CREDIT AGREEMENT
Dated as of August 4, 1997
between
QAD INC.
and
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS ........................................................... 1
1.01 Certain Defined Terms ............................................ 1
1.02 Other Interpretive Provisions .................................... 13
1.03 Accounting Principles ............................................ 14
ARTICLE II
THE CREDIT ............................................................ 14
2.01 Amount and Terms of Commitment ................................... 14
2.02 Loan Accounts .................................................... 14
2.03 Procedure for Borrowing .......................................... 14
2.04 Conversion and Continuation Elections ............................ 15
2.05 Voluntary Termination or Reduction of Commitment ................. 15
2.06 Optional Prepayments ............................................. 16
2.07 Repayment ........................................................ 16
2.08 Interest ......................................................... 16
2.09 Commitment Fee ................................................... 16
2.10 Computation of Fees and Interest ................................. 17
2.11 Payments by the Company .......................................... 17
ARTICLE III
TAXES, YIELD PROTECTION AND ILLEGALITY ................................ 17
3.01 Taxes ............................................................ 17
3.02 Illegality ....................................................... 18
3.03 Increased Costs and Reduction of Return .......................... 18
3.04 Funding Losses ................................................... 19
3.05 Inability to Determine Rates ..................................... 19
3.06 Survival ......................................................... 19
ARTICLE IV
CONDITIONS PRECEDENT .................................................. 19
4.01 Conditions of Initial Loan ....................................... 19
(a) Credit Agreement .................................................. 20
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(b) Resolutions; Incumbency ........................................... 20
(c) Organization Documents; Good Standing ............................. 20
(d) Legal Opinion ..................................................... 20
(e) Payment of Fees ................................................... 20
(f) Certificate ....................................................... 20
(g) Other Documents ................................................... 20
(h) Recapitalization .................................................. 21
4.02 Conditions to All Loans .......................................... 21
(a) Notice of Borrowing or Conversion/Continuation .................... 21
(b) Continuation of Representations and Warranties .................... 21
(c) No Existing Default ............................................... 21
ARTICLE V
REPRESENTATIONS AND WARRANTIES ........................................ 21
5.01 Corporate Existence and Power .................................... 21
5.02 Corporate Authorization; No Contravention ........................ 22
5.03 Governmental Authorization ....................................... 22
5.04 Binding Effect ................................................... 22
5.05 Litigation ....................................................... 22
5.06 No Default ....................................................... 23
5.07 ERISA Compliance ................................................. 23
5.08 Use of Proceeds; Margin Regulations .............................. 23
5.09 Title to Properties .............................................. 23
5.10 Taxes ............................................................ 24
5.11 Financial Condition .............................................. 24
5.12 Environmental Matters ............................................ 24
5.13 Regulated Entities ............................................... 24
5.14 No Burdensome Restrictions ....................................... 24
5.15 Copyrights, Patents, Trademarks and Licenses, etc ................ 25
5.16 Subsidiaries ..................................................... 25
5.17 Insurance ........................................................ 25
5.18 Swap Obligations ................................................. 25
5.19 Full Disclosure .................................................. 25
ARTICLE VI
AFFIRMATIVE COVENANTS ................................................. 26
6.01 Financial Statements ............................................. 26
6.02 Certificates; Other Information .................................. 26
6.03 Notices .......................................................... 27
6.04 Preservation of Corporate Existence, Etc ......................... 28
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6.05 Maintenance of Property .......................................... 28
6.06 Insurance ........................................................ 28
6.07 Payment of Obligations ........................................... 28
6.08 Compliance with Laws ............................................. 28
6.09 Compliance with ERISA ............................................ 29
6.10 Inspection of Property and Books and Records ..................... 29
6.11 Environmental Laws ............................................... 29
6.12 Use of Proceeds .................................................. 29
ARTICLE VII
NEGATIVE COVENANTS .................................................... 29
7.01 Limitation on Liens .............................................. 29
7.02 Disposition of Assets ............................................ 31
7.03 Consolidations and Mergers ....................................... 32
7.04 Loans and Investments ............................................ 32
7.05 Limitation on Indebtedness ....................................... 33
7.06 Transactions with Affiliates ..................................... 33
7.07 Use of Proceeds .................................................. 33
7.08 Contingent Obligations ........................................... 33
7.09 Joint Ventures ................................................... 34
7.10 Lease Obligations ................................................ 34
7.11 Restricted Payments .............................................. 34
7.12 ERISA ............................................................ 34
7.13 Change in Business ............................................... 34
7.14 Accounting Changes ............................................... 34
7.15 Financial Covenants .............................................. 35
(a) Adjusted Quick Ratio .............................................. 35
(b) Leverage Ratio .................................................... 35
(c) Profitability ..................................................... 35
(d) Minimum Tangible Net Worth ........................................ 35
ARTICLE VIII
EVENTS OF DEFAULT ..................................................... 35
8.01 Event of Default ................................................. 35
(a) Non-Payment ....................................................... 35
(b) Representation or Warranty ........................................ 36
(c) Specific Defaults ................................................. 36
(d) Other Defaults .................................................... 36
(e) Cross-Default ..................................................... 36
(f) Insolvency; Voluntary Proceedings ................................. 36
3
(g) Involuntary Proceedings ........................................... 37
(h) ERISA ............................................................. 37
(i) Monetary Judgments ................................................ 37
(j) Non-Monetary Judgments ............................................ 37
(l) Loss of Licenses .................................................. 38
(m) Adverse Change .................................................... 38
8.02 Remedies ......................................................... 38
8.03 Rights Not Exclusive ............................................. 38
ARTICLE IX
MISCELLANEOUS ......................................................... 38
9.01 Amendments and Waivers ........................................... 38
9.02 Notices .......................................................... 38
9.03 No Waiver; Cumulative Remedies ................................... 39
9.04 Costs and Expenses ............................................... 39
9.05 Indemnification .................................................. 40
9.06 Payments Set Aside ............................................... 40
9.07 Successors and Assigns ........................................... 40
9.08 Assignments, Participations, etc ................................. 40
9.09 Confidentiality .................................................. 41
9.10 Set-off .......................................................... 42
9.11 Automatic Debits of Fees ......................................... 42
9.12 Counterparts ..................................................... 42
9.13 Severability ..................................................... 42
9.14 No Third Parties Benefited ....................................... 42
9.15 Governing Law .................................................... 42
9.16 Arbitration; Reference Proceeding ................................ 43
9.17 Entire Agreement ................................................. 44
Exhibits:
Exhibit A Form of Notice of Borrowing
Exhibit B Form of Notice of Conversion/Continuation
Exhibit C Form of Compliance Certificate
Exhibit D S-1
Schedules:
Schedule 4.02(d) Indebtedness to be Repaid
Schedule 5.16 Subsidiaries and Minority Interests
Schedule 7.01 Permitted Liens
4
Schedule 7.05 Permitted Indebtedness
Schedule 7.08 Contingent Obligations
5
CREDIT AGREEMENT
This CREDIT AGREEMENT is entered into as of August 4, 1997, between QAD
Inc., a Delaware corporation (the "Company"), and Bank of America National Trust
and Savings Association (the "Bank").
WHEREAS, the Bank has agreed to make available to the Company a
revolving credit facility upon the terms and conditions set forth in this
Agreement;
NOW, THEREFORE, in consideration of the mutual agreements, provisions
and covenants contained herein, the parties agree as follows:
ARTICLE I
DEFINITIONS
1.01 Certain Defined Terms . The following terms have the following
meanings:
"Acquisition" means any transaction or series of related
transactions for the purpose of or resulting, directly or indirectly,
in (a) the acquisition of all or substantially all of the assets of a
Person, or of any business or division of a Person, (b) the acquisition
of in excess of 50% of the capital stock, partnership interests,
membership interests or equity of any Person, or otherwise causing any
Person to become a Subsidiary, or (c) a merger or consolidation or any
other combination with another Person (other than a Person that is a
Subsidiary) provided that the Company or the Subsidiary is the
surviving entity.
"Affiliate" means, as to any Person, any other Person which,
directly or indirectly, is in control of, is controlled by, or is under
common control with, such Person. A Person shall be deemed to control
another Person if the controlling Person possesses, directly or
indirectly, the power to direct or cause the direction of the
management and policies of the other Person, whether through the
ownership of voting securities, membership interests, by contract, or
otherwise.
"Agreement" means this Credit Agreement.
"Applicable Margin" means: (i) with respect to Base Rate
Loans, 0%; and (ii) with respect to Offshore Rate Loans, (a) during the
periods when 50% or less of the Commitment is being utilized, the
Applicable Margin for all Offshore Rate Loans outstanding during such
periods shall be 1.25%, and (b) during the periods when more than 50%
of the Commitment is being utilized, the Applicable Margin for all
Offshore
1
Rate Loans outstanding during such periods shall be 1.50%. As a
result, the Applicable Margin for all Offshore Rate Loans outstanding
at any one time can vary from time to time depending on the amount of
the Commitment that is being utilized at any one time.
"Assignee" has the meaning specified in subsection 9.08(a).
"Attorney Costs" means and includes all reasonable fees and
disbursements of any law firm or other external counsel, the allocated
cost of internal legal services and all disbursements of internal
counsel.
"Base Rate" means, for any day, the higher of: (a) 0.50% per
annum above the latest Federal Funds Rate, which means, for any day,
the rate set forth in the weekly statistical release designated as
H.15(519), or any successor publication, published by the Federal
Reserve Bank of New York (including any such successor, "H.15(519)") on
the preceding Business Day opposite the caption "Federal Funds
(Effective)"; or, if for any relevant day such rate is not so published
on any such preceding Business Day, the rate for such day will be the
arithmetic mean as determined by the Bank of the rates for the last
transaction in overnight Federal funds arranged prior to 9:00 a.m. (New
York City time) on that day by each of three leading brokers of Federal
funds transactions in New York City selected by the Bank; and (b) the
rate of interest in effect for such day as publicly announced from time
to time by the Bank in San Francisco, California, as its "reference
rate." (The "reference rate" is a rate set by the Bank based upon
various factors including the Bank's costs and desired return, general
economic conditions and other factors, and is used as a reference point
for pricing some loans, which may be priced at, above, or below such
announced rate.) Any change in the reference rate announced by the Bank
shall take effect at the opening of business on the day specified in
the public announcement of such change.
"Base Rate Loan" means a Loan that bears interest based on the
Base Rate.
"Borrowing Date" means any date on which a Loan is made to the
Company under Section 2.03.
"Business Day" means any day other than a Saturday, Sunday or
other day on which commercial banks in San Francisco are authorized or
required by law to close and, if the applicable Business Day relates to
any Offshore Rate Loan, means such a day on which dealings are carried
on in the applicable offshore dollar interbank market.
"Capital Adequacy Regulation" means any guideline, request or
directive of any central bank or other Governmental Authority, or any
other law, rule or regulation, whether or not having the force of law,
in each case, regarding capital adequacy of any bank
2
or of any corporation controlling a bank.
"Cash Equivalents" means:
(a) securities issued or fully guaranteed or insured
by the United States Government or any agency thereof having
maturities of not more than 12 months from the date of
acquisition;
(b) certificates of deposit, time deposits,
Eurodollar time deposits, repurchase agreements, reverse
repurchase agreements, or bankers' acceptances, having in each
case a tenor of not more than 12 months, issued by any U.S.
commercial bank or any branch or agency of a non-U.S. bank
licensed to conduct business in the U.S. having combined
capital and surplus of not less than $100,000,000 and whose
short-term securities are rated at least A-1 by Standard &
Poor's Corporation ("S&P") or at least P-1 by ▇▇▇▇▇'▇ Investor
Service, Inc. ("Moody's");
(c) taxable and tax-exempt commercial paper of an
issuer rated at least A-l by S&P or at least P-l by Moody's
and in either case having a tenor of not more than 270 days;
(d) medium term notes of an issuer rated at least AA
by S&P or at least Aa2 by Moody's and having a remaining term
of not more than 12 months after the date of acquisition by
the Company or its Subsidiaries;
(e) municipal notes and bonds which are rated at
least SP-l or AA by S&P or at least MIG-2 or Aa by Moody's
with tenors of not more than 12 months;
(f) investments in taxable or tax-exempt money market
funds with assets greater than $500,000,000 and whose assets
have average maturities less than or equal to 180 days and are
rated at least A-l by S&P or at least P-l by Moody's;
(g) money market preferred instruments of an issuer
rated at least A-1 by S&P or at least P-1 by Moody's with
tenors of not more than 12 months; or
(h) other similar investments, subject to the
Bank's prior written approval.
"Closing Date" means the date on which all conditions
precedent set forth in Section 4.01 are satisfied or waived by the
Bank.
"Code" means the Internal Revenue Code of 1986, and
regulations promulgated thereunder.
"Commitment" has the meaning specified in Section 2.01.
"Compliance Certificate" means a certificate substantially in
the form of Exhibit C.
"Consolidated Tangible Net Worth" means, at any time of
determination, in respect of the Company and its Subsidiaries,
determined on a consolidated basis, total assets (exclusive of
goodwill, licensing agreements, patents, trademarks, trade names,
organization expense, treasury stock, unamortized debt discount and
premium, deferred charges and other like intangibles) minus total
liabilities (including accrued and deferred income taxes), at such
time.
"Contingent Obligation" means, as to any Person, any direct or
indirect liability of that Person, whether or not contingent, with or
without recourse, (a) with respect to any Indebtedness, lease,
dividend, letter of credit or other obligation (the "primary
obligations") of another Person (the "primary obligor"), including any
obligation of that Person (i) to purchase, repurchase or otherwise
acquire such primary obligations or any security therefor, (ii) to
advance or provide funds for the payment or discharge of any such
primary obligation, or to maintain working capital or equity capital of
the primary obligor or otherwise to maintain the net worth or solvency
or any balance sheet item, level of income or financial condition of
the primary obligor, (iii) to purchase property, securities or services
primarily for the purpose of assuring the owner of any such primary
obligation of the ability of the primary obligor to make payment of
such primary obligation, or (iv) otherwise to assure or hold harmless
the holder of any such primary obligation against loss in respect
thereof (each, a "Guaranty Obligation"); (b) with respect to any Surety
Instrument issued for the account of that Person or as to which that
Person is otherwise liable for reimbursement of drawings or payments;
(c) to purchase any materials, supplies or other property from, or to
obtain the services of, another Person if the relevant contract or
other related document or obligation requires that payment for such
materials, supplies or other property, or for such services, shall be
made regardless of whether delivery of such materials, supplies or
other property is ever made or tendered, or such services are ever
performed or tendered, or (d) in respect of any Swap Contract.
"Consolidated Current Liabilities" means, at any time of
determination, all amounts which would, in accordance with GAAP, be
included under current liabilities on a consolidated balance sheet of
the Company and its Subsidiaries, but in any event including all
outstanding Loans, at such time.
"Contractual Obligation" means, as to any Person, any
provision of any security issued by such Person or of any agreement,
undertaking, contract, indenture, mortgage, deed of trust or other
instrument, document or agreement to which such Person is a party or by
which it or any of its property is bound.
"Conversion/Continuation Date" means any date on which, under
Section 2.04, the Company (a) converts a Loan of one Type to a Loan of
another Type, or (b) continues as a Loan of the same Type, but with a
new Interest Period, a Loan having an Interest Period expiring on such
date.
"Default" means any event or circumstance which, with the
giving of notice, the lapse of time, or both, would (if not cured or
otherwise remedied during such time) constitute an Event of Default.
"Dollars", "dollars" and "$" each mean lawful money of the
United States.
"Environmental Claims" means all claims, however asserted, by
any Governmental Authority or other Person alleging potential liability
or responsibility for violation of any Environmental Law, or for
release or injury to the environment.
"Environmental Laws" means all federal, state or local laws,
statutes, common law duties, rules, regulations, ordinances and codes,
together with all administrative orders, directed duties, requests,
licenses, authorizations and permits of, and agreements with, any
Governmental Authorities, in each case relating to environmental,
health, safety and land use matters.
"ERISA" means the Employee Retirement Income Security Act of
1974, and regulations promulgated thereunder.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) under common control with the Company within the meaning
of Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of
the Code for purposes of provisions relating to Section 412 of the
Code).
"ERISA Event" means (a) with respect to a Pension Plan, any of
the events set forth in Section 4043(c) of ERISA or the regulations
thereunder, other than any such event for which the 30-day notice
requirement under ERISA has been waived in regulations issued by the
PBGC; (b) a withdrawal by the Company or any ERISA Affiliate from a
Pension Plan subject to Section 4063 of ERISA during a plan year in
which it was a substantial employer (as defined in Section 4001(a)(2)
of ERISA) or a cessation of operations which is treated as such a
withdrawal under Section 4062(e) of ERISA; (c) a complete or partial
withdrawal by the Company or any ERISA Affiliate from a Multiemployer
Plan or notification that a Multiemployer Plan is in reorganization;
(d) the filing of a notice of intent to terminate, the treatment of a
Plan amendment as a termination under Section 4041 or 4041A of ERISA,
or the commencement of proceedings by the PBGC to terminate a Pension
Plan or Multiemployer Plan; (e) an event or condition which might
reasonably be expected to constitute grounds under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to
administer, any Pension Plan or Multiemployer Plan; or (f) the
imposition of any liability under Title IV of ERISA, other than PBGC
premiums due but not delinquent under Section 4007 of ERISA, upon the
Company or any ERISA Affiliate.
"Event of Default" means any of the events or circumstances
specified in Section 8.01.
"FDIC" means the Federal Deposit Insurance Corporation, and
any Governmental Authority succeeding to any of its principal
functions.
"FRB" means the Board of Governors of the Federal Reserve
System, and any Governmental Authority succeeding to any of its
principal functions.
"GAAP" means generally accepted accounting principles set
forth from time to time in the opinions and pronouncements of the
Accounting Principles Board and the American Institute of Certified
Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board (or agencies with similar functions of
comparable stature and authority within the U.S. accounting
profession), which are applicable to the circumstances as of the date
of determination.
"Governmental Authority" means any nation or government, any
state or other political subdivision thereof, any central bank (or
similar monetary or regulatory authority) thereof, any entity
exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government, and any
corporation or other entity owned or controlled, through stock or
capital ownership or otherwise, by any of the foregoing.
"Guaranty Obligation" has the meaning specified in the
definition of "Contingent Obligation."
"Indebtedness" of any Person means, without duplication, (a)
all indebtedness for borrowed money; (b) all obligations issued,
undertaken or assumed as the deferred purchase price of property or
services (other than trade payables entered into in the ordinary course
of business on ordinary terms); (c) all non-contingent reimbursement or
payment obligations with respect to Surety Instruments; (d) all
obligations evidenced by notes, bonds, debentures or similar
instruments, including obligations so evidenced incurred in connection
with the acquisition of property, assets or businesses; (e) all
indebtedness created or arising under any conditional sale or other
title retention agreement, or incurred as financing, in either case
with respect to property acquired by the Person (even though the rights
and remedies of the seller or bank under such agreement in the event of
default are limited to repossession or sale of such property); (f) all
obligations with respect to capital leases; (g) all net indebtedness
referred to in clauses (a) through (f) above secured by (or for which
the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien upon or in property (including
accounts and contracts rights) owned by such Person, even though such
Person has not assumed or become liable for the payment of such
Indebtedness; and (h) all Guaranty Obligations in respect of
indebtedness or obligations of others of the kinds referred to in
clauses (a) through (g) above. Notwithstanding the foregoing, the term
"Indebtedness" shall not include the Company's deferred maintenance
revenue arising in the Company's ordinary course of business and
calculated in accordance with GAAP. For all purposes of this Agreement,
the Indebtedness of any Person shall include all recourse Indebtedness
of any partnership or joint venture or limited liability company in
which such Person is a general partner or a joint venturer or a member.
"Indemnified Liabilities" has the meaning specified in Section
9.05.
"Indemnified Person" has the meaning specified in Section
9.05.
"Independent Auditor" has the meaning specified in subsection
6.01(a).
"Insolvency Proceeding" means, with respect to any person, (a)
any case, action or proceeding with respect to such Person before any
court or other Governmental Authority relating to bankruptcy,
reorganization, insolvency, liquidation, receivership, dissolution,
winding-up or relief of debtors, or (b) any general assignment for the
benefit of creditors, composition, marshalling of assets for creditors,
or other, similar arrangement in respect of its creditors generally or
any substantial portion of its creditors; undertaken under U.S.
Federal, state or foreign law, including the Federal Bankruptcy Reform
Act of 1978 (11 U.S.C. ss.101, et seq.).
"Interest Payment Date" means, as to any Loan other than a
Base Rate Loan, the last day of each Interest Period applicable to such
Loan and, as to any Base Rate Loan, the last Business Day of each
calendar quarter and each date such Loan is converted into another Type
of Loan, provided, however, that if any Interest Period for an Offshore
Rate Loan exceeds three months, the date that falls three months after
the beginning of such Interest Period and after each Interest Payment
Date thereafter is also an Interest Payment Date.
"Interest Period" means, as to any Offshore Rate Loan, the
period commencing on the Borrowing Date of such Loan or on the
Conversion/Continuation Date on which the Loan is converted into or
continued as an Offshore Rate Loan, and ending on the date one, two,
three or six months thereafter as selected by the Company in its Notice
of Borrowing or Notice of Conversion/Continuation; provided that:
(i) if any Interest Period would otherwise end on a
day that is not a Business Day, that Interest Period shall be
extended to the following Business Day unless, in the case of an
Offshore Rate Loan, the result of such extension would be to
carry such Interest Period into another calendar month, in which
event such Interest Period shall end on the preceding Business
Day;
(ii) any Interest Period pertaining to an Offshore
Rate Loan that begins on the last Business Day of a calendar
month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such
Interest Period) shall end on the last Business Day of the
calendar month at the end of such Interest Period; and
(iii) no Interest Period for any Loan shall extend
beyond the Termination Date as determined by subsection (a) of
the definition of that term.
"Joint Venture" means a single-purpose corporation, partnership,
limited liability company, joint venture or other similar legal
arrangement (whether created by contract or conducted through a separate
legal entity) now or hereafter formed by the Company or any of its
Subsidiaries with another Person in order to conduct a common venture or
enterprise with such Person.
"Leverage Ratio" means, as of any date of determination, the
ratio of (a) total consolidated liabilities of the Company and its
Subsidiaries on such date less deferred revenue of the Company and its
Subsidiaries as of such date, to (b) Consolidated Tangible Net Worth, in
each case as determined in accordance with GAAP.
"Lien" means any security interest, mortgage, deed of trust,
pledge, hypothecation, assignment, charge or deposit arrangement,
encumbrance, lien (statutory or other) or preferential arrangement of
any kind or nature whatsoever in respect of any property (including
those created by, arising under or evidenced by any conditional sale or
other title retention agreement, the interest of a lessor under a
capital lease, any financing lease having substantially the same
economic effect as any of the foregoing, or the filing of any financing
statement naming the owner of the asset to which such lien relates as
debtor, under the Uniform Commercial Code or any comparable law), but
not including the interest of a lessor under an operating lease.
"Loan" means an extension of credit by the Bank to the Company
under Article II, or any portion thereof remaining after or resulting
from any conversion of a Loan under Section 2.04, and may be a Base Rate
Loan or an Offshore Rate Loan (each, a "Type" of Loan).
"Loan Documents" means this Agreement and all other documents
delivered to the Bank in connection herewith.
"Margin Stock" means "margin stock" as such term is defined in
Regulation G, T, U or X of the FRB.
"Material Adverse Effect" means (a) a material adverse change
in, or a material adverse effect upon, the operations, business,
properties, condition (financial or otherwise) or prospects of the
Company or the Company and its Subsidiaries taken as a whole; (b) a
material impairment of the ability of the Company to perform under any
Loan Document and to avoid any Event of Default; or (c) a material
adverse effect upon the legality, validity, binding effect or
enforceability against the Company of any Loan Document.
"Multiemployer Plan" means a "multiemployer plan", within the
meaning of Section 4001(a)(3) of ERISA, to which the Company or any
ERISA Affiliate makes, is making, or is obligated to make contributions
or, during the preceding three calendar years, has made, or been
obligated to make, contributions.
"Net Issuance Proceeds" means, as to any issuance of debt or
equity by any Person, cash proceeds and non-cash proceeds received or
receivable by such Person in connection therewith, net of reasonable
out-of-pocket costs and expenses paid or incurred in connection
therewith in favor of any Person not an Affiliate of such Person.
"Notice of Borrowing" means a notice in substantially the form
of Exhibit A.
"Notice of Conversion/Continuation" means a notice in
substantially the form of Exhibit B.
"Obligations" means all advances, debts, liabilities,
obligations, covenants and duties arising under any Loan Document owing
by the Company to the Bank or any Indemnified Person, whether direct or
indirect (including those acquired by assignment), absolute or
contingent, due or to become due, now existing or hereafter arising.
"Offshore Rate" means, for any Interest Period, with respect to
an Offshore Rate Loan the rate of interest per annum (rounded upward to
the next 1/16th of 1%) determined by the Bank as follows:
Offshore Rate = IBOR
------------------------------------
1.00 - Eurodollar Reserve Percentage
Where,
"Eurodollar Reserve Percentage" means for any day for
any Interest Period the maximum reserve percentage (expressed as
a decimal, rounded upward to the next 1/100th of 1%) in effect
on such day (whether or not applicable to the Bank) under
regulations issued from time to time by the FRB for determining
the maximum reserve requirement (including any emergency,
supplemental or other marginal reserve requirement) with respect
to Eurocurrency funding (currently referred to as "Eurocurrency
liabilities"); and
"IBOR" means the rate of interest per annum determined
by the Bank as the rate at which dollar deposits in the
approximate amount of the Bank's Offshore Rate Loan for such
Interest Period would be offered by the Bank's Grand Cayman
Branch, Grand Cayman B.W.I. (or such other office as may be
designated for such purpose by the Bank), to major banks in the
offshore dollar interbank market at their request at
approximately [11:00 a.m. (New York City time) two Business Days
prior to] the commencement of such Interest Period.
The Offshore Rate shall be adjusted automatically as to
all Offshore Rate Loans then outstanding as of the effective
date of any change in the Eurodollar Reserve Percentage.
"Offshore Rate Loan" means a Loan that bears interest based on
the Offshore Rate.
"Organization Documents" means, for any corporation, the
certificate or articles of incorporation, the bylaws, any certificate of
determination or instrument relating to the rights of preferred
shareholders of such corporation, any shareholder rights agreement, and
all applicable resolutions of the board of directors (or any committee
thereof) of such corporation.
"Participant" has the meaning specified in subsection 9.08(b).
"PBGC" means the Pension Benefit Guaranty Corporation, or any
Governmental Authority succeeding to any of its principal functions
under ERISA.
"Pension Plan" means a pension plan (as defined in Section 3(2)
of ERISA) subject to Title IV of ERISA which the Company sponsors,
maintains, or to which it makes, is making, or is obligated to make
contributions, or in the case of a multiple employer plan (as described
in Section 4064(a) of ERISA) has made contributions at any time during
the immediately preceding five (5) plan years.
"Permitted Liens" has the meaning specified in Section 7.01.
"Permitted Swap Obligations" means all obligations (contingent
or otherwise) of the Company or any Subsidiary existing or arising under
Swap Contracts, provided that each of the following criteria is
satisfied: (a) such obligations are (or were) entered into by such
Person in the ordinary course of business for the purpose of directly
mitigating risks associated with liabilities, commitments or assets held
by such Person, or changes in the value of securities issued by such
Person in conjunction with a securities repurchase program not otherwise
prohibited hereunder, and not for purposes of speculation or taking a
"market view;" (b) such Swap Contracts do not contain any provision
("walk-away" provision) exonerating the non-defaulting party from its
obligation to make payments on outstanding transactions to the
defaulting party or any provision creating or permitting the declaration
of an event of default, termination event or similar event upon the
occurrence of an Event of Default hereunder (other than an Event of
Default under subsection 8.01(a).
"Person" means an individual, partnership, corporation, limited
liability company, business trust, joint stock company, trust,
unincorporated association, joint venture or Governmental Authority.
"Plan" means an employee benefit plan (as defined in Section
3(3) of ERISA) which the Company sponsors or maintains or to which the
Company makes, is making, or is obligated to make contributions and
includes any Pension Plan.
"Requirement of Law" means, as to any Person, any law (statutory
or common), treaty, rule or regulation or determination of an arbitrator
or of a Governmental Authority, in each case applicable to or binding
upon the Person or any of its property or to which the Person or any of
its property is subject.
"Responsible Officer" means the chief executive officer or the
president of the Company, or any other officer having substantially the
same authority and responsibility; or, with respect to compliance with
financial covenants, the chief financial officer or the treasurer of the
Company, or any other officer having substantially the same authority
and responsibility.
"SEC" means the Securities and Exchange Commission, or any
Governmental Authority succeeding to any of its principal functions.
"Subsidiary" of a Person means any corporation, association,
partnership, limited liability company, joint venture or other business
entity of which more than 50% of the voting stock, membership interests
or other equity interests (in the case of Persons other than
corporations), is owned or controlled directly or indirectly by the
Person, or one or more of the Subsidiaries of the Person, or a
combination thereof. Unless the context otherwise clearly requires,
references herein to a "Subsidiary" refer to a Subsidiary of the
Company.
"Surety Instruments" means all letters of credit (including
standby and commercial), banker's acceptances, bank guaranties, shipside
bonds, surety bonds and similar instruments.
"Swap Contract" means any agreement, whether or not in writing,
relating to any transaction that is a rate swap, basis swap, forward
rate transaction, commodity swap, commodity option, equity or equity
index swap or option, bond, note or ▇▇▇▇ option, interest rate option,
forward foreign exchange transaction, cap, collar or floor transaction,
currency swap, cross-currency rate swap, swaption, currency option or
any other, similar transaction (including any option to enter into any
of the foregoing) or any combination of the foregoing, and, unless the
context otherwise clearly requires, any master agreement relating to or
governing any or all of the foregoing.
"Swap Termination Value" means, in respect of any one or more
Swap Contracts, after taking into account the effect of any legally
enforceable netting agreement relating to such Swap Contracts, (a) for
any date on or after the date such Swap Contracts have been closed out
and termination value(s) determined in accordance therewith, such
termination value(s), and (b) for any date prior to the date referenced
in clause (a) the amount(s) determined as the ▇▇▇▇-to-market value(s)
for such Swap Contracts, as determined by the Company based upon one or
more mid-market or other readily available quotations provided by any
recognized dealer in such Swap Contracts (which may include any Bank).
"Termination Date" means the earlier to occur of:
(a) the date that is two (2) years after the Closing
Date; provided, that if the Termination Date shall fall on a
date that is not a Business Day, the Termination Date shall be
the immediately preceding Business Day; and
(b) the date on which the Commitment terminates in
accordance with the provisions of this Agreement.
"Type" has the meaning specified in the definition of "Loan."
"Unfunded Pension Liability" means the excess of a Plan's
benefit liabilities under Section 4001(a)(16) of ERISA, over the current
value of that Plan's assets, determined in accordance with the
assumptions used for funding the Pension Plan pursuant to Section 412 of
the Code for the applicable plan year.
"United States" and "U.S." each means the United States of
America.
"Wholly-Owned Subsidiary" means any corporation in which (other
than directors' qualifying shares required by law) 100% of the capital
stock of each class having ordinary voting power, and 100% of the
capital stock of every other class, in each case, at the time as of
which any determination is being made, is owned, beneficially and of
record, by the Company, or by one or more of the other Wholly-Owned
Subsidiaries at the Company, or both.
1.02 Other Interpretive Provisions. (a) The meanings of defined terms are
equally applicable to the singular and plural forms of the defined terms.
(b) The words "hereof", "herein", "hereunder" and similar words
refer to this Agreement as a whole and not to any particular provision of this
Agreement; and subsection, Section, Schedule and Exhibit references are to this
Agreement unless otherwise specified. The term "documents" includes any and all
instruments, documents, agreements, certificates, indentures, notices and other
writings, however evidenced. The term "including" is not limiting and means
"including without limitation." In the computation of periods of time from a
specified date to a later specified date, the word "from" means "from and
including"; the words "to" and "until" each mean "to but excluding", and the
word "through" means "to and including."
(c) Unless otherwise expressly provided herein, (i) references
to agreements (including this Agreement) and other contractual instruments shall
be deemed to include all subsequent amendments and other modifications thereto,
but only to the extent such amendments and other modifications are not
prohibited by the terms of any Loan Document, and (ii) references to any statute
or regulation are to be construed as including all statutory and regulatory
provisions consolidating, amending, replacing, supplementing or interpreting the
statute or regulation.
(d) The captions and headings of this Agreement are for
convenience of reference only and shall not affect the interpretation of this
Agreement. This Agreement and other Loan Documents may use several different
limitations, tests or measurements to regulate the same or similar matters. All
such limitations, tests and measurements are cumulative and shall each be
performed in accordance with their terms. Unless otherwise expressly provided,
any reference to any action of the Agent or the Banks by way of consent,
approval or waiver shall be deemed modified by the phrase "in its/their sole
discretion."
(e) This Agreement and the other Loan Documents are the result
of negotiations between and have been reviewed by counsel to the Bank and the
Company, and are the products of both parties. Accordingly, they shall not be
construed against the Bank merely because of the Bank's involvement in their
preparation.
1.03 Accounting Principles . Unless the context otherwise clearly
requires, all accounting terms not expressly defined herein shall be construed,
and all financial computations required under this Agreement shall be made, in
accordance with GAAP, consistently applied. References herein to "fiscal year"
and "fiscal quarter" refer to such fiscal periods of the Company.
ARTICLE II
THE CREDIT
2.01 Amount and Terms of Commitment . The Bank agrees, on the terms and
conditions set forth herein, to make Loans to the Company from time to time on
any Business Day during the period from the Closing Date to the Termination
Date, in an aggregate amount not to exceed at any time outstanding $20,000,000
(such amount, as the same may be reduced under Section 2.05 or as a result of
one or more assignments under Section 9.08, the "Commitment"). Within the limits
of the Commitment, and subject to the other terms and conditions hereof, the
Company may borrow under this Section 2.01, prepay under Section 2.06 and
reborrow under this Section 2.01.
2.02 Loan Accounts . The Loans made by the Bank shall be evidenced by
one or more loan accounts or records maintained by the Bank in the ordinary
course of business. The loan accounts or records maintained by the Bank shall be
conclusive absent manifest error of the amount of the Loans made by the Bank to
the Company and the interest and payments thereon. Any failure so to record or
any error in doing so shall not, however, limit or otherwise affect the
obligation of the Company hereunder to pay any amount owing with respect to the
Loans.
2.03 Procedure for Borrowing . Each Loan shall be made upon the
Company's irrevocable written notice delivered to the Bank in the form of a
Notice of Borrowing, (which notice must be received by the Bank prior to 9:00
a.m. (San Francisco time) (a) three Business Days prior to the requested
Borrowing Date, in the case of an Offshore Rate Loan; and (b) on the requested
Borrowing Date, in the case of a Base Rate Loan, specifying: (i) the amount of
the Loan, which shall be in a minimum amount of $500,000 or any multiple of
$100,000 in excess thereof; (ii) the requested Borrowing Date, which shall be a
Business Day; (iii) the Type of Loan requested; and (iv) the duration of the
Interest Period applicable to such Loan. If the Notice of Borrowing fails to
specify the duration of the Interest Period for an Offshore Rate Loan, such
Interest Period shall be three months. The proceeds of each Loan will be made
available to the Company by the Bank either (i) by crediting the account of the
Company on the books of the Bank, or by wire transfer in accordance with written
instructions provided to the Bank by the Company. After giving effect to any
borrowing of a Loan, there shall not be more than ten different Interest Periods
in effect.
2.04 Conversion and Continuation Elections . (a) The Company may, upon
irrevocable written notice to the Bank in accordance with subsection 2.04(b):
(i) elect, as of any Business Day, in the case of a Base Rate Loan, or as of the
last day of the applicable Interest Period, in the case of an Offshore Rate
Loan, to convert any such Loan (or any part thereof in an amount not less than
$500,000, or that is in an integral multiple of $100,000 in excess thereof) into
a Loan of any other Type; or (ii) elect, as of the last day of the applicable
Interest Period, to continue a Loan having an Interest Period expiring on such
day (or any part thereof in an amount not less than $500,000, or that is in an
integral multiple of $100,000 in excess thereof); provided, that if at any time
the amount of any Offshore Rate Loan is reduced, by payment, prepayment, or
conversion of part thereof to be less than $500,000, such Offshore Rate Loan
shall automatically convert into a Base Rate Loan, and on and after such date
the right of the Company to continue such Loan as, and convert such Loan into,
an Offshore Rate Loan shall terminate.
(b) The Company shall deliver a Notice of
Conversion/Continuation to be received by the Bank not later than 9:00 a.m. (San
Francisco time) at least (i) three Business Days in advance of the
Conversion/Continuation Date, if any Loan is to be converted into or continued
as an Offshore Rate Loan; and (ii) on the Conversion/Continuation Date, if any
Loan is to be converted into a Base Rate Loan, specifying: (A) the proposed
Conversion/Continuation Date; (B) the amount of the Loan to be converted or
continued; (C) the Type of Loan resulting from the proposed conversion or
continuation; and (D) in the case of conversions into Offshore Rate Loans, the
duration of the requested Interest Period.
(c) If upon the expiration of any Interest Period applicable to
an Offshore Rate Loan, the Company has failed to select timely a new Interest
Period to be applicable to such Loan, or if any Default or Event of Default then
exists, the Company shall be deemed to have elected to convert such Loan into a
Base Rate Loan effective as of the expiration date of such Interest Period.
(d) Unless the Bank otherwise consents, during the existence of
a Default or Event of Default, the Company may not elect to have a Loan
converted into or continued as an Offshore Rate Loan.
(e) After giving effect to any conversion or continuation of any
Loan, there shall not be more than ten different Interest Periods in effect.
2.05 Voluntary Termination or Reduction of Commitment. The Company may,
upon not less than five Business Days' prior notice to the Bank, terminate the
Commitment, or permanently reduce the Commitment by a minimum amount of
$500,000, or any multiple of $100,000 in excess thereof; unless, after giving
effect thereto and to any prepayments of Loans made on the effective date
thereof, the then-outstanding principal amount of the Loans would exceed the
amount of the Commitment then in effect. Once reduced in accordance with this
Section, the Commitment may not be increased. All accrued commitment fees to,
but not including the effective date of any reduction or termination of the
Commitment, shall be paid on the effective date of such reduction or
termination.
2.06 Optional Prepayments. Subject to the terms and provisions of
Section 3.04, the Company may, at any time or from time to time, upon not less
than one Business Day's irrevocable notice to the Bank received prior to 10:00
a.m. (San Francisco time), prepay without penalty Loans in whole or in part, in
minimum amounts of $500,000, or any multiple of $100,000 in excess thereof. Such
notice of prepayment shall specify the date and amount of such prepayment and
the Type(s) of Loans to be prepaid. If such notice is given by the Company, the
Company shall make such prepayment and the payment amount specified in such
notice shall be due and payable on the date specified therein, together with
accrued interest to each such date on the amount prepaid and any amounts
required pursuant to Section 3.04.
2.07 Repayment. The Company shall repay to the Bank on the Termination
Date the aggregate principal amount of all Loans outstanding on such date.
2.08 Interest. (a) Each Loan shall bear interest on the outstanding
principal amount thereof from the applicable Borrowing Date at a rate per annum
equal to the Offshore Rate or the Base Rate, as the case may be (and subject to
the Company's right to convert to other Types of Loans under Section 2.04), plus
the Applicable Margin.
(b) Interest on each Loan shall be paid in arrears on each
Interest Payment Date. Interest shall also be paid on the date of any prepayment
of Loans under Section 2.06 for the portion of the Loans so prepaid and upon
payment (including prepayment) in full thereof and, during the existence of any
Event of Default, interest shall be paid on demand of the Bank.
(c) Notwithstanding subsection (a) of this Section, while any
Event of Default exists or after acceleration, the Company shall pay interest
(after as well as before entry of judgment thereon to the extent permitted by
law) on the principal amount of all outstanding Loans, at a rate per annum which
is determined by adding 2% per annum to the Applicable Margin then in effect for
such Loans; provided, however, that, on and after the expiration of any Interest
Period applicable to any Offshore Rate Loan outstanding on the date of
occurrence of such Event of Default or acceleration, the principal amount of
such Loan shall, during the continuation of such Event of Default or after
acceleration, bear interest at a rate per annum equal to the Base Rate plus 2%.
2.09 Commitment Fee. The Company shall pay to the Bank a commitment fee
on the average daily unused portion of the Commitment, computed on a quarterly
basis in arrears on the last Business Day of each calendar quarter based upon
the daily utilization for that quarter as calculated by the Bank, equal to
one-half of one percent (.50%) per annum. Such commitment fee shall accrue from
the Closing Date to the Termination Date and shall be due and payable quarterly
in arrears on the last Business Day of each quarter commencing on the Closing
Date through the Termination Date, with the final payment to be made on the
Termination Date provided that, in connection with any reduction or termination
of Commitment under Section 2.05, the accrued commitment fee calculated for the
period ending on such date shall also be paid on the date of such reduction or
termination, with the following quarterly payment being calculated on the basis
of the period from such reduction or termination date to such quarterly payment
date. The commitment fee provided in this subsection shall accrue at all times
after the above-mentioned commencement date, including at any time during which
one or more conditions in Article IV are not met.
2.10 Computation of Fees and Interest. All computations of interest for
Base Rate Loans when the Base Rate is determined by the Bank's "reference rate"
shall be made on the basis of a year of 365 or 366 days, as the case may be, and
actual days elapsed. All other computations of fees and interest shall be made
on the basis of a 360-day year and actual days elapsed (which results in more
interest being paid than if computed on the basis of a 365-day year). Interest
and fees shall accrue during each period during which interest or such fees are
computed from the first day thereof to the last day thereof. Each determination
of an interest rate by the Bank shall be conclusive and binding on the Company
in the absence of manifest error.
2.11 Payments by the Company. All payments to be made by the Company
shall be made without set-off, recoupment or counterclaim. Except as otherwise
expressly provided herein, all payments by the Company shall be made to the Bank
at the address from time to time specified by the Bank for such purpose, and
shall be made in dollars and in immediately available funds, no later than 3:00
p.m. (San Francisco time) on the date specified herein. Any payment received by
the Bank later than 3:00 p.m. (San Francisco time) shall be deemed to have been
received on the following Business Day and any applicable interest or fee shall
continue to accrue. Subject to the provisions set forth in the definition of
"Interest Period" herein, whenever any payment is due on a day other than a
Business Day, such payment shall be made on the following Business Day, and such
extension of time shall in such case be included in the computation of interest
or fees, as the case may be.
ARTICLE III
TAXES, YIELD PROTECTION AND ILLEGALITY
3.01 Taxes. If any payments to the Bank under this Agreement are made
from outside the United States, the Company will not deduct any foreign taxes
from any payments it makes to the Bank. If any such taxes are imposed on any
payments made by the Company (including payments under this Section), the
Company will pay the taxes and will also pay to the Bank, at the time interest
is paid, any additional amount which the Bank specifies as necessary to preserve
the after-tax yield the Bank would have received if such taxes had not been
imposed. The Company will confirm that it has paid the taxes by giving the Bank
official tax receipts (or notarized copies) within 30 days after the due date.
3.02 Illegality. (a) If the Bank determines that the introduction of
any Requirement of Law, or any change in any Requirement of Law, or in the
interpretation or administration of any Requirement of Law, has made it
unlawful, or that any central bank or other Governmental Authority has asserted
that it is unlawful, for the Bank or any applicable lending office of the Bank
to make Offshore Rate Loans, then, on notice thereof by the Bank to the Company,
any obligation of the Bank to make Offshore Rate Loans shall be suspended until
the Bank notifies the Company that the circumstances giving rise to such
determination no longer exist.
(b) If the Bank determines that it is unlawful to maintain
Offshore Rate Loans, the Company shall, upon its receipt of notice of such fact
and demand from the Bank, prepay in full all Offshore Rate Loans then
outstanding, together with interest accrued thereon and amounts required under
Section 3.04, either on the last day of the Interest Period thereof, if the Bank
may lawfully continue to maintain Offshore Rate Loans to such day, or
immediately, if the Bank may not lawfully continue to maintain Offshore Rate
Loans. If the Company is required to so prepay any Offshore Rate Loan, then
concurrently with such prepayment, the Company shall borrow from the Bank, in
the amount of such repayment, a Base Rate Loan.
3.03 Increased Costs and Reduction of Return. (a) If the Bank
determines that, due to either (i) the introduction of or any change in or in
the interpretation of any law or regulation or (ii) the compliance by the Bank
with any guideline or request from any central bank or other Governmental
Authority (whether or not having the force of law), there shall be any increase
in the cost to the Bank of agreeing to make or making, funding or maintaining
any Offshore Rate Loan, then the Company shall be liable for, and shall from
time to time, upon written demand, pay to the Bank, additional amounts as are
sufficient to compensate the Bank for such increased costs.
(b) If the Bank shall have determined that (i) the introduction
of any Capital Adequacy Regulation, (ii) any change in any Capital Adequacy
Regulation, (iii) any change in the interpretation or administration of any
Capital Adequacy Regulation by any central bank or other Governmental Authority
charged with the interpretation or administration thereof, or (iv) compliance by
the Bank (or any applicable lending office of the Bank) or any corporation
controlling the Bank with any Capital Adequacy Regulation, affects or would
affect the amount of capital required or expected to be maintained by the Bank
or any corporation controlling the Bank and (taking into consideration the
Bank's or such corporation's policies with respect to capital adequacy and the
Bank's desired return on capital) determines that the amount of such capital is
increased as a consequence of its Commitment, loans, credits or obligations
under this Agreement, then, upon written demand of the Bank to the Company, the
Company shall pay to the Bank, from time to time as specified by the Bank,
additional amounts sufficient to compensate the Bank for such increase.
3.04 Funding Losses. The Company shall reimburse the Bank and hold the
Bank harmless from any loss or expense which the Bank may sustain or incur as a
consequence of: (a) the failure of the Company to make on a timely basis any
payment of principal of any Offshore Rate Loan; (b) the failure of the Company
to borrow, continue or convert a Loan after the Company has given (or is deemed
to have given) a Notice of Borrowing or a Notice of Conversion/Continuation; (c)
the failure of the Company to make any prepayment in accordance with any notice
delivered under Section 2.06; (d) the prepayment or other payment (including
after acceleration thereof) of an Offshore Rate Loan on a day that is not the
last day of the relevant Interest Period; or (e) the automatic conversion under
Section 2.04 of any Offshore Rate Loan to a Base Rate Loan on a day that is not
the last day of the relevant Interest Period; including any such loss or expense
arising from the liquidation or reemployment of funds obtained by it to maintain
any Offshore Rate Loans or from fees payable to terminate the deposits from
which such funds were obtained.
3.05 Inability to Determine Rates. If the Bank determines that for any
reason adequate and reasonable means do not exist for determining the Offshore
Rate for any requested Interest Period with respect to a proposed Offshore Rate
Loan, or that the Offshore Rate applicable pursuant to subsection 2.08(a) for
any requested Interest Period with respect to a proposed Offshore Rate Loan does
not adequately and fairly reflect the cost to the Bank of funding such Loan, the
Bank will promptly so notify the Company. Thereafter, the obligation of the Bank
to make or maintain Offshore Rate Loans, as the case may be, hereunder shall be
suspended until the Bank revokes such notice in writing. Upon receipt of such
notice, the Company may revoke any Notice of Borrowing or Notice of
Conversion/Continuation then submitted by it. If the Company does not revoke
such Notice, the Bank shall make, convert or continue the Loan, as proposed by
the Company, in the amount specified in the applicable notice submitted by the
Company, but such Loans shall be made, converted or continued as a Base Rate
Loan instead of an Offshore Rate Loan.
3.06 Survival. The agreements and obligations of the Company in this
Article III shall survive the payment of all other Obligations.
ARTICLE IV
CONDITIONS PRECEDENT
4.01 Conditions of Initial Loan. The obligation of the Bank to make the
initial Loan hereunder is subject to the condition that the Bank has received on
or before the Closing Date all of the following, in form and substance
satisfactory to the Bank:
(a) Credit Agreement. This Agreement executed by the Company;
(b) Resolutions; Incumbency. (i) Copies of the resolutions of
the board of directors of the Company authorizing the transactions contemplated
hereby, certified as of the Closing Date by the Secretary of the Company; and
(ii) a certificate of the Secretary of the Company certifying the names and true
signatures of the officers of the Company authorized to execute, deliver and
perform, as applicable, this Agreement, and all other Loan Documents to be
delivered by it hereunder;
(c) Organization Documents; Good Standing. Each of the
following documents: (i) the articles or certificate of incorporation and the
bylaws of the Company as in effect on the Closing Date, certified by the
Secretary of the Company as of the Closing Date; and (ii) a good standing and
tax good standing certificate for the Company from the Secretary of State (or
similar, applicable Governmental Authority) of its state of incorporation and
each state where the Company is qualified to do business as a foreign
corporation as of a recent date, together with a bring-down certificate by
facsimile, dated the Closing Date;
(d) Legal Opinion. A favorable opinion of counsel to the
Company, addressed to the Bank, with respect to such legal matters relating
hereto as the Bank may reasonably request, provided that such opinion shall be
limited to United States legal matters;
(e) Payment of Fees. Evidence of payment by the Company of all
accrued and unpaid fees, costs and expenses to the extent then due and payable
on the Closing Date, together with Attorney Costs of the Bank to the extent
invoiced prior to or on the Closing Date, plus such additional amounts of
Attorney Costs as shall constitute the Bank's reasonable estimate of Attorney
Costs incurred or to be incurred by it through the closing proceedings (provided
that such estimate shall not thereafter preclude final settling of accounts
between the Company and the Bank); including any such costs, fees and expenses
arising under or referenced in Sections 2.10 and 9.04;
(f) Certificate. A certificate signed by a Responsible Officer,
dated as of the Closing Date, stating that: (i) the representations and
warranties contained in Article V are true and correct on and as of such date,
as though made on and as of such date; (ii) no Default or Event of Default
exists or would result from the execution and delivery of this Agreement; and
(iii) there has occurred since January 31, 1997, no event or circumstance that
has resulted or could reasonably be expected to result in a Material Adverse
Effect; and
(g) Other Documents. Such other approvals, opinions, documents
or materials as the Bank may reasonably request.
4.02 Conditions to All Loans. The obligation of the Bank to make any
Loan (including the initial Loan) or to continue or convert any Loan under
Section 2.04 is subject to the satisfaction of the following conditions
precedent on the relevant Borrowing Date or Conversion/Continuation Date:
(a) Notice of Borrowing or Conversion/Continuation. The Bank
shall have received a Notice of Borrowing or a Notice of
Conversion/Continuation, as applicable;
(b) Continuation of Representations and Warranties. The
representations and warranties in Article V shall be true and correct on and as
of such Borrowing Date or Conversion/Continuation Date with the same effect as
if made on and as of such Borrowing Date or Conversion/Continuation Date (except
to the extent such representations and warranties expressly refer to an earlier
date, in which case they shall be true and correct as of such earlier date);
(c) No Existing Default. No Default or Event of Default shall
exist or shall result from such Loan or continuation or conversion;
(d) Recapitalization. Completion of the recapitalization
transaction described in the Company's Form S-1 filing with the Securities and
Exchange Commission dated June 3, 1997 (a true and correct copy of which is
attached hereto as Exhibit D), including (i) the sale of common shares to the
public, producing net cash proceeds to the Company in the minimum amount of
$60,000,000, and (ii) the repayment of the indebtedness, the termination of the
credit facilities and the release of the Liens, in each case, identified in
Schedule 4.02(d) hereto, all of which must be demonstrated or otherwise
evidenced to the Bank's reasonable satisfaction on or prior to September 1,
1997; and
(e) Schedules. The Bank shall have received by no later than
August 11, 1997, the Schedules hereto in form and substance satisfactory to the
Bank, in its sole discretion.
Each Notice of Borrowing and Notice of Conversion/Continuation submitted by the
Company hereunder shall constitute a representation and warranty by the Company
hereunder, as of the date of each such notice and as of each Borrowing Date or
Conversion/Continuation Date, as applicable, that the conditions in this Section
4.02 are satisfied.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to the Bank that:
5.01 Corporate Existence and Power. Each of the Company and its
Subsidiaries: (a) is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation; (b) has the
power and authority and all governmental licenses, authorizations, consents and
approvals to own its assets, carry on its business and to execute, deliver, and
perform its obligations under the Loan Documents; (c) is duly qualified as a
foreign corporation and is licensed and in good standing under the laws of each
jurisdiction where its ownership, lease or operation of property or the conduct
of its business requires such qualification or license; and (d) is in compliance
with all Requirements of Law; except, in each case referred to in clause (c) or
clause (d), to the extent that the failure to do so could not reasonably be
expected to have a Material Adverse Effect.
5.02 Corporate Authorization; No Contravention. The execution, delivery
and performance by the Company of this Agreement and each other Loan Document to
which the Company is party, have been duly authorized by all necessary corporate
action, and do not and will not: (a) contravene the terms of any of the
Company's Organization Documents; (b) conflict with or result in any breach or
contravention of, or the creation of any Lien under, any document evidencing any
Contractual Obligation to which the Company is a party or any order, injunction,
writ or decree of any Governmental Authority to which the Company or its
property is subject (other than the documents described in Schedule 4.01(h)
hereto evidencing obligations of the Company to be paid or otherwise satisfied
and released in full on or prior to the Closing Date); or (c) violate any
Requirement of Law.
5.03 Governmental Authorization. No approval, consent, exemption,
authorization, or other action by, or notice to, or filing with, any
Governmental Authority is necessary or required in connection with the
execution, delivery or performance by, or enforcement against, the Company or
any of its Subsidiaries of the Agreement or any other Loan Document.
5.04 Binding Effect. This Agreement and each other Loan Document to
which the Company is a party constitute the legal, valid and binding obligations
of the Company, enforceable against the Company in accordance with their
respective terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, or similar laws affecting the enforcement of creditors'
rights generally or by equitable principles relating to enforceability.
5.05 Litigation. There are no actions, suits, proceedings, claims or
disputes pending, or to the best knowledge of the Company, threatened or
contemplated, at law, in equity, in arbitration or before any Governmental
Authority, against the Company, or its Subsidiaries or any of their respective
properties which: (a) purport to affect or pertain to this Agreement or any
other Loan Document, or any of the transactions contemplated hereby or thereby;
or (b) if determined adversely to the Company or its Subsidiaries, would
reasonably be expected to have a Material Adverse Effect. No injunction, writ,
temporary restraining order or any order of any nature has been issued by any
court or other Governmental Authority purporting to enjoin or restrain the
execution, delivery or performance of this Agreement or any other Loan Document,
or directing that the transactions provided for herein or therein not be
consummated as herein or therein provided.
5.06 No Default. No Default or Event of Default exists or would result
from the incurring of any Obligations by the Company. As of the Closing Date,
neither the Company nor any Subsidiary is in default under or with respect to
any Contractual Obligation in any respect which, individually or together with
all such defaults, could reasonably be expected to have a Material Adverse
Effect, or that would, if such default had occurred after the Closing Date,
create an Event of Default under subsection 8.01(e).
5.07 ERISA Compliance. (a) Each Plan is in compliance in all material
respects with the applicable provisions of ERISA, the Code and other federal or
state law. Each Plan which is intended to qualify under Section 401(a) of the
Code has received a favorable determination letter from the Internal Revenue
Service, and any Governmental Authority succeeding to any of its principal
functions under the Code, and to the best knowledge of the Company, nothing has
occurred which would cause the loss of such qualification. The Company and each
ERISA Affiliate has made all required contributions to any Plan subject to
Section 412 of the Code, and no application for a funding waiver or an extension
of any amortization period pursuant to Section 412 of the Code has been made
with respect to any Plan.
(b) There are no pending or, to the best knowledge of Company,
threatened claims, actions or lawsuits, or action by any Governmental Authority,
with respect to any Plan which has resulted or could reasonably be expected to
result in a Material Adverse Effect. There has been no prohibited transaction or
violation of the fiduciary responsibility rules with respect to any Plan which
has resulted or could reasonably be expected to result in a Material Adverse
Effect.
(c) (i) No ERISA Event has occurred or is reasonably expected to
occur; (ii) no Pension Plan has any Unfunded Pension Liability; (iii) neither
the Company nor any ERISA Affiliate has incurred, or reasonably expects to
incur, any liability under Title IV of ERISA with respect to any Pension Plan
(other than premiums due and not delinquent under Section 4007 of ERISA); (iv)
neither the Company nor any ERISA Affiliate has incurred, or reasonably expects
to incur, any liability (and no event has occurred which, with the giving of
notice under Section 4219 of ERISA, would result in such liability) under
Section 4201 or 4243 of ERISA with respect to a Multiemployer Plan; and (v)
neither the Company nor any ERISA Affiliate has engaged in a transaction that
could be subject to Section 4069 or 4212(c) of ERISA.
5.08 Use of Proceeds; Margin Regulations. The proceeds of the Loans are
to be used solely for the purposes set forth in and permitted by Section 6.12
and Section 7.07. Neither the Company nor any Subsidiary is generally engaged in
the business of purchasing or selling Margin Stock or extending credit for the
purpose of purchasing or carrying Margin Stock.
5.09 Title to Properties. The Company and each Subsidiary have good
record and marketable title in fee simple to, or valid leasehold interests in,
all real property necessary or used in the ordinary conduct of their respective
businesses, except for such defects in title as could not, individually or in
the aggregate, have a Material Adverse Effect. As of the Closing Date, the
property of the Company and its Subsidiaries is subject to no Liens, other than
Permitted Liens.
5.10 Taxes. The Company and its Subsidiaries have filed all Federal and
other material tax returns and reports required to be filed, and have paid all
Federal and other material taxes, assessments, fees and other governmental
charges levied or imposed upon them or their properties, income or assets
otherwise due and payable, except those which are being contested in good faith
by appropriate proceedings and for which adequate reserves have been provided in
accordance with GAAP. There is no proposed tax assessment against the Company or
any Subsidiary that would, if made, have a Material Adverse Effect.
5.11 Financial Condition. The audited consolidated financial statements
of the Company and its Subsidiaries dated January 31, 1997, and the related
consolidated statements of income or operations, shareholders' equity and cash
flows for the fiscal year ended on that date: (i) were prepared in accordance
with GAAP consistently applied throughout the period covered thereby, except as
otherwise expressly noted therein; (ii) fairly present the financial condition
of the Company and its Subsidiaries as of the date thereof and results of
operations for the period covered thereby; and (iii) show all material
indebtedness and other liabilities, direct or contingent, of the Company and its
consolidated Subsidiaries as of the date thereof, including liabilities for
taxes, material commitments and Contingent Obligations. Since January 31, 1997,
there has been no Material Adverse Effect.
5.12 Environmental Matters. The Company conducts in the ordinary course
of business a review of the effect of existing Environmental Laws and existing
Environmental Claims on its business, operations and properties, and as a result
thereof the Company has reasonably concluded that, such Environmental Laws and
Environmental Claims could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
5.13 Regulated Entities. None of the Company, any Person controlling
the Company, or any Subsidiary, is an "Investment Company" within the meaning of
the Investment Company Act of 1940. The Company is not subject to regulation
under the Public Utility Holding Company Act of 1935, the Federal Power Act, the
Interstate Commerce Act, any state public utilities code, or any other Federal
or state statute or regulation limiting its ability to incur Indebtedness.
5.14 No Burdensome Restrictions. Neither the Company nor any Subsidiary
is a party to or bound by any Contractual Obligation, or subject to any
restriction in any Organization Document, or any Requirement of Law, which could
reasonably be expected to have a Material Adverse Effect (other than under the
documents described in Schedule 4.01(h) hereof evidencing obligations of the
Company to be paid or otherwise satisfied and released in full on or prior to
the Closing Date).
5.15 Copyrights, Patents, Trademarks and Licenses, etc. The Company or
its Subsidiaries own or are licensed or otherwise have the right to use all of
the patents, trademarks, service marks, trade names, copyrights, contractual
franchises, authorizations and other rights that are reasonably necessary for
the operation of their respective businesses, without conflict with the rights
of any other Person. To the best knowledge of the Company, no slogan or other
advertising device, product, process, method, substance, part or other material
now employed, or now contemplated to be employed, by the Company or any
Subsidiary infringes upon any rights held by any other Person. No claim or
litigation regarding any of the foregoing is pending or threatened, and no
patent, invention, device, application, principle or any statute, law, rule,
regulation, standard or code is pending or, to the knowledge of the Company,
proposed, which, in either case, could reasonably be expected to have a Material
Adverse Effect.
5.16 Subsidiaries. As of the Closing Date, the Company has no
Subsidiaries other than those specifically disclosed in part (a) of Schedule
5.16 hereto and has no equity investments in any other corporation or entity
other than those specifically disclosed in part (b) of Schedule 5.16.
5.17 Insurance. The properties of the Company and its Subsidiaries are
insured with financially sound and reputable insurance companies not Affiliates
of the Company, in such amounts, with such deductibles and covering such risks
as are customarily carried by companies engaged in similar businesses and owning
similar properties in localities where the Company or such Subsidiary operates.
5.18 Swap Obligations. Neither the Company nor any of its Subsidiaries
has incurred any outstanding obligations under any Swap Contracts, other than
Permitted Swap Obligations. The Company has undertaken its own independent
assessment of its consolidated assets, liabilities and commitments and has
considered appropriate means of mitigating and managing risks associated with
such matters and has not relied on any swap counterparty or any Affiliate of any
swap counterparty in determining whether to enter into any Swap Contract.
5.19 Full Disclosure. None of the representations or warranties made by
the Company in the Loan Documents as of the date such representations and
warranties are made or deemed made, and none of the statements contained in any
exhibit, report, statement or certificate furnished by or on behalf of the
Company in connection with the Loan Documents (including the offering and
disclosure materials delivered by or on behalf of the Company to the Bank prior
to the Closing Date), contains any untrue statement of a material fact or omits
any material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances under which they are
made, not misleading as of the time when made or delivered.
ARTICLE VI
AFFIRMATIVE COVENANTS
So long as the Bank shall have any Commitment hereunder, or any Loan or
other Obligation shall remain unpaid or unsatisfied, unless the Bank waives
compliance in writing:
6.01 Financial Statements. The Company shall deliver to the Bank, in
form and detail satisfactory to the Bank:
(a) as soon as available, but not later than 95 days after the
end of each fiscal year (commencing with the fiscal year ended January 31,
1998), a copy of the audited consolidated balance sheet of the Company and its
Subsidiaries as at the end of such year and the related consolidated statements
of income or operations, shareholders' equity and cash flows for such year,
setting forth in each case in comparative form the figures for the previous
fiscal year, and accompanied by the opinion of a nationally-recognized
independent public accounting firm ("Independent Auditor") which report shall
state that such consolidated financial statements present fairly the financial
position for the periods indicated in conformity with GAAP applied on a basis
consistent with prior years. Such opinion shall not be qualified or limited
because of a restricted or limited examination by the Independent Auditor of any
material portion of the Company's or any Subsidiary's records; and
(b) as soon as available, but not later than 50 days after the
end of each of the first three fiscal quarters of each fiscal year (commencing
with the fiscal quarter ended July 31, 1997, a copy of the unaudited
consolidated balance sheet of the Company and its Subsidiaries as of the end of
such quarter and the related consolidated statements of income, shareholders'
equity and cash flows for the period commencing on the first day and ending on
the last day of such quarter, and certified by a Responsible Officer as fairly
presenting, in accordance with GAAP (subject to ordinary, good faith year-end
audit adjustments), the financial position and the results of operations of the
Company and the Subsidiaries;
6.02 Certificates; Other Information. The Company shall furnish to the
Bank:
(a) concurrently with the delivery of the financial statements
referred to in subsection 6.01(a), a certificate of the Independent Auditor
stating that in making the examination necessary therefor no knowledge was
obtained of any Default or Event of Default, except as specified in such
certificate;
(b) concurrently with the delivery of the financial statements
referred to in subsections 6.01(a) and (b), a Compliance Certificate executed by
a Responsible Officer;
(c) promptly, copies of all financial statements and reports
that the Company sends to its shareholders, and copies of all financial
statements and regular, periodical or special reports (including Forms 10K, 10Q
and 8K) that the Company or any Subsidiary may make to, or file with, the SEC;
and
(d) promptly, such additional information regarding the
business, financial or corporate affairs of the Company or any Subsidiary as the
Bank may from time to time reasonably request.
6.03 Notices. The Company shall promptly notify the Bank:
(a) of the occurrence of any Default or Event of Default, and of
the occurrence or existence of any event or circumstance that foreseeably will
become a Default or Event of Default;
(b) of any matter that has resulted or may result in a Material
Adverse Effect, including (i) breach or non-performance of, or any default
under, a Contractual Obligation of the Company or any Subsidiary; (ii) any
dispute, litigation, investigation, proceeding or suspension between the Company
or any Subsidiary and any Governmental Authority; or (iii) the commencement of,
or any material development in, any litigation or proceeding affecting the
Company or any Subsidiary; including pursuant to any applicable Environmental
Laws;
(c) of the occurrence of any of the following events affecting
the Company or any ERISA Affiliate (but in no event more than 10 days after such
event), and deliver to the Bank a copy of any notice with respect to such event
that is filed with a Governmental Authority and any notice delivered by a
Governmental Authority to the Company or any ERISA Affiliate with respect to
such event: (i) an ERISA Event; (ii) a material increase in the Unfunded Pension
Liability of any Pension Plan; (iii) the adoption of, or the commencement of
contributions to, any Plan subject to Section 412 of the Code by the Company or
any ERISA Affiliate; or (iv) the adoption of any amendment to a Plan subject to
Section 412 of the Code, if such amendment results in a material increase in
contributions or Unfunded Pension Liability; and
(d) of any material change in accounting policies or financial
reporting practices by the Company or any of its consolidated Subsidiaries.
Each notice under this Section shall be accompanied by a
written statement by a Responsible Officer setting forth details of the
occurrence referred to therein, and stating what action the Company or any
affected Subsidiary proposes to take with respect thereto and at what time. Each
notice under subsection 6.03(a) shall describe with particularity any and all
clauses or provisions of this Agreement or other Loan Document that have been
(or foreseeably will be) breached or violated.
6.04 Preservation of Corporate Existence, Etc. The Company shall, and
shall cause each Subsidiary to: (a) preserve and maintain in full force and
effect its corporate existence and good standing under the laws of its state or
jurisdiction of incorporation; (b) preserve and maintain in full force and
effect all governmental rights, privileges, qualifications, permits, licenses
and franchises necessary or desirable in the normal conduct of its business
except in connection with transactions permitted by Section 7.03 and sales of
assets permitted by Section 7.02; (c) use reasonable efforts, in the ordinary
course of business, to preserve its business organization and goodwill; and (d)
preserve or renew all of its registered patents, trademarks, trade names and
service marks, the non-preservation of which could reasonably be expected to
have a Material Adverse Effect.
6.05 Maintenance of Property. The Company shall maintain, and shall
cause each Subsidiary to maintain, and preserve all its property which is used
or useful in its business in good working order and condition, ordinary wear and
tear excepted and make all necessary repairs thereto and renewals and
replacements thereof except where the failure to do so could not reasonably be
expected to have a Material Adverse Effect.
6.06 Insurance. The Company shall maintain, and shall cause each
Subsidiary to maintain, with financially sound and reputable independent
insurers, insurance with respect to its properties and business against loss or
damage of the kinds customarily insured against by Persons engaged in the same
or similar business, of such types and in such amounts as are customarily
carried under similar circumstances by such other Persons.
6.07 Payment of Obligations. The Company shall, and shall cause each
Subsidiary to, pay and discharge as the same shall become due and payable, all
their respective obligations and liabilities, including: (a) all tax
liabilities, assessments and governmental charges or levies upon it or its
properties or assets, unless the same are being contested in good faith by
appropriate proceedings and adequate reserves in accordance with GAAP are being
maintained by the Company or such Subsidiary; (b) all lawful claims which, if
unpaid, would by law become a Lien upon its property; and (c) all Indebtedness,
as and when due and payable, but subject to any subordination provisions
contained in any instrument or agreement evidencing such Indebtedness.
6.08 Compliance with Laws. The Company shall comply, and shall cause
each Subsidiary to comply, in all material respects with all Requirements of Law
of any Governmental Authority having jurisdiction over it or its business
(including the Federal Fair Labor Standards Act), except such as may be
contested in good faith or as to which a bona fide dispute may exist.
6.09 Compliance with ERISA. The Company shall, and shall cause each of
its ERISA Affiliates to: (a) maintain each Plan in compliance in all material
respects with the applicable provisions of ERISA, the Code and other federal or
state law; (b) cause each Plan which is qualified under Section 401(a) of the
Code to maintain such qualification; and (c) make all required contributions to
any Plan subject to Section 412 of the Code.
6.10 Inspection of Property and Books and Records. The Company shall
maintain and shall cause each Subsidiary to maintain proper books of record and
account, in which full, true and correct entries in conformity with GAAP
consistently applied shall be made of all financial transactions and matters
involving the assets and business of the Company and such Subsidiary. The
Company shall permit, and shall cause each Subsidiary to permit, representatives
and independent contractors of the Bank to visit and inspect any of their
respective properties, to examine their respective corporate, financial and
operating records, and make copies thereof or abstracts therefrom, and to
discuss their respective affairs, finances and accounts with their respective
directors, officers, and independent public accountants, all at the reasonable
expense of the Company and at such reasonable times during normal business hours
and as often as may be reasonably desired, upon reasonable advance notice to the
Company; provided, however, when an Event of Default exists the Bank may do any
of the foregoing at the expense of the Company at any time during normal
business hours and without advance notice.
6.11 Environmental Laws. The Company shall, and shall cause each
Subsidiary to, conduct its operations and keep and maintain its property in
compliance with all Environmental Laws.
6.12 Use of Proceeds. The Company shall use the proceeds of the Loans
for working capital and other general corporate purposes not in contravention of
any Requirement of Law or of any Loan Document.
ARTICLE VII
NEGATIVE COVENANTS
So long as the Bank shall have any Commitment hereunder, or any Loan or
other Obligation shall remain unpaid or unsatisfied, unless the Bank waives
compliance in writing:
7.01 Limitation on Liens. The Company shall not, and shall not suffer
or permit any Subsidiary to, directly or indirectly, make, create, incur, assume
or suffer to exist any Lien upon or with respect to any part of its property,
whether now owned or hereafter acquired, other than the following ("Permitted
Liens"):
(a) any Lien existing on property of the Company or any
Subsidiary on the Closing Date and set forth in Schedule 7.01 securing
Indebtedness outstanding on such date;
(b) any Lien created under any Loan Document;
(c) Liens for taxes, fees, assessments or other governmental
charges which are not delinquent or remain payable without penalty, or to the
extent that non-payment thereof is permitted by Section 6.07, provided that no
notice of lien has been filed or recorded under the Code;
(d) carriers', warehousemen's, mechanics', landlords',
materialmen's, repairmen's or other similar Liens arising in the ordinary course
of business which are not delinquent or remain payable without penalty or which
are being contested in good faith and by appropriate proceedings, which
proceedings have the effect of preventing the forfeiture or sale of the property
subject thereto;
(e) Liens (other than any Lien imposed by ERISA) consisting of
pledges or deposits required in the ordinary course of business in connection
with workers' compensation, unemployment insurance and other social security
legislation;
(f) Liens on the property of the Company or its Subsidiary
securing (i) the non-delinquent performance of bids, trade contracts (other than
for borrowed money), leases, statutory obligations, (ii) contingent obligations
on surety and appeal bonds, and (iii) other non-delinquent obligations of a like
nature; in each case, incurred in the ordinary course of business, provided all
such Liens in the aggregate would not (even if enforced) cause a Material
Adverse Effect;
(g) Liens consisting of judgment or judicial attachment liens,
provided that the enforcement of such Liens is effectively stayed and all such
Liens in the aggregate at any time outstanding for the Company and its
Subsidiaries do not exceed $1,000,000;
(h) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which, in the
aggregate, are not substantial in amount, and which do not in any case
materially detract from the value of the property subject thereto or interfere
with the ordinary conduct of the businesses of the Company and its Subsidiaries;
(i) Liens on assets of corporations which become Subsidiaries
after the date of this Agreement, provided, however, that such Liens existed at
the time the respective corporations became Subsidiaries and were not created in
anticipation thereof;
(j) purchase money security interests on any property acquired
or held by the Company or its Subsidiaries in the ordinary course of business,
securing Indebtedness incurred or assumed for the purpose of financing all or
any part of the cost of acquiring such property; provided that (i) any such Lien
attaches to such property concurrently with or within 20 days after the
acquisition thereof, (ii) such Lien attaches solely to the property so acquired
in such transaction, (iii) the principal amount of the debt secured thereby does
not exceed 100% of the cost of such property, and (iv) the principal amount of
the Indebtedness secured by any and all such purchase money security interests
(excluding purchase money security interests otherwise permitted under this
subsection (j) securing Indebtedness incurred or assumed for the purpose of
financing all or any part of the cost of acquiring new operating facilities for
the Company or its Subsidiaries) shall not at any time exceed, together with
Indebtedness permitted under subsection 7.05(d), $5,000,000;
(l) Liens arising solely by virtue of any statutory or common
law provision relating to banker's liens, rights of set-off or similar rights
and remedies as to deposit accounts or other funds maintained with a creditor
depository institution; provided that (i) such deposit account is not a
dedicated cash collateral account and is not subject to restrictions against
access by the Company in excess of those set forth by regulations promulgated by
the FRB, and (ii) such deposit account is not intended by the Company or any
Subsidiary to provide collateral to the depository institution; and
(m) Liens consisting of pledges of cash collateral or government
securities to secure on a ▇▇▇▇-to-market basis obligations under Swap Contracts
entered into in the ordinary course of business as bona fide hedging
transactions, provided that (i) the counterparty to such Swap Contract is under
a similar requirement to deliver similar collateral from time to time to the
Company or the Subsidiary party thereto, and (ii) the aggregate value of such
collateral so pledged by the Company and the Subsidiaries together in favor of
any counterparty does not at any time exceed $1,000,000.
7.02 Disposition of Assets. The Company shall not, and shall not suffer
or permit any Subsidiary to, directly or indirectly, sell, assign, lease,
convey, transfer or otherwise dispose of (whether in one or a series of
transactions) any property (including accounts and notes receivable, with or
without recourse) or enter into any agreement to do any of the foregoing,
except:
(a) dispositions of inventory, or used, worn-out or surplus
equipment, all in the ordinary course of business;
(b) the sale of equipment to the extent that such equipment is
exchanged for credit against the purchase price of similar replacement
equipment, or the proceeds of such sale are reasonably promptly applied to the
purchase price of such replacement equipment;
(c) dispositions of inventory, equipment and other property by
the Company or any Subsidiary to the Company or any Subsidiary pursuant to
reasonable business requirements; and
(d) dispositions of assets (other than accounts receivable of
the Company or any Subsidiary) not otherwise permitted hereunder which are made
for fair market value; provided, that (i) at the time of any disposition, no
Event of Default shall exist or shall result from such disposition, (ii) the
aggregate sales price from such disposition shall be paid in cash, and (iii) the
aggregate value of all assets so sold by the Company and its Subsidiaries,
together, shall not exceed in any fiscal year an amount equal to 10% of
Consolidated Tangible Net Worth measured as of the end of the then immediately
preceding fiscal year.
7.03 Consolidations and Mergers. The Company shall not, and shall not
suffer or permit any Subsidiary to, merge, consolidate with or into, or convey,
transfer, lease or otherwise dispose of (whether in one transaction or in a
series of transactions) all or substantially all of its assets (whether now
owned or hereafter acquired) to or in favor of any Person, except:
(a) any Subsidiary may merge with the Company, provided that the
Company shall be the continuing or surviving corporation, or with any one or
more Subsidiaries, provided that if any transaction shall be between a
Subsidiary and a Wholly-Owned Subsidiary, the Wholly-Owned Subsidiary shall be
the continuing or surviving corporation; and
(b) any Subsidiary may sell all or substantially all of its
assets (upon voluntary liquidation or otherwise), to the Company or another
Wholly-Owned Subsidiary.
7.04 Loans and Investments. The Company shall not purchase or acquire,
or suffer or permit any Subsidiary to purchase or acquire, or make any
commitment therefor, any capital stock, equity interest, or any obligations or
other securities of, or any interest in, any Person, or make or commit to make
any Acquisitions, or make or commit to make any advance, loan, extension of
credit or capital contribution to or any other investment in, any Person
including any Affiliate of the Company, except for:
(a) investments in the form of Cash Equivalents or short term
marketable securities;
(b) extensions of credit in the nature of accounts receivable or
notes receivable arising from the sale or lease of goods or services in the
ordinary course of business;
(c) extensions of credit by the Company to any of its
Wholly-Owned Subsidiaries or by any of its Wholly-Owned Subsidiaries to another
of its Wholly-Owned Subsidiaries;
(d) investments incurred in order to consummate Acquisitions
otherwise permitted herein, provided that (i) the book value (as to the
purchaser) of any such Acquisition, together with such value of all prior
Acquisitions undertaken by the Company and its Subsidiaries after the Closing
Date, shall not exceed at the time of such investment $10,000,000 in the
aggregate, (ii) such Acquisition is undertaken in accordance with all applicable
Requirements of Law, and (iii) the prior, effective written consent or approval
to such Acquisition of the board of directors or equivalent governing body of
the acquiree is obtained; or
(e) investments constituting Permitted Swap Obligations or
payments or advances under Swap Contracts relating to Permitted Swap
Obligations.
(f) investments in the capital stock of any corporation not
otherwise permitted hereunder provided that such investments, together with
investments made pursuant to clause (d) above, do not exceed $10,000,000 in the
aggregate.
7.05 Limitation on Indebtedness. The Company shall not, and shall not
suffer or permit any Subsidiary to, create, incur, assume, suffer to exist, or
otherwise become or remain directly or indirectly liable with respect to, any
Indebtedness, except: (a) Indebtedness incurred pursuant to this Agreement; (b)
Indebtedness consisting of Contingent Obligations permitted pursuant to Section
7.08; (c) Indebtedness existing on the Closing Date and set forth in Schedule
7.05; (d) Indebtedness secured by Liens permitted by subsection 7.01(i), (j) and
(m) in an aggregate amount outstanding not to exceed $10,000,000; and (e)
Indebtedness incurred in connection with leases permitted pursuant to Section
7.10.
7.06 Transactions with Affiliates. The Company shall not, and shall not
suffer or permit any Subsidiary to, enter into any transaction with any
Affiliate of the Company, except upon fair and reasonable terms no less
favorable to the Company or such Subsidiary than would obtain in a comparable
arm's-length transaction with a Person not an Affiliate of the Company or such
Subsidiary.
7.07 Use of Proceeds. The Company shall not, and shall not suffer or
permit any Subsidiary to, use any portion of the Loan proceeds, directly or
indirectly, (i) to purchase or carry Margin Stock, (ii) to repay or otherwise
refinance indebtedness of the Company or others incurred to purchase or carry
Margin Stock, (iii) to extend credit for the purpose of purchasing or carrying
any Margin Stock, or (iv) to acquire any security in any transaction that is
subject to Section 13 or 14 of the Securities and Exchange Act of 1934, and
regulations promulgated thereunder.
7.08 Contingent Obligations. The Company shall not, and shall not
suffer or permit any Subsidiary to, create, incur, assume or suffer to exist any
Contingent Obligations except: (a) endorsements for collection or deposit in the
ordinary course of business; (b) Permitted Swap Obligations; and (c) Contingent
Obligations of the Company and its Subsidiaries existing as of the Closing Date
and listed in Schedule 7.08.
7.09 Joint Ventures. The Company shall not, and shall not suffer or
permit any Subsidiary to enter into any Joint Venture, other than in the
ordinary course of business.
7.10 Lease Obligations. The Company shall not, and shall not suffer or
permit any Subsidiary to, create or suffer to exist any obligations for the
payment of rent for any property under lease or agreement to lease, except for:
(a) leases of the Company and of Subsidiaries in existence on the Closing Date
and any renewal, extension or refinancing thereof; (b) operating leases entered
into by the Company or any Subsidiary after the Closing Date in the ordinary
course of business.
7.11 Restricted Payments. The Company shall not, and shall not suffer
or permit any Subsidiary to, declare or make any dividend payment or other
distribution of assets, properties, cash, rights, obligations or securities on
account of any shares of any class of its capital stock, or purchase, redeem or
otherwise acquire for value any shares of its capital stock or any warrants,
rights or options to acquire such shares, now or hereafter outstanding; except
that the Company and any Wholly-Owned Subsidiary may: (a) declare and make
dividend payments or other distributions payable solely in its common stock; and
(b) purchase, redeem or otherwise acquire shares of its common stock or warrants
or options to acquire any such shares (i) in an aggregate amount not to exceed
$5,000,000 or (ii) with the proceeds received from the substantially concurrent
issue of new shares of its common stock.
7.12 ERISA. The Company shall not, and shall not suffer or permit any
of its ERISA Affiliates to: (a) engage in a prohibited transaction or violation
of the fiduciary responsibility rules with respect to any Plan which has
resulted or could reasonably expected to result in a Material Adverse Effect; or
(b) engage in a transaction that could be subject to Section 4069 or 4212(c) of
ERISA.
7.13 Change in Business. The Company shall not, and shall not suffer or
permit any Subsidiary to, engage in any material line of business substantially
different from those lines of business carried on by the Company and its
Subsidiaries on the date hereof (including the development of the On/Q product
described in the Company's Form S-1).
7.14 Accounting Changes. The Company shall not, and shall not suffer or
permit any Subsidiary to, make any significant change in accounting treatment or
reporting practices, except as required by GAAP, or change the fiscal year of
the Company or of any Subsidiary.
7.15 Financial Covenants.
(a) Adjusted Quick Ratio. The Company shall not as of the end
of any fiscal quarter suffer or permit its ratio (determined on a consolidated
basis) of (i) cash plus the value (valued in accordance with GAAP) of all Cash
Equivalents, other than cash and Cash Equivalents subject to a Lien securing
Indebtedness, plus net current accounts receivable (valued in accordance with
GAAP) to (ii) Consolidated Current Liabilities, to be less than (A) 1.15 to 1.00
from the Closing Date through the fiscal quarter ending July 31, 1998 and (B)
1.20 to 1.00 thereafter.
(b) Leverage Ratio. The Company shall not as of the end of any
fiscal quarter suffer or permit its Leverage Ratio to be greater than 0.65 to
1.00.
(c) Profitability. The Company shall not suffer or permit, on a
net or operating basis, (i) a loss in any two fiscal quarters during any period
of four consecutive fiscal quarters beginning after the fourth fiscal quarter
ended after the Closing Date, (ii) a loss in any single fiscal quarter or for
any period of two consecutive fiscal quarters of more than 10% of Consolidated
Tangible Net Worth measured as of the end of the immediately preceding fiscal
quarter, and (iii) a loss for any period of four consecutive fiscal quarters.
(d) Minimum Tangible Net Worth. The Company shall not suffer or
permit Consolidated Tangible Net Worth as of the end of any fiscal quarter to be
less than (i) 85% of Consolidated Tangible Net Worth measured as of July 31,
1997, plus (ii) 75% of net income for the Company and its Subsidiaries earned in
each fiscal quarter ended after the Closing Date, determined on a consolidated
basis and not reduced by any quarterly loss, plus (iii) 100% of the Net Issuance
Proceeds of any sale of capital stock of the Company by or for the account of
the Company occurring on or after the Closing Date.
ARTICLE VIII
EVENTS OF DEFAULT
8.01 Event of Default. Any of the following shall constitute an "Event
of Default":
(a) Non-Payment. The Company fails to pay, (i) when and as
required to be paid herein, any amount of principal of any Loan, or (ii) within
five (5) days after the same becomes due, any interest, fee or any other amount
payable hereunder or under any other Loan Document; or
(b) Representation or Warranty. Any representation or warranty
by the Company made or deemed made herein, in any other Loan Document, or which
is contained in any certificate, document or financial or other statement by the
Company, or any Responsible Officer, furnished at any time under this Agreement,
or in or under any other Loan Document, is incorrect in any material respect on
or as of the date made or deemed made; or
(c) Specific Defaults. The Company fails to perform or observe
any term, covenant or agreement contained in any of Sections 6.01, 6.02, 6.03 or
6.09 or in Article VII; or
(d) Other Defaults. The Company fails to perform or observe any
other term or covenant contained in this Agreement or any other Loan Document,
and such default shall continue unremedied for a period of 20 days after the
earlier of (i) the date upon which a Responsible Officer knew or reasonably
should have known of such failure and (ii) the date upon which written notice
thereof is given to the Company by the Bank; or
(e) Cross-Default. (i) The Company or any Subsidiary (A) fails
to make any payment in respect of any Indebtedness or Contingent Obligation
(other than in respect of Swap Contracts), having an aggregate principal amount
(including undrawn committed or available amounts and including amounts owing to
all creditors under any combined or syndicated credit arrangement) of more than
$2,500,000 when due (whether by scheduled maturity, required prepayment,
acceleration, demand, or otherwise) and such failure continues after the
applicable grace or notice period, if any, specified in the relevant document on
the date of such failure; or (B) fails to perform or observe any other condition
or covenant, or any other event shall occur or condition exist, under any
agreement or instrument relating to any such Indebtedness or Contingent
Obligation, and such failure continues after the applicable grace or notice
period, if any, specified in the relevant document on the date of such failure
if the effect of such failure, event or condition is to cause, or to permit the
holder or holders of such Indebtedness or beneficiary or beneficiaries of such
Indebtedness (or a trustee or agent on behalf of such holder or holders or
beneficiary or beneficiaries) to cause such Indebtedness to be declared to be
due and payable prior to its stated maturity, or such Contingent Obligation to
become payable or cash collateral in respect thereof to be demanded; or (ii)
there occurs under any Swap Contract an Early Termination Date (as defined in
such Swap Contract) resulting from (1) any event of default under such Swap
Contract as to which the Company or any Subsidiary is the Defaulting Party (as
defined in such Swap Contract) or (2) any Termination Event (as so defined) as
to which the Company or any Subsidiary is an Affected Party (as so defined),
and, in either event, the Swap Termination Value owed by the Company or such
Subsidiary as a result thereof is greater than $2,500,000; or
(f) Insolvency; Voluntary Proceedings. The Company or any
Subsidiary (i) ceases or fails to be solvent, or generally fails to pay, or
admits in writing its inability to pay, its debts as they become due, subject to
applicable grace periods, if any, whether at stated maturity or otherwise; (ii)
voluntarily ceases to conduct its business in the ordinary course; (iii)
commences any Insolvency Proceeding with respect to itself; or (iv) takes any
action to effectuate or authorize any of the foregoing; or
(g) Involuntary Proceedings. (i) Any involuntary Insolvency
Proceeding is commenced or filed against the Company or any Subsidiary, or any
writ, judgment, warrant of attachment, execution or similar process, is issued
or levied against a substantial part of the Company's or any Subsidiary's
properties, and any such proceeding or petition shall not be dismissed, or such
writ, judgment, warrant of attachment, execution or similar process shall not be
released, vacated or fully bonded within 60 days after commencement, filing or
levy; (ii) the Company or any Subsidiary admits the material allegations of a
petition against it in any Insolvency Proceeding, or an order for relief (or
similar order under non-U.S. law) is ordered in any Insolvency Proceeding; or
(iii) the Company or any Subsidiary acquiesces in the appointment of a receiver,
trustee, custodian, conservator, liquidator, mortgagee in possession (or agent
therefor), or other similar Person for itself or a substantial portion of its
property or business; or
(h) ERISA. (i) An ERISA Event shall occur with respect to a
Pension Plan or Multiemployer Plan which has resulted or could reasonably be
expected to result in liability of the Company under Title IV of ERISA to the
Pension Plan, Multiemployer Plan or the PBGC in an aggregate amount in excess of
$1,000,000; (ii) the aggregate amount of Unfunded Pension Liability among all
Pension Plans at any time exceeds $1,000,000; or (iii) the Company or any ERISA
Affiliate shall fail to pay when due, after the expiration of any applicable
grace period, any installment payment with respect to its withdrawal liability
under Section 4201 of ERISA under a Multiemployer Plan in an aggregate amount in
excess of 1,000,000; or
(i) Monetary Judgments. One or more non-interlocutory
judgments, non-interlocutory orders, decrees or arbitration awards is entered
against the Company or any Subsidiary involving in the aggregate a liability (to
the extent not covered by independent third-party insurance as to which the
insurer does not dispute coverage) as to any single or related series of
transactions, incidents or conditions, of $2,500,000 or more, and the same shall
remain unsatisfied, unvacated and unstayed pending appeal for a period of 10
days after the entry thereof; or
(j) Non-Monetary Judgments. Any non-monetary judgment, order or
decree is entered against the Company or any Subsidiary which does or would
reasonably be expected to have a Material Adverse Effect, and there shall be any
period of 10 consecutive days during which a stay of enforcement of such
judgment or order, by reason of a pending appeal or otherwise, shall not be in
effect; or
(l) Loss of Licenses. Any Governmental Authority revokes or
fails to renew any material license, permit or franchise of the Company or any
Subsidiary, or the Company or any Subsidiary for any reason loses any material
license, permit or franchise, or the Company or any Subsidiary suffers the
imposition of any restraining order, escrow, suspension or impound of funds in
connection with any proceeding (judicial or administrative) with respect to any
material license, permit or franchise; or
(m) Adverse Change. There occurs a Material Adverse Effect.
8.02 Remedies. If any Event of Default occurs, the Bank may: (a)
declare the commitment of the Bank to make Loans to be terminated, whereupon
such commitment shall be terminated; (b) declare the unpaid principal amount of
all outstanding Loans, all interest accrued and unpaid thereon, and all other
amounts owing or payable hereunder or under any other Loan Document to be
immediately due and payable, without presentment, demand, protest or other
notice of any kind, all of which are hereby expressly waived by the Company; and
(c) exercise all rights and remedies available to it under the Loan Documents or
applicable law; provided, however, that upon the occurrence of any event
specified in subsection (f) or (g) of Section 8.01 (in the case of clause (i) of
subsection (g) upon the expiration of the 60-day period mentioned therein), the
obligation of the Bank to make Loans shall automatically terminate and the
unpaid principal amount of all outstanding Loans and all interest and other
amounts as aforesaid shall automatically become due and payable without further
act of the Bank.
8.03 Rights Not Exclusive. The rights provided for in this Agreement
and the other Loan Documents are cumulative and are not exclusive of any other
rights, powers, privileges or remedies provided by law or in equity, or under
any other instrument, document or agreement now existing or hereafter arising.
ARTICLE IX
MISCELLANEOUS
9.01 Amendments and Waivers. No amendment or waiver of any provision of
this Agreement or any other Loan Document, and no consent with respect to any
departure by the Company therefrom, shall be effective unless the same shall be
in writing and signed by the Bank and the Company, and then any such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given.
9.02 Notices. (a) All notices, requests, consents, approvals, waivers
and other communications shall be in writing (including, unless the context
expressly otherwise provides, by facsimile transmission, provided that any
matter transmitted by the Company by facsimile (i) shall be immediately
confirmed by a telephone call to the recipient at the number specified on the
signature page hereof with respect to such Person, and (ii) shall be followed
promptly by delivery of a hard copy original thereof) and mailed, telecopied or
delivered, to the address or facsimile number specified for notices on the
signature page hereof with respect to such Person; or, as directed to the
Company or the Bank, to such other address as shall be designated by such party
in a written notice to the other parties, and as directed to any other party, at
such other address as shall be designated by such party in a written notice to
the Company and the Bank.
(b) All such notices, requests and communications shall, when
transmitted by overnight delivery, or faxed, be effective when delivered for
overnight (next-day) delivery, or transmitted in legible form by facsimile
machine, respectively, or if mailed, upon the third Business Day after the date
deposited into the U.S. mail, or if delivered, upon delivery; except that
notices pursuant to Article II shall not be effective until actually received by
the Bank.
(c) Any agreement of the Bank herein to receive certain notices
by telephone or facsimile is solely for the convenience and at the request of
the Company. The Bank shall be entitled to rely on the authority of any Person
purporting to be a Person authorized by the Company to give such notice and the
Bank shall not have any liability to the Company or other Person on account of
any action taken or not taken by the Bank in reliance upon such telephonic or
facsimile notice. The obligation of the Company to repay the Loans shall not be
affected in any way or to any extent by any failure by the Bank to receive
written confirmation of any telephonic or facsimile notice or the receipt by the
Bank of a confirmation which is at variance with the terms understood by the
Bank to be contained in the telephonic or facsimile notice.
9.03 No Waiver; Cumulative Remedies. No failure to exercise and no
delay in exercising, on the part of the Bank, any right, remedy, power or
privilege hereunder, shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, remedy, power or privilege hereunder preclude any
other or further exercise thereof or the exercise of any other right, remedy,
power or privilege.
9.04 Costs and Expenses. The Company shall: (a) whether or not the
transactions contemplated hereby are consummated, pay or reimburse the Bank
within five Business Days after demand (subject to subsection 4.01(e)) for all
reasonable costs and expenses incurred by the Bank in connection with the
development, preparation, delivery, administration and execution of, and any
amendment, supplement, waiver or modification to (in each case, whether or not
consummated), this Agreement, any Loan Document and any other documents prepared
in connection herewith or therewith, and the consummation of the transactions
contemplated hereby and thereby, including Attorney Costs incurred by the Bank
with respect thereto; and (b) pay or reimburse the Bank within five Business
Days after demand for all reasonable costs and expenses (including Attorney
Costs) incurred by it in connection with the enforcement, attempted enforcement,
or preservation of any rights or remedies under this Agreement or any other Loan
Document during the existence of an Event of Default or after acceleration of
the Loans (including in connection with any "workout" or restructuring regarding
the Loans, and including in any Insolvency Proceeding or appellate proceeding).
9.05 Indemnification. Whether or not the transactions contemplated
hereby are consummated, the Company shall indemnify, defend and hold the Bank
and each of its officers, directors, employees, counsel, agents and
attorneys-in-fact (each, an "Indemnified Person") harmless from and against any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, charges, expenses and disbursements (including Attorney
Costs) of any kind or nature whatsoever which may at any time (including at any
time following repayment of the Loans) be imposed on, incurred by or asserted
against any such Person in any way relating to or arising out of this Agreement
or any document contemplated by or referred to herein, or the transactions
contemplated hereby, or any action taken or omitted by any such Person under or
in connection with any of the foregoing, including with respect to any
investigation, litigation or proceeding (including any Insolvency Proceeding or
appellate proceeding) related to or arising out of this Agreement or the Loans
or the use of the proceeds thereof, whether or not any Indemnified Person is a
party thereto (all the foregoing, collectively, the "Indemnified Liabilities");
provided, that the Company shall have no obligation hereunder to any Indemnified
Person with respect to Indemnified Liabilities resulting solely from the gross
negligence or willful misconduct of such Indemnified Person. The agreements in
this Section shall survive payment of all other Obligations.
9.06 Payments Set Aside. To the extent that the Company makes a payment
to the Bank, or the Bank exercises its right of set-off, and such payment or the
proceeds of such set-off or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside or required (including
pursuant to any settlement entered into by the Bank in its discretion) to be
repaid to a trustee, receiver or any other party, in connection with any
Insolvency Proceeding or otherwise, then to the extent of such recovery the
obligation or part thereof originally intended to be satisfied shall be revived
and continued in full force and effect as if such payment had not been made or
such set-off had not occurred.
9.07 Successors and Assigns. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns, except that the Company may not assign or transfer any
of its rights or obligations under this Agreement without the prior written
consent of the Bank.
9.08 Assignments, Participations, etc. (a) The Bank may at any time and
from time to time, with the prior consent of the Company, at all times other
than during the existence of an Event of Default, which consent shall not be
unreasonably withheld (provided, that no consent of the Company shall be
required in connection with any assignment and delegation by the Bank to an
Affiliate of the Bank), assign and delegate to one or more commercial banks
(each an "Assignee") all, or any part of all, of the Loans, the Commitment and
the other rights and obligations of the Bank hereunder; provided, however, that
the Company may continue to deal solely and directly with the Bank in connection
with the interest so assigned to an Assignee until written notice of such
assignment, together with payment instructions, addresses and related
information with respect to the Assignee, shall have been given to the Company
by the Bank and the Assignee.
(b) The Bank may at any time and from time to time, without
notice to or the consent of the Company, sell to one or more commercial banks or
other Persons (a "Participant") participating interests in any Loans, the
Commitment and the other interests of the Bank hereunder and under the other
Loan Documents.
(c) Notwithstanding any other provision in this Agreement, the
Bank may at any time create a security interest in, or pledge, all or any
portion of its rights under and interest in this Agreement in favor of any
Federal Reserve Bank in accordance with Regulation A of the FRB or 31 U.S.
Treasury Regulation CFR ss.203.14, and such Federal Reserve Bank may enforce
such pledge or security interest in any manner permitted under applicable law.
9.09 Confidentiality. The Bank agrees to take normal and reasonable
precautions and exercise due care to maintain the confidentiality of all
information identified as "confidential" or "secret" by the Company and provided
to it by the Company or any Subsidiary, under this Agreement or any other Loan
Document, and the Bank shall not use any such information other than in
connection with or in enforcement of this Agreement and the other Loan Documents
or in connection with other business now or hereafter existing or contemplated
with the Company or any Subsidiary; except to the extent such information (i)
was or becomes generally available to the public other than as a result of
disclosure by the Bank, or (ii) was or becomes available on a non-confidential
basis from a source other than the Company, provided that such source is not
bound by a confidentiality agreement with the Company known to the Bank;
provided, however, that the Bank may disclose such information (A) at the
request or pursuant to any requirement of any Governmental Authority to which
the Bank is subject or in connection with an examination of the Bank by any such
authority; (B) pursuant to subpoena or other court process; (C) when required to
do so in accordance with the provisions of any applicable Requirement of Law;
(D) to the extent reasonably required in connection with any litigation or
proceeding to which the Bank or may be party; (E) to the extent reasonably
required in connection with the exercise of any remedy hereunder or under any
other Loan Document; (F) to the Bank's independent auditors and other
professional advisors; (G) to any Participant or Assignee, actual or potential,
provided that such Person agrees in writing to keep such information
confidential to the same extent required of the Bank hereunder; (H) as expressly
permitted under the terms of any other document or agreement regarding
confidentiality to which the Company or any Subsidiary is party or is deemed
party with the Bank; and (I) to its Affiliates.
9.10 Set-off. In addition to any rights and remedies of the Bank
provided by law, if an Event of Default exists or the Loans have been
accelerated, the Bank is authorized at any time and from time to time, without
prior notice to the Company, any such notice being waived by the Company to the
fullest extent permitted by law, to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held by,
and other indebtedness at any time owing by, the Bank to or for the credit or
the account of the Company against any and all Obligations owing to the Bank,
now or hereafter existing, irrespective of whether or not the Bank shall have
made demand under this Agreement or any Loan Document and although such
Obligations may be contingent or unmatured. The Bank agrees promptly to notify
the Company after any such set-off and application made by the Bank; provided,
however, that the failure to give such notice shall not affect the validity of
such set-off and application.
9.11 Automatic Debits of Fees. With respect to any commitment fee or
any other cost or expense (including Attorney Costs) due and payable to the Bank
under the Loan Documents, the Company hereby irrevocably authorizes the Bank to
debit any deposit account of the Company with the Bank in an amount such that
the aggregate amount debited from all such deposit accounts does not exceed such
fee or other reasonable cost or expense. If there are insufficient funds in such
deposit accounts to cover the amount of the fee or other cost or expense then
due, such debits will be reversed (in whole or in part, in the Bank's sole
discretion) and such amount not debited shall be deemed to be unpaid. No such
debit under this Section shall be deemed a set-off.
9.12 Counterparts. This Agreement may be executed in any number of
separate counterparts, each of which, when so executed, shall be deemed an
original, and all of said counterparts taken together shall be deemed to
constitute but one and the same instrument.
9.13 Severability. The illegality or unenforceability of any provision
of this Agreement or any instrument or agreement required hereunder shall not in
any way affect or impair the legality or enforceability of the remaining
provisions of this Agreement or any instrument or agreement required hereunder.
9.14 No Third Parties Benefited. This Agreement is made and entered
into for the sole protection and legal benefit of the Company, the Bank and
their permitted successors and assigns, and no other Person shall be a direct or
indirect legal beneficiary of, or have any direct or indirect cause of action or
claim in connection with, this Agreement or any of the other Loan Documents.
9.15 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAW OF THE STATE OF CALIFORNIA; PROVIDED THAT THE BANK
SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.
9.16 Arbitration; Reference Proceeding. (a) Any controversy or claim
between or among the parties, including but not limited to those arising out of
or relating to this Agreement or any other Loan Document, and any claim based on
or arising from an alleged tort, shall at the request of any party be determined
by arbitration. The arbitration shall be conducted in accordance with the United
States Arbitration Act (Title 9, U.S. Code), notwithstanding any choice of law
provision in this Agreement, and under the Commercial Rules of the American
Arbitration Association ("AAA"). The arbitrators shall give effect to statutes
of limitation in determining any claim. Any controversy concerning whether an
issue is arbitrable shall be determined by the arbitrators. Judgment upon the
arbitration award may be entered in any court having jurisdiction. The
institution and maintenance of an action for judicial relief or pursuit of a
provisional or ancillary remedy shall not constitute a waiver of the right of
any party, including the plaintiff, to submit the controversy or claim to
arbitration if any other party contests such action for judicial relief.
(b) Notwithstanding the provisions of subsection (a), no
controversy or claim shall be submitted to arbitration without the consent of
all parties if, at the time of the proposed submission, such controversy or
claim arises from or relates to an obligation to the Bank which is secured by
real property collateral located in California. If all parties do not consent to
submission of such a controversy or claim to arbitration, the controversy or
claim shall be determined as provided in subsection (c).
(c) A controversy or claim which is not submitted to arbitration
as provided and limited in subsections (a) and (b) shall, at the request of any
party, be determined by a reference in accordance with California Code of Civil
Procedure Sections 638 et seq. If such an election is made, the parties shall
designate to the court a referee or referees selected under the auspices of the
AAA in the same manner as arbitrators are selected in AAA-sponsored proceedings.
The presiding referee of the panel, or the referee if there is a single referee,
shall be an active attorney or retired judge. Judgment upon the award rendered
by such referee or referees shall be entered in the court in which such
proceeding was commenced in accordance with California Code of Civil Procedure
Sections 644 and 645.
(d) No provision of this Section shall limit the right of any
party to this Agreement to exercise self-help remedies such as set-off, to
foreclose against or sell any real or personal property collateral or security
or to obtain provisional or ancillary remedies from a court of competent
jurisdiction before, after, or during the pendency of any arbitration or other
proceeding. The exercise of a remedy does not waive the right of either party to
resort to arbitration or reference. At the Bank's option, foreclosure under a
deed of trust or mortgage may be accomplished either by exercise of power of
sale under the deed of trust or mortgage or by judicial foreclosure.
9.17 Entire Agreement. This Agreement, together with the other
Loan Documents, embodies the entire agreement and understanding between the
Company and the Bank, and supersedes all prior or contemporaneous agreements and
understandings of such Persons, verbal or written, relating to the subject
matter hereof and thereof.
[Signature pages follow.]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.
QAD INC. BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
----------------------- ---------------------------
Title: Vice President Title: Assistant Vice President
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
----------------------------
Title: Managing Director
Notices: Notices (other than Borrowing Notices and
Notices of Conversion/Continuation):
▇▇▇▇ ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ Bank of America National Trust and Savings
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ Association
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇., ▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Domestic and Offshore Lending Office:
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ #▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
EXHIBIT A
NOTICE OF BORROWING
Date:____________________, 199__
To: Bank of America National Trust and Savings Association regarding that
certain Credit Agreement dated as of August 4, 1997 (as extended, renewed,
amended or restated from time to time, the "Agreement") between QAD Inc. and
Bank of America National Trust and Savings Association (the "Bank")
Ladies and Gentlemen:
The undersigned, QAD Inc. (the "Company"), refers to the Agreement, the
terms defined therein being used herein as therein defined, and hereby gives you
notice irrevocably, pursuant to Section 2.03 of the Agreement, of the Borrowing
specified below:
1. The Business Day of the proposed Borrowing is ______________________,
19__.
2. The aggregate amount of the proposed Borrowing is
$_______________________.
3. The Borrowing is to be comprised of $________ of [Base Rate] [Offshore
Rate] Loans.
4. The duration of the Interest Period for the Offshore Rate Loans included
in the Borrowing shall be _____ months.
The undersigned hereby certifies that the following statements are true
on the date hereof, and will be true on the date of the proposed Borrowing,
before and after giving effect thereto and to the application of the proceeds
therefrom:
(a) the representations and warranties of the Company
contained in Article V of the Agreement are true and correct as though
made on and as of such date (except to the extent such representations
and warranties relate to an earlier date, in which case they are true
and correct as of such date);
(b) no Default or Event of Default has occurred and is
continuing, or would result from such proposed Borrowing; and
(c) The proposed Borrowing will not cause the aggregate
principal amount of all outstanding Loans to exceed the Commitment of
the Bank.
QAD INC.
By:_____________________________________
Title:__________________________________
EXHIBIT B
NOTICE OF CONVERSION/CONTINUATION
Date: ___________________, 199_
To: Bank of America National Trust and Savings Association regarding that
certain Credit Agreement dated as of August 4, 1997 (as extended, renewed,
amended or restated from time to time, the "Agreement") between QAD Inc.
and Bank of America National Trust and Savings Association (the "Bank")
Ladies and Gentlemen:
The undersigned, QAD Inc. (the "Company"), refers to the Agreement, the
terms defined therein being used herein as therein defined, and hereby gives you
notice irrevocably, pursuant to Section 2.04 of the Agreement, of the
[conversion] [continuation] of the Loans specified herein, that:
1. The Conversion/Continuation Date is _______________________, 19__.
2. The aggregate amount of the Loans to be [converted] [continued] is
$______________.
3. The Loans are to be [converted into] [continued as] [Offshore Rate]
[Base Rate] Loans.
4. [If applicable:] The duration of the Interest Period for the Loans
included in the [conversion] [continuation] shall be ____months.
The undersigned hereby certifies that the following statements are true
on the date hereof, and will be true on the proposed Conversion/Continuation
Date, before and after giving effect thereto and to the application of the
proceeds therefrom:
(a) the representations and warranties of the Company
contained in Article V of the Agreement are true and correct as though
made on and as of such date (except to the extent such representations
and warranties relate to an earlier date, in which case they are true
and correct as of such date);
(b) no Default or Event of Default has occurred and is
continuing, or would result from such proposed [conversion]
[continuation]; and
(c) the proposed [conversion][continuation] will not cause the
aggregate principal amount of all outstanding Loans to exceed the
Commitment of the Bank.
QAD INC.
By:_______________________________
Title:____________________________
EXHIBIT C
QAD INC.
COMPLIANCE CERTIFICATE
Financial
Statement Date: ______________, 199_
Reference is made to that certain Credit Agreement dated as of August
4, 1997 (as extended, renewed, amended or restated from time to time, the
"Agreement") between QAD Inc., a Delaware corporation (the "Company"), and Bank
of America National Trust and Savings Association (the "Bank"). Unless otherwise
defined herein, capitalized terms used herein have the respective meanings
assigned to them in the Agreement.
The undersigned Responsible Officer of the Company, hereby certifies as
of the date hereof that he/she is the of the Company, and that, as such, he/she
is authorized to execute and deliver this Certificate to the Bank on the behalf
of the Company and its consolidated Subsidiaries, and that:
[Use the following paragraph if this Certificate is delivered in connection with
the financial statements required by subsection 6.01(a) of the Agreement.]
1. Attached as Schedule 1 hereto are (a) a true and correct copy of the
audited consolidated balance sheet of the Company and its consolidated
Subsidiaries as at the end of the fiscal year ended _______________, 199__ and
(b) the related consolidated statements of income or operations, [retained
earnings,] shareholders' equity and cash flows for such fiscal year, setting
forth in each case in comparative form the figures for the previous fiscal year,
[reported on without a "going concern" or like qualification or exception, or
qualification arising out of the scope of the audit] and accompanied by the
opinion of _________________ or another nationally-recognized certified
independent public accounting firm (the "Independent Auditor") which report
shall state that such consolidated financial statements are complete and correct
and have been prepared in accordance with GAAP, and fairly present, in all
material respects, the financial position of the Company and its consolidated
Subsidiaries for the periods indicated and on a basis consistent with prior
periods.
or
[Use the following paragraph if this Certificate is delivered in connection with
the financial statements required by subsection 6.01(b) of the Agreement.]
1. Attached as Schedule 1 hereto are (a) a true and correct copy of the
unaudited consolidated balance sheet of the Company and its consolidated
Subsidiaries as of the end of the fiscal quarter ended __________, 199__, and
(b) the related unaudited consolidated statements of income, shareholders'
equity, [retained earnings,] and cash flows for the period commencing on the
first day and ending on the last day of such quarter, [setting forth in each
case in comparative form the figures for the previous year,] and certified by a
Responsible Officer that such financial statements were prepared in accordance
with GAAP (subject only to ordinary, good faith year-end audit adjustments and
the absence of footnotes) and fairly present, in all material respects, the
financial position and the results of operations of the Company and its
consolidated Subsidiaries.
2. The undersigned has reviewed and is familiar with the terms of the
Agreement and has made, or has caused to be made under his/her supervision, a
detailed review of the transactions and conditions (financial or otherwise) of
the Company during the accounting period covered by the attached financial
statements.
3. To the best of the undersigned's knowledge, the Company, during such
period, has observed, performed or satisfied all of its covenants and other
agreements, and satisfied every condition in the Credit Agreement to be
observed, performed or satisfied by the Company, and the undersigned has no
knowledge of any Default or Event of Default.
4. The following financial covenant analyses and information set forth
on Schedule 2 attached hereto are true and accurate on and as of the date of
this Certificate.
IN WITNESS WHEREOF, the undersigned has executed this Certificate as of
___________________, 199__.
QAD INC.
By:_______________________________
Title:____________________________
[NOTE: SAMPLE ONLY] Date: ______________, 199__
For the fiscal quarter/year
ended ______________, 199__
SCHEDULE 2
to the Compliance Certificate
($ in 000's)
Actual Required/Permitted
Schedule 4.02(D)
Grayrock Business Credit, Inc.
Line of Credit 14,055,612.03
Real Estate Note 3,143,485.76
Fixed Asset Financing 1,147,948.87
The CIT Group
Fixed Asset Financing 734,451.60
GE Capital Corp.
Fixed Asset Financing 673,099.13
U.S. Bancorp Leasing & Financial
Fixed Asset Financing 600,997.92
First Capital Corp.
Fixed Asset Financing 479,281.94
Schedule 5.15
SUBSIDIARIES AND MINORITY INTERESTS
QAD Inc.
QAD AUSTRALIA PTY LIMITED
qad.china inc.
QAD.Eurpoe B.V.
qad france e.u.r.l.
qad. Germany GmbH
QAD HOLDINGS FTY LIMITED
QAD Inc. - Canada Branch
QAD Inc. - Hong Kong Branch
QAD Inc. - Singapore Represntative Office
QAD India. Inc.
QAD Japan K.K.
QAD Brazil, Inc.
QAD MEXICO, S.A. DE C.V.
QAD SOFTWARE E APLICATIVOS LTDA.
qad.Aktiebolag
▇▇▇.▇▇▇▇▇▇▇▇▇▇
qad.united kingdom ltd.
qad.USVI Inc.
Integral Software & Services GmbH
Integral Software Betelligunge GmbH
Integral Informationstechnik GmbH (58% owned)
QAD LATIN AMERICA, S.A. DE C.V.
QAD Eastern Europe Sp.2.00
QAD ASIA LIMITED
Enterprise Engines Inc. (minority interest)
SCHEDULE 7.01
PERMITTED LIENS
QAD Inc.
Notes Payable and Debt as of 8/11/97
Lease Number Terms Item Description Start Marurity Amount
QAD Maker Date Date ST LT
------ -------------- ------------- ----------------------- -------- --------- ----------- ---------
Hewlett Packard Leases
HP95C 2403-01068-5A0 24mo., 11.46% Shanghai Server 9/21/95 8/21/97 2,109.26
HP96 2400-01072-0A0 24mo., 11.46% Shangahi-China Server 9/21/95 8/21/97 1,333.14
HP99 2403-03063-4A0 24mo., 11.00% 712 Worksation 11/30/95 10/31/97 2,504.56
HP100 2403-01699-7A0 24mo., 11.46% Equipment Upgrade 10/7/95 8/7/97 1,251.65
HP101 2403-02284-7A0 24mo., 11.00% ▇▇▇▇ Server Project 9/30/95 8/31/97 1,753.10
HP103 4124-03062 24mo., 11.00% (3) servers 12/7/95 11/7/97 5,288.48
HP104 2403-02951-1A0 24mo., 11.22% Netherlands server 12/21/95 11/21/97 5,530.83
HP105 4124-01430 24mo., 11.00% Add-ons to Kitty Hawk 3/31/96 2/28/98 14,786.37
HP106A 2403-04046-BB1 24mo., 13.74% Upgrades for ▇. ▇▇▇▇▇▇ 3/31/96 2/28/98 2,448.92
HP106B 2403-04046-BC1 24mo., 13.74% Add-ons for ▇. ▇▇▇▇▇▇ 2/29/96 1/31/98 1,619.18
HP106C 2403-04046-BA0 24mo., 13.74% 725 for ▇. ▇▇▇▇▇▇ 3/31/96 2/28/98 4,727.98
HP107 4124-18394 24mo., 13.74% CPU for Test DB Server 1/1/97 12/1/98 28,633.27 13,134.32
HP108 4124-52127 24mo., 9.62% QAD University server 5/29/97 4/29/99 98,452.42 80,263.81
AT&T Lease
AT1 564670 36mo., 14.48% Multiprotocol router 8/13/96 5/13/99 6,278.88 5,968.70
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Leasehold Improvement
Matco 24mo., 0.00% Leasehold improvements Apr-94 Feb-98 4,766.55
Total Notes
Payable and Debt 181,484.59 99,386.83
SCHEDULE 7.05
PERMITTED INDEBTEDNESS
QAD Inc.
Notes Payable and Debt as of 8/11/97
Lease Number Terms Item Description Start Marurity Amount
QAD Maker Date Date ST LT
------ -------------- ------------- ----------------------- -------- --------- ----------- ---------
Hewlett Packard Leases
HP95C 2403-01068-5A0 24mo., 11.46% Shanghai Server 9/21/95 8/21/97 2,109.26
HP96 2400-01072-0A0 24mo., 11.46% Shangahi-China Server 9/21/95 8/21/97 1,333.14
HP99 2403-03063-4A0 24mo., 11.00% 712 Worksation 11/30/95 10/31/97 2,504.56
HP100 2403-01699-7A0 24mo., 11.46% Equipment Upgrade 10/7/95 8/7/97 1,251.65
HP101 2403-02284-7A0 24mo., 11.00% ▇▇▇▇ Server Project 9/30/95 8/31/97 1,753.10
HP103 4124-03062 24mo., 11.00% (3) servers 12/7/95 11/7/97 5,288.48
HP104 2403-02951-1A0 24mo., 11.22% Netherlands server 12/21/95 11/21/97 5,530.83
HP105 4124-01430 24mo., 11.00% Add-ons to Kitty Hawk 3/31/96 2/28/98 14,786.37
HP106A 2403-04046-BB1 24mo., 13.74% Upgrades for ▇. ▇▇▇▇▇▇ 3/31/96 2/28/98 2,448.92
HP106B 2403-04046-BC1 24mo., 13.74% Add-ons for ▇. ▇▇▇▇▇▇ 2/29/96 1/31/98 1,619.18
HP106C 2403-04046-BA0 24mo., 13.74% 725 for ▇. ▇▇▇▇▇▇ 3/31/96 2/28/98 4,727.98
HP107 4124-18394 24mo., 13.74% CPU for Test DB Server 1/1/97 12/1/98 28,633.27 13,134.32
HP108 4124-52127 24mo., 9.62% QAD University server 5/29/97 4/29/99 98,452.42 80,263.81
AT&T Lease
AT1 564670 36mo., 14.48% Multiprotocol router 8/13/96 5/13/99 6,278.88 5,968.70
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Leasehold Improvement
Matco 24mo., 0.00% Leasehold improvements Apr-94 Feb-98 4,766.55
Total Notes
Payable and Debt 181,484.59 99,386.83
SCHEDULE 7.08
CONTINGENT OBLIGATIONS
Employee loans guaranteed at Santa ▇▇▇▇▇▇▇ Bank & Trust of approximately
$397,000.