, in any order and in such manner as
Lender may determine or hold such proceeds as cash collateral for the
Obligations.
9.6 FINANCIAL STATEMENTS AND OTHER INFORMATION.
(a) Borrowers shall keep proper books and records in which true and
complete entries shall be made of all dealings or transactions of or in relation
to the Collateral and the business of Borrowers and their subsidiaries in
accordance with GAAP and Borrowers shall furnish or cause to be furnished to
Lender: (i) within thirty (30) days after the end of each fiscal month, monthly
unaudited consolidated financial statements, and unaudited consolidating
financial statements (including in each case balance sheets, statements of
income and loss, statements of cash flow, and statements of shareholders'
equity), all in reasonable detail, fairly presenting the financial position and
the results of the operations of Company and its subsidiaries as of the end of
and through such fiscal month and (ii) within ninety (90) days after the end of
each fiscal year, audited consolidated financial statements and audited
consolidating financial statements of Company and its subsidiaries (including in
each case balance sheets, statements of income and loss, statements of cash flow
and statements of shareholders' equity), and the accompanying notes thereto, all
in reasonable detail, fairly presenting the financial position and the results
of the operations of Company and its subsidiaries as of the end of and for such
fiscal year, together with the unqualified opinion of independent certified
public accountants, which accountants shall be an independent accounting firm
selected by Company and reasonably acceptable to Lender, that such financial
statements have been prepared in accordance with GAAP, and present fairly the
results of operations and financial condition of Company and its subsidiaries as
of the end of and for the fiscal year then ended.
(b) Borrowers shall promptly notify Lender in writing of the details
of (i) any loss, damage, investigation, action, suit, proceeding or claim
relating to the Collateral or any other property which is security for the
Obligations or which would result in any material adverse change in any
Borrower's business, properties, assets, goodwill or condition, financial or
otherwise and (ii) the occurrence of any Event of Default or event which, with
the passage of time or giving of notice or both, would constitute an Event of
Default.
(c) Company shall promptly after the sending or filing thereof
furnish or cause to be furnished to Lender copies of all reports which Company
or any Borrower sends to its stockholders generally and copies of all reports
and registration statements which Company files with the Securities and Exchange
Commission, any national securities exchange or the National Association of
Securities Dealers, Inc.
(d) Borrowers shall furnish or cause to be furnished to Lender such
budgets, forecasts, projections and other information respecting the Collateral
and the business of Borrowers, as Lender may, from time to time, reasonably
request. Lender is hereby authorized to deliver a copy of any financial
statement or any other information relating to the business of Borrowers to any
court or other government agency or to any participant or assignee or
prospective participant or assignee. Each Borrower hereby irrevocably authorizes
and directs all
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accountants or auditors to deliver to Lender, at Borrowers' expense, copies of
the financial statements of Borrowers and any reports or management letters
prepared by such accountants or auditors on behalf of Borrowers and to disclose
to Lender such information as they may have regarding the business of Borrowers.
Any documents, schedules, invoices or other papers delivered to Lender may be
destroyed or otherwise disposed of by Lender one (1) year after the same are
delivered to Lender, except as otherwise designated by Borrowers to Lender in
writing.
9.7 SALE OF ASSETS, CONSOLIDATION, MERGER, DISSOLUTION, ETC. No Borrower
shall, directly or indirectly, (a) merge into or with or consolidate with any
other Person or permit any other Person to merge into or with or consolidate
with it (except for mergers among Borrowers), or (b) sell, assign, lease,
transfer, abandon or otherwise dispose of any stock or indebtedness to any other
Person or any of its assets to any other Person (except for (i) sales of
Inventory in the ordinary course of business and (ii) the disposition of
worn-out or obsolete Equipment or Equipment no longer used in the business of
Borrowers so long as any proceeds are paid to Lender and such sales do not
involve Equipment having an aggregate fair market value in excess of $100,000
for all such Equipment disposed of in any fiscal year of Borrowers), or (c) form
or acquire any subsidiaries, or (d) wind up, liquidate or dissolve or (e) agree
to do any of the foregoing.
9.8 ENCUMBRANCES. Borrowers shall not create, incur, assume or suffer to
exist any security interest, mortgage, pledge, lien, charge or other encumbrance
of any nature whatsoever on any of its assets or properties, including the
Collateral, EXCEPT: (a) liens and security interests of Lender; (b) liens
securing the payment of taxes, either not yet overdue or the validity of which
are being contested in good faith by appropriate proceedings diligently pursued
and available to Borrowers and with respect to which adequate reserves have been
set aside on its books; (c) non-consensual statutory liens (other than liens
securing the payment of taxes) arising in the ordinary course of Borrowers'
business to the extent: (i) such liens secure indebtedness which is not overdue
or (ii) such liens secure indebtedness relating to claims or liabilities which
are fully insured and being defended at the sole cost and expense and at the
sole risk of the insurer or being contested in good faith by appropriate
proceedings diligently pursued and available to Borrowers, in each case prior to
the commencement of foreclosure or other similar proceedings and with respect to
which adequate reserves have been set aside on its books; (d) zoning
restrictions, easements, licenses, covenants and other restrictions affecting
the use of real property which do not interfere in any material respect with the
use of such real property or ordinary conduct of the business of Borrowers as
presently conducted thereon or materially impair the value of the real property
which may be subject thereto; (e) purchase money security interests in Equipment
(including capital leases) and purchase money mortgages on real estate not to
exceed $250,000 in the aggregate at any time outstanding so long as such
security interests and mortgages do not apply to any property of Borrowers other
than the Equipment or real estate so acquired, and the indebtedness secured
thereby does not exceed the cost of the Equipment or real estate so acquired, as
the case may be; and (f) the security interests and liens set forth on Schedule
8.4 hereto.
9.9 INDEBTEDNESS. Borrowers shall not incur, create, assume, become or be
liable in any manner with respect to, or permit to exist, any obligations or
indebtedness, EXCEPT: (a) the Obligations; (b) trade obligations and normal
accruals in the ordinary course of business not yet due and payable, or with
respect to which the Borrowers are contesting in good faith the amount or
validity thereof by appropriate proceedings diligently pursued and available to
Borrowers, and with respect to which adequate reserves have been set aside on
its books; (c) purchase money indebtedness (including capital leases) to the
extent not incurred or secured by liens (including capital leases) in violation
of any other provision of this Agreement; and (d) the indebtedness set forth on
Schedule 9.9 hereto; PROVIDED, THAT, (i) Borrowers may only make regularly
scheduled payments of principal and interest in respect of such indebtedness in
accordance with the terms of the agreement or instrument evidencing or giving
rise to such indebtedness as in effect on the date hereof, (ii) Borrowers shall
not, directly or indirectly, (A) amend, modify, alter or change the terms of
such indebtedness or any agreement, document or instrument related thereto as in
effect on the date hereof, or (B) redeem, retire, defease, purchase or otherwise
acquire such indebtedness, or set aside or otherwise deposit or invest any sums
for such purpose, and (iii) Borrowers shall furnish to Lender all notices or
demands in connection with such indebtedness either received by any Borrower or
on its behalf, promptly after the receipt thereof, or sent by any Borrower or on
its behalf, concurrently with the sending thereof, as the case may be.
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9.10 LOANS, INVESTMENTS, GUARANTEES, ETC. Borrowers shall not, directly or
indirectly, make any loans or advance money or property to any person, or invest
in (by capital contribution, dividend or otherwise) or purchase or repurchase
the stock or indebtedness or all or a substantial part of the assets or property
of any person, or guarantee, assume, endorse, or otherwise become responsible
for (directly or indirectly) the indebtedness, performance, obligations or
dividends of any Person or agree to do any of the foregoing, EXCEPT: (a) the
endorsement of instruments for collection or deposit in the ordinary course of
business; (b) investments in: (i) short-term direct obligations of the United
States Government, (ii) negotiable certificates of deposit issued by any bank
satisfactory to Lender, payable to the order of any Borrower or to bearer and
delivered to Lender, and (iii) commercial paper rated A1 or P1; PROVIDED, THAT,
as to any of the foregoing, unless waived in writing by Lender, Borrowers shall
take such actions as are deemed necessary by Lender to perfect the security
interest of Lender in such investments, (c) loans to employees pursuant to the
Company's employee stock option plan to fund the exercise of options under such
plan so long as the aggregate amount outstanding on all such loans does not at
any time exceed $250,000 and (d) the loans, advances and guarantees set forth on
Schedule 9.10 hereto; PROVIDED, THAT, as to such loans, advances and guarantees,
(i) Borrowers shall not, directly or indirectly, (A) amend, modify, alter or
change the terms of such loans, advances or guarantees or any agreement,
document or instrument related thereto, or (B) as to such guarantees, redeem,
retire, defease, purchase or otherwise acquire the obligations arising pursuant
to such guarantees, or set aside or otherwise deposit or invest any sums for
such purpose, and (ii) Borrowers shall furnish to Lender all notices or demands
in connection with such loans, advances or guarantees or other indebtedness
subject to such guarantees either received by Borrowers or on their behalf,
promptly after the receipt thereof, or sent by Borrowers or on their behalf,
concurrently with the sending thereof, as the case may be.
9.11 DIVIDENDS AND REDEMPTIONS. Borrowers shall not, directly or
indirectly, declare or pay any dividends on account of any shares of class of
capital stock of Borrowers now or hereafter outstanding, or set aside or
otherwise deposit or invest any sums for such purpose, or redeem, retire,
defease, purchase or otherwise acquire any shares of any class of capital stock
(or set aside or otherwise deposit or invest any sums for such purpose) for any
consideration other than common stock or apply or set apart any sum, or make any
other distribution (by reduction of capital or otherwise) in respect of any such
shares or agree to do any of the foregoing.
9.12 TRANSACTIONS WITH AFFILIATES. Borrowers shall not, directly or
indirectly, (a) purchase, acquire or lease any property from, or sell, transfer
or lease any property to, any officer, director, agent or other person
affiliated with any Borrower, except in the ordinary course of and pursuant to
the reasonable requirements of Borrowers' business and upon fair and reasonable
terms no less favorable to the Borrowers than Borrowers would obtain in a
comparable arm's length transaction with an unaffiliated person or (b) make any
payments of management, consulting or other fees for management or similar
services, or of any indebtedness owing to any officer, employee, shareholder,
director or other person affiliated with Borrowers except reasonable
compensation to officers, employees and directors for services rendered to
Borrowers in the ordinary course of business.
9.13 ADDITIONAL BANK ACCOUNTS. Borrowers shall not, directly or indirectly,
open, establish or maintain any deposit account, investment account or any other
account with any bank or other financial institution, other than the Blocked
Accounts and the accounts set forth in Schedule 8.8 hereto, except: (a) as to
any new or additional Blocked Accounts and other such new or additional accounts
which contain any Collateral or proceeds thereof, with the prior written consent
of Lender and subject to such conditions thereto as Lender may establish and (b)
as to any accounts used by any Borrower to make payments of payroll, taxes or
other obligations to third parties, after prior written notice to Lender.
9.14 WORKING CAPITAL. Company shall, as of the last day of each fiscal
month, maintain Working Capital of not less than $15,000,000.
9.15 ADJUSTED NET WORTH. Company shall, as of the last day of each fiscal
month, maintain Adjusted Net Worth of not less than $67,000,000. In determining
the Adjusted Net Worth of the Company, non-cash accounting adjustments resulting
from the following shall not be included in such calculation: (i) the investment
in redeemable preferred stock of the Company by Intel Corporation and Wisconsin
Investment Board; (ii) the proposed transaction with the landlord relating to
the termination of certain leases of real property in Andover, Massachusetts;
(iii) the proposed sale of Starlight Networks Incorporated (provided that no
approval or consent to
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such transaction shall be implied); (iv) the write-off of the Company's
investment in cerepoint software; and (v) additional non-cash restructuring
charges taken on or before September 30, 2000.
9.16 COSTS AND EXPENSES. Borrowers shall pay to Lender on demand all costs,
expenses, filing fees and taxes paid or payable in connection with the
preparation, negotiation, execution, delivery, recording, administration,
collection, liquidation, enforcement and defense of the Obligations, Lender's
rights in the Collateral, this Agreement, the other Financing Agreements and all
other documents related hereto or thereto, including any amendments, supplements
or consents which may hereafter be contemplated (whether or not executed) or
entered into in respect hereof and thereof, including: (a) all costs and
expenses of filing or recording (including Uniform Commercial Code financing
statement filing taxes and fees, documentary taxes, intangibles taxes and
mortgage recording taxes and fees, if applicable); (b) costs and expenses and
fees for insurance premiums, environmental audits, surveys, assessments,
engineering reports and inspections, appraisal fees and search fees; (c) costs
and expenses of remitting loan proceeds, collecting checks and other items of
payment, and establishing and maintaining the Blocked Accounts, together with
Lender's customary charges and fees with respect thereto; (d) charges, fees or
expenses charged by any bank or issuer in connection with the Letter of Credit
Accommodations; (e) costs and expenses of preserving and protecting the
Collateral; (f) costs and expenses paid or incurred in connection with obtaining
payment of the Obligations, enforcing the security interests and liens of
Lender, selling or otherwise realizing upon the Collateral, and otherwise
enforcing the provisions of this Agreement and the other Financing Agreements or
defending any claims made or threatened against Lender arising out of the
transactions contemplated hereby and thereby (including preparations for and
consultations concerning any such matters); (g) all out-of-pocket expenses and
costs heretofore and from time to time hereafter incurred by Lender during the
course of periodic field examinations of the Collateral and Borrowers'
operations, plus a per diem charge at the rate of $750 per person per day for
Lender's examiners in the field and office; and (h) the reasonable fees and
disbursements of counsel (including legal assistants) to Lender in connection
with any of the foregoing.
9.17 COMPLIANCE WITH ERISA.
(a) Borrowers shall not with respect to any "employee benefit plans"
maintained by Borrowers or any of their ERISA Affiliates: (i) terminate any of
such employee benefit plans so as to incur any liability to the Pension Benefit
Guaranty Corporation established pursuant to ERISA, (ii) allow or suffer to
exist any prohibited transaction involving any of such employee benefit plans or
any trust created thereunder which would subject any Borrower or such ERISA
Affiliate to a tax or penalty or other liability on prohibited transactions
imposed under Section 4975 of the Code or ERISA, (iii) fail to pay to any such
employee benefit plan any contribution which it is obligated to pay under
Section 302 of ERISA, Section 412 of the Code or the terms of such plan, (iv)
allow or suffer to exist any accumulated funding deficiency, whether or not
waived, with respect to any such employee benefit plan, (v) allow or suffer to
exist any occurrence of a reportable event or any other event or condition which
presents a material risk of termination by the Pension Benefit Guaranty
Corporation of any such employee benefit plan that is a single employer plan,
which termination could result in any liability to the Pension Benefit Guaranty
Corporation or (vi) incur any withdrawal liability with respect to any
multiemployer pension plan.
(b) As used in this Section 9.17, the terms "employee benefit plans",
"accumulated funding deficiency" and "reportable event" shall have the
respective meanings assigned to them in ERISA, and the term "prohibited
transaction" shall have the meaning assigned to it in Section 4975 of the Code
and ERISA.
9.18 FURTHER ASSURANCES. At the request of Lender at any time and from time
to time, Borrowers shall, at their expense, duly execute and deliver, or cause
to be duly executed and delivered, such further agreements, documents and
instruments, and do or cause to be done such further acts as may be necessary or
proper to evidence, perfect, maintain and enforce the security interests and the
priority thereof in the Collateral and to otherwise effectuate the provisions or
purposes of this Agreement or any of the other Financing Agreements. Lender may
at any time and from time to time request a certificate from an officer of
Borrowers representing that all conditions precedent to the making of Loans and
providing Letter of Credit Accommodations contained herein are satisfied. In the
event of such request by Lender, Lender may, at its option, cease to make any
further Loans or provide any further Letter of Credit Accommodations until
Lender has received such certificate and, in addition, Lender has
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determined that such conditions are satisfied. Where permitted by law, Borrowers
hereby authorize Lender to execute and file one or more UCC financing statements
signed only by Lender.
10. EVENTS OF DEFAULT AND REMEDIES
10.1 EVENTS OF DEFAULT. The occurrence or existence of any one or more of
the following events are referred to herein individually as an "Event of
Default", and collectively as "Events of Default":
(a) (i) Borrowers fail to pay when due any of the Obligations or (ii)
Borrowers fail to perform any of the covenants contained in Sections 9.2, 9.6,
9.13 or 9.18 and such failure shall continue for fourteen (14) days; PROVIDED,
THAT, such fourteen (14) day period shall not apply in the case of: (A) any
failure to observe any such covenant which is not capable of being cured at all
or within such fourteen (14) day period or which has been the subject of a prior
failure within a six (6) month period or (B) an intentional breach by any
Borrower of any such covenant or (iii) any Borrower fails to perform any of the
terms, covenants, conditions or provisions contained in this Agreement or any of
the other Financing Agreements other than those described in Sections 10.1(a)(i)
and 10.1(a)(ii) above;
(b) any representation, warranty or statement of fact made by any
Borrower to Lender in this Agreement, the other Financing Agreements or any
other agreement, schedule, confirmatory assignment or otherwise shall when made
or deemed made be false or misleading in any material respect;
(c) any Obligor revokes, terminates or fails to perform any of the
terms, covenants, conditions or provisions of any guarantee, endorsement or
other agreement of such party in favor of Lender;
(d) any judgment for the payment of money is rendered against any
Borrower or any Obligor in excess of $250,000 in any one case or in excess of
$500,000 in the aggregate and shall remain undischarged or unvacated for a
period in excess of thirty (30) days or execution shall at any time not be
effectively stayed, or any judgment other than for the payment of money, or
injunction, attachment, garnishment or execution is rendered against any
Borrower or any Obligor or any of their assets;
(e) any Borrower or any Obligor, which is a partnership, limited
liability company, limited liability partnership or a corporation, dissolves or
suspends or discontinues doing business;
(f) any Borrower or any Obligor becomes insolvent (however defined or
evidenced), makes an assignment for the benefit of creditors, makes or sends
notice of a bulk transfer or calls a meeting of its creditors or principal
creditors;
(g) a case or proceeding under the bankruptcy laws of the United
States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at law or
in equity) is filed against any Borrower or any Obligor or all or any part of
its properties and such petition or application is not dismissed within thirty
(30) days after the date of its filing or any Borrower or any Obligor shall file
any answer admitting or not contesting such petition or application or indicates
its consent to, acquiescence in or approval of, any such action or proceeding or
the relief requested is granted sooner;
(h) a case or proceeding under the bankruptcy laws of the United
States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at a law
or equity) is filed by any Borrower or any Obligor or for all or any part of its
property; or
(i) any default by any Borrower or any Obligor under any agreement,
document or instrument relating to any indebtedness for borrowed money owing to
any person other than Lender, or any capitalized lease obligations, contingent
indebtedness in connection with any guarantee, letter of credit, indemnity or
similar type of
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instrument in favor of any person other than Lender, in any case in an amount in
excess of $500,000, which default continues for more than the applicable cure
period, if any, with respect thereto, or any default by any Borrower or any
Obligor under any material contract, lease, license or other obligation to any
person other than Lender, which default continues for more than the applicable
cure period, if any, with respect thereto;
(j) any Change of Control of Company or any change in the ownership
of any other Borrowers or Obligors;
(k) the indictment or threatened indictment of any Borrower or any
Obligor under any criminal statute, or commencement or threatened commencement
of criminal or civil proceedings against any Borrower or any Obligor, pursuant
to which statute or proceedings the penalties or remedies sought or available
include forfeiture of any of the property of any Borrower or such Obligor;
(l) there shall be a material adverse change in the business, assets
or prospects of any Borrower or any Obligor after the date hereof; or
(m) there shall be an event of default under any of the other
Financing Agreements.
10.2 REMEDIES.
(a) At any time an Event of Default exists or has occurred and is
continuing, Lender shall have all rights and remedies provided in this
Agreement, the other Financing Agreements, the Uniform Commercial Code and other
applicable law, all of which rights and remedies may be exercised without notice
to or consent by any Borrower or any Obligor, except as such notice or consent
is expressly provided for hereunder or required by applicable law. All rights,
remedies and powers granted to Lender hereunder, under any of the other
Financing Agreements, the Uniform Commercial Code or other applicable law, are
cumulative, not exclusive and enforceable, in Lender's discretion,
alternatively, successively, or concurrently on any one or more occasions, and
shall include, without limitation, the right to apply to a court of equity for
an injunction to restrain a breach or threatened breach by any Borrower of this
Agreement or any of the other Financing Agreements. Lender may, at any time or
times, proceed directly against any Borrower or any Obligor to collect the
Obligations without prior recourse to the Collateral.
(b) Without limiting the foregoing, at any time an Event of Default
exists or has occurred and is continuing, Lender may, in its discretion and
without limitation, (i) accelerate the payment of all Obligations and demand
immediate payment thereof to Lender (PROVIDED, THAT, upon the occurrence of any
Event of Default described in Sections 10.1(g) and 10.1(h), all Obligations
shall automatically become immediately due and payable), (ii) with or without
judicial process or the aid or assistance of others, enter upon any premises on
or in which any of the Collateral may be located and take possession of the
Collateral or complete processing, manufacturing and repair of all or any
portion of the Collateral, (iii) require Borrowers, at Borrowers' expense, to
assemble and make available to Lender any part or all of the Collateral at any
place and time designated by Lender, (iv) collect, foreclose, receive,
appropriate, setoff and realize upon any and all Collateral, (v) remove any or
all of the Collateral from any premises on or in which the same may be located
for the purpose of effecting the sale, foreclosure or other disposition thereof
or for any other purpose, (vi) sell, lease, transfer, assign, deliver or
otherwise dispose of any and all Collateral (including entering into contracts
with respect thereto, public or private sales at any exchange, broker's board,
at any office of Lender or elsewhere) at such prices or terms as Lender may deem
reasonable, for cash, upon credit or for future delivery, with the Lender having
the right to purchase the whole or any part of the Collateral at any such public
sale, all of the foregoing being free from any right or equity of redemption of
any Borrower, which right or equity of redemption is hereby expressly waived and
released by any Borrower and/or (vii) terminate this Agreement. If any of the
Collateral is sold or leased by Lender upon credit terms or for future delivery,
the Obligations shall not be reduced as a result thereof until payment therefor
is finally collected by Lender. If notice of disposition of Collateral is
required by law, five (5) days prior notice by Lender to Borrowers designating
the time and place of any public sale or the time after which any private sale
or other intended disposition of Collateral is to be made, shall be deemed to be
reasonable notice thereof and each Borrower waives any other notice. In the
event Lender institutes an action to recover any Collateral or seeks recovery of
any
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Collateral by way of prejudgment remedy, each Borrower waives the posting of any
bond which might otherwise be required.
(c) Lender may apply the cash proceeds of Collateral actually
received by Lender from any sale, lease, foreclosure or other disposition of the
Collateral to payment of the Obligations, in whole or in part and in such order
as Lender may elect, whether or not then due. Borrowers shall remain jointly and
severally liable to Lender for the payment of any deficiency with interest at
the highest rate provided for herein and all costs and expenses of collection or
enforcement, including attorneys' fees and legal expenses.
(d) Without limiting the foregoing, upon the occurrence of an Event
of Default or an event which with notice or passage of time or both would
constitute an Event of Default, Lender may, at its option, without notice, (i)
cease making Loans or arranging for Letter of Credit Accommodations or reduce
the lending formulas or amounts of Revolving Loans and Letter of Credit
Accommodations available to Borrowers and/or (ii) terminate any provision of
this Agreement providing for any future Loans or Letter of Credit Accommodations
to be made by Lender to Borrowers.
(e) Each Borrower acknowledges and agrees that each and every Event
of Default described above shall be of equal weight and significance, and
equally and fully shall allow Lender to exercise its rights and remedies
hereunder. Each Borrower acknowledges and agrees that each such Event of Default
has been a material inducement for Lender to enter into this Agreement and that
Lender would be irreparably harmed if Lender, in any way, were unable to
exercise its rights and remedies on the basis that certain Events of Default
(for example, Events of Default not relating to payment) were of less weight or
significance than certain other Events of Default (for example, Events of
Default relating to payment).
11. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW
11.1 GOVERNING LAW; CHOICE OF FORUM; SERVICE OF PROCESS; JURY TRIAL WAIVER.
(a) The validity, interpretation and enforcement of this Agreement
and the other Financing Agreements and any dispute arising out of the
relationship between the parties hereto, whether in contract, tort, equity or
otherwise, shall be governed by the internal laws of the Commonwealth of
Massachusetts (without giving effect to principles of conflicts of law).
(b) Each Borrower and Lender irrevocably consent and submit to the
non-exclusive jurisdiction of the Superior Court of Suffolk County of the
Commonwealth of Massachusetts and the United States District Court for the
District of Massachusetts and waive any objection based on venue or FORUM NON
CONVENIENS with respect to any action instituted therein arising under this
Agreement or any of the other Financing Agreements or in any way connected with
or related or incidental to the dealings of the parties hereto in respect of
this Agreement or any of the other Financing Agreements or the transactions
related hereto or thereto, in each case whether now existing or hereafter
arising, and whether in contract, tort, equity or otherwise, and agree that any
dispute with respect to any such matters shall be heard only in the courts
described above (except that Lender shall have the right to bring any action or
proceeding against any Borrower or its property in the courts of any other
jurisdiction which Lender deems necessary or appropriate in order to realize on
the Collateral or to otherwise enforce its rights against any Borrower or its
property).
(c) Each Borrower hereby waives personal service of any and all
process upon it and consents that all such service of process may be made by
certified mail (return receipt requested) directed to its address set forth on
the signature pages hereof and service so made shall be deemed to be completed
five (5) days after the same shall have been so deposited in the U.S. mails, or,
at Lender's option, by service upon any Borrower in any other manner provided
under the rules of any such courts. Within thirty (30) days after such service,
Borrowers shall appear in answer to such process, failing which Borrowers shall
be deemed in default and judgment may be entered by Lender against Borrowers for
the amount of the claim and other relief requested.
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(d) EACH BORROWER AND LENDER EACH HEREBY WAIVES ANY RIGHT TO TRIAL BY
JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS
AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR (ii) IN ANY WAY CONNECTED
WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT
OF THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE TRANSACTIONS
RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER
ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. EACH BORROWER AND
LENDER EACH HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT
BORROWERS OR LENDER MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT
WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE
WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
(e) Lender shall not have any liability to any Borrower (whether in
tort, contract, equity or otherwise) for losses suffered by any Borrower in
connection with, arising out of, or in any way related to the transactions or
relationships contemplated by this Agreement, or any act, omission or event
occurring in connection herewith, unless it is determined by a final and
non-appealable judgment or court order binding on Lender, that the losses were
the result of acts or omissions constituting gross negligence or willful
misconduct. In any such litigation, Lender shall be entitled to the benefit of
the rebuttable presumption that it acted in good faith and with the exercise of
ordinary care in the performance by it of the terms of this Agreement.
(f) PictureTel UK hereby irrevocably appoints and designates
PictureTel Corporation with an address at ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
as its agent for the acceptance of service of process hereunder. PictureTel UK
agrees that service made to such agent in the manner provided under (c) above
shall be binding on PictureTel UK in all respects.
11.2 WAIVER OF NOTICES. Each Borrower hereby expressly waives demand,
presentment, protest and notice of protest and notice of dishonor with respect
to any and all instruments and commercial paper, included in or evidencing any
of the Obligations or the Collateral, and any and all other demands and notices
of any kind or nature whatsoever with respect to the Obligations, the Collateral
and this Agreement, except such as are expressly provided for herein. No notice
to or demand on any Borrower which Lender may elect to give shall entitle any
Borrower to any other or further notice or demand in the same, similar or other
circumstances.
11.3 AMENDMENTS AND WAIVERS. Neither this Agreement nor any provision
hereof shall be amended, modified, waived or discharged orally or by course of
conduct, but only by a written agreement signed by an authorized officer of
Lender, and as to amendments, as also signed by an authorized officer of
Borrowers. Lender shall not, by any act, delay, omission or otherwise be deemed
to have expressly or impliedly waived any of its rights, powers and/or remedies
unless such waiver shall be in writing and signed by an authorized officer of
Lender. Any such waiver shall be enforceable only to the extent specifically set
forth therein. A waiver by Lender of any right, power and/or remedy on any one
occasion shall not be construed as a bar to or waiver of any such right, power
and/or remedy which Lender would otherwise have on any future occasion, whether
similar in kind or otherwise.
11.4 WAIVER OF COUNTERCLAIMS. Each Borrower waives all rights to interpose
any claims, deductions, setoffs or counterclaims of any nature (other then
compulsory counterclaims) in any action or proceeding with respect to this
Agreement, the Obligations, the Collateral or any matter arising therefrom or
relating hereto or thereto.
11.5 INDEMNIFICATION. Each Borrower shall indemnify and hold Lender, and
its directors, agents, employees and counsel, harmless from and against any and
all losses, claims, damages, liabilities, costs or expenses imposed on, incurred
by or asserted against any of them in connection with any litigation,
investigation, claim or proceeding commenced or threatened related to the
negotiation, preparation, execution, delivery, enforcement, performance or
administration of this Agreement, any other Financing Agreements, or any
undertaking or proceeding related to any of the transactions contemplated hereby
or any act, omission, event or transaction related
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or attendant thereto, including amounts paid in settlement, court costs, and the
fees and expenses of counsel. To the extent that the undertaking to indemnify,
pay and hold harmless set forth in this Section may be unenforceable because it
violates any law or public policy, Borrowers shall pay the maximum portion which
it is permitted to pay under applicable law to Lender in satisfaction of
indemnified matters under this Section. The foregoing indemnity shall survive
the payment of the Obligations and the termination or non-renewal of this
Agreement.
12. TERM OF AGREEMENT; MISCELLANEOUS
12.1 TERM.
(a) This Agreement and the other Financing Agreements shall become
effective as of the date set forth on the first page hereof and shall continue
in full force and effect for a term ending on the date three (3) years from the
date hereof (the "Renewal Date"), and from year to year thereafter, unless
sooner terminated pursuant to the terms hereof. Lender or Borrowers may
terminate this Agreement and the other Financing Agreements effective on the
Renewal Date or on the anniversary of the Renewal Date in any year by giving to
the other party at least sixty (60) days prior written notice; PROVIDED, THAT,
this Agreement and all other Financing Agreements must be terminated
simultaneously. Upon the effective date of termination or non-renewal of the
Financing Agreements, Borrowers shall pay to Lender, in full, all outstanding
and unpaid Obligations and shall furnish cash collateral to Lender in such
amounts as Lender determines are reasonably necessary to secure Lender from
loss, cost, damage or expense, including attorneys' fees and legal expenses, in
connection with any contingent Obligations, including issued and outstanding
Letter of Credit Accommodations and checks or other payments provisionally
credited to the Obligations and/or as to which Lender has not yet received final
and indefeasible payment. Such payments in respect of the Obligations and cash
collateral shall be remitted by wire transfer in Federal funds to such bank
account of Lender, as Lender may, in its discretion, designate in writing to
Borrowers for such purpose. Interest shall be due until and including the next
business day, if the amounts so paid by Borrowers to the bank account designated
by Lender are received in such bank account later than 12:00 noon, Boston,
Massachusetts time.
(b) No termination of this Agreement or the other Financing
Agreements shall relieve or discharge Borrowers of their respective duties,
obligations and covenants under this Agreement or the other Financing Agreements
until all Obligations have been fully and finally discharged and paid, and
Lender's continuing security interest in the Collateral and the rights and
remedies of Lender hereunder, under the other Financing Agreements and
applicable law, shall remain in effect until all such Obligations have been
fully and finally discharged and paid.
(c) If for any reason this Agreement is terminated prior to the end
of the then current term or renewal term of this Agreement, in view of the
impracticality and extreme difficulty of ascertaining actual damages and by
mutual agreement of the parties as to a reasonable calculation of Lender's lost
profits as a result thereof and as a result of Lender's deferral of the payment
of fees that would be payable at the inception and during the term of this
Agreement, Borrowers agree to pay to Lender, upon the effective date of such
termination, an early termination fee in the amount set forth below if such
termination is effective in the period indicated:
Amount Period
------ ------
(i) 3% of Maximum Credit From the date hereof to and including
the first anniversary of the date hereof
(ii) 2% of Maximum Credit From the first anniversary of the date
hereof to and including the second
anniversary of the date hereof
(iii) 1% of Maximum Credit From the second anniversary of the date
hereof to and including the third
anniversary of the date
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hereof
Such early termination fee shall be presumed to be the amount of damages
sustained by Lender as a result of such early termination and Borrowers agree
that it is reasonable under the circumstances currently existing. In addition,
Lender shall be entitled to such early termination fee upon the occurrence of
any Event of Default described in Sections 10.1(g) and 10.1(h) hereof, even if
Lender does not exercise its right to terminate this Agreement, but elects, at
its option, to provide financing to Borrowers or permit the use of cash
collateral under the United States Bankruptcy Code. The early termination fee
provided for in this Section 12.1 shall be deemed included in the Obligations.
12.2 NOTICES. All notices, requests and demands hereunder shall be in
writing and (a) made to Lender at its address set forth below and to Borrowers
at their chief executive office set forth below, or to such other address as
either party may designate by written notice to the other in accordance with
this provision, and (b) deemed to have been given or made: if delivered in
person, immediately upon delivery; if by telex, telegram or facsimile
transmission, immediately upon sending and upon confirmation of receipt; if by
nationally recognized overnight courier service with instructions to deliver the
next business day, one (1) business day after sending; and if by certified mail,
return receipt requested, five (5) days after mailing.
12.3 PARTIAL INVALIDITY. If any provision of this Agreement is held to be
invalid or unenforceable, such invalidity or unenforceability shall not
invalidate this Agreement as a whole, but this Agreement shall be construed as
though it did not contain the particular provision held to be invalid or
unenforceable and the rights and obligations of the parties shall be construed
and enforced only to such extent as shall be permitted by applicable law.
12.4 SUCCESSORS. This Agreement, the other Financing Agreements and any
other document referred to herein or therein shall be binding upon and inure to
the benefit of and be enforceable by Lender, Borrowers and their respective
successors and assigns, except that Borrowers may not assign their rights under
this Agreement, the other Financing Agreements and any other document referred
to herein or therein without the prior written consent of Lender. Lender may,
after notice to Borrowers, assign its rights and delegate its obligations under
this Agreement and the other Financing Agreements and further may assign, or
sell participations in, all or any part of the Loans, the Letter of Credit
Accommodations or any other interest herein to another financial institution or
other person, in which event, the assignee or participant shall have, to the
extent of such assignment or participation, the same rights and benefits as it
would have if it were the Lender hereunder, except as otherwise provided by the
terms of such assignment or participation.
12.5 JOINT AND SEVERAL LIABILITY. All Loans made hereunder are made to or
for the benefit of each of the Borrowers. The Borrowers are jointly and
severally, directly and primarily, absolutely and unconditionally liable for the
full and indefeasible payment when due and performance of all Obligations and
for the prompt and full payment and performance of all of the promises,
covenants, representations, and warranties made or undertaken by each Borrower
under the Financing Agreements and Borrowers agree that such liability is
independent of the duties, obligations, and liabilities of each of the joint and
several Borrowers.
12.6 SURETYSHIP WAIVERS AND CONSENTS.
(a) Each Borrower acknowledges and agrees that the Obligations
undertaken herein are direct and primary obligations and that each such Borrower
is jointly and severally obligated thereon with the other Borrowers. In full
recognition thereof, each Borrower consents and agrees that Lender may, at any
time and from time to time, without notice or demand, (except as provided in and
in accordance with the terms of this Agreement), whether before or after any
actual or purported termination, repudiation or revocation of this Agreement by
any Borrower, and without affecting the enforceability or continuing
effectiveness hereof as to each Borrower: (i) increase, extend, or otherwise
change the time for payment or the terms of the Obligations or any part thereof;
(ii) supplement, restate, modify, amend, increase, decrease, or waive, or enter
into or give any agreement, approval or consent with respect to, the Obligations
or any part thereof, or any of the Financing Agreements or any additional
security or guarantees, or any condition, covenant, default, remedy, right,
representation, or term thereof or
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thereunder; (iii) accept new or additional instruments, documents, or agreements
in exchange for or relative to any of the Financing Agreements or the
Obligations or any part thereof; (iv) accept partial payments on the
Obligations; (v) receive and hold additional security or guarantees for the
Obligations or any part thereof; (vi) release, reconvey, terminate, waive,
abandon, fail to perfect, subordinate, exchange, substitute, transfer, or
enforce any Collateral, security or guarantees, and apply any Collateral or
security and direct the order or manner of sale thereof as Lender in its
discretion may determine; (vii) release any person from any personal liability
with respect to the Obligations or any part thereof; (viii) settle, release on
terms satisfactory to Lender or by operation of applicable laws or otherwise
liquidate or enforce any Obligations and any Collateral or security therefor or
guaranty thereof in any manner, consent to the transfer of any Collateral or
security and bid and purchase at any sale; or (ix) consent to the merger,
change, or any other restructuring or termination of the corporate or
partnership existence of any Borrower, and any corresponding restructuring of
the Obligations, and any such merger, change, restructuring, or termination
shall not affect the liability of any Borrower or the continuing effectiveness
hereof, or the enforceability hereof with respect to all or any part of the
Obligations.
(b) Lender may enforce this Agreement independently as to each
Borrower and independently of any other remedy or security Lender at any time
may have or hold in connection with the Obligations, and it shall not be
necessary for Lender to marshal assets in favor of any Borrower or any guarantor
or to proceed upon or against or exhaust any Collateral or security or remedy
before proceeding to enforce this Agreement. Each Borrower expressly waives any
right to require Lender to marshal assets in favor of any Borrower or any
guarantor of the Obligations or to proceed against any other Borrower, and
agrees that Lender may proceed against Borrowers or any Collateral or any
guarantor in such order as Lender shall determine in its sole an absolute
discretion.
(c) Lender may file a separate action or actions against any
Borrower, whether such action is brought or prosecuted with respect to any
security or against any guarantor of the Obligations, or whether any other
person is joined in any such action or actions. Each Borrower agrees that Lender
and each Borrower and any affiliate of any Borrower may deal with each other in
connection with the Obligations or otherwise, or alter any contracts or
agreements now or hereafter existing between any of them, in any manner
whatsoever, all without in any way altering or affecting the continuing
enforceability of this Agreement. Each Borrower, as a joint and several Borrower
hereunder, expressly waives the benefit of any statute of limitations affecting
its joint and several liability hereunder (but not its primary liability) or the
enforcement of the Obligations or any rights of Lender created or granted
herein.
(d) Lender's rights hereunder shall be reinstated and revived, and
the enforceability of this Agreement shall continue, with respect to any amount
at any time paid on account of the Obligations which thereafter shall be
required to be restored or returned by Lender, all as though such amount had not
been paid. The rights of Lender created or granted herein and the enforceability
of this Agreement at all times shall remain effective to cover the full amount
of all the Obligations even though the Obligations, including any part thereof
or any Collateral, other security or guaranty therefor, may be or hereafter may
become invalid or otherwise unenforceable as against any Borrower and whether or
not any Borrower shall have any personal liability with respect thereto.
(e) Each Borrower expressly waives any and all defenses now or
hereafter arising or asserted by reason of (i) any disability or other defense
of any other Borrower with respect to the Obligations; (ii) the unenforceability
or invalidity of any security or guaranty for the Obligations or the lack of
perfection or continuing perfection or failure of priority of any security for
the Obligations; (iii) the cessation for any cause whatsoever of the liability
of any other Borrower (other than by reason of the full payment and performance
of all Obligations); (iv) any failure of Lender to marshal assets in favor of
any Borrower; (v) any act or omission of Lender or others that directly or
indirectly results in or aids the discharge or release of any Borrower or the
Obligations of any Borrower or any security or guaranty therefor by operation of
law or otherwise; (vi) any law which provides that the obligation of a surety or
guarantor must neither be larger in amount nor in other respects more burdensome
than that of the principal or which reduces a surety's or guarantor's obligation
in proportion to the principal obligation; (vii) any failure of Lender to file
or enforce a claim in any bankruptcy or other proceeding with respect to any
Borrower; (viii) the avoidance of any lien or security interest in assets of any
Borrower in favor of Lender for any reason; or (ix) any action taken by Lender
that is authorized by this section or any other provision of any Financing
Agreements. Until such time, if any, as all of the Obligations have been
indefeasibly paid and performed in full and
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no portion of any commitment of Lender to Borrowers under any Financing
Agreement remains in effect, each Borrower's indebtedness, claims and rights of
subrogation, contribution, reimbursement, or indemnity against the other
Borrowers shall be fully and completely subordinated to the indefeasible
repayment in full of the Obligations, and each Borrower expressly waives until
such indefeasible payment any right to enforce any remedy that it now has or
hereafter may have against any other Person and waives the benefit of, or any
right to participate in, any Collateral now or hereafter held by Lender.
(f) To the fullest extent permitted by applicable law, each Borrower
expressly waives and agrees not to assert, any and all defenses in its favor
based upon an election of remedies by Lender which destroys, diminishes, or
affects such Borrower's subrogation rights against the other Borrowers, or
against any guarantor, and/or (except as explicitly provided for herein) any
rights to proceed against each other Borrower, or any other party liable to
Lender, for reimbursement, contribution, indemnity, or otherwise.
(g) Borrowers and each of them warrant and agree that each of the
waivers and consents set forth herein are made after consultation with legal
counsel and with full knowledge of their significance and consequences, with the
understanding that events giving rise to any defense or right waived may
diminish, destroy, or otherwise adversely affect rights which Borrowers
otherwise may have against each other, Lender, or others, or against Collateral,
and that, under the circumstances, the waivers and consents herein given are
reasonable and not contrary to public policy or law. If any of the waivers or
consents herein are determined to be contrary to any applicable law or public
policy, such waivers and consents shall be effective to the maximum extent
permitted by law.
(h) Other subsidiaries of the Borrowers may with the prior written
consent of Lender, in its sole discretion, may become Borrowers hereunder
subject to the execution and delivery of such assumption agreements, security
agreements, UCC financing statements and other agreements, instruments and
documents as the Lender may require.
12.7 CONTRIBUTION AGREEMENT. As an inducement to Lender to enter into the
Financing Agreements and to make the loans and extend credit to the Borrowers,
each Borrower agrees to indemnify and hold the other harmless from and each
shall have a continuing right of contribution against the other Borrowers, if
and to the extent that a Borrower makes or is caused to make disproportionate
payments in excess of that Borrower's Proportionate Share (as defined herein) of
the Obligations or contributions (from dispositions of its assets or otherwise)
to the repayment and satisfaction of the Obligations. These indemnification and
contribution obligations shall be unconditional and continuing obligations of
the Borrowers and shall not be waived, rescinded, modified, limited or
terminated in any way whatsoever without the prior written consent of Lender, in
its sole discretion. These indemnification and contribution obligations are
subordinated to the prior indefeasible payment in full in cash of all
Obligations. For purposes hereof, Proportionate Share shall mean the fraction
determined for each Borrower where the numerator shall be the Adjusted Net Worth
of solely such Borrower on the date off this Agreement and the denominator shall
be the consolidated Adjusted Net Worth of the Company and all other Borrowers on
such date, as determined in accordance with GAAP.
12.8 CONFIDENTIALITY.
(a) Lender shall use all reasonable efforts to keep confidential, in
accordance with its customary procedures for handling confidential information
and safe and sound lending practices, any non-public information supplied to it
by Borrowers pursuant to this Agreement which is clearly and conspicuously
marked as confidential at the time such information is furnished by Borrowers to
Lender, PROVIDED, THAT, nothing contained herein shall limit the disclosure of
any such information: (i) to the extent required by statute, rule, regulation,
subpoena or court order, (ii) to bank examiners and other regulators, auditors
and/or accountants, (iii) in connection with any litigation to which Lender is a
party, (iv) to any assignee or participant (or prospective assignee or
participant) so long as such assignee or participant (or prospective assignee or
participant) shall have first agreed in writing to treat such information as
confidential in accordance with this Section 12.8, or (v) to counsel for Lender
or any participant or assignee (or prospective participant or assignee).
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(b) In no event shall this Section 12.8 or any other provision of
this Agreement or applicable law be deemed: (i) to apply to or restrict
disclosure of information that has been or is made public by Borrowers or any
third party without breach of this Section 12.8 or otherwise become generally
available to the public other than as a result of a disclosure in violation
hereof, (ii) to apply to or restrict disclosure of information that was or
becomes available to Lender on a non-confidential basis from a person other than
Borrowers, (iii) require Lender to return any materials furnished by Borrowers
to Lender or (iv) prevent Lender from responding to routine informational
requests in accordance with the CODE OF ETHICS FOR THE EXCHANGE OF CREDIT
INFORMATION promulgated by The ▇▇▇▇▇▇ ▇▇▇▇▇▇ Associates or other applicable
industry standards relating to the exchange of credit information. The
obligations of Lender under this Section 12.8 shall supersede and replace the
obligations of Lender under any confidentiality letter signed prior to the date
hereof.
12.9 JUDGMENT CURRENCY. To the extent permitted by applicable law, the
obligations of Borrowers in respect of any amount due under this Agreement
shall, notwithstanding any payment in any other currency (the "Other Currency")
(whether pursuant to a judgment or otherwise), be discharged only to the extent
of the amount in United States Dollars being the currency in which it is due
(the "Agreed Currency") that Lender may, in accordance with normal banking
procedures, purchase with the sum paid in the Other Currency (after any premium
and costs of exchange) on the business day immediately after the day on which
Lender receives the payment. If the amount in the Agreed Currency that may be so
purchased for any reason falls short of the amount originally due, Borrowers ,
as the case may be, shall pay all additional amounts, in the Agreed Currency, as
may be necessary to compensate for the shortfall. Any obligations of Borrowers ,
as the case may be, not discharged by that payment shall, to the extent
permitted by law, be due as a separate and independent obligations and, until
discharged as provided in this section, continue in full force and effect.
12.10 TERMINATION OF PRIOR CREDIT AGREEMENT. This Agreement replaces in its
entirety the Credit Agreement, dated June 15, 1999, as amended, among The Chase
Manhattan Bank, Congress Financial Corporation (New England), PictureTel
Corporation and certain subsidiaries of PictureTel Corporation (the "Original
Credit Agreement") and the Loan Agreements referred to therein, which Original
Credit Agreement and other Loan Agreements, upon satisfaction of the conditions
precedent under Sections 4.1 and 4.2 hereof, shall be deemed to be terminated
(except for the provisions thereof that expressly survive any such termination);
provided, however, that, upon satisfaction of the conditions in Sections 4.1 and
4.2 hereof and the effectiveness of this Agreement, all Letters of Credit issued
pursuant to the Original Credit Agreement and the letter of credit applications
therefore are and shall remain in full force and effect and shall for all
purposes hereunder be deemed to be Letter of Credit Accommodations issued
pursuant to the terms and provisions of this Agreement.
12.11 ENTIRE AGREEMENT. This Agreement, the other Financing Agreements, any
supplements hereto or thereto, and any instruments or documents delivered or to
be delivered in connection herewith or therewith represents the entire agreement
and understanding concerning the subject matter hereof and thereof between the
parties hereto, and supersede all other prior agreements, understandings,
negotiations and discussions, representations, warranties, commitments,
proposals, offers and contracts concerning the subject matter hereof, whether
oral or written. In the event of any inconsistency between the terms of this
Agreement and any schedule or exhibit hereto, the terms of this Agreement shall
govern.
[Remainder of Page Intentionally Left Blank]
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[SIGNATURE PAGE TO LOAN AGREEMENT]
IN WITNESS WHEREOF, Lender and Borrowers have caused these presents to be
duly executed as of the day and year first above written.
LENDER BORROWER
------ --------
CONGRESS FINANCIAL CORPORATION PICTURETEL CORPORATION
(NEW ENGLAND)
By: By:
------------------------ -------------------------------
Name: Name: ▇▇▇▇▇ ▇▇▇▇▇▇
---------------------- Title: Vice President & Chief
Title: Financial Officer
---------------------
ADDRESS: CHIEF EXECUTIVE OFFICE:
One Post Office Square ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
PICTURETEL SECURITIES CORPORATION
By:
--------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Vice President &
Treasurer
CHIEF EXECUTIVE OFFICE:
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
STARLIGHT NETWORKS INCORPORATED
By:
--------------------------------
Name: ▇▇▇ ▇▇▇▇▇▇▇
Title: Vice President
CHIEF EXECUTIVE OFFICE:
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
PICTURETEL UK LIMITED
By:
--------------------------------
Name: W. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇.
Title: Director
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CHIEF EXECUTIVE OFFICE:
▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
MULTILINK, INC.
By:
-------------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Vice President
CHIEF EXECUTIVE OFFICE:
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
1414c, INC.
By:
-------------------------------------
Name: W. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇.
Title: Vice President & Treasurer
CHIEF EXECUTIVE OFFICE:
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
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