EXHIBIT 4.1
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SECURITIES EXCHANGE AGREEMENT
among
iBASIS, INC.
iBASIS GLOBAL, INC.
iBASIS SECURITIES CORPORATION
SYMPHONY FUNDS SIGNATORIES HERETO
and
U.S. BANK NATIONAL ASSOCIATION, AS COLLATERAL AGENT
Dated as of January 30, 2003
$15,100,000 SENIOR SECURED NOTES
WARRANTS TO PURCHASE 3,071,184 COMMON SHARES
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TABLE OF CONTENTS
PAGE
1. Definitions; Certain Rules of Construction......................................1
2. Purchase and Sale of the Securities............................................11
2.1. Purchase and Sale of the Notes........................................11
2.2. Purchase and Sale of the Warrants.....................................12
2.3. Note Terms............................................................12
2.4. Form of Securities....................................................12
2.5. Depositary............................................................12
2.6. Purchase Price for Securities; Allocation of Purchase Price...........12
2.7. Closing...............................................................13
3. Interest.......................................................................13
3.1. Rate of Interest......................................................13
3.2. Default Interest......................................................13
3.3. Interest Accrual and Computation......................................13
4. Payments.......................................................................13
4.1. Payments..............................................................13
4.2. Voluntary Prepayments.................................................13
4.3. Mandatory Prepayments.................................................14
4.4. Net Payments..........................................................14
5. Conditions Precedent to the Purchase of the Securities.........................16
5.1. Issuance of Securities; Contemporaneous Investment....................16
5.2. Opinions of Counsel...................................................16
5.3. Corporate Proceedings.................................................16
5.4. Material Adverse Effect, etc..........................................17
5.5. Litigation............................................................17
5.6. Approvals.............................................................17
5.7. Senior Loan Agreement; 8-K Filing.....................................17
5.8. Guarantee.............................................................17
5.9. Collateral Documents..................................................17
5.10. Fiscal Agency Agreement...............................................17
5.11. Warrant Agreement.....................................................18
5.12. DTC Eligibility.......................................................18
5.13. CUSIP Number..........................................................18
5.14. Fees..................................................................18
5.15. Capitalization........................................................18
5.16. Senior Lender Possession of Stock Certificates........................18
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5.17. No Default; Representations and Warranties............................18
6. Representations and Warranties of the Obligors.................................18
6.1. Corporate Status......................................................18
6.2. Corporate Power and Authority.........................................19
6.3. No Violation..........................................................19
6.4. Capitalization........................................................19
6.5. Litigation............................................................20
6.6. Margin Regulations....................................................20
6.7. Governmental Approvals................................................20
6.8. Investment Company Act................................................20
6.9. Public Utility Holding Company Act....................................20
6.10. Conformity to Securities Act and Exchange Act; No
Misstatement or Omission..............................................20
6.11. Financial Condition; Financial Statements.............................20
6.12. No Material Adverse Changes...........................................21
6.13. Tax Returns and Payments..............................................21
6.14. Subsidiaries..........................................................21
6.15. Intellectual Property.................................................21
6.16. Properties............................................................22
6.17. Labor Relations.......................................................22
6.18. Compliance with Statutes, etc.........................................22
6.19. ERISA.................................................................23
7. Symphony Fund Representations..................................................23
7.1. Authorization; No Contravention.......................................23
7.2. Binding Effect........................................................23
7.3. No Legal Bar..........................................................23
7.4. Purchase for Own Account..............................................23
7.5. Accredited Investor...................................................23
7.6. Restricted Securities.................................................23
7.7. Financial Condition...................................................24
7.8. Experience............................................................24
7.9. Legend................................................................24
7.10. Subordination Legend..................................................24
7.11. ERISA.................................................................24
7.12. Broker's, Finder's or Similar Fees....................................24
7.13. Governmental Authorization; Third Party Consent.......................25
8. Continuing Covenants...........................................................25
8.1. Newly Created Entity..................................................25
8.2. SEC Filings and Reports...............................................25
8.3. Repurchase of Convertible Subordinated Notes..........................25
8.4. Exchange of Convertible Notes.........................................25
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8.5. Non-public Information................................................26
8.6. Insurance.............................................................26
8.7. Litigation Cooperation................................................26
8.8. Banking Relationship..................................................26
8.9. Subordination of Inside Debt..........................................26
8.10. Subordination Agreements..............................................26
8.11. Further Assurances....................................................27
9. Contingent Covenants...........................................................27
10. Events of Default; Remedies....................................................28
10.1. Events of Default.....................................................28
10.2. Certain Actions Following an Event of Default.........................31
10.3. Annulment of Events of Default........................................31
10.4. Waivers...............................................................31
10.5. Acceleration Following an Event of Default under the
Senior Loan Agreement.................................................32
11. Collateral Agent...............................................................32
11.1. Appointment of Collateral Agent.......................................32
11.2. Actions by the Collateral Agent.......................................32
11.3. Execution of Additional Documents.....................................33
11.4. Information Regarding Obligors, etc...................................33
11.5. Concerning the Collateral Agent.......................................33
11.6. Collateral Agent Indemnity............................................35
11.7. Collateral Agent's Resignation or Removal.............................35
11.8. Merger, Conversion or Consolidation...................................36
11.9. Representations and Warranties of the Collateral Agent................36
12. Prior Claims Extinguished......................................................36
13. General........................................................................36
13.1. Payment of Expenses, etc..............................................37
13.2. Notices...............................................................37
13.3. Assignments; Participations...........................................38
13.4. Amendment or Waiver...................................................38
13.5. No Waiver; Remedies Cumulative........................................38
13.6. No Strict Construction................................................39
13.7. Calculations; Computations............................................39
13.8. Interpretation; Governing Law; etc....................................39
13.9. Waiver of Jury Trial..................................................40
13.10. Counterparts..........................................................40
13.11. Execution.............................................................40
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13.12. Headings Descriptive..................................................41
13.13. Survival..............................................................41
13.14. Benefit of Agreement..................................................41
EXHIBITS
Exhibit A Form of Warrant and Registration Rights Agreement
Exhibit 2.3 Notes and Warrants Purchased; Convertible Notes
Exchanged
Exhibit 5.3 Form of Officer's Certificate
Exhibit 5.8 Form of Guarantee
Schedule 1.1 Permitted Liens
Schedule 6.14 Subsidiaries
Schedule 6.19 ERISA Plans
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This
SECURITIES EXCHANGE AGREEMENT, dated as of January 30, 2003 (this
"AGREEMENT"), is among iBASIS, INC., a Delaware corporation (the "COMPANY"),
iBasis Global, Inc., a Delaware corporation ("iBASIS GLOBAL", and together with
the Company, the "BORROWER"), iBasis Securities corporation, a Massachusetts
corporation (the "GUARANTOR"), the Symphony Funds identified on the signature
pages hereof (the "SYMPHONY FUNDS") and U.S. Bank National Association as
Collateral Agent for the Holders (with its successors and assigns, the
"COLLATERAL AGENT"). The parties hereto agree as follows:
RECITALS: Pursuant to this Agreement, the Symphony Funds are exchanging an
aggregate principal amount of $30,200,000 of the Company's 5 3/4% Convertible
Subordinated Notes due 2005 (the "CONVERTIBLE NOTES") for (a) an aggregate
principal amount of $15,100,000 of the Borrower's 11.5% Senior Secured Notes due
2005 (the "NOTES") and (b) warrants (the "WARRANTS") exercisable for an
aggregate of 3,071,184 shares of Common Stock, $0.001 par value, of the Company
(the "COMMON STOCK"). The Notes mature on January 15, 2005. The Notes are
guaranteed by each of the Borrower's Domestic Subsidiaries identified on the
signature pages hereof, and are secured by second priority liens on
substantially all the assets (including the stock of Subsidiaries) of the
Borrower. Prior to the purchase and sale of the Notes and the Warrants pursuant
to this Agreement, the Borrower has entered into a credit agreement (as amended,
restated or supplemented from time to time, the "SENIOR LOAN AGREEMENT") among
Borrower and Silicon Valley Bank. The Notes and Warrants to be purchased
thereunder are collectively referred to as the "SECURITIES".
1. DEFINITIONS; CERTAIN RULES OF CONSTRUCTION. Certain capitalized terms
are used in this Agreement and in the other Documents with the specific meanings
defined below in this Section 1. Except as otherwise explicitly specified to the
contrary or unless the context clearly requires otherwise, (a) the capitalized
term "Section" refers to sections of this Agreement, (b) the capitalized term
"Exhibit" refers to exhibits to this Agreement, (c) references to a particular
Section include all subsections thereof, (d) the word "including" shall be
construed as "including without limitation", (e) accounting terms not otherwise
defined herein have the meaning provided under GAAP, (f) references to a
particular statute or regulation include all rules and regulations thereunder
and any successor statute, regulation or rules, in each case as from time to
time in effect, (g) references to a particular Person include such Person's
successors and assigns to the extent not prohibited by this Agreement and the
other Documents and (h) references to "Dollars" or "$" mean United States Funds.
References to "the date hereof" mean the date first set forth above.
"ACCUMULATED FUNDING DEFICIENCY" shall have the meaning provided in section
302 of ERISA.
"ADDITIONAL DOCUMENTS" is defined in Section 11.3.
"AFFILIATE" means, with respect to any Person, any other Person directly or
indirectly controlling (including all directors and officers of such Person),
controlled by, or under direct or indirect common control with such Person. A
Person shall be deemed to control a corporation if such Person possesses,
directly or indirectly, the power (a) to vote 10% or more of the securities
having ordinary voting power for the election of directors of such corporation
or (b) to direct or cause the direction of the management and policies of such
corporation, whether through the ownership of voting securities, by contract or
otherwise.
"AGGREGATE PREPAYMENT AMOUNT" means, as of any date, the sum of (a) the
Notes and (b) accrued and unpaid interest, and all other amounts due, in respect
of the Notes being prepaid on and as of such date.
"AGREEMENT" is defined in the recitals hereto.
"APPLICABLE ACCELERATION" is defined in Section 10.5.
"AUTHORIZED OFFICEr" means any senior officer of the Borrower designated in
writing to the Holders by the Borrower, in each case to the extent acceptable to
the Required Holders.
"BANKRUPTCY CODE" is defined in Section 10.1.5.
"BANKRUPTCY DEFAULT" means an Event of Default referred to in Section
10.1.5.
"BENEFIT PLAN" means an employee pension benefit plan as defined in section
3(2) of ERISA (other than a Multiemployer Plan) for which the funding
requirements under section 412 of the Code or section 302 of ERISA is, or within
the immediately preceding six years was, in whole or in part, the responsibility
of the Company, any of its Subsidiaries or any ERISA Affiliate.
"BOOK-ENTRY SECURITY" is defined in Section 2.4.
"BORROWER" is defined in the preamble to this Agreement.
"BUSINESS DAY" means any day, excluding Saturday, Sunday and any day which
shall be in New York, New York or Boston, Massachusetts a legal holiday or a day
on which banking institutions are authorized by law or other governmental
actions to close.
"CAPITALIZED LEASE" means any lease which is required to be capitalized on
the balance sheet of the lessee in accordance with GAAP, including Statement
Nos. 13 and 98 of the Financial Accounting Standards Board.
"CAPITALIZED LEASE OBLIGATIONS" means the amount of the liability
reflecting the aggregate discounted amount of future payments under all
Capitalized Leases calculated in accordance with GAAP, including Statement Nos.
13 and 98 of the Financial Accounting Standards Board.
"CHANGE OF CONTROL" means one or more of the following events: (a) any
"person" or "group" (as such terms are used in sections 13(d) and 14(d) of the
Exchange Act) is or becomes the "beneficial owner" (as defined in Rules 13d-3
and 13d-5 under the Exchange Act) of shares representing more than 50% of the
combined voting power of the then outstanding securities entitled to vote
generally in elections of directors of the Company (the "VOTING STOCK"); (b)
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approval by stockholders of the Company of any plan or proposal for the
liquidation, dissolution or winding up of the Company; (c) the Company (i)
consolidates with or merges into any other corporation or any other corporation
merges into the Company, and in the case of any such transaction, the
outstanding Common Stock of the Company is changed or exchanged into other
assets or securities as a result, unless the stockholders of the Company
immediately before such transaction own, directly or indirectly immediately
following such transaction, at least 51% of the combined voting power of the
outstanding voting securities of the corporation resulting from such transaction
in substantially the same proportion as their ownership of the Voting Stock
immediately before such transaction, or (ii) conveys, transfers or leases all or
substantially all of its assets to any person; or (d) any time Continuing
Directors do not constitute a majority of the Board of Directors of the company
(or, if applicable, a successor corporation to the Company); provided that a
Change of Control shall not be deemed to have occurred if, in the case of a
merger or consolidation otherwise constituting a Change in Control, all of the
consideration (excluding cash payments for fractional shares) in such merger or
consolidation constituting the Change in Control consists of common stock traded
on a United States national securities exchange or quoted on the Nasdaq National
Market (or which will be so traded or quoted when issued or exchanged in
connection with such Change in Control) and as a result of such transaction or
transactions all Convertible Notes become convertible solely into such common
stock.
"CLOSING DATE" means the date on which the Symphony Funds purchase the
Securities pursuant to this Agreement.
"CODE" means the Internal Revenue Code of 1986.
"COLLATERAL AGENT" is defined in the preamble to this Agreement.
"COLLATERAL DOCUMENTS" means each of (a) the Security Agreement, (b) the
Subordination Agreement and (c) such other documents as may be entered into to
secure the payment and performance of the Obligations under the Credit
Documents.
"COMMON STOCK" is defined in the recitals hereto.
"COMPANY" is defined the preamble to this Agreement.
"CONTINUING DIRECTOR" means at any date a member of the Company's Board of
Directors (a) who was a member of such board on the date hereof or (b) who was
nominated or elected by at least a majority of the directors who were Continuing
Directors at the time of such nomination or election or whose election to the
Company's Board of Directors was recommended or endorsed by at least a majority
of the directors who were Continuing Directors at the time of such nomination or
election or such lesser number comprising a majority of a nominating committee
if authority for such nominations or elections has been delegated to a
nominating committee whose authority and composition have been approved by at
least a majority of the directors who were continuing directors at the time such
committee was formed. (Under this definition, if the Board of Directors of the
Company as of the date of this Agreement were to
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approve a new director or directors and then resign, no Change in Control would
occur even though the current Board of Directors would thereafter cease to be in
office).
"CONTROL" means, with respect to any Person, the possession, directly or
indirectly, of the power to (a) vote 10% or more of the Capital Securities
having ordinary voting power for the election of directors of such Person or (b)
direct or cause the direction of management and policies of such Person, whether
through the ownership of voting Capital Securities, by contact or otherwise,
either alone or in conjunction with others. The words "Controlling" and
"Controlled" have correlative meanings.
"CONVERTIBLE NOTES INDENTURE" means the Indenture dated as of March 15,
2000 between the Company and The Bank of New York, as trustee, governing the
Convertible Notes (as amended, modified or supplemented from time to time).
"CONVERTIBLE NOTES" is defined in the recitals hereto.
"CREDIT DOCUMENTS" means each of this Agreement, the Fiscal Agency
Agreement, the Notes, the Guarantee and the Collateral Documents.
"CREDIT FACILITY" means the credit facility created under the Senior Loan
Agreement in an aggregate maximum principal amount not to exceed $40,000,000, as
reduced from time to time by permanent reductions thereto, and any refinancing
or renewal of such Indebtedness, which in no event shall exceed $40,000,000.
"CREDIT SECURITY" means all assets now or from time to time hereafter
subjected to a security interest, mortgage or charge (or intended or required so
to be subjected pursuant to the Collateral Documents or any other Credit
Document) to secure the payment or performance of any of the Obligations.
"DEFAULT" means any event or condition which with notice or lapse of time,
or both, would constitute an Event of Default.
"DEMAND HOLDERS" means Holders holding Notes in an outstanding principal
amount greater than 25% of the total outstanding principal amount of all Notes.
"DEPOSITARY" means the depositary appointed pursuant to Section 2.5, to
which the Notes and Warrants in typewritten form representing Book-Entry
Securities are delivered on the Closing Date pursuant to Section 2.5.
"DOCUMENTS" means each of the Credit Documents, the Warrant and the Warrant
Agreement.
"DOMESTIC SUBSIDIARIES" means the Subsidiaries of the Borrower organized
under the laws of, or domesticated in, the United States of America or the
states or governmental districts thereof.
"EFFECTIVE DATE" is defined in Section 13.11.
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"EQUIPMENT" means all of the Borrower's present and hereafter acquired
machinery, molds, machine tools, motors, furniture, equipment, furnishings,
fixtures, trade fixtures, motor vehicles, tools, parts, dyes, jigs, goods and
other tangible personal property (other than Inventory) of every kind and
description used in the Borrower's operations or owned by the Borrower and any
interest in any of the foregoing, and all attachments, accessories, accessions,
replacements, substitutions, additions or improvements to any of the foregoing,
wherever located.
"ERISA" means the Employee Retirement Income Security Act of 1974.
"ERISA AFFILIATe" means any Person required to be aggregated with the
Borrower or any Subsidiary of the Borrower under sections 414(b), (c), (m) or
(o) of the Code.
"EVENT OF DEFAULT" is defined in Section 10.1.
"EXCHANGE ACT" means the Securities Exchange Act of 1934.
"EXCHANGE ACT REPORTS" means the Company's reports filed with the SEC since
December 31, 2000 pursuant to Section 13 of the Exchange Act.
"FEE LETTER" is defined in Section 5.14.
"FISCAL AGENCY AGREEMENT" means that Fiscal Agency Agreement, dated as of
the date hereof, between the Company and the Fiscal Agent.
"FISCAL AGENT" means U.S. Bank National Association.
"FOREIGN SUBSIDIARY" means a Subsidiary of the Borrower other than a
Domestic Subsidiary.
"GAAP" means generally accepted accounting principles in effect within the
United States of America, consistently applied.
"GLOBAL SECURITY" is defined in Section 2.4.
"GOVERNMENTAL AUTHORITY" means any nation or government, any state or other
political subdivision thereof and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government.
"GOVERNING DOCUMENTS" means, as to any Person, the certificate or articles
of incorporation and by-laws or other organizational or governing documents of
such Person.
"GUARANTOR" means each of the Domestic Subsidiaries of the Borrower.
"GUARANTEE" is defined in Section 5.8.
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"HOLDER" means the Person or Persons in whose name a Note is registered at
any time, and, for purposes solely of Section 4.4, the Person or Persons for
whose benefit a Note registered to the Depositary is held as reflected on the
transfer records of the Depositary at any time.
"INTEREST PAYMENT DATE" means the 15th day of each of July and January.
"INDEBTEDNESS" means with respect to any Person, all obligations,
contingent or otherwise, which in accordance with GAAP are required to be
classified upon the balance sheet of such specified Person as liabilities, but
in any event including (without duplication) the following:
(a) all obligations of such Person for borrowed money or with respect to
deposits or advances of any kind;
(b) all obligations of such Person evidenced by bonds, debentures, notes or
other similar instruments or upon which interest charges are customarily paid;
(c) all obligations of such Person for the deferred purchase price of
property or services, except current accounts payable arising in the ordinary
course of business and not overdue beyond such period as is commercially
reasonable for such Person's business;
(d) all obligations of such Person under conditional sale or other title
retention agreements relating to property purchased by such Person and all
Capitalized Lease Obligations;
(e) all payment obligations of such Person with respect to interest rate or
currency protection agreements;
(f) all obligations of such Person as an account party under any letter of
credit or in respect of bankers' acceptances;
(g) all obligations of any third party secured by property or assets of
such Person (regardless of whether or not such Person is liable for repayment of
such obligations);
(h) all guarantees of such Person, including existing guarantees for lease
obligations;
(i) all reimbursement obligations of such Person under letters of credit;
and
(j) the redemption price of all redeemable equity securities of such
Person, but only to the extent that such securities are redeemable at the option
of the holder, or require sinking funds or similar payments, at any time prior
to the Maturity Date.
"INVENTORY" means all of the Borrower's now owned and hereafter acquired
goods, merchandise or other personal property, wherever located, to be furnished
under any contract of service or held for sale or lease (including without
limitation all raw materials, work in process, finished goods and goods in
transit), and all materials and supplies of every kind, nature and
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description which are or might be used or consumed in the Borrower's business or
used in connection with the manufacture, packing, shipping, advertising, selling
or finishing of such goods, merchandise or other personal property, and all
warehouse receipts, documents of title and other documents representing any of
the foregoing.
"INVESTMENT" means, with respect to any specified Person:
(a) any share of capital stock, partnership or other equity
interest, evidence of Indebtedness or other security issued by any other
Person;
(b) any loan, advance or extension of credit to, or contribution to
the capital of, any other Person;
(c) any guarantee of the obligations of any other Person;
(d) any acquisition of all, or any division or similar operating
unit of, the business of any other Person or the assets comprising such
business, division or unit; and
(e) any other similar investment.
The investments described in the foregoing clauses (a) through (e) shall be
included in the term "Investment" whether they are made or acquired by purchase,
exchange, issuance of stock or other securities, merger, reorganization or any
other method; PROVIDED, HOWEVER, that the term "Investment" shall not include
(i) trade and customer accounts receivable for property leased, goods furnished
or services rendered in the ordinary course of business and payable within one
year in accordance with customary trade terms, (ii) deposits, advances or
prepayments to suppliers for property leased or licensed, goods furnished and
services rendered in the ordinary course of business, (iii) advances to
employees for relocation and travel expenses, drawing accounts and similar
expenditures, (iv) stock or other securities acquired in connection with the
satisfaction or enforcement of Indebtedness or claims due to such specified
Person or as security for any such Indebtedness or claim or (v) demand deposits
in banks or similar financial institutions.
"LIEN" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including any agreement to give any of the foregoing, any
conditional sale or other title retention agreement or any lease in the nature
thereof).
"MARGIN STOCK" is defined in Regulation U.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on the present or
future business, assets, operations, prospects or condition (financial or
otherwise) of the Borrower and its Subsidiaries taken as a whole.
"MATURITY DATE" means January 15, 2005.
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"MULTIEMPLOYER PLAN" means a "multiemployer plan" as defined in section
4001(a)(3) of ERISA (a) which is, or within the immediately preceding six years
was, contributed to by the Borrower, any Subsidiary of the Borrower or any ERISA
Affiliate or (b) with respect to which the Borrower or any Subsidiary of the
Borrower may incur any liability.
"NET ASSET SALE PROCEEDS" means the cash proceeds of the sale or
disposition of assets (including any Equipment and by way of merger, but not
including the proceeds of any sale of finished Inventory in the ordinary course
of business permitted by Section 9(iv)), and the cash proceeds of any insurance
payments or condemnation awards on account of the destruction or loss of
property, by the Borrower or any of its Subsidiaries after the Closing Date, net
of (a) any Indebtedness permitted by Section 5.5 (Senior Loan Agreement) or
Section 8.10 (purchase money indebtedness and capitalized leases) in each case
secured by assets being sold in such transaction required to be paid from such
proceeds, (b) income taxes that, as estimated by the Borrower in good faith,
will be required to be paid by the Borrower or any of its Subsidiaries in cash
as a result of, and within 16 months after, such sale or disposition (provided
that any such amounts that are not actually paid in taxes within such period
shall automatically become Net Asset Sale Proceeds), (c) reasonable reserves for
liabilities, indemnification, escrows and purchase price adjustments resulting
from the sale of assets, (d) transfer, sales, use and other similar taxes
payable in connection with such sale or disposition, (e) all reasonable expenses
of the Borrower or any of its Subsidiaries payable in connection with the sale
or disposition and (f) the amount of such proceeds applied to mandatory
prepayments under the Senior Loan Agreement.
"NOTE PREPAYMENT PRICE" is defined in Section 4.2.
"NOTES" is defined in the recitals hereto.
"OBLIGATIONS" means any and all present and future liabilities, obligations
and Indebtedness of the Borrower and any of its Subsidiaries or any other
Obligor owing to the Collateral Agent or any Holder (or any Affiliate of a
Holder or Collateral Agent) under or in connection with this Agreement or any
other Credit Document, including, without limitation, obligations in respect of
principal, interest, prepayment premium and all other reimbursement obligations
under the Notes, all fees, charges, indemnities and expenses from time to time
owing hereunder or under any other Credit Document (all whether accruing before
or after a Bankruptcy Default and regardless of whether allowed as a claim in
bankruptcy or similar proceedings).
"OBLIGOR" means the Borrower, each Guarantor and each other Person
guaranteeing or providing collateral for the Obligations.
"PERMITTED EXCHANGE" is defined in Section 8.3.
"PERMITTED INVESTMENTS" means the following: (i) subject to compliance with
the terms of Section 8.1 and the Collateral Documents, immaterial Investments,
loans and advances by the Company to Wholly Owned Subsidiaries of the Company
(including newly created or acquired Wholly Owned Subsidiaries) which are
guarantors of the Senior Subordinated Notes, (ii) Investments in commercial
paper and loan participations maturing in 270 days or less from the
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date of issuance which at the time of acquisition are rated at least A-1 by S&P
or Prime-1 by ▇▇▇▇▇'▇; (iii) Investments in securities of or guaranteed by the
United States of America or agencies thereof, or securities issued by foreign
governments of comparable credit quality maturing within one year of
acquisition; (iv) Investments in bank instruments maturing within one year after
their acquisition issued by banks which are rated at least A-2/A by S&P; and (v)
repurchase agreements, having terms of less than 90 days, for government
obligations of the type specified above with a commercial bank or trust company
which is rated at least A-2/A by S&P.
"PERMITTED LIENS" means the following: (i) Liens incurred in connection
with the Credit Facility; (ii) purchase money security interests in, or leases
of, specific items of Equipment existing on the date hereof and described on
SCHEDULE 1.1; (iii) Liens on account of future purchase money security interests
in, or Capitalized Leases of, specific items of Equipment, in each case incurred
in the ordinary course of business, and in each case secured solely by the
Equipment to which the Lien relates; (iv) Liens securing obligations incurred in
connection with any exchange of Convertible Notes for new securities in a
transaction not prohibited by Section 8.4, (v) Liens for taxes not yet payable;
(vi) additional security interests and Liens consented to in writing by the
Required Holders, which consent shall not be unreasonably withheld; (vii)
security interests being terminated substantially concurrently with this
Agreement; (viii) Liens of materialmen, mechanics, warehousemen, carriers, or
other similar Liens arising in the ordinary course of business and securing
obligations which are not delinquent or are otherwise being contested in good
faith and by appropriate proceedings; (ix) Liens incurred in connection with the
extension, renewal or refinancing of the indebtedness secured by Liens of the
type described above in clauses (i), (ii) or (iii) above, provided that any
extension, renewal or replacement Lien is limited to the property encumbered by
the existing Lien and the principal amount of the indebtedness being extended,
renewed or refinanced does not increase; and (x) Liens in favor of customs and
revenue authorities which secure payment of customs duties in connection with
the importation of goods. Each of the Holders will have the right to require, as
a condition to its consent under subsection (vi) above, that the holder of the
additional security interest or Lien sign an intercreditor agreement on a
customary form, acknowledging that the security interest is subordinate to the
security interest in favor of the Holders, and agree not to take any action to
enforce its subordinate security interest so long as any Obligations remain
outstanding, and that the Borrower agrees that any uncured event of default in
any obligation secured by the subordinate security interest shall also
constitute an Event of Default under this Agreement.
"PERSON" means any individual, partnership, joint venture, limited
liability company, corporation, association, trust or other enterprise or any
government or political subdivision or any agency, department or instrumentality
thereof.
"PLAN" means any employee benefit plan, program or arrangement, whether
oral or written, maintained or contributed to by the Borrower, any Subsidiary of
the Borrower or any ERISA Affiliate, or with respect to which the Borrower, any
Subsidiary of the Borrower or any ERISA Affiliate may incur liability.
"PROHIBITED TRANSACTION" means any transaction that is prohibited under
Code section 4975 or ERISA section 406 and not exempt under Code section 4975 or
ERISA section 408.
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"REGISTRATION STATEMENTS" means the Company's registration statements filed
with the SEC since December 31, 2001 pursuant to the Securities Act.
"REGULATION U" means Regulation U of the Board of Governors of the Federal
Reserve System.
"REPORTABLE EVENT" means any of the events described in section 4043 of
ERISA.
"REQUIRED HOLDERS" means Holders holding Notes in an outstanding principal
amount greater than 50% of the total outstanding principal amount of all Notes.
"REQUIREMENT OF LAW" means, as to any Person, the Governing Documents of
such Person, and any law, treaty, rule, regulation, direction, ordinance,
criterion or guideline or determination of a court or other Governmental
Authority or determination of an arbitrator, in each case applicable to or
binding upon such Person or any of its property or to which such Person or any
of its property is subject.
"SEC" means the U.S. Securities and Exchange Commission.
"SEC REPORTS" means the Exchange Act Reports and the Registration
Statements.
"SECURITIES" is defined in the recitals hereto.
"SECURITIES ACT" means the Securities Act of 1933.
"SECURITY AGREEMENT" means the Security Agreement dated as of the date
hereof among the Borrower, the Guarantor and the Collateral Agent, as amended,
restated or supplemented from time to time in accordance with the terms thereof.
"SENIOR LENDER" means Silicon Valley Bank, a California chartered bank.
"SENIOR LOAN AGREEMENT" is defined in the recitals hereto.
"SENIOR LOAN EVENT OF DEFAULT" is defined in Section 10.5.
"SENIOR LOANS" means the Loans and Letters of Credits under and as defined
in the Senior Loan Agreement.
"SUBORDINATION AGREEMENT" means the Subordination Agreement dated as of the
date hereof among the Senior Lender, the Holders and the Collateral Agent, as
amended, restated or supplemented from time to time in accordance with the terms
thereof.
"SUBSIDIARY" means with respect to any Person at any time, (a) any other
Person the accounts of which would be consolidated with those of such first
Person in its consolidated financial statements as of such time, and (b) any
other Person (i) which is, at such time, Controlled by, or (ii) Capital
Securities of which having ordinary voting power to elect a majority of the
board of directors (or other persons having similar functions), or other
ownership
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interest of which ordinarily constituting a majority voting interest, are at
such time, directly or indirectly, owned or Controlled by, in the case of each
of clauses (i) and (ii), such first Person or one or more of its Subsidiaries or
by such first Person and one or more of its Subsidiaries. Unless otherwise
expressly provided, all references herein to "Subsidiary" means a Subsidiary of
the Company.
"TAX BENEFIT" is defined in Section 4.4.3.
"TAXES" is defined in Section 4.4.1.
"TERMINATION EVENT" means (a) a Reportable Event with respect to any
Benefit Plan or Multiemployer Plan; (b) the withdrawal of the Borrower, any
Subsidiary of the Borrower or any ERISA Affiliate from a Benefit Plan during a
plan year in which such entity was a "substantial employer" as defined in
section 4001(a)(2) of ERISA; (c) the providing of notice of intent to terminate
a Benefit Plan in a distress termination described in section 4041(c) of ERISA
or the treatment of any amendment as a termination under section 4041(e) of
ERISA; (d) the institution by the PBGC of proceedings to terminate a Benefit
Plan or Multiemployer Plan; (e) any event or condition (i) that might constitute
grounds under section 4042 of ERISA for the termination of, or the appointment
of a trustee to administer, any Benefit Plan or Multiemployer Plan, or (ii) that
may result in termination of a Multiemployer Plan pursuant to section 4041A of
ERISA; or (f) the partial or complete withdrawal within the meaning of sections
4203 and 4205 of ERISA, of the Borrower, any Subsidiary of the Borrower or any
ERISA Affiliate from a Multiemployer Plan.
"UCC" means the Uniform Commercial Code as in effect in The Commonwealth of
Massachusetts.
"U.S." means the United States of America.
"WARRANT AGREEMENT" means the Warrant and Registration Rights Agreement to
be entered into by the Company and U.S. Bank National Association, as Warrant
Agent, in substantially in the form of EXHIBIT A (as amended, modified or
supplemented from time to time).
"WARRANTS" is defined in the recitals hereto.
"IN WRITING" means any form of written communication or a communication by
means of telex, facsimile transmission, telegraph or cable.
2. PURCHASE AND SALE OF THE SECURITIES.
2.1. PURCHASE AND SALE OF THE NOTES. Subject to the terms and
conditions hereof, the Borrower agrees that it will issue and sell to the
Symphony Funds, and the Symphony Funds severally agree that they will acquire
from the Borrower, on the Closing Date, Notes in the aggregate principal amount
of $15,100,000.
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2.2. PURCHASE AND SALE OF THE WARRANTS. Subject to the terms and
conditions hereof, the Borrower agrees that it will issue and sell to the
Symphony Funds, and the Symphony Funds severally agree that they will acquire
from the Borrower, on the Closing Date, Warrants to purchase an aggregate
3,071,184 shares of Common Stock.
2.3. NOTE TERMS. Each Note issued to each Holder shall (a) be
executed by the Borrower, (b) be payable to the order of such Holder and be
dated the date of issuance thereof, (c) be in a stated principal amount set
forth opposite such Holder's name on EXHIBIT 2.3, (d) mature on the Maturity
Date, (e) bear interest as provided in Section 3, and (f) be entitled to the
benefits of this Agreement and the other Credit Documents.
2.4. FORM OF SECURITIES. Each Note or Warrant, as applicable, will
be issued only in fully registered form and will initially be represented by a
global note or global warrant (each a "GLOBAL SECURITY") registered in the name
of the Depositary or its nominee, and delivered to the Fiscal Agent, as
custodian for the Depositary and recorded in the book-entry system maintained by
the Depositary (a "BOOK-ENTRY Security"). No beneficial owner of an interest in
the Notes or the Warrants will be entitled to receive a certificate representing
such Note or Warrant, as applicable, except as provided in the Fiscal Agency
Agreement or the Warrant Agreement, as applicable.
2.5. DEPOSITARY. The Depositary for the Notes and the Warrants shall
initially be The Depository Trust Company and such Notes and Warrants shall be
registered in the name of Cede & Co., its nominee, and shall bear a legend in
substantially the following form:
"Unless this Certificate is presented by an authorized representative
of the Depository Trust Company, a New York corporation ("DTC"), to the
Issuer or its agent for registration of transfer, exchange, or payment, and
any certificate issued is registered in the name of Cede & Co. or in such
other name as requested by an authorized representative of DTC (and any
payment is made to Cede & Co. or to such other entity as requested by an
authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF
FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the
registered owner hereof, Cede & Co., has any interest herein."
The Depositary shall at all times be a "clearing corporation" as defined in
section 8-102(3) of the UCC or any successor provision thereto.
2.6. PURCHASE PRICE FOR SECURITIES; ALLOCATION OF PURCHASE PRICE.
The purchase price to each Symphony Fund for the Securities purchased by it
hereunder is the principal amount of Convertible Notes exchanged by such
Symphony Fund as set forth opposite such Symphony Fund's name on EXHIBIT 2.3.
The Borrower and the Symphony Funds agree that, for purposes of sections 1271
through 1275 of the Code or any other jurisdiction, the value of the Warrants
shall be $0.1438, and that such value shall be appropriately used by the
Borrower and each Symphony Fund for financial and income tax reporting purposes.
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2.7. CLOSING. Unless otherwise agreed among the Borrower and the
Symphony Funds, the purchase and issuance of the Securities shall take place on
the Closing Date at the offices of Ropes & ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇, at 10:00 a.m., local time. On the Closing Date, the
Borrower shall deliver the Securities to be issued by it to the Symphony Funds
against delivery by the Symphony Funds of the consideration therefor.
3. INTEREST.
3.1. RATE OF INTEREST. The principal amount of each Note shall bear
interest from the date of issuance until maturity (whether by acceleration or
otherwise) at 11.5% per annum. Interest shall be payable in full in cash in
accordance with Section 3.3.
3.2. DEFAULT INTEREST. All overdue principal, any premium on and, to
the extent permitted by applicable law, overdue interest in respect of any Note
shall bear interest at a rate per annum equal to 2% in excess of the interest
rate otherwise applicable to such Note.
3.3. INTEREST ACCRUAL AND COMPUTATION. Interest shall accrue on each
Note from and including the date of issuance thereof to but excluding the date
of any repayment thereof and shall be payable in cash semi-annually in arrears
on each Interest Payment Date, on any prepayment (on the principal amount
prepaid), at maturity (whether by acceleration or otherwise) and, after such
maturity, on demand. All computations of interest hereunder shall be made on the
actual number of days elapsed over a year of 360 days.
4. PAYMENTS.
4.1. PAYMENTS. All payments owing under this Agreement, any Note or
any other Credit Document to a Holder shall be paid directly by the Borrower in
immediately available funds by wire transfer to the Fiscal Agent for payment to
the Holders pursuant to the Fiscal Agency Agreement. The Borrower shall cause
all such amounts to be deposited with the Fiscal Agent not later than the
Business Day immediately prior to the date on which such amounts are required to
be paid to the Holders.
4.2. VOLUNTARY PREPAYMENTS. The Borrower shall have the right to
prepay the Notes, in whole or in part, at any time and from time to time, prior
to the Maturity Date. The Notes shall be prepaid at the following prepayment
prices (expressed in percentages of the outstanding principal amount of the
Note, as the case may be, being prepaid) plus accrued and unpaid interest on
such prepaid principal amount to the prepayment date, MINUS the number of
percentage points reflected by the product of (a) 10.1695 and (b) the difference
between (i) the average closing trading price of the Common Stock for the five
trading days immediately prior to, but not including, the date of such
prepayment and (ii) the Common Stock price denoted below in the column titled
"Minimum Common Stock Price" (the "NOTE PREPAYMENT PRICE"); PROVIDED, HOWEVER,
that in no event shall the Note Prepayment Price be less than 100% of the
outstanding principal amount of the Notes to be prepaid, plus accrued and unpaid
interest on such principal amount to the prepayment date:
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PERCENTAGE OF MINIMUM COMMON
OUTSTANDING STOCK PRICE
DATE OF PREPAYMENT PRINCIPAL AMOUNT
AFTER PRIOR TO AND INCLUDING
November 15, 2002 January 15, 2003 124.9167% $2.00
January 15, 2003 July 15, 2003 123.0000% $2.25
July 15, 2003 January 15, 2004 117.2500% $3.50
January 15, 2004 July 15, 2004 111.5000% $4.25
July 15, 2004 January 15, 2005 105.7500% $5.00
Each prepayment under this Section 4.2 shall be made on the following terms and
conditions: (a) the Borrower shall give each Holder written notice (or
telephonic notice promptly confirmed in writing) of its intent to prepay the
Notes and the amount of such prepayment, which notice shall be given by the
Borrower at least 30 days prior to the date of such prepayment, (b) each partial
prepayment shall be in an aggregate principal amount of at least $100,000, and
(c) each prepayment shall be allocated PRO RATA among all the Holders holding
the Notes being prepaid.
4.3. MANDATORY PREPAYMENTS.
4.3.1. Subject to Section 4.3.2, upon receipt of any Net Asset
Sale Proceeds in excess of $250,000 (or, if a Default or an Event of Default
shall then exist, regardless of amount) by the Borrower or any of its
Subsidiaries, which in each such case does not result in a Change of Control,
the Borrower shall, within one Business Day, pay (or cause its Subsidiary
receiving such proceeds to pay) to the Holders as a prepayment of the Notes to
be applied as provided in this Section 4.3 an amount determined by the Borrower
that is the lesser of (a) the amount of such Net Asset Sale Proceeds and (b) the
Aggregate Prepayment Amount (excluding any portion of such Net Asset Sale
Proceeds which so long as no Default or Event of Default exists, (x) in the case
of proceeds of business interruption insurance, is used in the ordinary course
of the Borrower's and its Subsidiaries' business and (y) in the case of proceeds
of casualty insurance, is applied for the purpose of replacing, repairing,
restoring or rebuilding the relevant tangible property).
4.3.2. Upon a Change of Control, the Borrower shall, within one
Business Day, make an offer to prepay all of the Notes then outstanding at the
Note Prepayment Price set forth in Section 4.2.
4.3.3. All prepayments pursuant to this Section 4.3 shall be
applied PRO RATA among the Holders holding the Notes being prepaid.
4.4. NET PAYMENTS.
4.4.1. All payments made by the Company hereunder or under any
Note will be made without setoff, counterclaim or other defense. Except as
provided in Section 4.4.2, all such payments will be made free and clear of, and
without deduction or withholding for, any
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present or future taxes, levies, imposts, duties, fees, assessments or other
charges of whatever nature now or hereafter imposed by any jurisdiction or by
any political subdivision or taxing authority thereof or therein with respect to
such payments (but excluding any tax imposed on or measured by the net income or
net profits, or franchise taxes imposed in lieu of net income or net profit
taxes, of a Holder pursuant to the laws of the jurisdiction in which it is
organized or the jurisdiction in which the principal office or applicable
lending office of such Holder, is located or any subdivision thereof) and all
interest, penalties or similar liabilities with respect to such non-excluded
taxes, levies, imposts, duties, fees, assessments or other charges (all such
non-excluded taxes, levies, imposts, duties, fees, assessments or other charges
being referred to collectively as "TAXES"). Subject to Section 4.4.2, if any
Taxes are so levied or imposed, the Borrower agrees to pay promptly the full
amount of such Taxes. The Borrower will furnish to the affected Holder within 60
days (or as soon thereafter as available) after the date the payment of any
Taxes is due pursuant to applicable law, certified copies of tax receipts
evidencing such payment by the Borrower or, if such receipts are not obtainable,
other evidence of such payments by the Borrower reasonably satisfactory to such
affected Holder. The Borrower agrees to indemnify and hold harmless each Holder,
and reimburse such Holder within 30 days after its written request, for the
amount of any Taxes so levied or imposed and paid by such Holder.
4.4.2. If any Holder is not created or organized in, or under
the laws of, the United States of America or any state thereof, such Holder
shall deliver to the Borrower such duly executed forms and statements from time
to time as may be necessary so that such Holder is entitled to receive payments
of the Obligations payable to it without deduction or withholding of any United
States federal income taxes, to the extent such exemption is available to such
Holder. If no such exemption is available at the time a Holder acquires any Note
(or any beneficial interest therein) or if at any time the Borrower has not
received all forms and statements (including any renewals thereof) required to
be provided by any Holder pursuant to this Section 4.4.2, Section 4.4.1 above
shall not apply with respect to any amount of United States federal income taxes
required to be withheld from payments of the Obligations to such Holder.
4.4.3. If the Borrower pays any additional amount under this
Section 4.4 to a Holder and such Holder determines in its sole and absolute
discretion that it has actually received or realized in connection therewith any
refund or any reduction of, or credit against, its Tax liabilities in or with
respect to the taxable year in which the additional amount is paid (a "TAX
BENEFIT"), such Holder shall promptly, but in no event later than 30 days
following the receipt of any such refund or 30 days following the earlier of the
filing of the applicable Tax return or the payment of the applicable Taxes, pay
to the Borrower an amount that such Holder shall, in its sole and absolute
discretion, determine is equal to the net benefit, after tax, which was obtained
by the Holder in such year as a consequence of such Tax Benefit; PROVIDED,
HOWEVER, that (a) any Holder may determine, in its sole and absolute discretion
consistent with the policies of such Holder, whether to seek a Tax Benefit; (b)
any Taxes that are imposed on a Holder as a result of a disallowance or
reduction (including through the expiration of any tax credit carryover or
carryback of such Holder that otherwise would not have expired) of any Tax
Benefit with respect to which such Holder has made a payment to the Borrower
pursuant to this
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Section 4.4.3 shall be treated as a Tax for which the Borrower is obligated to
indemnify such Holder pursuant to this Section 4.4 without any exclusions or
defenses; (c) nothing in this Section 4.4.3 shall require any Holder to disclose
any confidential information to the Borrower (including its tax returns); and
(d) no Holder shall be required to pay any amounts pursuant to this Section
4.4.3 at any time when a Default or Event of Default exists.
5. CONDITIONS PRECEDENT TO THE PURCHASE OF THE SECURITIES. The obligation
of each Symphony Fund to purchase and pay for the Securities as of the Closing
Date is subject to the satisfaction, prior to or on the Closing Date, of the
following conditions:
5.1. ISSUANCE OF SECURITIES; CONTEMPORANEOUS INVESTMENT. (a) The
Effective Date shall have occurred, (b) there shall have been delivered to the
Depositary a Note executed by the Borrower in the amount, maturity and as
otherwise provided herein, and (c) there shall have been delivered to the
Depositary a Warrant to purchase the number of shares of Common Stock as
provided herein.
5.2. OPINIONS OF COUNSEL. Each Symphony Fund shall have received
from (a) ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ LLP, counsel to the Obligors, and (b) such other
counsel to the Obligors, all opinions covering such matters incident to the
transactions contemplated hereby as the Symphony Funds may reasonably request,
addressed to each Symphony Fund, dated the Closing Date and otherwise
satisfactory in form and substance to the Symphony Funds.
5.3. CORPORATE PROCEEDINGS.
(a) Each Symphony Fund shall have received a certificate from the
Borrower and such other Obligors requested by the Symphony Funds, dated the
Closing Date, signed by the chairman, a vice chairman, the president, any
vice president or representative director of such Obligor in the form of
EXHIBIT 5.3 with appropriate insertions and deletions, together with (i)
copies of the certificate of incorporation, by-laws or other organizational
documents of each such Obligor, (ii) the resolutions of each Obligor
referred to in such certificate and all of the foregoing (including each
such certificate of incorporation and by-laws) shall be in form and
substance reasonably satisfactory to the Symphony Funds and (iii) a
certification that all of the applicable conditions precedent set forth in
Sections 5.3, 5.5, 5.6 and 5.7 shall have been satisfied as of such date.
(b) On the Closing Date, all corporate and legal proceedings and
all instruments and agreements in connection with the transactions
contemplated by this Agreement and each other Document shall be reasonably
satisfactory in form and substance to the Symphony Funds, and the Symphony
Funds shall have received all information and copies of all certificates,
documents and papers, including good standing certificates and any other
records of corporate proceedings and governmental approvals, if any, which
a Symphony Fund may have reasonably requested in connection therewith, such
documents and papers, where appropriate, to be certified by proper
corporate or governmental authorities.
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5.4. MATERIAL ADVERSE EFFECT, ETC. From September 30, 2002 to the
Closing Date, nothing shall have occurred (and no Symphony Fund shall have
become aware of any facts or conditions not previously known) which any Symphony
Fund shall determine has, or is reasonably likely to have, (a) a material
adverse effect on the rights or remedies of the Holders or Symphony Funds
hereunder or under any other Document, or on the ability of the Obligors taken
as a whole to perform their obligations under the Documents or (b) a Material
Adverse Effect.
5.5. LITIGATION. There shall be no actions, suits or proceedings
pending or threatened (a) with respect to any Document or (b) which any Symphony
Fund shall determine is reasonably likely to have (i) a Material Adverse Effect
or (ii) a material adverse effect on the rights or remedies of the Holders or
Symphony Funds hereunder or under any other Document or on the ability of the
Obligors taken as a whole to perform their obligations under the Documents.
5.6. APPROVALS. The Obligors shall have received all authorizations,
consents, approvals, licenses, franchises, permits and certificates by or of all
governmental and third parties, in each case necessary for the issuance of the
Securities and for the execution and delivery of the Documents to which they are
parties, and all of the foregoing shall be in full force and effect on the
Closing Date.
5.7. SENIOR LOAN AGREEMENT; 8-K FILING. The initial borrowing under
the Senior Loan Agreement shall have been made on or prior to the Closing Date.
The Symphony Funds shall have each received a complete and correct copy of the
Senior Loan Agreement, certified by an Authorized Officer. The Company shall
have disclosed the transactions contemplated by the Senior Loan Agreement on
Form 8-K and filed such Form 8-K with the SEC, including the filing as an
exhibit of the Senior Loan Agreement.
5.8. GUARANTEE. The Borrower and each Domestic Subsidiary (other
than Ivanet, LLC and iBasis Holdings, Inc.) in existence on the Closing Date
shall have duly authorized, executed and delivered a Guarantee in the form of
EXHIBIT 5.8 with respect to the Notes (as modified, amended or supplemented from
time to time in accordance with the terms hereof and thereof, the "GUARANTEE"),
and each Guarantee shall be in full force and effect.
5.9. COLLATERAL DOCUMENTS. Each Obligor, as appropriate, shall have
duly authorized, executed and delivered to the Symphony Funds each of the
Collateral Documents, together with such other agreements and documents
contemplated thereunder, each in form and substance reasonably satisfactory to
the Symphony Funds. The Symphony Funds shall have received evidence that all
actions necessary or, in the reasonable opinion of the Symphony Funds,
desirable, to perfect the security interests created by each of the Collateral
Documents have been taken.
5.10. FISCAL AGENCY AGREEMENT. The Fiscal Agency Agreement shall
have been duly executed and delivered by the parties thereto.
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5.11. WARRANT AGREEMENT. The Warrant Agreement shall have been duly
executed and delivered by all of the parties thereto.
5.12. DTC ELIGIBILITY. The Notes and Warrants shall have become
eligible for DTC book-entry delivery services.
5.13. CUSIP NUMBER. The Borrower shall have obtained CUSIP Numbers
for each of the Notes and the Warrants.
5.14. FEES. Subject to the terms of the letter agreement, dated
November 8, 2002, between Symphony Asset Management and the Company (the "FEE
LETTER"), the Borrower shall have paid to the Symphony Funds and their
representatives all costs, fees and expenses, and all other compensation
contemplated by this Agreement and the other Documents (including reasonable
legal fees and expenses).
5.15. CAPITALIZATION. The Company shall deliver evidence furnished
by Equiserve as to the authorized and issued and outstanding Common Stock of the
Company as of the Closing Date.
5.16. SENIOR LENDER POSSESSION OF STOCK CERTIFICATES. The Senior
Lender (or its agent) shall have taken physical possession of the stock or other
certificates representing (i) all issued and outstanding equity of each Domestic
Subsidiary and (ii) 65% of the issued and outstanding equity of each Foreign
Subsidiary, together in each case with appropriate undated stock or other
transfer powers, duly executed by the holder of such equity in blank.
5.17. NO DEFAULT; REPRESENTATIONS AND WARRANTIES. On the Closing
Date and after giving effect to the transaction contemplated hereby, (a) there
shall exist no Default or Event of Default and (b) all representations and
warranties made by any Obligor contained herein or in the other Credit Documents
shall be true and correct in all material respects with the same effect as
though such representations and warranties had been made on and as of such date,
except to the extent that such representations and warranties expressly relate
to an earlier date.
All of the certificates, legal opinions and other documents and papers
referred to in Section 5, unless otherwise specified, shall be delivered to each
of the Symphony Funds and shall be reasonably satisfactory in form and substance
to such Symphony Funds.
6. REPRESENTATIONS AND WARRANTIES OF THE OBLIGORS. In order to induce the
Symphony Funds and the Collateral Agent to enter into this Agreement and to
purchase the Securities, each of the Obligors jointly and severally makes the
following representations and warranties, all of which shall survive the
execution and delivery of this Agreement and the purchase of the Securities:
6.1. CORPORATE STATUS. Each Obligor and each of its Subsidiaries (a)
is a duly organized and validly existing corporation in good standing under the
laws of the jurisdiction of its organization and has the corporate power and
authority to own its property and assets and
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to transact the business in which it is engaged and presently proposes to engage
and (b) has duly qualified to do business and is in good standing in each
jurisdiction where it is required to be so qualified and where the failure to be
so qualified is reasonably likely to have a Material Adverse Effect.
6.2. CORPORATE POWER AND AUTHORITY. Each Obligor has the corporate
power and authority to execute, deliver and perform its obligations under each
of the Documents to which it is a party and has taken all necessary corporate
action to authorize the execution, delivery and performance of the Documents to
which it is a party. Each Obligor has duly executed and delivered to the
Symphony Funds each Document to which it is a party and each such Document
constitutes the legal, valid and binding obligation of such Person enforceable
in accordance with its terms.
6.3. NO VIOLATION. Neither the execution, delivery and performance
by any Obligor of the Documents to which it is a party nor compliance with the
terms and provisions thereof (a) will contravene any applicable provision of any
law, statute, rule, regulation, order, writ, injunction or decree of any court
or governmental instrumentality, except as would not have a Material Adverse
Effect, (b) will conflict or be inconsistent with or result in any breach of,
any of the material terms, covenants, conditions or provisions of, or constitute
a default under, or result in the creation or imposition of (or the obligation
to create or impose) any Lien upon any of the property or assets of such Obligor
pursuant to the terms of, any indenture, mortgage, deed of trust, agreement or
other instrument to which such Person is a party or by which it or any of its
property or assets are bound or to which it may be subject or (c) will violate
any provision of the certificate of incorporation, by-laws or other
organizational document of such Obligor.
6.4. CAPITALIZATION. The authorized capital stock of the Company
consists of 85,000,000 shares of Common Stock, of which 45,785,055 are issued
and outstanding. As of the Closing Date, (i) 2,542,035 shares of Common Stock
were reserved for future issuance pursuant to outstanding options issued by the
Company, (ii) 337,500 shares of Common Stock were reserved for future issuance
pursuant to outstanding warrants issued by the Company and (iii) 1,027,397
shares of Common Stock were reserved for future issuance upon conversion of the
Convertible Notes. The Warrants to be issued and sold hereunder shall constitute
5.58%% of the fully diluted equity of the Company (calculated assuming exercise
of all warrants, rights or options outstanding as of the Closing Date). Except
as set forth above and for the exercise rights of the Warrants and the
conversion rights of the Convertible Notes, after giving effect to the
transactions contemplated by this Agreement, and except as set forth on SCHEDULE
6.4, there will be no other outstanding options, warrants, rights (including
conversion or preemptive rights) or any agreement for the purchase or
acquisition from the Company of any shares of the Company's capital stock or
voting agreements with respect to equity of the Company. All shares of the
capital stock of the Company subject to issuance as aforesaid, including the
Warrants, upon issuance on the terms and conditions specified in the instruments
pursuant to which they are issuable, shall be duly authorized, validly issued,
fully paid and nonassessable. There are no obligations, contingent or otherwise,
of the Company to repurchase, redeem or otherwise acquire any shares of Common
Stock or to provide funds to or make any investment
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(in the form of a loan, capital contribution, guaranty or otherwise) in any
other entity. None of the outstanding shares of capital stock of the Company
were issued in violation of the Securities Act or any state securities laws.
6.5. LITIGATION. Except as disclosed in the SEC Reports, no actions,
suits or proceedings are pending or, to the best of each Obligor's knowledge,
threatened that are reasonably likely to have (a) a Material Adverse Effect or
(b) a material adverse effect on the rights or remedies of the Holders or the
Symphony Funds or on the ability of the Obligors taken as a whole to perform
their obligations under the Documents.
6.6. MARGIN REGULATIONS. Neither the sale of any Securities, nor the
use of the proceeds thereof, will violate Regulation T, U or X of the Board of
Governors of the Federal Reserve System and no part of the proceeds from the
sale of the Securities will be used to purchase or carry any Margin Stock or to
extend credit for the purpose of purchasing or carrying any Margin Stock.
6.7. GOVERNMENTAL APPROVALS. Except for any required filings and
recordings which have been made and are in full force and effect, no order,
consent, approval, license, authorization or validation of, or filing, recording
or registration with, or exemption by, any foreign or domestic governmental or
public body or authority, or any subdivision thereof, is required to authorize
or is required in connection with (a) the execution, delivery and performance of
any Document or (b) the legality, validity, binding effect or enforceability of
any Document.
6.8. INVESTMENT COMPANY ACT. None of the Obligors is an "investment
company" or a company "controlled" by an "investment company," within the
meaning of the Investment Company Act of 1940.
6.9. PUBLIC UTILITY HOLDING COMPANY ACT. None of the Obligors is a
"holding company," or a "subsidiary company" of a "holding company," or an
"affiliate" of a "holding company" or of a "subsidiary company" of a "holding
company," within the meaning of the Public Utility Holding Company Act of 1935.
6.10. CONFORMITY TO SECURITIES ACT AND EXCHANGE ACT; NO MISSTATEMENT
OR OMISSION. Each of the SEC Reports as of the date it was filed with the SEC in
the case of filings under the Exchange Act or declared effective in the case of
the Registration Statements, complied in all material respects with the
applicable requirements of the Securities Act or the Exchange Act and the
respective rules and regulations of the SEC thereunder and did not contain an
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements therein not misleading.
6.11. FINANCIAL CONDITION; FINANCIAL STATEMENTS. The financial
statements and supporting schedules included in the Company's Annual Report on
Form 10-K for the year ended December 31, 2001, and in the Company's Quarterly
Reports on Form 10-Q for the quarters ended March 31, 2002, June 30, 2002 and
September 30, 2002 and in any Registration Statements or other SEC Reports, in
each case filed with the SEC, are complete
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and correct in all material respects and present fairly the consolidated
financial position of the Company and its Subsidiaries as of the dates specified
and the consolidated results of their operations for the periods specified, in
each case, in conformity with generally accepted accounting principles applied
on a consistent basis during the periods involved, except as indicated therein
or in the notes thereto.
6.12. NO MATERIAL ADVERSE CHANGES. Since September 30, 2002, (a)
there has been no Material Adverse Effect; (b) except as contemplated by this
Agreement or described in the SEC Reports, there has been no transaction entered
into by the Company or any of its Subsidiaries other than transactions in the
ordinary course of business or transactions which would not, individually or in
the aggregate, have a Material Adverse Effect; (c) there have not been any
changes in the Borrower's authorized capital or, other than the borrowing made
by the Borrower under the Senior Loan Agreement, any material increases in the
debt of the Borrower and its Subsidiaries taken as a whole; and (d) there has
been no actual or, to the knowledge of the Borrower, threatened revocation of,
or default under, any material contract to which the Borrower or any of its
Subsidiaries is a party, except as would not have a Material Adverse Effect.
6.13. TAX RETURNS AND PAYMENTS. Each of the Borrower and each of its
Subsidiaries has filed all federal income tax returns and all other material
domestic and foreign tax returns required to be filed by it and has paid all
material taxes and assessments payable by it which have become due, except for
those contested in good faith and adequately reserved against (in the good faith
determination of the Borrower), all of which, to the extent outstanding on the
Closing Date, have been disclosed by the Company in the SEC Reports. Each of the
Borrower and each of its Subsidiaries has paid, or has provided adequate
reserves (in the good faith judgment of the Borrower) for the payment of, all
material federal, state and foreign taxes that are not yet due and payable for
all fiscal years, including the current fiscal year, to date. No action, suit,
proceeding, investigation, audit or claim is now pending or, to the knowledge of
the Borrower or its Subsidiaries, threatened by any authority regarding any
taxes relating to the Borrower or any of its Subsidiaries which is reasonably
likely to have a Material Adverse Effect. As of the Closing Date, neither the
Borrower nor any of its Subsidiaries has entered into an agreement or waiver or
been requested to enter into an agreement or waiver extending any statute of
limitations relating to the payment or collection of taxes of the Borrower or
any of its Subsidiaries.
6.14. SUBSIDIARIES. As of the Closing Date, the Company has no
directly held Subsidiary other than iBasis Global, iBasis Securities
Corporation, and iBasis Speech Solutions, Inc., and such Subsidiaries have no
Subsidiaries other than those listed on SCHEDULE 6.14.
6.15. INTELLECTUAL PROPERTY. The Borrower and each of its
Subsidiaries have obtained all material patents, trademarks, service marks,
trade names, copyrights, licenses and other rights, free from materially
burdensome restrictions, that are necessary for the operation of their
businesses taken as a whole as presently conducted, except for those for which
the failure to obtain is not reasonably likely to have a Material Adverse
Effect.
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6.16. PROPERTIES. The Borrower and each of its Subsidiaries have
good and valid title to all material properties owned by them, including all
such properties reflected in their balance sheets included in the Company's
Quarterly Report on Form 10-Q for the quarter ended September 30, 2002, free and
clear of all Liens, other than (a) as referred to in such balance sheet or in
the notes thereto or (b) otherwise permitted by Section 8.10.
6.17. LABOR RELATIONS. No Obligor is engaged in any unfair labor
practice that is reasonably likely to have a Material Adverse Effect. No unfair
labor practice complaint is pending against any Obligor or, to the best of its
knowledge, threatened against any of them, before the National Labor Relations
Board or similar foreign labor relations authority, and no grievance or
arbitration proceeding arising out of or under any collective bargaining
agreement is so pending against any Obligor or, to the best of its knowledge,
threatened against any of them. No strike, labor dispute, slowdown or stoppage
is pending against any Obligor or, to the best of its knowledge, threatened
against any Obligor. No union representation question exists with respect to the
employees of any Obligor and no union organizing activities are taking place,
except with respect to any matter specified above, either individually or in the
aggregate, which is not reasonably likely to have a Material Adverse Effect.
6.18. COMPLIANCE WITH STATUTES, ETC.
6.18.1. Each Obligor is in compliance with all applicable
statutes, regulations and orders of, and all applicable restrictions imposed by,
all governmental authorities, domestic or foreign, in respect of the conduct of
its business and the ownership of its property, except such non-compliance as is
not reasonably likely, individually or in the aggregate, to have a Material
Adverse Effect.
6.18.2. Except as has been disclosed by the Company in the SEC
Reports, no Obligor has (a) any material liability of which any Obligor has
knowledge or reasonably should have knowledge in connection with any release,
generation, storage, use, transportation, disposal or other handling of any
hazardous or toxic waste, substance or constituent material into the
environment, or (b) received any written notice, letter or other indication of
potential liability arising from the release, generation, storage, use,
transportation, disposal or other handling of any hazardous or toxic waste,
substance or constituent material into the environment.
6.18.3. To the best of each Obligor's knowledge, except as has
been disclosed by the Company in the SEC Reports, none of the operations of the
Company or any of its Subsidiaries is the subject of any federal or state or
foreign investigation evaluating whether such Person disposed of any hazardous
or toxic waste, substance or constituent material at any site that may require
remedial action, or any federal or state or foreign investigation evaluating
whether any remedial action is needed to respond to a release of any hazardous
or toxic waste, substance or constituent material into the environment.
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6.19. ERISA. Neither the Borrower, any Subsidiary of the Borrower
nor any ERISA Affiliate maintains or contributes to any Plan other than those
listed on SCHEDULE 6.19.
7. SYMPHONY FUND REPRESENTATIONS. Each Symphony Fund, severally but not
jointly, represents and warrants only as to itself as follows:
7.1. AUTHORIZATION; NO CONTRAVENTION. The execution, delivery and
performance by it of this Agreement: (a) is within its power and authority and
has been duly authorized by all necessary action and (b) does not contravene the
terms of its organizational documents or any amendment thereof.
7.2. BINDING EFFECT. This Agreement has been duly executed and
delivered by it and this Agreement constitutes its legal, valid and binding
obligation, enforceable against it in accordance with its terms.
7.3. NO LEGAL BAR. The execution, delivery and performance of this
Agreement by it will not violate any Requirement of Law applicable to it.
7.4. PURCHASE FOR OWN ACCOUNT. The Securities to be acquired by it
pursuant to this Agreement are being acquired for its own account and with no
intention of distributing or reselling such securities or any part thereof in
any transaction that would violate the securities laws of the United States of
America, or any state thereof, without prejudice, however, to its right at all
times to sell or otherwise dispose of all or any part of its Securities, under
an effective registration statement under the Securities Act, or under an
exemption from such registration available under the Securities Act, and
subject, nevertheless, to the disposition of its property being at all times
within its control.
7.5. ACCREDITED INVESTOR. Such Symphony Fund is an "accredited
investor" as that term is defined in Rule 501 of Regulation D promulgated under
the Securities Act, by virtue, INTER ALIA, of its being a corporation,
Massachusetts or similar business trust, or partnership, not formed for the
specific purpose of acquiring the Warrants or the shares of Common Stock
issuable upon exercise of the Warrants, with total assets in excess of
$5,000,000.
7.6. RESTRICTED SECURITIES. Such Symphony Fund understands that the
Warrants acquired by it may not be sold, transferred or otherwise disposed of
without registration under the Securities Act or an exemption therefrom, and
that in the absence of an effective registration statement covering the Warrants
or an available exemption from registration under the Securities Act, the
Warrants must be held indefinitely. In the absence of a registration statement
covering the Warrants, such Symphony Fund will sell, transfer or otherwise
dispose of the Warrants only in a manner consistent with its representations and
agreements set forth herein.
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7.7. FINANCIAL CONDITION. Such Symphony Fund's financial condition
is such that it is able to bear the risk of holding the Securities acquired by
it for an indefinite period of time and can bear the loss of its entire
investment in the Securities.
7.8. EXPERIENCE. Such Symphony Fund has such knowledge and
experience in financial and business matters and in making high-risk investments
of the type such as the Securities that it is capable of evaluating the merits
and risks of the acquisition of the Securities.
7.9. LEGEND. Such Symphony Fund understands that the certificates
evidencing the Securities may bear a legend substantially in the following form:
"[THIS SECURITY] [THE NOTE EVIDENCED HEREBY] HAS NOT BEEN REGISTERED UNDER
THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT AS SET FORTH BELOW. BY ITS
ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT), (2)
AGREES THAT IT WILL NOT WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS
SECURITY RESELL OR OTHERWISE TRANSFER THIS [SECURITY] [NOTE] EXCEPT (A) TO THE
ISSUER OR ANY SUBSIDIARY THEREOF, (B) TO A QUALIFED INSTITUTIONAL BUYER IN
COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, OR (C) PURSUANT TO A
REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT (AND WHICH CONTINUES TO BE EFFECTIVE AT THE TIME OF SUCH TRANSFER) AND (3)
AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS [SECURITY] [NOTE] IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND."
7.10. SUBORDINATION LEGEND. Such Symphony Fund understands that the
Notes will bear a legend substantially in the following form:
"THE TERMS OF THIS NOTE ARE SUBJECT TO THAT CERTAIN SUBORDINATION AGREEMENT
DATED AS OF JANUARY 30, 2003, AMONG SILICON VALLEY BANK, THE CREDITORS NAMED
THEREIN AND U.S. BANK NATIONAL ASSOCIATION, AS COLLATERAL AGENT AND FISCAL
AGENT."
7.11. ERISA. No part of the funds used by it to purchase the
Securities hereunder constitutes assets of an "employee benefit plan" (as
defined in section 3(3) of ERISA) or "plan" (as defined in section 4975 of the
Code).
7.12. BROKER'S, FINDER'S OR SIMILAR FEES. No brokerage commissions,
finder's fees or similar fees or commissions are payable in connection with the
transactions contemplated hereby based on any agreement, arrangement or
understanding with it or any action taken by it. Such Symphony Fund hereby
indemnifies each other party against and agrees that it will hold each such
party harmless from any claim, demand or liability for any
-24-
such brokerage commissions, finder's fees or similar fees or commissions alleged
to have been incurred by such Symphony Fund with respect to the transactions
contemplated hereby.
7.13. GOVERNMENTAL AUTHORIZATION; THIRD PARTY CONSENT. No approval,
consent, compliance, exemption, authorization or other action by, or notice to
or filing with, any Governmental Authority or any other Person in respect of any
Requirement of Law, and no lapse of a waiting period under a Requirement of Law,
is required in connection with the execution, delivery or performance by it of
this Agreement or the transactions contemplated hereby.
8. CONTINUING COVENANTS. The Borrower covenants and agrees that for so
long as this Agreement is in effect and until each of the Notes and all other
Obligations incurred hereunder are paid in full, the Borrower will comply with
the following provisions and make the following representations and warranties:
8.1. NEWLY CREATED ENTITY. The Borrower shall (a) cause any newly
created Domestic Subsidiary (or any existing Domestic Subsidiary that is not
presently a Guarantor, but whose assets have a fair market value exceeding
$1,000,000) to become a Guarantor and pledge its assets (including its stock) to
secure the Obligations hereunder and (b) use reasonable efforts to pledge all of
its interest in a newly created joint venture to secure the Obligations
hereunder.
8.2. SEC FILINGS AND REPORTS. The Company will timely file all
documents required to be filed with the SEC pursuant to section 13 or 15 of the
Exchange Act, and shall provide to the Collateral Agent within one day of making
any filing with the SEC copies, copies of all such documents, including all
financial statements of the Company filed with the SEC, and all supplemental
information packages given to securities analysts or investors.
8.3. REPURCHASE OF CONVERTIBLE SUBORDINATED NOTES. Other than in
connection with an exchange of Convertible Notes at an exchange rate less than
or equal to (a) $0.50 of principal amount of each new note to be issued in
connection therewith and (b) warrants to purchase 0.101695 shares of Common
Stock to be issued in connection therewith in exchange for each $1 of principal
amount of Convertible Notes to be exchanged, whereby any new securities issued
by the Borrower in connection with such exchange are not senior to the
Securities and do not otherwise have terms (taken as a whole) more favorable to
the holders thereof than the terms governing the Securities (a "PERMITTED
EXCHANGE"), from and after the Closing Date, except as contemplated by this
Agreement, the Borrower shall not repay principal of any outstanding Convertible
Note, and shall not repurchase or otherwise acquire (including in any exchange
or other acquisition of Convertible Notes in whole or in part for other debt
securities) any outstanding Convertible Note, at a purchase price greater than
35% of the outstanding principal amount of such Convertible Note.
8.4. EXCHANGE OF CONVERTIBLE NOTES. In addition to the limitations
set forth in Section 8.3, prior to the six-month anniversary of the Closing
Date, the Borrower shall not effect any exchange of Convertible Notes other than
pursuant to Permitted Exchanges for up to $27,300,000 aggregate principal amount
of Convertible Notes. Any new securities issued by
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the Company pursuant to a Permitted Exchange shall be in minimum denominations
of $1,000 principal amount and integral multiples in excess thereof. Following
the six-month anniversary of the Closing Date, the Borrower shall not effect any
exchange of Convertible Notes for new debt securities to be issued by the
Borrower or any Affiliate of the Borrower.
8.5. NON-PUBLIC INFORMATION. Except, in accordance with, or as
required by, the Credit Documents, Borrower will not furnish to any Holder or
any Symphony Fund any non-public, confidential information regarding the Company
or any of its Subsidiaries.
8.6. INSURANCE. The Borrower shall, at all times insure all of the
tangible Credit Security and carry such other business insurance in such form
and amounts as are customary and necessary for the operation of its business,
and the Borrower shall provide evidence of such insurance to the Collateral
Agent, of which evidence the Collateral Agent shall provide copies to any Holder
upon its written request therefor. All such insurance policies shall name the
Collateral Agent as an additional loss payee, and shall contain a lenders loss
payee endorsement in form reasonably acceptable to the Collateral Agent.
8.7. LITIGATION COOPERATION. Should any suit or proceeding be
instituted by or against the Holders, the Symphony Funds or the Collateral Agent
by a third party with respect to any Credit Security or in any manner relating
to the Borrower, the Borrower shall, without expense to the Holders, the
Symphony Funds or the Collateral Agent, make available the Borrower and its
officers, employees and agents and the Borrower's books and records, to the
extent that the Holders or the Symphony Funds, as applicable, may deem them
reasonably necessary in order to prosecute or defend any such suit or proceeding
by such third party.
8.8. BANKING RELATIONSHIP. In order for the Holders to properly
monitor their arrangement with the Borrower, the Borrower shall at all times
during the term of this Agreement maintain all of its depository, operating and
securities accounts at institutions which are have agreed to a form of deposit
account control agreement reasonably acceptable to the Holders.
8.9. SUBORDINATION OF INSIDE DEBT. All present and future
Indebtedness of the Company to its officers, directors and shareholders other
than to any lender under the Credit Facility ("INSIDE DEBT") shall, at all
times, be subordinated to the Obligations pursuant to a subordination agreement
on in form and substance satisfactory to the Required Holders. The Company
represents and warrants that there is no Inside Debt presently outstanding.
Prior to incurring any Inside Debt in the future, the Company shall cause the
person to whom such Inside Debt will be owed to execute and deliver to the
Holders and the Collateral Agent a subordination agreement in form and substance
satisfactory to the Holders and the Collateral Agent.
8.10. SUBORDINATION AGREEMENTS. The Borrower represents and warrants
that, other than the Senior Loans, the Convertible Notes and indebtedness
secured by Permitted Liens or otherwise incurred in the ordinary course of
business, the Borrower has no Indebtedness for money borrowed. Prior to
incurring any additional indebtedness, other than in connection with the Credit
Facility or pursuant to any exchange of Convertible Notes for new
-26-
securities in a transaction not prohibited by Section 8.4, the Borrower shall
cause each new creditor to execute and deliver to the Holders and the Collateral
Agent a subordination agreement subordinating to the Obligations the
Indebtedness of the Borrower to any such creditor. The Borrower represents that
none of the existing subordinated debt outstanding under the Convertible Notes
Indenture is currently secured by any assets or property of the Borrower. In
addition, as further described in Section 9, the Borrower covenants that at no
time will any of the subordinated debt be secured by its assets or property.
Notwithstanding the foregoing, the Convertible Notes may be exchanged for new
securities pursuant to transactions not prohibited by Section 8.3 or Section
8.4, and such Indebtedness shall be permitted hereunder and Liens securing such
Indebtedness shall automatically be deemed a "Permitted Lien" hereunder. The
Borrower acknowledges and agrees that the Obligations are and shall at all times
constitute "Designated Senior Indebtedness" of the Borrower with respect to each
of its subordinated creditors, including, without limitation, those subordinated
creditors party to, or who are entitled to the benefits of, the Convertible
Notes Indenture. The Borrower hereby represents, warrants and certifies that it
has, on or about the date hereof, delivered to the Trustee under the Convertible
Notes Indenture a notice in accordance with the terms of the Convertible Notes
Indenture to confirm that the Obligations constitute Designated Senior
Indebtedness thereunder. The Borrower hereby agrees that it will not materially
modify any of the terms and conditions of the Convertible Notes Indenture
without the Required Holders' prior written consent in each instance. Other than
in connection with any exchange of Convertible Notes for new securities in
transactions not prohibited by Section 8.3 or Section 8.4, the Borrower shall
not make any payments of any kind (including, without limitation, pursuant to
section 13.1 of the Convertible Notes Indenture) to, or for the benefit of, any
of the subordinated debt holders or the Trustee under the Convertible Notes
Indenture without the prior written consent of the Required Holders in each
instance; PROVIDED, HOWEVER, that the Company shall be permitted to pay the
compensation expenses of the Trustee (as such term is defined in the Convertible
Notes Indenture) in accordance with section 8.6 of the Convertible Notes
Indenture, and prior to the occurrence of an Event of Default, the Company may
make regularly scheduled payments of interest in accordance with the terms of
the Convertible Notes Indenture and may consummate one or more exchanges of
Convertible Notes pursuant to transactions not prohibited by Section 8.3 or
Section 8.4.
8.11. FURTHER ASSURANCES. The Borrower agrees, at its expense, on
request by any of the Holders, to execute all documents and take all actions, as
the Holders or the Collateral Agent may deem reasonably necessary or useful in
order to perfect and maintain the Holders' perfected security interest in the
Credit Security, and in order to fully consummate the transactions contemplated
by this Agreement.
9. CONTINGENT COVENANTS. The Borrower makes the following representations
and warranties and covenants and agrees that, following the termination or
material modification (in the reasonable discretion of the Required Holders) of
the Senior Loan Agreement (PROVIDED, HOWEVER, that neither a refinancing or
renewal of such Indebtedness incurred pursuant to the Senior Loan Agreement of
up to $40,000,000 nor any amendment or modification to the financial covenants
contained in the Senior Loan Agreement shall, in and of itself, constitute a
termination or material modification of the Senior Loan Agreement), for so long
as this
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Agreement is in effect and until each of the Notes and all other Obligations
incurred hereunder are paid in full, the Borrower shall not, without the
Required Holders' prior written consent (which consent will not be unreasonably
withheld or delayed), do any of the following: (i) merge or consolidate with
another corporation or entity if such merger or consolidation results in a
Change of Control; PROVIDED, HOWEVER, that iBasis Global and the Guarantor may
(x) merge into the Company or (y) merge together; (ii) acquire any assets,
except in the ordinary course of business; (iii) enter into any other
transaction outside the ordinary course of business; (iv) sell or transfer any
Credit Security, except for the sale of finished Inventory in the ordinary
course of the Borrower's business, and except for the sale of obsolete or
unneeded Equipment in the ordinary course of business; (v) store any Inventory
or other Credit Security with any warehouseman or other third party other than
in the ordinary course of business; (vi) other than the sale of finished
Inventory in the ordinary course of Borrower's business in accordance with
Section 9(iv) above, sell any Inventory on a sale-or-return, guaranteed sale,
consignment, or other contingent basis; (vii) other than as permitted by the
Senior Loan Agreement or the Security Agreement or pursuant to transactions not
prohibited by Section 8.4, use any of its assets as security for any
Indebtedness; (viii) other than travel advances and similar loans to employees
made in the ordinary course of business and the payment of salaries and the
granting of other employee benefits in the ordinary course of business, make any
loans of any money or transfer any of its assets, including loans and transfers
to its Affiliates; (ix) other than under the Senior Loan Agreement, the Notes or
in accordance with Sections 8.3 and 8.4, incur any debts outside the ordinary
course of business; (x) guarantee or otherwise become liable with respect to the
obligations of another party or entity; (xi) enter into any Lien with respect to
a Capitalized Lease other than a Permitted Lien; (xii) pay or declare any
dividends on Borrower's stock (except for dividends payable solely in stock of
the Borrower and dividends payable by iBasis Global to the Company); (xiii)
other than a cashless or "net" exercise of employee stock options pursuant to
plans existing on the date hereof or otherwise approved by Borrower's board of
directors, redeem, retire, purchase or otherwise acquire, directly or
indirectly, any of the Borrower's stock; (xiv) enter into any agreement that
restricts dividends to be paid by any Subsidiary of the Borrower; (xv) make any
change in the Borrower's capital structure which would have a material adverse
effect on the Borrower or on the prospect of repayment of the Obligations; (xvi)
make any Investment other than Permitted Investments; or (xvii) dissolve or
elect to dissolve. Transactions permitted by the foregoing provisions of this
Section 9 are only permitted if no Default or Event of Default would occur as a
result of such transaction. Notwithstanding anything to the contrary contained
in this Section 9, nothing in this Section 9 shall prohibit the Borrower from
repurchasing Convertible Notes or exchanging new securities for Convertible
Notes in accordance with Sections 8.3 and 8.4, and the consummation of such
transactions shall not be deemed to result in a breach of this Section 9.
10. EVENTS OF DEFAULT; REMEDIES.
10.1. EVENTS OF DEFAULT. The following events are referred to as
"EVENTS OF DEFAULT":
10.1.1. PAYMENTS. The Borrower shall (a) default in the payment
when due of any principal of the Notes or (b) default, and such default shall
continue for three or more
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Business Days, in the payment when due of any interest on the Notes or any other
amounts owing hereunder or under any other Credit Document.
10.1.2. REPRESENTATIONS, ETC. Any representation, warranty or
certification made by any Obligor herein or in any other Credit Document or in
any statement or certificate delivered or required to be delivered pursuant
hereto or thereto shall prove to be untrue in any material respect as of the
date made or deemed made.
10.1.3. COVENANTS. Any Obligor shall (a) default in the due
performance or observance by it of any covenant or agreement contained in
Section 8 or Section 9, or (b) default in the due performance or observance by
it of any covenant or agreement (other than those referred to in Sections 10.1.1
or clause (a) of this Section 10.1.3) contained in this Agreement or any other
Credit Document and such default shall continue unremedied for a period of at
least 30 days after written notice to the defaulting party by the Demand Holders
or the Collateral Agent.
10.1.4. DEFAULT UNDER OTHER AGREEMENTS. The Borrower or any of
its Subsidiaries shall (a) default in payment of the principal of any
Indebtedness (other than the Obligations) at the final maturity thereof beyond
the period of grace, if any, applicable thereto; or (b) default in the
observance or performance of any agreement or condition relating to any such
Indebtedness or contained in any instrument or agreement evidencing, securing or
relating thereto, or any other event shall occur or condition exist, the effect
of which default or other event or condition is to cause any such Indebtedness
to become due prior to its stated maturity; or (c) any such Indebtedness of the
Borrower or any of its Subsidiaries shall be declared to be due and payable
prior to the stated maturity thereof; or (d) an event of default under the
Senior Loan Agreement occurs and is continuing or (e) an event of default under
the Convertible Notes Indenture occurs and is continuing; PROVIDED, HOWEVER,
that it shall not constitute an Event of Default pursuant to this Section 10.1.4
unless the aggregate amount of all Indebtedness referred to in clauses (a), (b)
and (c) above exceeds at any one time $2,500,000 individually or in the
aggregate.
10.1.5. BANKRUPTCY, ETC. The Borrower or any of its
Subsidiaries shall commence a voluntary case under Title 11 of the United States
Code (the "BANKRUPTCY CODE"); or an involuntary case is commenced against the
Borrower or any of its Subsidiaries and the petition is not controverted within
10 days, or is not dismissed within 60 days, after commencement of the case; or
a custodian (as defined in the Bankruptcy Code) is appointed for, or takes
charge of, all or substantially all of the property of the Borrower or any of
its Subsidiaries; or the Borrower or any of its Subsidiaries commences any other
proceeding under any reorganization, arrangement, adjustment of debt, relief of
debtors, dissolution, insolvency or liquidation or similar law of any
jurisdiction whether now or hereafter in effect relating to the Borrower or any
of its Subsidiaries; or any such proceeding is commenced against the Borrower or
any of its Subsidiaries which remains undismissed for a period of 60 days; or
the Borrower or any of its Subsidiaries is adjudicated insolvent or bankrupt; or
any order of relief or other order approving any such case or proceeding is
entered; the Borrower or any of its Subsidiaries suffers any appointment of any
custodian or receiver for it or any substantial part of its property to
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continue undischarged or unstayed for a period of 60 days; or the Borrower or
any of its Subsidiaries makes a general assignment for the benefit of creditors;
or any corporate action is taken by the Borrower or any of its Subsidiaries for
the purpose of effecting any of the foregoing.
10.1.6. ERISA. (a) Any Termination Event shall occur with
respect to any Benefit Plan of the Borrower, any of its Subsidiaries or any
ERISA Affiliate, (b) any Accumulated Funding Deficiency, whether or not waived,
shall exist with respect to any such Benefit Plan, (c) any Person shall engage
in any Prohibited Transaction involving any such Benefit Plan, (d) the Borrower,
any of its Subsidiaries or any ERISA Affiliate shall be in "default" (as defined
in ERISA section 4219(c)(5)) with respect to payments owing to any such Benefit
Plan that is a Multiemployer Plan as a result of such Person's complete or
partial withdrawal (as described in ERISA sections 4203 or 4205) therefrom, (e)
the Borrower, any of its Subsidiaries or any ERISA Affiliate shall fail to pay
when due an amount that is payable by it to the PBGC or to any such Benefit Plan
under Title IV of ERISA, (f) a proceeding shall be instituted by a fiduciary of
any such Benefit Plan against the Borrower, any of its Subsidiaries or any ERISA
Affiliate to enforce ERISA section 515 and such proceeding shall not have been
dismissed within 30 days thereafter or (g) any other event or condition shall
occur or exist with respect to any such Benefit Plan, except that no event or
condition referred to in clauses (a) through (g) shall constitute an Event of
Default if it, together with all other such events or conditions at the time
existing, has not subjected, and in the reasonable determination of the Demand
Holders will not subject, the Borrower or any of its Subsidiaries to any
liability that, alone or in the aggregate with all such liabilities for all such
Persons, exceeds $2,500,000.
10.1.7. ENFORCEABILITY, ETC. Any Credit Document shall cease
for any reason (other than the scheduled termination thereof in accordance with
its terms) to be enforceable in accordance with its terms or in full force and
effect; or any party to any Credit Document (other than one or more of the
Symphony Funds) shall so assert in a judicial or similar proceeding; or the
security interests created by any Credit Document shall cease to be enforceable
and of the same effect and priority purported to be created thereby; or any
Guarantor or any Person acting by or on behalf of such Guarantor shall deny or
disaffirm such Guarantor's obligations under such Guarantee or any Guarantor
shall default in the due performance or observance of any covenant or agreement
on its part to be performed pursuant to such Guarantee and such default (other
than a payment default) shall continue unremedied for a period of at least 30
days after written notice to the defaulting party by any Holder or the
Collateral Agent.
10.1.8. JUDGMENTS. A final judgment (a) which, with other
outstanding final judgments against the Borrower and its Subsidiaries, exceeds
an aggregate of $2,500,000 in excess of applicable insurance coverage shall be
rendered against the Borrower or any of its Subsidiaries, or (b) which grants
injunctive relief that results, or creates a material risk of resulting, in a
Material Adverse Effect and in either case if (i) within 30 days after entry
thereof, such judgment shall not have been discharged or execution thereof
stayed pending appeal or (ii) within 30 days after the expiration of any such
stay, such judgment shall not have been discharge.
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10.2. CERTAIN ACTIONS FOLLOWING AN EVENT OF DEFAULT.
10.2.1. SPECIFIC PERFORMANCE; EXERCISE OF RIGHTS. Upon the
occurrence and during the continuance of an Event of Default, but only at the
written direction of the Demand Holders, the Collateral Agent shall proceed to
protect and enforce the Holders' rights by suit in equity, action at law and/or
other appropriate proceeding, either for specific performance of any covenant or
condition contained in this Agreement or any other Credit Document or in any
instrument or assignment delivered to the Holders pursuant to this Agreement or
any other Credit Document, or in aid of the exercise of any power granted in
this Agreement or any other Credit Document or any such instrument or
assignment.
10.2.2. ACCELERATION. Upon the occurrence and during the
continuance of an Event of Default and upon the written request of the Demand
Holders, the Collateral Agent shall by notice in writing to the Borrower declare
all or any part of the unpaid balance of the Obligations then outstanding to be
immediately due and payable; PROVIDED, HOWEVER, that if a Bankruptcy Default
shall have occurred, the unpaid balance of the Obligations shall automatically
become immediately due and payable.
10.2.3. ENFORCEMENT OF PAYMENT; CREDIT SECURITY; SETOFF. Upon
the occurrence and during the continuance of an Event of Default, but only at
the written direction of the Demand Holders, the Collateral Agent shall proceed
to enforce payment of the Obligations in such manner as the Demand Holders may
elect and to realize upon any and all rights of the Holders under the Credit
Documents. The Holders may offset and apply toward the payment of the
Obligations (and/or toward the curing of any Event of Default) any Indebtedness
from the Holders to the respective Obligors, regardless of the adequacy of any
security for the Obligations. The Holders shall have no duty to determine the
adequacy of any such security in connection with any such offset.
10.2.4. CUMULATIVE REMEDIES. To the extent not prohibited by
applicable law which cannot be waived, all of the Holders' rights hereunder and
under each other Credit Document shall be cumulative.
10.3. ANNULMENT OF EVENTS OF DEFAULT. Once an Event of Default has
occurred, such Event of Default shall be deemed to exist and be continuing for
all purposes of the Credit Documents until the Required Holders or the
Collateral Agent (with the consent of the Required Holders) shall have waived
such Event of Default in writing, stating in writing that the same has been
cured to such Holders' reasonable satisfaction or entered into an amendment to
this Agreement which by its express terms cures such Event of Default, at which
time such Event of Default shall no longer be deemed to exist or to have
continued. No such action by the Holders or the Collateral Agent shall extend to
or affect any subsequent Event of Default or impair any rights of the Holders
upon the occurrence thereof.
10.4. WAIVERS. To the extent that any such waiver is not prohibited
by the provisions of applicable law that cannot be waived, each of the Obligors
waives:
(a) all presentments, demands for performance, notices of
nonperformance
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(except to the extent required by this Agreement or any other Credit
Document), protests, notices of protest and notices of dishonor;
(b) any requirement of diligence or promptness on the part of the
Collateral Agent or any Holder in the enforcement of its rights under
this Agreement or any other Credit Document;
(c) any and all notices of every kind and description which may be
required to be given by any statute or rule of law; and
(d) any defense (other than indefeasible payment in full) which it
may now or hereafter have with respect to its liability under this
Agreement or any other Credit Document or with respect to the
Obligations.
10.5. ACCELERATION FOLLOWING AN EVENT OF DEFAULT UNDER THE SENIOR
LOAN AGREEMENT. In the event of a declaration of acceleration by the Demand
Holders (an "APPLICABLE ACCELERATION") because an Event of Default set forth in
Section 10.1.4 above has occurred and is continuing under the Senior Loan
Agreement (a "SENIOR LOAN EVENT OF DEFAULT") such Applicable Acceleration shall
be automatically annulled if the holders of such Senior Loans have waived such
Senior Loan Event of Default within 20 days thereafter and if (a) the annulment
of such Senior Loan Event of Default would not conflict with any judgment or
decree of a court of competent jurisdiction and (b) all existing Events of
Default, except the non-payment of principal or interest on the Notes hereunder
which shall have become due solely because of such Applicable Acceleration, have
been cured or waived.
11. COLLATERAL AGENT.
11.1. APPOINTMENT OF COLLATERAL AGENT. Each of the Symphony Funds
hereby appoints and authorizes the Collateral Agent to act for them as their
collateral agent in connection with the transactions contemplated by this
Agreement and the other Credit Documents on the terms set forth herein and
therein, and hereby agrees that all actions in connection with the Credit
Security and the enforcement or exercise of any remedies in respect of the
Obligations shall be taken by the Collateral Agent pursuant to this Agreement on
behalf of the Holders.
11.2. ACTIONS BY THE COLLATERAL AGENT. The Collateral Agent shall
not take any action under this Agreement or the other Credit Documents,
including the enforcement or exercise of any remedies in respect of the
Obligations, and shall not be obligated to take any such action, except to the
extent expressly specified in a written notice received by the Collateral Agent
signed by the Required Holders (or, pursuant to Sections 10.2 or 10.5 only,
signed by the Demand Holders); PROVIDED, HOWEVER, that the Collateral Agent may
execute releases and other collateral termination documents with respect to
assets disposed of by the Obligors as permitted by Section 9. All actions taken
by the Collateral Agent in accordance with this Section 11.2 shall be binding
upon all Holders; PROVIDED, HOWEVER, that the foregoing shall not be deemed a
waiver of any Holder's rights against any other party hereto with respect to the
taking of such action.
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11.3. EXECUTION OF ADDITIONAL DOCUMENTS. The Collateral Agent is
hereby directed and authorized to execute and deliver each of the following
documents (collectively, the "ADDITIONAL DOCUMENTS"): each Guarantee, the
Subordination Agreement, the Security Agreement, and the other Collateral
Documents. Each of the Symphony Funds hereby consents to and accepts the terms
of each of the Additional Documents and the execution and delivery thereof by
the Collateral Agent. Whether or not so stated therein, in entering into any
such Additional Documents, and in performing or observing any of the terms of
any such Additional Documents, and otherwise in respect of any matter arising
under or in respect of any such Additional Documents, the Collateral Agent shall
enjoy and shall be protected by each of the rights, immunities, indemnities and
other protections set forth in this Agreement; and any obligations, duties or
liabilities to which the Collateral Agent may be or become subject under or in
respect of any such Additional Documents shall be subject to and limited by the
terms of this Agreement (including, without limitation, the terms of this
Section 11). In no event shall the Collateral Agent have any liability under any
such Additional Documents that it would not have, nor shall the Collateral Agent
be obligated to take any action thereunder that it would not be required to
take, under the terms of this Agreement. It is hereby expressly acknowledged
that the Collateral Agent has not evaluated nor negotiated any of the terms of
this Agreement or any such Additional Documents on behalf of the Symphony Funds,
has not performed any investigation of otherwise advised the Symphony Funds in
respect of this Agreement or any such Additional Documents and has no
responsibility for terms of this Agreement or any such Additional Documents, or
the sufficiency or validity hereof or thereof. The Collateral Agent is further
authorized and directed to execute, upon the request of Borrower, such
amendments to the Collateral Documents and such other instruments including, but
not limited to, intercreditor agreements in such form as may be reasonably
requested by the Borrower, as may be necessary to secure, on a pari passu basis
(as to seniority and priority) with the security interests granted to new
Holders in connection with this Agreement, the obligations of the Borrower, in
respect of new securities issued by the Company pursuant to exchange
transactions not prohibited by Section 8.4.
11.4. INFORMATION REGARDING OBLIGORS, ETC. Each of the Symphony
Funds expressly waives any duty which may now or hereafter exist on the part of
the Collateral Agent to disclose to the Symphony Funds any matter related to the
business, operations, character, collateral, credit, condition (financial or
otherwise), income or prospects of the Obligors or their Affiliates or their
properties or management, whether now or hereafter known by the Collateral Agent
other than matters related to the disposition of the Credit Security. Each of
the Symphony Funds represents, warrants and agrees that it assumes sole
responsibility for obtaining from the Obligors all information concerning this
Agreement and all other Credit Documents and all other information as to the
Obligors and their Affiliates or their properties or management as such Symphony
Fund deems necessary or desirable.
11.5. CONCERNING THE COLLATERAL AGENT.
11.5.1. ACTION IN GOOD FAITH, ETC. The Collateral Agent and its
officers, directors, employees and agents shall be under no duty to act except
as expressly set forth in Section 11.2 and shall have no liability to the
Holders for any action or failure to act taken or
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suffered without willful misconduct or gross negligence. The Collateral Agent
shall in all cases be entitled to rely, and shall not be liable to the Holders
for any action taken in reliance, on instructions given to the Collateral Agent
in accordance with Section 11.2.
11.5.2. NO IMPLIED DUTIES, ETC. The Collateral Agent shall have
and may exercise such powers as are specifically delegated to the Collateral
Agent under this Agreement together with all other powers as may be incidental
thereto. The Collateral Agent shall have no implied duties to any Person or any
obligation to take any action under this Agreement or any other Collateral
Document except for any action specifically provided for in this Agreement or
any other Collateral Document to be taken by the Collateral Agent.
11.5.3. VALIDITY, ETC. The Collateral Agent shall not be
responsible to any Holder (a) for the legality, validity, enforceability or
effectiveness of this Agreement or any Credit Document, (b) for any recitals,
reports, representations, warranties or statements contained in or made in
connection with this Agreement or any Credit Document, (c) for the existence or
value of any assets included in the Credit Security, (d) for the effectiveness
of any lien purported to be included in the Credit Security or (e) for the
specification or failure to specify any particular assets to be included in the
Credit Security.
11.5.4. COMPLIANCE. The Collateral Agent shall not be obligated
to ascertain or inquire as to the performance or observance of any of the terms
of this Agreement or any Collateral Document, including the occurrence of any
Event of Default.
11.5.5. EMPLOYMENT OF AGENTS AND COUNSEL. The Collateral Agent
may execute any of its duties as Collateral Agent under this Agreement by or
through employees, agents and attorneys-in-fact and shall not be responsible to
any Holder or any Obligor (except as to money or securities received by the
Collateral Agent or the Collateral Agent's authorized agents) for the default or
misconduct of any such agents or attorneys-in-fact selected by the Collateral
Agent with reasonable care. The Collateral Agent shall be entitled to advice of
counsel concerning all matters pertaining to the agency hereby created and its
duties hereunder and shall be reimbursed by the Obligors for all reasonable
attorneys' fees and costs incurred in connection with its responsibilities
hereunder.
11.5.6. RELIANCE ON DOCUMENTS AND COUNSEL. The Collateral Agent
shall be entitled to rely, and shall be fully protected in relying, upon any
affidavit, certificate, cablegram, consent, instrument, letter, notice, order,
document, statement, facsimile, telegram, telex or teletype message or writing
believed in good faith by the Collateral Agent to be genuine and correct and to
have been signed, sent or made by the Person in question, including without
limitation any telephonic or oral statement made by such Person and, with
respect to legal matters, upon the opinion of counsel selected by the Collateral
Agent.
11.5.7. COLLATERAL AGENT'S REIMBURSEMENT. Each of the Holders
shall, jointly and severally, reimburse the Collateral Agent for any expenses
not reimbursed by the Obligors within 30 days (without limiting their
obligations to make such reimbursement): (a) for which the Collateral Agent is
entitled to reimbursement by the Obligors under this Agreement, and (b) after
the occurrence of an Event of Default, for any other expenses incurred
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by the Collateral Agent on their behalf in connection with the enforcement of
their rights under this Agreement or any other Collateral Document.
11.6. COLLATERAL AGENT INDEMNITY. The Holders shall, jointly and
severally, be responsible for indemnifying and holding harmless the Collateral
Agent and its directors, officers, employees, agents, professional advisers and
representatives (to the extent that the Collateral Agent is not indemnified by
the Obligors, and without in any way limiting the Obligations of the Obligors so
to indemnify the Collateral Agent pursuant to Section 13.1 or any other Credit
Document) from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind whatsoever which may at any time be imposed on, incurred by or
asserted against the Collateral Agent and its directors, officers, employees,
agents, professional advisers and representatives relating to or arising out of
this Agreement, the Credit Security, any other Collateral Document, the
transactions contemplated hereby or thereby, or any action taken or omitted by
the Collateral Agent in connection with any of the foregoing, PROVIDED, HOWEVER,
that the foregoing shall not extend to actions or omissions which are taken by
the Collateral Agent with gross negligence or willful misconduct. The foregoing
indemnity shall survive the expiration of this Agreement or any of the
agreements evidencing the Obligations. All amounts due under this Section 11.6
shall be immediately payable on written demand therefor.
11.7. COLLATERAL AGENT'S RESIGNATION OR REMOVAL. The Collateral
Agent may resign at any time by giving at least 60 days' prior written notice of
its intention to do so to each of the Holders and to the Borrower and upon the
appointment by the Required Holders of a successor Collateral Agent reasonably
satisfactory to the Borrower; PROVIDED, HOWEVER, if at the time of such
appointment, an Event of Default shall have occurred, the consent of the
Borrower to the appointment of a successor Collateral Agent shall not be
required. If no successor Collateral Agent shall have been so appointed and
shall have accepted such appointment within 45 days after the retiring
Collateral Agent's giving of such notice of resignation, then the retiring
Collateral Agent may with the consent of the Borrower, which consent shall not
be unreasonably withheld, appoint a successor Collateral Agent which shall be a
bank or a trust company organized under the laws of the United States of America
or any state thereof and having a combined capital, surplus and undivided profit
of at least $100,000,000; PROVIDED, HOWEVER, if at the time of such appointment,
an Event of Default shall have occurred, the consent of the Borrower to the
appointment of a successor Collateral Agent shall not be required. Any
Collateral Agent may be removed upon the written request of the Required
Holders, which request shall also appoint a successor Collateral Agent
reasonably satisfactory to the Borrower; PROVIDED, HOWEVER, if at the time of
such appointment, an Event of Default shall have occurred, the consent of the
Borrower to the appointment of a successor Collateral Agent shall not be
required. Upon the appointment of a new Collateral Agent hereunder, the term
"Collateral Agent" shall for all purposes of this Agreement and any other
Collateral Document thereafter mean such successor. After any retiring
Collateral Agent's resignation hereunder as Collateral Agent, or the removal
hereunder of any Collateral Agent, the provisions of this Agreement or any other
Collateral Document shall continue to inure to the benefit of such Collateral
Agent as to any actions taken or omitted to be taken by it while it was
Collateral Agent under this Agreement or any other Collateral Document.
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11.8. MERGER, CONVERSION OR CONSOLIDATION. Any corporation into
which the Collateral Agent may be merged or converted or with which it may be
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Collateral Agent shall be a party, or any corporation
succeeding to all or substantially all of the corporate trust business of the
Collateral Agent, shall be the successor of the Collateral Agent hereunder;
PROVIDED that such corporation shall be otherwise qualified and eligible under
this Agreement, without the execution or filing of any paper or any further act
on the part of any of the parties hereto.
11.9. REPRESENTATIONS AND WARRANTIES OF THE COLLATERAL AGENT. The
Collateral Agent represents and warrants to each of the other parties hereto
that:
11.9.1. AUTHORITY. It has all necessary power and has taken all
necessary action to enter into and perform this Agreement and to make this
Agreement the legal, valid, binding and enforceable obligation it purports to
be.
11.9.2. AUTHORIZATION AND ENFORCEABILITY. It has taken all
corporate action required to execute, deliver and perform this Agreement and
each Additional Document to which it is party. Each of this Agreement and each
Additional Document constitutes its legal, valid and binding obligation and is
enforceable against the Collateral Agent in accordance with their respective
terms.
11.9.3. NO LEGAL OBSTACLE TO AGREEMENT. Neither the execution
and delivery of this Agreement nor the consummation of any transaction
contemplated hereby nor the fulfillment of the terms hereof or of any other
agreement or instrument referred to herein has constituted or resulted in, or
will constitute or result in, a breach of the provisions of any agreement,
instrument, deed or lease to which it is a party or by which it is bound or of
its charter or by-laws, or the violation of any law, judgment, decree or
governmental or administrative order, rule or regulation applicable to it. No
approval, authorization or other action by, or declaration to or filing with,
any governmental or administrative authority or any other Person is required to
be obtained or made by the Collateral Agent in connection with the execution,
delivery and performance of this Agreement.
12. PRIOR CLAIMS EXTINGUISHED. Except for the obligations to be performed
by the Borrower and the other Obligors on or after the date hereof as expressly
stated in this Agreement and the other Credit Documents, each of the Symphony
Funds unconditionally releases, waives and forever discharges any and all
liabilities, obligations, duties, promises or indebtedness of any kind of the
Company or any other Obligor to such Symphony Fund on account of any past or
presently existing condition, act, omission, event, contract, liability,
obligation, indebtedness, claim, cause of action, defense, circumstance or
matter of any kind which relates in any manner to the Convertible Notes being
exchanged in connection herewith, the Convertible Notes Indenture, but solely
with respect to the Convertible Notes being exchanged herewith, or any other
document executed in connection therewith, but solely with respect to the
Convertible Notes being exchanged herewith.
13. GENERAL.
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13.1. PAYMENT OF EXPENSES, ETC. The Borrower agrees: (a) Subject to
the terms of the Fee Letter and whether or not the transactions herein
contemplated are consummated, to pay its share of all reasonable out-of-pocket
costs and expenses of the Symphony Funds and the Collateral Agent in connection
with the negotiation, preparation, execution and delivery of the Credit
Documents and the documents and instruments referred to therein and any
amendment, waiver or consent relating thereto, together with, in each case, the
reasonable fees and disbursements of counsel for the Symphony Funds and the
Collateral Agent and any enforcement (whether through negotiations, legal
process or otherwise) of the Credit Documents and the documents and instruments
referred to therein (including the reasonable fees and disbursements of counsel
for the Symphony Funds and the Collateral Agent); (b) to pay the fees of the
Collateral Agent as separately agreed to by the Collateral Agent and the
Borrower; (c) to pay and hold each of the Symphony Funds and Holders harmless
from and against any and all present and future stamp and other similar taxes
with respect to the foregoing matters and save each of the Symphony Funds and
Holders harmless from and against any and all liabilities with respect to or
resulting from any delay or omission (other than to the extent attributable to
such Symphony Fund or Holder, as applicable) to pay such taxes; and (d) to
indemnify each Symphony Fund, each Holder, the Collateral Agent and their
respective officers, directors, employees, representatives, partners, counsel,
advisors and agents from and hold each of them harmless against any and all
losses, liabilities, claims, damages or expenses incurred by any of them with
respect to the entering into and/or performance of any Document or the
consummation of any transactions contemplated in any Document (including as a
result of, or arising out of, any investigation, litigation or other proceeding
or preparation of a defense in connection therewith (whether or not any Symphony
Fund, any Holder or the Collateral Agent is a party thereto and whether or not
any such investigation, litigation or other proceeding is between or among any
Symphony Fund, any Holder, or the Collateral Agent any Obligor or any third
Person or otherwise)), and in each case including the reasonable fees and
disbursements of counsel, but excluding in each case any such losses,
liabilities, claims, damages or expenses to the extent incurred by reason of the
gross negligence or willful misconduct of the Person to be indemnified.
13.2. NOTICES. Except as otherwise expressly provided herein, all
notices, requests, consents, and other communications under this Agreement shall
be in writing and shall be deemed delivered (a) two business days after being
sent by registered or certified mail, return receipt requested, postage prepaid
or (b) one business day after being sent via a reputable nationwide overnight
courier service guaranteeing next business day delivery, in each case to the
intended recipient as set forth below:
If to the Borrower, at ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, Attention:
Chief Financial Officer, or at such other address or addresses as may have been
furnished in writing by the Company to the Holders and the Collateral Agent,
with a copy to ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ LLP, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇; and
If to any Symphony Fund, at Symphony Asset Management, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇ ▇▇▇▇▇, or at such
other address or addresses
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as may have been furnished to the Borrower in writing by the applicable Symphony
Fund, with a copy to ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Ropes & ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇; and
If to the Collateral Agent, at ▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇ - ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇, Attention: Corporate Trust Services, Re: iBasis, with a copy to ▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇, Esq., ▇▇▇▇▇ Peabody LLP, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇.
Any party may give any notice, request, consent or other communication
under this Agreement using any other means (including personal delivery,
messenger service, facsimile, first class mail or electronic mail), but no such
notice, request, consent or other communication shall be deemed to have been
duly given unless and until it is actually received by the party for whom it is
intended. Any party may change the address to which notices, requests, consents
or other communications hereunder are to be delivered by giving the other
parties notice in the manner set forth in this Section 13.2.
13.3. ASSIGNMENTS; PARTICIPATIONS.
13.3.1. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the respective successors and assigns of the
parties hereto; PROVIDED, HOWEVER, that the Borrower may not assign or transfer
any of its rights or obligations hereunder without the prior written consent of
each Holder.
13.4. AMENDMENT OR WAIVER. Neither this Agreement nor any other
Document nor any terms hereof or thereof may be changed, waived, discharged or
terminated unless such change, waiver, discharge or termination is in writing
signed by the respective Obligors party thereto and the Required Holders;
PROVIDED, HOWEVER, that no such change, waiver, discharge or termination shall,
without the consent of each Holder directly affected thereby, (a) extend the
Maturity Date (any waiver of any prepayment of, or the method of application of
any prepayment of, the Notes shall not constitute any such extension), or reduce
the rate or extend the time of payment of interest (other than as a result of
waiving the applicability of any post-default increase in interest rates)
thereon, or reduce the principal amount thereof, (b) amend, modify or waive any
provision of this Section 13.4, (c) reduce the percentage specified in, or
otherwise modify, the definition of "Required Holders" or "Demand Holders", (d)
consent to the assignment or transfer by the Borrower of any of its rights and
obligations under this Agreement, (e) establish any new obligations for any
Holder not relating to the subject matter of the Agreement or (f) release all or
substantially all the collateral or guarantees with respect to the Obligations.
13.5. NO WAIVER; REMEDIES CUMULATIVE. No failure or delay on the
part of any Symphony Fund, any Holder or Collateral Agent in exercising any
right, power or privilege hereunder or under any other Document and no course of
dealing between any Obligor, Collateral Agent and any Holder or Symphony Fund
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right, power or privilege hereunder or under any other Document preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege hereunder or thereunder. The rights and remedies herein expressly
provided are cumulative and not exclusive of any rights or remedies which a
Holder or Symphony Fund
-38-
would otherwise have. No notice to or demand on any Obligor in any case shall
entitle any Obligor to any other or further notice or demand in similar or other
circumstances or constitute a waiver of the rights of the Holders or the
Symphony Funds to any other or further action in any circumstances without
notice or demand.
13.6. NO STRICT CONSTRUCTION. The parties have participated jointly
in the negotiation and drafting of this Agreement and the other Documents with
counsel sophisticated in financing transactions. In the event an ambiguity or
question of intent or interpretation arises, this Agreement and the other
Documents shall be construed as if drafted jointly by the parties and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any provisions of this Agreement and the other
Documents.
13.7. CALCULATIONS; COMPUTATIONS. The financial statements to be
furnished to the Holders pursuant hereto shall be made and prepared in
accordance with GAAP consistently applied throughout the periods involved
(except as set forth in the notes thereto or as otherwise disclosed in writing
by the Borrower to the Holders).
13.8. INTERPRETATION; GOVERNING LAW; ETC.
13.8.1. Time is (and shall be) of the essence in this Agreement
and the other Documents. All covenants, agreements, representations and
warranties made in this Agreement or any other Document or in certificates
delivered pursuant hereto or thereto shall be deemed to have been relied on by
each Symphony Fund and the Collateral Agent, notwithstanding any investigation
made by any such party on its behalf, and shall survive the execution and
delivery to each such party hereof and thereof. The invalidity or
unenforceability of any provision hereof shall not affect the validity or
enforceability of any other provision hereof, and any invalid or unenforceable
provision shall be modified so as to be enforced to the maximum extent of its
validity or enforceability. This Agreement and the other Documents constitute
the entire understanding of the parties with respect to the subject matter
hereof and thereof and supersede all prior and contemporaneous understandings
and agreements, whether written or oral.
13.8.2. This Agreement, and any issue, claim or proceeding
arising out of or relating to this Agreement or any other Document or the
conduct of the parties hereto, whether now existing or hereafter arising and
whether in contract, tort or otherwise, shall be governed by, and shall be
construed and enforced in accordance with, the laws of The Commonwealth of
Massachusetts, without regard to the principles of conflicts of laws. Any legal
action or proceeding with respect to this Agreement or any other Document may be
brought in any state or federal court sitting in the Commonwealth of
Massachusetts, and, by execution and delivery of this Agreement and the other
Documents, as applicable, each Obligor irrevocably accepts for itself and in
respect of its property, generally and unconditionally, the nonexclusive
jurisdiction of the aforesaid courts for such action or proceeding. Each Obligor
further irrevocably consents to the service of process out of any of the
aforementioned courts in any such action or proceeding by the mailing of copies
thereof by registered or certified mail, postage prepaid, to each Obligor at its
address for notices pursuant to Section 13.2, such service
-39-
to become effective 15 days after such mailing. Nothing herein shall affect the
right of any Holder or Symphony Fund to serve process in any other manner
permitted by law or to commence legal proceedings or otherwise proceed against
any Obligor in any other jurisdiction.
13.8.3. Each Obligor irrevocably waives any objection which it
may now or hereafter have to the venue of any of the aforesaid actions or
proceedings arising out of or in connection with this Agreement or any other
Document brought in the courts referred to in Section 13.8.2 above and further
irrevocably waives and agrees not to plead or claim in any such court that any
such action or proceeding brought in any such court has been brought in an
inconvenient forum.
13.8.4. Each of the parties to this Agreement waives to the
extent not prohibited by applicable law that cannot be waived any right it may
have to claim or recover in any legal action or proceeding any special,
exemplary, punitive or consequential damages.
13.9. WAIVER OF JURY TRIAL. TO THE EXTENT NOT PROHIBITED BY
APPLICABLE LAW THAT CANNOT BE WAIVED, EACH OF THE PARTIES HERETO WAIVES, AND
COVENANTS THAT IT WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR
OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE,
CLAIM OR PROCEEDING ARISING OUT OF THIS AGREEMENT OR ANY OTHER DOCUMENT OR THE
SUBJECT MATTER HEREOF OR THEREOF OR ANY OBLIGATION OR IN ANY WAY CONNECTED WITH
THE DEALINGS OF THE SYMPHONY FUNDS, THE HOLDERS OR THE COLLATERAL AGENT, THE
BORROWER OR ANY OTHER OBLIGOR IN CONNECTION WITH ANY OF THE ABOVE, IN EACH CASE
WHETHER NOW EXISTING OR HEREAFTER ARISING AND WHETHER IN CONTRACT, TORT OR
OTHERWISE. Each of the Borrower and the other Obligors acknowledges that it has
been informed by the Symphony Funds that the foregoing sentence constitutes a
material inducement upon which each of the Symphony Funds and Collateral Agent
has relied and will rely in entering into this Agreement and any other Document.
Any party hereto may file an original counterpart or a copy of this Agreement
with any court as written evidence of the consent of each of the parties hereto
to the waiver of their rights to trial by jury.
13.10. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument. A set of counterparts
executed by all the parties hereto shall be lodged with the Borrower, the
Collateral Agent, each Holder and each Symphony Fund.
13.11. EXECUTION. This Agreement shall become effective on the date
(the "EFFECTIVE DATE") on which each of the Borrower, each other Obligor, the
Collateral Agent and the Symphony Funds shall have signed a copy hereof (whether
the same or different copies) and shall have delivered the same to one another.
-40-
13.12. HEADINGS DESCRIPTIVE. The headings of the several sections
and subsections of this Agreement are inserted for convenience only and shall
not in any way affect the meaning or construction of any provision of this
Agreement.
13.13. SURVIVAL. All indemnities set forth herein including, without
limitation, in Sections 11.6 or 13.1, shall survive the execution and delivery
of this Agreement and the purchase, sale and repayment of the Notes.
13.14. BENEFIT OF AGREEMENT. Each beneficial holder of the Notes
shall be entitled to the benefits of, and subject to the obligations of, a
Holder under this Agreement.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
-41-
Each of the parties hereto has caused a counterpart of this Agreement to be
duly executed and delivered as of the date first above written.
THE BORROWER:
iBASIS, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇
Title: President and CEO
iBASIS GLOBAL, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Treasurer and CFO
THE GUARANTOR:
iBASIS SECURITIES CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Title: Executive Vice President
THE SYMPHONY FUNDS:
RHAPSODY FUND, LP
BY SYMPHONY ASSET MANAGEMENT LLC,
AS GENERAL PARTNER
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇
Title: Chief Operating Officer
ARPEGGIO FUND
BY SYMPHONY ASSET MANAGEMENT LLC,
AS INVESTMENT ADVISOR
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇
Title: Chief Operating Officer
INTERNATIONAL MONETARY FUND
-CONVERTIBLE ARBITRAGE ACCOUNT
BY SYMPHONY ASSET MANAGEMENT LLC,
AS INVESTMENT ADVISOR
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇
Title: Chief Operating Officer
CSV LIMITED
BY SYMPHONY ASSET MANAGEMENT LLC,
AS INVESTMENT ADVISOR
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇
Title: Chief Operating Officer
CITISAM, LTD.
BY SYMPHONY ASSET MANAGEMENT LLC,
AS INVESTMENT ADVISOR
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇
Title: Chief Operating Officer
ANDANTE FUND, LP
BY SYMPHONY ASSET MANAGEMENT LLC,
AS GENERAL PARTNER
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇
Title: Chief Operating Officer
VIVACE FUND, LP
BY SYMPHONY ASSET MANAGEMENT LLC,
AS GENERAL PARTNER
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇
Title: Chief Operating Officer
ADAGIO FUND
BY SYMPHONY ASSET MANAGEMENT LLC,
AS INVESTMENT ADVISOR
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇
Title: Chief Operating Officer
THE COLLATERAL AGENT:
U.S. BANK NATIONAL ASSOCIATION
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Trust Officer
EXHIBIT A
FORM OF WARRANT AND REGISTRATION RIGHTS AGREEMENT
C-1
EXHIBIT 2.3
NOTES AND WARRANTS PURCHASED; CONVERTIBLE NOTES EXCHANGED
CONVERTIBLE NEW NOTES
FUND NAME NOTES EXCHANGED PURCHASED WARRANTS PURCHASED
-------------------------------------------------------------------------------------------------
Rhapsody Fund, LP $ 12,950,000 $ 6,475,000 1,316,949
--------------------------------------------------------------------------------------------------
Arpeggio Fund $ 9,350,000 $ 4,675,000 950,847
--------------------------------------------------------------------------------------------------
International Monetary Fund - $ 1,000,000 $ 500,000 101,695
Convertible Arbitrage Account
--------------------------------------------------------------------------------------------------
CSV Limited $ 2,300,000 $ 1,150,000 233,898
--------------------------------------------------------------------------------------------------
CitiSAM Ltd. $ 1,100,000 $ 550,000 111,864
--------------------------------------------------------------------------------------------------
Andante Fund, LP $ 1,700,000 $ 850,000 172,881
--------------------------------------------------------------------------------------------------
Vivace Fund, LP $ 1,500,000 $ 750,000 152,542
--------------------------------------------------------------------------------------------------
Adagio Fund $ 300,000 $ 150,000 30,508
-------------------------------------------------------------------------------------------------
2.1B
EXHIBIT 5.3
FORM OF OFFICER'S CERTIFICATE
5.3
EXHIBIT 5.8
FORM OF GUARANTEE
5.9