================================================================================
$5,000,000
SENIOR SECURED SUPER-PRIORITY
DEBTOR-IN-POSSESSION
LOAN AND SECURITY AGREEMENT
by and among
SYSTEM SOFTWARE ASSOCIATES, INC.
as the Borrower,
and
THE FINANCIAL INSTITUTIONS THAT ARE IDENTIFIED HEREIN
as the Lenders,
and
FOOTHILL CAPITAL CORPORATION
as Agent
Dated as of May 5, 2000
===============================================================================
LOAN AND SECURITY AGREEMENT
---------------------------
THIS SENIOR SECURED, SUPER-PRIORITY DEBTOR-IN-POSSESSION LOAN AND
SECURITY AGREEMENT (this "Agreement"), is entered into as of May 5, 2000, by and
among SYSTEM SOFTWARE ASSOCIATES, INC., a Delaware corporation ("SSA" or
"Borrower"), the financial institutions identified on the signature pages hereof
(such financial institutions, together with their respective successors and
assigns, are referred to hereinafter each individually as a "Lender" and
collectively as the "Lenders"), and FOOTHILL CAPITAL CORPORATION, a California
corporation, as agent for the Lenders.
WITNESSETH:
WHEREAS, on May 3, 2000 (the "Relief Date"), the Borrower filed a
petition for relief pursuant to Chapter 11 of the United States Bankruptcy Code
in the United States Bankruptcy Court for the District of Delaware (the
"Court"). Borrower continues to operate its business and manage its properties
as a debtor-in-possession pursuant to Sections 1107 and 1108 of the United
States Bankruptcy Code; and
WHEREAS, prior to the Relief Date, the Lenders provided financing to
Borrower pursuant to that certain Loan and Security Agreement dated as of August
11, 1999 (as modified and amended, the "Pre-Relief Date Loan Agreement"); and
WHEREAS, the Lenders commitment to provide ongoing financing to
Borrower under the Pre-Relief Date Loan Agreement has been terminated; and
WHEREAS, Borrower has entered into a transaction whereby it will sell
certain assets and require the assumption of specified liabilities to Gores
Technology Group or one of its designated affiliates (collectively, "Gores"),
pursuant to that certain letter agreement dated April 6, 2000, as such letter
agreement may be evidenced by more definitive documentation with respect to the
referenced transaction;
WHEREAS, Borrower has requested that the Lenders provide a senior
secured, super-priority revolving credit facility up to $5,000,000 as provided
for in this Agreement to fund the ongoing working capital requirements of
Borrower and its subsidiaries as may be allowed by the Court until such time as
the sale of Borrower's assets to Gores can be completed. The Lenders are
willing to provide such financing in the manner and pursuant to the terms of
this Agreement and in reliance on the Gores Transaction (as defined herein);
TABLE OF CONTENTS
Page
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1. DEFINITIONS AND CONSTRUCTION............................................................. 1
1.1 Definitions...................................................................... 1
1.2 Accounting Terms................................................................. 17
1.3 Code............................................................................. 17
1.4 Construction..................................................................... 17
1.5 Schedules and Exhibits........................................................... 17
2. LOAN AND TERMS OF PAYMENT................................................................ 17
2.1 Revolver Advances................................................................ 17
2.2 Borrowing Procedures and Settlements............................................. 18
2.3 Payments......................................................................... 23
2.4 Overadvances..................................................................... 26
2.5 Interest and Letter of Credit Fees: Rates, Payments, and Calculations........... 26
2.6 Collection of Accounts........................................................... 27
2.7 Crediting Payments; Float Charge................................................. 28
2.8 Designated Account............................................................... 28
2.9 Maintenance of Loan Account; Statements of Obligations........................... 29
2.10 Fees............................................................................. 29
2.11 Super-Priority Nature of Obligations............................................. 30
2.12 Letters of Credit................................................................ 30
3. CONDITIONS; TERM OF AGREEMENT............................................................ 32
3.1 Conditions Precedent to the Initial Extension of Credit.......................... 32
3.2 Conditions Subsequent to the Initial Extension of Credit......................... 33
3.3 Conditions Precedent to all Extensions of Credit................................. 35
3.4 Term............................................................................. 36
3.5 Effect of Termination............................................................ 36
3.6 Early Termination by Borrower.................................................... 36
3.7 Special Provisions Relating to Gores Transaction................................. 37
4. CREATION OF SECURITY INTEREST............................................................ 37
4.1 Grants of Security Interests..................................................... 37
4.2 Negotiable Collateral........................................................... 38
4.3 Collection of Accounts, General Intangibles, and Negotiable Collateral.......... 38
4.4 Delivery of Additional Documentation Required................................... 38
4.5 Power of Attorney............................................................... 38
4.6 Right to Inspect................................................................ 39
4.7 Control Agreements.............................................................. 39
4.8 Grants, Rights and Remedies..................................................... 39
4.9 No Filings Required............................................................. 40
4.10 Survival........................................................................ 40
5. REPRESENTATIONS AND WARRANTIES.......................................................... 40
5.1 No Encumbrances................................................................. 41
5.2 Intentionally Omitted........................................................... 41
5.3 Equipment....................................................................... 41
5.4 Location of Inventory and Equipment............................................. 41
5.5 Inventory Records............................................................... 41
5.6 Location of Chief Executive Office; FEIN........................................ 41
5.8 Due Authorization; No Conflict.................................................. 42
5.9 Litigation...................................................................... 43
5.10 No Material Adverse Change...................................................... 43
5.11 Fraudulent Transfer............................................................. 43
5.12 Employee Benefits............................................................... 44
5.13 Environmental Condition......................................................... 44
5.14 Brokerage Fees.................................................................. 44
5.15 Year 2000 Compliance............................................................ 44
5.16 Intellectual Property........................................................... 44
5.17 Leases.......................................................................... 44
5.18 Software License Agreement...................................................... 44
5.19 Maintenance Agreement........................................................... 45
5.20 Intentionally omitted........................................................... 45
5.21 Intentionally omitted........................................................... 45
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5.22 Administrative Priority......................................................... 45
5.23 Appointment of Trustee or Examiner; Liquidation................................. 45
5.24 Disclosure...................................................................... 45
5.25 Investment Company Status....................................................... 45
5.26 Immaterial Subsidiary........................................................... 45
5.28 Schedules....................................................................... 46
6. AFFIRMATIVE COVENANTS................................................................... 46
6.1 Accounting System............................................................... 46
6.2 Collateral Reporting............................................................ 46
6.3 Financial Statements, Reports, Certificates..................................... 47
6.4 Guarantor Reports............................................................... 47
6.5 Return.......................................................................... 48
6.6 Title to Equipment.............................................................. 48
6.7 Maintenance of Equipment........................................................ 48
6.8 Taxes........................................................................... 48
6.9 Insurance....................................................................... 49
6.10 No Setoffs or Counterclaims..................................................... 49
6.11 Location of Inventory and Equipment............................................. 49
6.12 Compliance with Laws............................................................ 50
6.13 Intentionally omitted........................................................... 50
6.14 Leases.......................................................................... 50
6.15 Brokerage Commissions........................................................... 50
6.16 Year 2000 Compliance............................................................ 50
6.17 Intentionally Omitted........................................................... 50
6.18 Corporate Existence, etc........................................................ 50
6.19 Disclosure Updates.............................................................. 50
6.20 Copyright Registrations......................................................... 50
7. NEGATIVE COVENANTS...................................................................... 51
7.1 Indebtedness.................................................................... 51
7.2 Liens........................................................................... 51
7.3 Restrictions on Fundamental Changes............................................. 52
iii
7.4 Disposal of Assets................................................................. 52
7.5 Change Name........................................................................ 52
7.6 Guarantee.......................................................................... 52
7.7 Nature of Business................................................................. 52
7.8 Prepayments and Amendments......................................................... 52
7.9 Change of Control.................................................................. 53
7.10 Consignments....................................................................... 53
7.11 Distributions...................................................................... 53
7.12 Accounting Methods; Fiscal Year.................................................... 53
7.13 Investments........................................................................ 53
7.14 Transactions with Affiliates....................................................... 53
7.15 Suspension......................................................................... 53
7.16 Compensation....................................................................... 53
7.17 Use of Proceeds.................................................................... 53
7.18 Change in Location of Chief Executive Office; Inventory and Equipment Restrictions. 54
7.19 Defined Benefit Plan............................................................... 54
7.20 Financial Covenants................................................................ 54
7.21 Capital Expenditures............................................................... 55
7.22 Securities Accounts................................................................ 55
7.23 Preferred Stock.................................................................... 55
7.24 Software License Agreement......................................................... 55
7.25 Maintenance Agreement.............................................................. 55
7.26 Immaterial Subsidiary.............................................................. 55
7.27 Amendment to Certain Documents..................................................... 56
8. EVENTS OF DEFAULT.......................................................................... 56
9. THE LENDER GROUP'S RIGHTS AND REMEDIES..................................................... 59
9.1 Rights and Remedies................................................................ 59
9.2 Gores as Liquidator................................................................ 61
9.3 Remedies Cumulative................................................................ 61
10. TAXES AND EXPENSES........................................................................ 62
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11. WAIVERS; INDEMNIFICATION.................................................................. 62
11.1 Demand; Protest; etc............................................................. 62
11.2 The Lender Group's Liability for Collateral...................................... 62
11.3 Indemnification.................................................................. 62
12. NOTICES................................................................................... 63
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER................................................ 64
14.1 Assignments and Participations................................................... 65
14.2 Successors....................................................................... 67
15. AMENDMENTS; WAIVERS....................................................................... 68
15.1 Amendments and Waivers........................................................... 68
15.2 No Waivers; Cumulative Remedies.................................................. 69
16. AGENT; LENDER GROUP....................................................................... 69
16.1 Appointment and Authorization of Agent........................................... 69
16.2 Delegation of Duties............................................................. 70
16.3 Liability of Agent - Related Persons............................................. 70
16.4 Reliance by Agent................................................................ 71
16.5 Notice of Default or Event of Default............................................ 71
16.6 Credit Decision.................................................................. 71
16.7 Costs and Expenses; Indemnification.............................................. 72
16.8 Agent in Individual Capacity..................................................... 73
16.9 Successor Agent.................................................................. 73
16.10 Lender in Individual Capacity.................................................... 73
16.11 Withholding Tax.................................................................. 74
16.12 Collateral Matters............................................................... 75
16.13 Restrictions on Actions by Lenders; Sharing of Payments.......................... 76
16.14 Agency for Perfection............................................................ 77
16.15 Payments by Agent to the Lenders................................................. 77
16.16 Concerning the Collateral and Related Loan Documents............................. 77
16.17 Field Audits and Examination Reports; Confidentiality;
Disclaimers by Lenders; Other Reports and Information............................ 77
16.18 Several Obligations; No Liability................................................ 78
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16.19 Intentionally omitted..................................................... 79
17. GENERAL PROVISIONS................................................................... 79
17.1 Effectiveness............................................................... 79
17.2 Successors and Assigns...................................................... 79
17.3 Section Headings............................................................ 79
17.4 Interpretation.............................................................. 79
17.5 Severability of Provisions.................................................. 79
17.6 Amendments in Writing....................................................... 79
17.7 Counterparts; Telefacsimile Execution....................................... 80
17.8 Revival and Reinstatement of Obligations.................................... 80
17.9 Integration................................................................. 80
17.10 Intentionally omitted....................................................... 80
17.11 Time of the Essence......................................................... 80
17.12 Pre-Relief Date Loan Agreement.............................................. 80
18. Intentionally omitted................................................................ 81
19. CONFIDENTIALITY...................................................................... 81
SCHEDULES AND EXHIBITS
Schedule C-1 Commitments
Schedule P-1 Liens
Schedule S-1 Senior Claims
Schedule 3.1(h) Collateral Access Agreement Locations
Schedule 5.7 Chief Executive Offices; FEIN
Schedule 5.8 Capitalization; Subsidiaries
Schedule 5.10 Litigation
Schedule 5.15 Brokerage Fees
Schedule 5.19 Software License Agreement
Schedule 5.20 Maintenance Agreement
Schedule 6.11 Locations of Inventory and Equipment
Schedule 7.1 Indebtedness
Schedule 7.8 Adequate Protection Payments
Schedule 16.15 Lender Wiring Instructions
Exhibit A-1 Form of Assignment and Acceptance Agreement
Exhibit B-1 Budget
Exhibit C-2 Form of Compliance Certificate
vi
AGREEMENT:
NOW, THEREFORE, in consideration of the agreements, provisions and
covenants set forth herein, and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereby
agree as follows:
1. DEFINITIONS AND CONSTRUCTION.
1.1 Definitions.
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As used in this Agreement, the following terms shall have the
following definitions:
"Account Debtor" means any Person who is or who may become obligated
--------------
under, with respect to, or on account of, an Account, a General Intangible,
Investment Property, or Negotiable Collateral.
"Accounts" means all currently existing and hereafter arising
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accounts, contract rights, and all other forms of obligations owing to Borrower
arising out of the sale or lease of goods or software or the rendition of
services by Borrower, irrespective of whether earned by performance, and any and
all credit insurance, guaranties, or security therefor.
"Advances" has the meaning set forth in Section 2.1.
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"Affiliate" means, as applied to any Person, any other Person who,
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directly or indirectly, controls, is controlled by, or is under common control
with, such Person. For purposes of this definition, "control" means the
possession, directly or indirectly, of the power to direct the management and
policies of a Person, whether through the ownership of Stock, by contract, or
otherwise.
"Agent" means Foothill Capital Corporation, a California corporation,
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solely in its capacity as agent for the Lenders, and shall include any successor
agent.
"Agent's Account" has the meaning set forth in Section 2.6.
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"Agent Advances" has the meaning set forth in Section 2.2(e)(i).
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"Agent's Liens" has the meaning set forth in Section 4.1(a).
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"Agent-Related Persons" means Agent together with its Affiliates,
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officers, directors, employees, and agents.
"Agreement" has the meaning set forth in the preamble hereto.
---------
"Assignee" has the meaning set forth in Section 14.1(a).
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"Assignment and Acceptance" means an Assignment and Acceptance in the
-------------------------
form of Exhibit A-1 attached hereto.
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1
"Authorized Person" means any officer or other employee of Borrower.
-----------------
"Bankruptcy Code" means the United States Bankruptcy Code, as amended,
---------------
any successor statute, and any equivalent foreign legislation.
"Benefit Plan" means a "defined benefit plan" (as defined in Section
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3(35) of ERISA for which Borrower or any Subsidiary or ERISA Affiliate of
Borrower has been an "employer" (as defined in Section 3(5) of ERISA) within the
past six years.
"Books" means all of Borrower's books and records (including all of
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its records indicating, summarizing, or evidencing its assets (including the
Collateral) or liabilities, all of its information relating to its business
operations or financial condition, and all of its computer programs, disks,
files, printouts, runs, or other computer prepared information).
"Borrower" means SSA.
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"Borrowing" means a borrowing hereunder consisting of Advances made to
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Borrower on the same day by the Lenders, or Agent on behalf thereof, or by Agent
in the case of an Agent Advance.
"Budget" means the operating budget of Borrower relative to Borrower's
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operations in the Chapter 11 Case, as presented to and accepted by Lenders,
attached as Exhibit B-1 hereto as the same may be amended and modified.
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"Business Day" means any day that is not a Saturday, Sunday, or other
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day on which national banks are authorized or required to close in California,
Illinois, or New York.
"Canadian Sub" means SSA Canada Corporation, a corporation organized
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under the laws of Canada.
"Capital Expenditures" means expenditures that must be capitalized on
--------------------
a balance sheet in accordance with GAAP, but excluding capitalized software.
"Capital Lease" means a lease that is required to be capitalized for
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financial reporting purposes in accordance with GAAP.
"Capitalized Lease Obligation" means any Indebtedness represented by
----------------------------
obligations under Capital Lease.
"Carve-Out Expenses" has the meaning set forth in Section 2.11.
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"Change of Control" shall be deemed to have occurred at such time as:
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(a) a "person" or "group" (within the meaning of Sections 13(d) and 14(d) of the
Exchange Act), other than Permitted Holders, becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of more
than 30% of the total voting power of all classes of Stock then outstanding of
SSA entitled to vote in the election of directors;
2
(b) less than 100% of the issued and outstanding Stock of each Subsidiary that
is a Guarantor shall fail to be owned and controlled, beneficially and of
record, by SSA or one of the Guarantors; (c) a majority of members of the board
of directors of SSA are not Continuing Directors; or (d) a "Change in Control"
(as such term is defined in the Indenture) occurs; but (e) excluding the sale of
Borrower's assets pursuant to the Gores Transaction.
"Chapter 11 Case" means the voluntary petition for relief under
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Chapter 11 of the Bankruptcy Code filed by Borrower in the Court on the Relief
Date and Administered as Chapter 11 Case No. 00-1852 (RRM).
"Closing Date" means the date the Interim Order is entered and all
------------
conditions precedent under Section 3.1 of this Agreement are satisfied.
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"Code" means the New York Uniform Commercial Code.
----
"Collateral" means all of the real and personal property of Borrower,
----------
whether now existing or hereafter acquired, including without limitation:
(a) the Accounts;
(b) the Books;
(c) the Equipment;
(d) the General Intangibles;
(e) the Inventory;
(f) the Investment Property;
(g) the Negotiable Collateral;
(h) any money, or other assets of Borrower that now or hereafter
come into the possession, custody, or control of any member of the Lender Group;
(i) any and all Collateral with respect to the Pre-Relief Date
Loan Agreement; and
(j) the proceeds and products, whether tangible or intangible,
of any of the foregoing, including proceeds of insurance covering any or all of
the foregoing, and any and all Accounts, Books, Equipment, General Intangibles,
Inventory, Investment Property, Negotiable Collateral, Real Property, money,
deposit accounts, or other tangible or intangible property resulting from the
sale, exchange, collection, or other disposition of any of the foregoing, or any
portion thereof or interest therein, and the proceeds thereof.
"Collateral Access Agreement" means a landlord waiver, bailee letter,
---------------------------
or acknowledgement agreement of any lessor, warehouseman, processor, consignee,
or other
3
Person in possession of, having a Lien upon, or having rights or interests in
the Collateral, in each case, in form and substance reasonably satisfactory to
Agent.
"Collections" means all cash, checks, notes, instruments, and other
-----------
items of payment (including insurance proceeds, proceeds of cash sales, rental
proceeds, and tax refunds) of, or receipts by, the Borrower.
"Commitment" means, with respect to each Lender, its Revolving Credit
----------
Commitment, Letter of Credit Sub-Commitment, or Total Commitment, as the context
requires and, with respect to all Lenders, their Revolving Credit Commitments,
Letter of Credit Sub-Commitments, or Total Commitments, as the context requires,
in each case as such Dollar amounts are set forth beside such Lender's name
under the applicable heading on Schedule C-1 attached hereto or on the signature
------------
page of the Assignment and Acceptance pursuant to which such Lender became a
Lender hereunder in accordance with the provisions of Section 14.1.
------------
"Committee" means the official committee of unsecured creditors
---------
formed, appointed or approved by the United States Trustee in the Chapter 11
Case.
"Common Stock" shall mean the common stock, par value $0.0033 per
------------
share, of SSA.
"Compliance Certificate" means a certificate substantially in the
----------------------
form of Exhibit C-2 delivered by the chief financial officer of Borrower to
-----------
Agent.
"Contingent Surviving Obligations" means all contingent Obligations of
--------------------------------
Borrower to indemnify Lender Group under this Agreement or the other Loan
Documents.
"Continuing Director" means, as of any date of determination, a member
-------------------
of the board of directors of SSA who (a) was a member of the board of directors
of SSA on the Closing Date, or (b) was nominated to be a member of the board of
directors of SSA by a majority of the Continuing Directors (or subsequent
nominees thereof) then in office to fill a vacancy left by the death, expiration
of term, permanent disability, or resignation of a Continuing Director.
"copyright" shall have the meaning ascribed to such term in the United
---------
States Copyright Act of 1976 (as amended), and includes unregistered copyrights.
"Court" has the meaning set forth in the first recital paragraph
-----
hereto.
"Daily Balance" means, with respect to each day during the term of
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this Agreement, the amount of an Obligation owed at the end of such day.
"Default" means an event, condition, or default that, with the giving
-------
of notice, the passage of time, or both, would be an Event of Default.
"Defaulting Lender" means any Lender that fails to make any Advance
-----------------
that it is required to make hereunder on any Funding Date and that has not cured
such failure by
4
making such Advance within 1 Business Day after written demand upon it by Agent
to do so.
"Defaulting Lender Rate" means the interest rate then applicable to
----------------------
Advances.
"Designated Account" means account number ▇▇▇▇▇▇▇ of Borrower
------------------
maintained with Borrower's Designated Account Bank, or such other deposit
account of Borrower (located within the United States) that has been designated
as such, in writing, by Borrower to Agent.
"Designated Account Bank" means American National Bank and Trust
-----------------------
Company of Chicago, whose office is located at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ and whose ABA number is ▇▇▇-▇▇▇-▇▇▇.
"Disbursement Letter" means an instructional letter executed and
-------------------
delivered by Borrower to Agent regarding the extensions of credit to be made on
the Closing Date, the form and substance of which shall be reasonably
satisfactory to Agent.
"Dollars" or "$" means United States dollars.
------- -
"EBITDA" means, with respect to any fiscal period, Borrower's
------
consolidated earnings (excluding extraordinary gains) before all interest
expense, taxes, and depreciation and amortization expense for such period,
determined in accordance with GAAP.
"Eligible Transferee" means (a) a commercial bank organized under the
-------------------
laws of the United States, or any state thereof, and having total assets in
excess of $250,000,000, (b) a commercial bank organized under the laws of any
other country which is a member of the Organization for Economic Cooperation and
Development or a political subdivision of any such country and which has total
assets in excess of $250,000,000, provided that such bank is acting through a
branch or agency located in the United States, (c) a finance company, insurance
company, or other financial institution or fund that is engaged in making,
purchasing, or otherwise investing in commercial loans in the ordinary course of
its business and having (together with its Affiliates) total assets in excess of
$250,000,000, (d) any Affiliate (other than individuals) of a Lender (including
any funds or investment accounts managed by such Lender), (e) so long as no
Event of Default has occurred and is continuing, any other Person approved by
Agent and Borrower, and (f) during the continuation of an Event of Default, any
other Person approved by Agent.
"Equipment" means all of Borrower's present and hereafter acquired
---------
machinery, machine tools, motors, equipment, furniture, furnishings, fixtures,
vehicles (including motor vehicles and trailers), tools, parts, goods (other
than consumer goods, farm products, or Inventory), wherever located, including
all attachments, accessories, accessions, replacements, substitutions,
additions, and improvements to any of the foregoing.
5
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended, and any successor statute thereto.
"ERISA Affiliate" means (a) any corporation subject to ERISA whose
---------------
employees are treated as employed by the same employer as the employees of
Borrower under IRC Section 414(b), (b) any trade or business subject to ERISA
whose employees are treated as employed by the same employer as the employees of
Borrower under IRC Section 414(c), (c) solely for purposes of Section 302 of
ERISA and Section 412 of the IRC, any organization subject to ERISA that is a
member of an affiliated service group of which Borrower is a member under IRC
Section 414(m), or (d) solely for purposes of Section 302 of ERISA and Section
412 of the IRC, any party subject to ERISA that is a party to an arrangement
with Borrower and whose employees are aggregated with the employees of Borrower
under IRC Section 414(o).
"Event of Default" has the meaning set forth in Section 8.
---------------- ---------
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
------------
and any successor statute.
"Family Member" means, with respect to any individual, any other
-------------
individual having a relationship by blood (to the second degree of
consanguinity), by marriage, or adoption to such individual.
"Family Trusts" means, with respect to any individual, trusts or other
-------------
estate planning vehicles established for the benefit of Family Members of such
individual and in respect of which such individual serves as trustee or in a
similar capacity.
"FEIN" means Federal Employer Identification Number.
----
"Final Order" means the order of the Court entered in the Chapter 11
-----------
Case after a final hearing under Bankruptcy Rule 4001 (c)(2), satisfactory in
form and substance to Agent, and from which no appeal has been timely filed, or
if timely filed, such appeal has been dismissed (unless Agent waives such
requirement), together with all extensions, modifications and amendments
thereto, which, among other matters but not by way of limitation, authorizes
Borrower to obtain credit, incur indebtedness, and grant Liens under this
Agreement and the other Loan Documents, as the case may be, and provide for the
super-priority of Lenders' claims, all as set forth in such order.
"Funding Date" means the date on which a Borrowing occurs.
------------
"GAAP" means generally accepted accounting principles as in effect
----
from time to time in the United States, consistently applied.
"General Intangibles" means all of Borrower's present and future
-------------------
general intangibles and other personal property (including contract rights,
rights arising under common law, statutes, or regulations, choses or things in
action, goodwill, patents, trade names, trademarks, servicemarks, copyrights,
blueprints, drawings, purchase orders, customer lists, monies due or recoverable
from pension funds, route lists, rights to payment
6
and other rights under any royalty or licensing agreements, infringement claims,
computer programs, information contained on computer disks or tapes, literature,
reports, catalogs, money, deposit accounts, insurance premium rebates, tax
refunds, and tax refund claims), other than goods, Accounts, Investment
Property, and Negotiable Collateral.
"Gores" has the meaning set forth in the preambles and recitals to the
-----
Agreement.
"Gores Guaranty" means that certain guaranty, if any, executed and
--------------
delivered by Gores, in favor of Agent for the benefit of the Lender Group, in
form and substance reasonably satisfactory to Agent.
"Gores Transaction" means that certain transaction whereby Borrower
-----------------
will sell certain of its assets and require the assumption of specified
liabilities either to Gores as more completely identified by that certain letter
agreement dated April 6, 2000, as such letter agreement may be evidenced by more
definitive documentation, such as an asset purchase agreement, with respect to
the referenced transaction, or to a third party pursuant to Section 363 of the
Bankruptcy Code.
"Governing Documents" means, with respect to any Person, the
-------------------
certificate or articles of incorporation, by-laws, or other organizational
documents of such Person.
"Governmental Authority" means any nation or government, parliament or
----------------------
legislature or any state, province or other political subdivision thereof and
any entity exercising executive, legislative, judicial, regulatory, taxation or
administrative functions of or pertaining to government.
"Guarantors" means, individually and collectively, jointly and
----------
severally, the Canadian Sub and the UK Subs, and any other Subsidiary whose
assets were pledged to secure the Obligations under the Pre-Relief Date Loan
Agreement and included in the Borrowing Base as that term is defined therein.
"Guaranty" or "Guaranties" means those certain General Continuing
-------- ----------
Guaranty agreements, dated as of even date herewith, executed and delivered by
each Guarantor (other than Gores), in favor of Agent for the benefit of the
Lender Group, in form and substance reasonably satisfactory to Agent.
"Hazardous Materials" means (a) substances that are defined or listed
-------------------
in, or otherwise classified pursuant to, any applicable laws or regulations as
"hazardous substances," "hazardous materials," "hazardous wastes," "toxic
substances," or any other formulation intended to define, list, or classify
substances by reason of deleterious properties such as ignitability,
corrosivity, reactivity, carcinogenicity, reproductive toxicity, or "EP
toxicity", (b) oil, petroleum, or petroleum derived substances, natural gas,
natural gas liquids, synthetic gas, drilling fluids, produced waters, and other
wastes associated with the exploration, development, or production of crude oil,
natural gas, or geothermal resources, (c) any flammable substances or explosives
or any radioactive materials, and (d) asbestos in any form or electrical
equipment that contains any oil or dielectric fluid containing levels of
polychlorinated biphenyls in excess of 50 parts per million.
7
"Immaterial Subsidiary" means, collectively, Astral International
---------------------
Corporation, a Massachusetts corporation, SSA Caribbean, Inc., a Delaware
corporation, System Software Associates (FSC), Inc., a corporation organized
under the laws of the Virgin Islands, Computer Options, Inc., a Delaware
corporation, Astral International Corporation, a Massachusetts corporation,
Noftek N.W., Inc., an Oregon corporation, Priority Systems, Inc., a Texas
corporation, Knight Enterprises, Inc., a Texas corporation, SSA Acclaim Resource
Management Limited, a corporation organized under the laws of England and Wales,
Acclaim Computer Systems Limited, a corporation organized under the laws of
England and Wales, and Kiosk Company Limited, a corporation organized under the
laws of England and Wales.
"Indebtedness" means (a) all obligations of Borrower for borrowed
------------
money, (b) all obligations of Borrower evidenced by bonds, debentures, notes, or
other similar instruments and all reimbursement or other obligations of Borrower
in respect of letters of credit, bankers acceptances, interest rate swaps, or
other financial products, (c) all obligations of Borrower under Capital Leases
in an amount equal to the principal balance of such Capital Leases calculated in
accordance with GAAP, (d) all obligations or liabilities of others secured by a
Lien on any property or asset of Borrower, irrespective of whether such
obligation or liability is assumed, and (e) any obligation of Borrower
guaranteeing or intended to guarantee (whether guaranteed, endorsed, co-made,
discounted, or sold with recourse to Borrower) any obligation of any other
Person.
"Indemnified Liabilities" has the meaning set forth in Section 11.3.
----------------------- ------------
"Indemnified Person" has the meaning set forth in Section 11.3.
------------------ ------------
"Indenture" means that certain Indenture, dated as of September 12,
---------
1997, between SSA and ▇▇▇▇▇▇ Trust and Savings Bank, as Trustee, as amended,
supplemented, or otherwise modified from time to time.
"Insolvency Proceeding" means any proceeding commenced by or against
---------------------
any Person under any provision of the Bankruptcy Code or under any other
bankruptcy or insolvency law, assignments for the benefit of creditors, formal
or informal moratoria, compositions, extensions generally with creditors, or
proceedings seeking reorganization, arrangement, or other similar relief.
"Interim Order" means the order of the Court entered in the Chapter 11
-------------
Case after a hearing, satisfactory in form and substance to Lenders, which,
among other matters but not by way of limitation, authorizes the Borrower to
obtain credit, incur indebtedness, and grant Liens under this Agreement and the
other Loan Documents, as the case may be, and provide for the super-priority of
Lender's claims, all as set forth in such order.
"Inventory" means all present and future inventory in which Borrower
---------
has any interest, including goods held for sale or lease or to be furnished
under a contract of service and all of Borrower's present and future raw
materials, work in process, finished goods, and packing and shipping materials,
wherever located.
8
"Investment" means, with respect to any Person, any investment by such
----------
Person in any other Person (including Affiliates) in the form of loans,
guarantees, advances, or capital contributions (excluding (a) commission,
travel, and similar advances to officers and employees of such Person made in
the ordinary course of business, and (b) bona fide accounts receivable arising
from the sale of goods or services in the ordinary course of business consistent
with past practice), purchases or other acquisitions for consideration of
Indebtedness or Stock, and any other items that are or would be classified as
investments on a balance sheet prepared in accordance with GAAP.
"Investment Property" means "investment property" as that term is
-------------------
defined in of the Code, whether now owned or hereafter acquired by the Borrower.
"IRC" means the Internal Revenue Code of 1986, as amended, and any
---
successor statute.
"L/C" has the meaning set forth in Section 2.12(a).
--- ---------------
"L/C Undertaking" has the meaning set forth in Section 2.12(a).
--------------- ---------------
"Lender" and "Lenders" have the respective meanings set forth in the
------ -------
preamble to this Agreement, and shall include any other Person made a party to
this Agreement in accordance with the provisions of Section 14.1 hereof.
------------
"Lender Group" means, individually and collectively, each of the
------------
Lenders, and Agent.
"Lender Group Expenses" means all (a) costs or expenses (including
---------------------
taxes, and insurance premiums) required to be paid by the Borrower under any of
the Loan Documents that are paid or incurred by the Lender Group, (b) fees or
charges paid or incurred by any member of the Lender Group in connection with
any member of the Lender Group's transactions with the Borrower, including, fees
or charges for photocopying, notarization, couriers and messengers,
telecommunication, public record searches (including tax lien, litigation, and
UCC searches and including searches with the patent and trademark office, the
copyright office, or the department of motor vehicles), filing, recording,
publication, appraisal (including periodic appraisals of the Collateral), (c)
costs and expenses incurred by any member of the Lender Group in the
disbursement of funds to Borrower (by wire transfer or otherwise), (d) charges
paid or incurred by any member of the Lender Group resulting from the dishonor
of checks, (e) reasonable costs and expenses paid or incurred by any member of
the Lender Group to correct any default or enforce any provision of the Loan
Documents, or in gaining possession of, maintaining, handling, preserving,
storing, shipping, selling, preparing for sale, or advertising to sell the
Collateral, or any portion thereof, irrespective of whether a sale is
consummated, (f) reasonable costs and expenses paid or incurred by any member of
the Lender Group (including any costs and expense to engage outside parties) in
examining the Books or books and records of the Borrower and in monitoring and
analyzing the Collateral, (g) reasonable costs and expenses of third party
claims or any other suit paid or incurred by any member of the Lender Group in
enforcing or defending the Loan Documents or in connection with the transactions
contemplated by the Loan Documents or any member of the Lender Group's
relationship
9
with the Borrower, (h) reasonable fees and expenses (including attorneys fees
and expenses, and expenses of third party consultants, advisors, or independent
contractors) incurred by any member of the Lender Group in advising,
structuring, drafting, reviewing, administering, amending, terminating,
enforcing (including attorneys fees and expenses, and expenses of third party
consultants, advisors, or independent contractors, incurred in connection with
the Chapter 11 Case or in any other "workout," a "restructuring," or any other
Insolvency Proceeding concerning Borrower), defending, or concerning the Loan
Documents, irrespective of whether suit is brought, and (i) each of the Lenders'
reasonable fees and expenses (including attorneys fees) incurred in terminating,
enforcing (including attorneys fees and expenses incurred in connection with the
Chapter 11 Case or in any other "workout," a "restructuring," or any other
Insolvency Proceeding concerning any of the Borrower or any guarantor of the
Obligations), or defending, or concerning the Loan Documents, irrespective of
whether suit is brought.
"Lender-Related Person" means, with respect to any Lender, such
---------------------
Lender, together with such Lender's Affiliates, and the officers, directors,
employees, and agents of such Lender.
"Letter of Credit" means an L/C or an L/C Undertaking, as the context
----------------
requires.
"Letter of Credit Sub-Commitment" means, for each Lender, the Dollar
-------------------------------
amount of the obligation of such Lender to participate in any Letters of Credit,
as such amount is set forth opposite the name of such Lender under the caption
Letter of Credit Sub-Commitment on Schedule C-1.
------------
"Letter of Credit Usage" means, as of any date of determination, the
----------------------
aggregate undrawn amount of all outstanding Letters of Credit.
"Lien" means any interest in property securing an obligation owed to,
----
or a claim by, any Person other than the owner of the property, whether such
interest shall be based on the common law, statute, or contract, whether such
interest shall be recorded or perfected, and whether such interest shall be
contingent upon the occurrence of some future event or events or the existence
of some future circumstance or circumstances, including the lien or security
interest arising from a mortgage, deed of trust, encumbrance, pledge,
hypothecation, assignment, deposit arrangement, security agreement, conditional
sale or trust receipt, or from a lease, consignment, or bailment for security
purposes and also including reservations, exceptions, encroachments, easements,
rights-of-way, covenants, conditions, restrictions, leases, and other title
exceptions and encumbrances affecting Real Property.
"Loan Account" has the meaning set forth in Section 2.9.
------------ -----------
"Loan Documents" means this Agreement, the Disbursement Letter, the
--------------
Lockbox Agreements, the Letters of Credit, the Guaranty, and the Gores Guaranty,
any note or notes executed by the Borrower in connection with this Agreement and
payable to a member of the Lender Group, and any other agreement entered into,
now or in the future, by the Borrower and any member of the Lender Group in
connection with this Agreement.
10
"Lockbox Account" shall mean a depositary account established pursuant
---------------
to one of the Lockbox Agreements.
"Lockbox Agreements" means those certain lockbox agreements and those
------------------
certain depository agreements, in form and substance reasonably satisfactory to
Agent, each of which is among Borrower, Agent, and one of the Lockbox Banks
executed in connection with the Pre-Relief Date Loan Agreement, which Lockbox
Agreements shall continue and be of force and effect in connection with this
Agreement.
"Lockbox Banks" means American National Bank and Trust Company of
-------------
Chicago (or such other banks as may be agreed to by Agent and Borrower, from
time to time).
"Lockboxes" has the meaning set forth in Section 2.6.
--------- -----------
"Maintenance Agreement" means the Borrower's standard form of
---------------------
maintenance agreement entered into between the Borrower or its Subsidiaries and
its customer in order to memorialize such Borrower's or Subsidiaries ongoing
customer service, consulting, repair, and maintenance obligations with respect
to such customer.
"Manchester" has the meaning set forth in Section 3.1.
---------- -----------
"Material Adverse Change" means, without the inclusion of the filing
-----------------------
of the Chapter 11 Case or the direct effects arising therefrom, (a) a material
adverse change in the business, prospects, operations, results of operations,
assets, liabilities or condition (financial or otherwise) of the Borrower, taken
as a whole, (b) the material impairment of the Borrower's ability, taken as a
whole, to perform its obligations under the Loan Documents to which it is a
party or of the Lender Group to enforce the Obligations or realize upon the
Collateral, or (c) a material impairment of the priority of the Agent's Liens
with respect to the Collateral, as a result of an action or failure to act on
the part of the Borrower.
"Maturity Date" means May 26, 2000.
-------------
"Maximum Amount" means $5,000,000.
--------------
"Negotiable Collateral" means all of Borrower's now owned and
---------------------
hereafter acquired letters of credit, notes, drafts, instruments (including
intercompany receivable), security certificates, documents, and chattel paper.
"Obligations" means all Advances, debts, principal, interest,
-----------
contingent reimbursement obligations under any outstanding Letters of Credit,
premiums, liabilities (including all amounts charged to Borrower's Loan Account
pursuant hereto), obligations, fees (including the fees provided for hereunder),
charges, costs, or Lender Group Expenses, lease payments, guaranties, covenants,
and duties owing by Borrower to the Lender Group of any kind and description
pursuant to or evidenced by the Loan Documents, whether direct or indirect,
absolute or contingent, due or to become due, now existing or hereafter
11
arising, and including all interest not paid when due and all Lender Group
Expenses that Borrower is required to pay or reimburse by the Loan Documents, by
law, or otherwise.
"Overadvance" has the meaning set forth in Section 2.4.
----------- -----------
"Participant" has the meaning set forth in Section 14.1(e).
----------- ---------------
"Permitted Discretion" with respect to any determination by a member
--------------------
of the Lender Group, means a determination made in good faith and in the
exercise of reasonable (from the perspective of a secured asset-based lender)
business judgment.
"Permitted Dispositions" means (a) sales, exchanges, trade-ins or
----------------------
other dispositions of Equipment, that is substantially worn, damaged, or
obsolete in the ordinary course of Borrower's, business, (b) sales of Inventory
to buyers in the ordinary course of Borrower's business, (c) the use or transfer
of money, or cash equivalents by the Borrower in a manner that is not prohibited
by the terms of this Agreement or the other Loan Documents, (d) the licensing by
the Borrower, on a non-exclusive basis, of patents, trademarks, copyrights, and
other intellectual property rights in the ordinary course of the Borrower's
business, and (e) the Gores Transaction and sale of the Borrower's assets
pursuant to Section 363 of the Bankruptcy Code.
"Permitted Holder" means ▇▇▇▇▇ ▇. ▇▇▇▇▇, and his Family Members, and
----------------
his Family Trusts.
"Permitted Investments" means, collectively: (a) direct obligations
---------------------
of, or obligations the principal of and interest on which are unconditionally
guaranteed by, the United States of America with a maturity not exceeding one
year; (b) certificates of deposit, time deposits, banker's acceptances or other
instruments of a bank having a combined capital and surplus of not less than
$500,000,000 with a maturity not exceeding one year, (c) investments in
commercial paper rated at least A-1 or P-1 maturing within one year after the
date of acquisition thereof; (d) money market accounts maintained at a bank
having combined capital and surplus of no less than $500,000,000 or at any other
financial institution reasonably satisfactory to Agent; (e) loans and advances
to officers and employees of the Borrower in the ordinary course of business in
an aggregate amount at any one time outstanding not to exceed $500,000 and to
the extent such loans and advances are allowed by the Court; (f) investments in
negotiable instruments for collection; and (g) advances made in connection with
purchases of goods or services in the ordinary course of business.
"Permitted Liens" means (a) Liens held by Agent for the benefit of the
---------------
Lender Group, (b) Liens for unpaid taxes that either (i) are not yet due and
payable or (ii) do not constitute an Event of Default hereunder and are the
subject of Permitted Protests, (c) Liens set forth on Schedule P-1, (d) the
------------
interests of lessors under operating leases, (e) purchase money Liens or the
interests of lessors under Capital Leases to the extent that such Liens or
interests secure Permitted Purchase Money Indebtedness and so long as the Lien
attaches only to the asset purchased or acquired and the proceeds thereof, (f)
Liens arising by operation of law in favor of warehousemen, landlords, carriers,
mechanics, materialmen, laborers, or suppliers, incurred in the ordinary course
of business
12
of Borrower and not in connection with the borrowing of money, and which Liens
either (i) are for sums not yet due and payable, or (ii) are the subject of
Permitted Protests, (g) Liens arising from deposits made in connection with
obtaining worker's compensation or other unemployment insurance, (h) Liens or
deposits to secure performance of bids, tenders, leases, or other agreements
incurred in the ordinary course of business of Borrower and not in connection
with the borrowing of money, (i) Liens arising by reason of security for surety
or appeal bonds in the ordinary course of business of Borrower, and (j) with
respect to any Real Property, easements, rights of way, zoning and similar
covenants and restrictions, and similar encumbrances that customarily exist on
properties of Persons engaged in similar activities and similarly situated and
that in any event do not materially interfere with or impair the use or
operation of the Collateral by Borrower or the value of any of the Agent's Liens
thereon or therein for the benefit of the Lender Group, or materially interfere
with the ordinary conduct of the business of Borrower.
"Permitted Preferred Stock" means Series A Preferred Stock, par value
-------------------------
$.01, of SSA.
"Permitted Protest" means the right of the Borrower to protest any
-----------------
Lien (other than any such Lien that secures the Obligations), tax (other than
payroll taxes or taxes that are the subject of a United States federal tax
lien), or rental or license payment, provided that (a) a Reserve with respect to
such obligation is established on the Books, in such amount as is required under
GAAP, (b) any such protest is instituted and diligently prosecuted by the
Borrower in good faith, and (c) Agent is reasonably satisfied that, while any
such protest is pending, there will be no material impairment of the
enforceability, validity, or priority of any of the Liens of Agent on behalf of
the Lender Group in and to the Collateral.
"Permitted Purchase Money Indebtedness" means, as of any date of
-------------------------------------
determination, Purchase Money Indebtedness incurred after the Closing Date in an
aggregate amount outstanding at any one time not to exceed $250,000.
"Permitted Subordinated Debt" means those certain 7% Convertible
---------------------------
Subordinated Notes, due September 15, 2002, in the original principal amount of
$138,000,000.00 issued pursuant to the Indenture.
"Person" means natural persons, corporations, limited liability
------
companies, limited partnerships, general partnerships, limited liability
partnerships, joint ventures, trusts, land trusts, business trusts, or other
organizations, irrespective of whether they are legal entities, and governments
and agencies and political subdivisions thereof.
"Pre-Relief Date Loan Agreement" has the meaning set forth in the
------------------------------
recitals to this Agreement.
"Projections" means Borrower's forecasted (a) balance sheets, (b)
-----------
income statements, and (c) cash flow statements, all prepared on a consistent
basis with Borrower's historical financial statements, together with appropriate
supporting details and a statement of underlying assumptions.
13
"Pro Rata Share" means:
--------------
(a) with respect to a Lender's obligation to make Advances and receive
payments of interest, fees, and principal with respect thereto, the percentage
obtained by dividing (i) such Lender's Revolving Credit Commitment, by (ii) the
aggregate amount of all Lenders' Revolving Credit Commitments,
(b) with respect to a Lender's obligation to participate in Letters of
Credit, and receive payments with respect thereto, the percentage obtained by
dividing (i) such Lender's Letters of Credit Sub-Commitment, by (ii) the
aggregate amount of all Lenders' Letters of Credit Sub-Commitments,
(c) with respect to all other matters (including the indemnification
obligations arising under Section 16.7), the percentage obtained by dividing (i)
------------
such Lender's Total Commitment, by (ii) the aggregate amount of all Lenders'
Total Commitments.
"Purchase Money Indebtedness" means Indebtedness (other than the
---------------------------
Obligations, but including Capitalized Lease Obligations), incurred at the time
of, or within 20 days after, the acquisition of any fixed assets for the purpose
of financing all or any part of the acquisition cost thereof.
"Real Property" means any estates or interests in real property now
-------------
owned or hereafter acquired by the Borrower.
"Recurring Service and Maintenance Revenues" means, with respect to
------------------------------------------
any period, the total revenues of Borrower, determined on a consolidated basis,
for such period that are derived from services and ongoing support as reflected
in Borrower's financial statements in accordance with its historical practices.
"Relief Date" has the meaning set forth in the first recital paragraph
-----------
hereto.
"Required Lenders" means, at any time, Lenders whose Pro Rata Shares
----------------
aggregate 51% of the Total Commitments, or if the Commitments have been
terminated irrevocably, 51% of the Obligations then outstanding.
"Required Library" means, as of any date of determination, the set or
----------------
collection of existing copyrights of the Borrower relating to software of the
Borrower that generated not less than 85% of the aggregate amount of current
revenues arising from software sales and licensing of the Borrower (as
determined on a consolidated basis in accordance with GAAP).
"Reserves" means any reserves that may be established in accordance
--------
with the express provisions of this Agreement.
"Revolving Credit Commitment" means, for each Lender, the Dollar
---------------------------
amount of the obligation of such Lender to make Advances, as such amount is set
forth opposite the name of such Lender under the caption Revolving Credit
Commitment on Schedule C-1.
------------
14
"Revolver Usage" means, as of any date of determination, the sum of
--------------
(a) the aggregate amount of Advances outstanding, plus (b) the amount of the
Letter of Credit Usage.
"Risk Participation Liability" means, as to each Letter of Credit, all
----------------------------
reimbursement obligations of Borrower to the issuer of an L/C or to the issuer
of a letter of credit with respect to the transaction for which an L/C
Undertaking was executed and delivered (to the extent such reimbursement
obligations are subject to such L/C Undertaking), consisting of (a) the amount
available to be drawn or which may become available to be drawn, (b) all amounts
that have been paid and made available by the issuing bank to the extent not
reimbursed by Borrower, whether by the making of an Advance or otherwise, and
(c) all accrued and unpaid interest, fees, and expenses payable with respect
thereto.
"SSA" has the meaning set forth in the preamble recitals to this
---
Agreement.
"SSA Limited" means System Software Associates Limited, a corporation
-----------
organized under the laws of England and Wales.
"SEC" means the United States Securities and Exchange Commission and
---
any successor thereto.
"Securities Account" means a "securities account" as that term is
------------------
defined in Section 8-501 of the Code.
"Securities Act" means the Securities Act of 1933, as amended, and
--------------
all rules and regulations promulgated thereunder.
"Senior Claims" means those pre-Relief Date claims or liens set forth
-------------
on Schedule S-1 attached hereto, if any, that have priority over, or are pari
------------
passu with, the claims and Liens of the Lenders to the extent allowed by the
Court.
"Settlement" has the meaning set forth in Section 2.2(f)(i).
---------- -----------------
"Settlement Date" has the meaning set forth in Section 2.2(f)(i).
--------------- -----------------
"Software License Agreement" means the Borrower's standard form of
--------------------------
software license agreement entered into between the Borrower or its Subsidiaries
and its customer in order to consummate the license of software and sale of
related services.
"Softwright" means SSA Softwright Limited, a corporation organized
----------
under the laws of England and Wales and registered with company number 1467614.
"Solvent" means, with respect to any Person on a particular date, that
-------
on such date (a) at fair valuations, all of the properties and assets of such
Person are greater than the sum of the debts, including contingent liabilities,
of such Person, (b) the present fair salable value of the properties and assets
of such Person is not less than the amount that will be required to pay the
probable liability of such Person on its debts as they become absolute and
15
matured, (c) such Person is able to realize upon its properties and assets and
pay its debts and other liabilities, contingent obligations and other
commitments as they mature in the normal course of business, (d) such Person
does not intend to, and does not believe that it will, incur debts beyond such
Person's ability to pay as such debts mature, and (e) such Person has capital
sufficient to carry on its business and transactions and all business and
transactions in which it is about to engage, after giving due consideration to
the prevailing practices in the industry in which such Person is engaged. In
computing the amount of contingent liabilities at any time, it is intended that
such liabilities will be computed at the amount that, in light of all the facts
and circumstances existing at such time, represents the amount that reasonably
can be expected to become an actual or matured liability.
"Stock" means all shares, options, warrants, interests,
-----
participations, or other equivalents (regardless of how designated) of or in a
Person, whether voting or nonvoting, including common stock, preferred stock, or
any other "equity security" (as such term is defined in Rule 3a11-1 of the
General Rules and Regulations promulgated by the SEC under the Exchange Act).
"Subsidiary" of a Person means a corporation, partnership, limited
----------
liability company, or other entity in which that Person directly or indirectly
owns or controls the shares of Stock having ordinary voting power to elect a
majority of the board of directors (or appoint other comparable managers) of
such corporation, partnership, limited liability company, or other entity.
"Termination Date" has the meaning set forth in Section 3.4.
---------------- -----------
"Total Commitment" means, for each Lender, the sum of such Lender's
----------------
Revolving Credit Commitment, as such amount is set forth opposite the name of
such Lender under the caption Total Commitment on Schedule C-1.
------------
"UK Subs" means System Software Associates Limited, SSA-Acclaim
-------
Limited and SSA Softwright Limited, each a corporation organized under the laws
of England and Wales.
"Voidable Transfer" has the meaning set forth in Section 17.8.
----------------- ------------
"Year 2000 Compliant" means, with regard to any Person, that all
-------------------
software in goods produced or sold by, or utilized by and material to the
business operations or financial conditions of, such Person are able to
interpret and manipulate data on and involving all calendar dates correctly and
without causing any abnormal ending scenario, including in relation to dates on
and after the year 2000.
1.2 Accounting Terms. All accounting terms not specifically defined
-----------------
herein shall be construed in accordance with GAAP. When used herein, the term
"financial statements" shall include the notes and schedules thereto. Whenever
the term "SSA" or "Borrower" is used in respect of a financial covenant or a
related definition, it shall be understood to mean SSA and its Subsidiaries on a
consolidated basis unless the context clearly requires otherwise.
16
1.3 Code. Any terms used in this Agreement that are defined in the Code
----
shall be construed and defined as set forth in the Code unless otherwise defined
herein.
1.4 Construction. Unless the context of this Agreement or any other Loan
------------
Document clearly requires otherwise, references to the plural include the
singular, references to the singular include the plural, the term "including" is
not limiting, and the term "or" has, except where otherwise indicated, the
inclusive meaning represented by the phrase "and/or." The words "hereof,"
"herein," "hereby," "hereunder," and similar terms in this Agreement or any
other Loan Document refer to this Agreement or such other Loan Document, as the
case may be, as a whole and not to any particular provision of this Agreement or
such other Loan Document, as the case may be. Section, subsection, clause,
schedule, and exhibit references herein are to this Agreement unless otherwise
specified. Any reference in this Agreement or in the Loan Documents to this
Agreement or any of the Loan Documents shall include all alterations,
amendments, changes, extensions, modifications, renewals, replacements,
substitutions, joinders, and supplements, thereto and thereof, as applicable.
1.5 Schedules and Exhibits. All of the schedules and exhibits attached to
----------------------
this Agreement shall be deemed incorporated herein by reference.
2. LOAN AND TERMS OF PAYMENT.
-------------------------
2.1 Revolver Advances.
-----------------
(a) Subject to the terms and conditions of this Agreement, and
during the term of this Agreement, each Lender with a Revolving Credit
Commitment agrees to make advances ("Advances") to Borrower daily, as may be
--------
requested, from time to time in accordance with the Budget until the Termination
Date, in an aggregate principal amount not to exceed at any time outstanding
such Lender's Pro Rata Share of the Revolving Credit Commitment; provided,
however, that the principal amount outstanding and advanced pursuant to this
Agreement shall not exceed the Maximum Amount.
(b) Intentionally Omitted.
---------------------
(c) The Lenders shall have no obligation to make further Advances
hereunder to the extent such further Advances would cause the Revolver Usage to
exceed the Maximum Amount less the Letter of Credit Usage.
(d) Amounts borrowed pursuant to this Section may be repaid and,
subject to the terms and conditions of this Agreement, reborrowed at any time
during the term of this Agreement. The principal amount of all Advances shall be
repaid in full on the date this Agreement is terminated.
2.2 Borrowing Procedures and Settlements.
-------------------------------------
(a) Procedure for Borrowing. Each Borrowing shall be made by an
irrevocable written request by an Authorized Person delivered to Agent (which
notice must be received by Agent no later than 10:00 a.m. (California time) on
the Business Day
17
immediately preceding the requested Funding Date) specifying (i) the amount of
such Borrowing, (ii) the requested Funding Date, which shall be a Business Day,
and (iii) a cumulative reconciliation, in a form reasonably acceptable to Agent,
of amounts advanced hereunder and spent by Borrower compared to the Budget for
the same period. At Agent's election, in lieu of delivering the above-described
written request, any Authorized Person may give Agent telephonic notice of such
request by the required time, with such telephonic notice to be confirmed in
writing within 24 hours of the giving of such notice.
(b) Agent's Election. Promptly after receipt of a request for a
Borrowing pursuant to Section 2.2(a), Agent shall elect, in its discretion, to
--------------
have the terms of Section 2.2(c) apply to such requested Borrowing.
--------------
(c) Making of Advances.
(i) In the event that Agent shall elect to have the terms of
this Section 2.2(c) apply to a requested Borrowing as described in
--------------
Section 2.2(b), then promptly after receipt of a request for a
--------------
Borrowing pursuant to Section 2.2(a), Agent shall notify the Lenders,
--------------
not later than 1:00 p.m. (California time) on the Business Day
immediately preceding the Funding Date applicable thereto, by
telecopy, telephone, or other similar form of transmission, of the
requested Borrowing. Each Lender shall make the amount of such
Lender's Pro Rata Share of the requested Borrowing available to Agent
in immediately available funds, to such account of Agent as Agent may
designate, not later than 10:00 a.m. (California time) on the Funding
Date applicable thereto. After Agent's receipt of the proceeds of
such Advances, upon the satisfaction of the applicable conditions
precedent set forth in Section 3 hereof, Agent shall make the proceeds
of such Advances available to Borrower on the applicable Funding Date
by transferring same day funds equal to the proceeds of such Advances
received by Agent to Borrower's Designated Account; provided, however,
-------- -------
that, subject to the provisions of Section 2.2(i), Agent shall not
--------------
request any Lender to make, and no Lender shall make, any Advance if
Agent shall have received written notice from any Lender, or otherwise
has actual knowledge, that (1) one or more of the applicable
conditions precedent set forth in Section 3 will not be satisfied on
---------
the requested Funding Date for the applicable Borrowing (unless such
condition has been waived in accordance herewith), or (2) the
requested Borrowing would exceed the Availability of Borrower on such
Funding Date.
(ii) Unless Agent receives notice from a Lender on or prior to
the Closing Date or, with respect to any Borrowing after the Closing
Date, on the date of the proposed Borrowing but before the funding of
such Borrowing that such Lender will not make available (as and when
required hereunder to Agent for the account of Borrower) the amount of
that Lender's Pro Rata Share of the Borrowing, Agent may assume that
each Lender has made or will make such amount available to Agent in
immediately available funds on the Funding Date and Agent may (but
shall not be so required), in
18
reliance upon such assumption, make available to Borrower on such date
a corresponding amount. If and to the extent any Lender shall not have
made its full amount available to Agent in immediately available funds
and Agent in such circumstances has made available to Borrower such
amount, that Lender shall on the Business Day following such Funding
Date make such amount available to Agent, together with interest at
the Defaulting Lender Rate for each day during such period. A notice
submitted by Agent to any Lender with respect to amounts owing under
this subsection shall be conclusive, absent manifest error. If such
amount is so made available, such payment to Agent shall constitute
such Lender's Advance on the date of Borrowing for all purposes of
this Agreement. If such amount is not made available to Agent on the
Business Day following the Funding Date, Agent will notify Borrower of
such failure to fund and, upon demand by Agent, Borrower shall pay
such amount to Agent for Agent's account, together with interest
thereon for each day elapsed since the date of such Borrowing, at a
rate per annum equal to the interest rate applicable at the time to
the Advances composing such Borrowing. The failure of any Lender to
make any Advance on any Funding Date shall not relieve any other
Lender of any obligation hereunder to make an Advance on such Funding
Date, but no Lender shall be responsible for the failure of any other
Lender to make the Advance to be made by such other Lender on any
Funding Date.
(iii) Agent shall not be obligated to transfer to a Defaulting
Lender any payments made by Borrower to Agent for the Defaulting
Lender's benefit; nor shall a Defaulting Lender be entitled to the
sharing of any payments hereunder. Amounts payable to a Defaulting
Lender shall instead be paid to or retained by Agent as permitted
herein. Subject to the foregoing, Agent may hold and, in its
Permitted Discretion, re-lend to Borrower for the account of such
Defaulting Lender the amount of all such payments received or retained
by it for the account of such Defaulting Lender. Solely for the
purposes of voting or consenting to matters with respect to the Loan
Documents and determining Pro Rata Shares, such Defaulting Lender
shall be deemed not to be a "Lender" and such Lender's Commitment
shall be deemed to be zero (-0-). This section shall remain effective
with respect to such Lender until (x) the Obligations under this
Agreement shall have been declared or shall have become immediately
due and payable, (y) the requisite non-Defaulting Lenders and Agent
shall have waived such Lender's default in writing, or (z) the
Defaulting Lender makes its Pro Rata Share of the Advance and pays to
Agent all amounts owing by Defaulting Lender in respect thereof. The
operation of this section shall not be construed to increase or
otherwise affect the Commitment of any Lender, to relieve or excuse
the performance by such Defaulting Lender or any other Lender of its
duties and obligations hereunder.
(d) Intentionally omitted.
---------------------
(e) Agent Advances.
19
(i) Subject to the limitations set forth in the proviso
contained in this Section 2.2(e), Agent hereby is authorized by
--------------
Borrower and the Lenders, from time to time in Agent's sole
discretion, (1) after the occurrence and during the continuance of a
Default or an Event of Default, or (2) at any time that any of the
other applicable conditions precedent set forth in Section 3 have not
---------
been satisfied, to make Advances to Borrower on behalf of the Lenders
that Agent, in its Permitted Discretion, deems necessary or desirable
(A) to preserve or protect the Collateral, or any portion thereof, (B)
to enhance the likelihood of repayment of the Obligations, or (C) to
pay any other amount chargeable to Borrower pursuant to the terms of
this Agreement, including Lender Group Expenses and the costs, fees,
and expenses described in Section 10 (any of the Advances described in
----------
this Section 2.2(e) being hereinafter referred to as "Agent
--------------
Advances"); provided, however, that the Required Lenders may at any
-------- -------
time revoke Agent's authorization contained in this Section 2.2(e) to
--------------
make Agent Advances, any such revocation to be in writing and to
become effective from and after Agent's receipt thereof, and such
Agent Advances shall not exceed $2,000,000 outstanding, in the
aggregate, at any one time.
(ii) Agent Advances shall be repayable on demand, shall be
secured by the Agent's Liens on the Collateral, shall constitute
Advances and Obligations hereunder, and shall bear interest at the
rate applicable from time to time to the Advances pursuant to Section
-------
2.5 hereof.
---
(f) Settlement. It is agreed that each Lender's funded portion of
the Advances is intended by the Lenders to equal, at all times, such Lender's
Pro Rata Share of the outstanding Advances. Such agreement notwithstanding,
Agent, and the other Lenders agree (which agreement shall not be for the benefit
of, or enforceable by, Borrower) that, in order to facilitate the administration
of this Agreement and the other Loan Documents, settlement among them as to the
Advances, and the Agent Advances shall take place on a periodic basis in
accordance with the following provisions:
(i) Agent shall request settlement ("Settlement") with the
Lenders on a weekly basis, or on a more frequent basis if so
determined by Agent, (1) for itself, with respect to each Agent
Advance, and (2) with respect to Collections received, as to each by
notifying the Lenders by telecopy, telephone, or other similar form of
transmission, of such requested Settlement, no later than 2:00 p.m.
(California time) on the Business Day immediately prior to the date of
such requested Settlement (the date of such requested Settlement being
the "Settlement Date"). Such notice of a Settlement Date shall
include a summary statement of the amount of outstanding Advances and
Agent Advances for the period since the prior Settlement Date, the
amount of repayments received in such period, and the amounts
allocated to each Lender of the interest, fees, and other charges for
such period. Subject to the terms and conditions contained herein
(including Section 2.2(c)(iii)): (y) if a Lender's outstanding
-------------------
balance of the Advances and Agent Advances exceeds such Lender's Pro
Rata Share of the Advances
20
and Agent Advances as of a Settlement Date, then Agent shall by no
later than 12:00 p.m. (California time) on the Settlement Date
transfer in immediately available funds to the account of such Lender
as such Lender may designate, an amount such that such Lender shall,
upon its receipt of such amount, have as of the Settlement Date, its
Pro Rata Share of the Advances and Agent Advances; and (z) if a
Lender's balance of the Advances and Agent Advances is less than such
Lender's Pro Rata Share of the Advances and Agent Advances as of a
Settlement Date, such Lender shall no later than 12:00 p.m.
(California time) on the Settlement Date transfer in immediately
available funds to such account of Agent as Agent may designate, an
amount such that such Lender shall, upon Agent's receipt of such
amount, have as of the Settlement Date, its Pro Rata Share of the
Advances and Agent Advances. Such amounts made available to Agent
under clause (z) of the immediately preceding sentence shall be
applied against the amounts of the Agent Advance and shall constitute
Advances of such Lenders. If any such amount is not made available to
Agent by any Lender on the Settlement Date applicable thereto to the
extent required by the terms hereof, Agent shall be entitled to
recover for its account such amount on demand from such Lender
together with interest thereon at the Defaulting Lender Rate.
(ii) In determining whether a Lender's outstanding balance of
the Advances and Agent Advances is less than, equal to, or greater
than such Lender's Pro Rata Share of the Advances and Agent Advances
as of a Settlement Date, Agent shall, as part of the relevant
Settlement, apply to such balance the portion of payments actually
received in good funds by Agent with respect to principal, interest,
fees payable by Borrower and allocable to the Lenders hereunder, and
proceeds of Collateral. To the extent that a net amount is owed to
any Lender after such application, such net amount shall be
distributed by Agent to that Lender as part of such Settlement.
(iii) During the period between Settlement Dates, Agent with
respect to Agent Advances, and each Lender with respect to the
Advances other than Agent Advances, shall be entitled to interest at
the applicable rate or rates payable under this Agreement on the daily
amount of funds employed by Agent, or the Lenders, as applicable.
(g) Notation. Agent shall record on its books the principal amount
of the Advances owing to each Lender, and Agent Advances owing to Agent, and the
interests therein of each Lender, from time to time. In addition, each Lender is
authorized, at such Lender's option, to note the date and amount of each payment
or prepayment of principal of such Lender's Advances in its books and records,
including computer records, such books and records constituting rebuttably
presumptive evidence, absent manifest error, of the accuracy of the information
contained therein.
21
(h) Lenders' Failure to Perform. All Advances (other than Agent
Advances) shall be deemed made by the Lenders simultaneously and in accordance
with their Pro Rata Shares. It is understood that (i) no Lender shall be
responsible for any failure by any other Lender to perform its obligation to
make any Advances hereunder, nor shall any Commitment of any Lender be increased
or decreased as a result of any failure by any other Lender to perform its
obligation to make any Advances hereunder, and (ii) no failure by any Lender to
perform its obligation to make any Advances hereunder shall excuse any other
Lender from its obligation to make any Advances hereunder.
(i) Optional Overadvances.
(i) Any contrary provision of this Agreement notwithstanding,
if the condition precedent set forth in Section 3.3 will not be
-----------
satisfied in respect to a particular Borrowing, the Lenders
nonetheless hereby authorize Agent, and Agent, may, but is not
obligated to, knowingly and intentionally continue to make Advances to
Borrower such failure of condition notwithstanding, so long as, at any
time, the outstanding Revolver Usage (except for and excluding amounts
charged to the Loan Account for interest, fees, or Lender Group
Expenses) does not exceed the Maximum Amount less the Letter of Credit
Usage. The foregoing provisions are for the sole and exclusive benefit
of Agent and the Lenders and are not intended to benefit the Borrower
in any way. The Advances that are made pursuant to this Section 2.2(i)
--------------
shall be subject to the same terms and conditions as any other Advance
except that the rate of interest applicable thereto shall be the rates
set forth in Section 2.5(c) hereof without regard to the presence or
--------------
absence of a Default or Event of Default; provided, however, that the
-------- -------
Required Lenders may, at any time during the continuance of an Event
of Default, revoke Agent's authorization contained in this Section
-------
2.2(i) to make Overadvances (except for and excluding amounts charged
------
to the Loan Account for interest, fees, or Lender Group Expenses), any
such revocation to be in writing and to become effective from and
after Agent's receipt thereof.
(ii) In the event Agent obtains actual knowledge that the
Revolver Usage exceeds the amounts permitted by the preceding
paragraph, regardless of the amount of or reason for such excess,
Agent shall notify Lenders as soon as practicable (and prior to making
any (or any further) intentional Overadvances (except for and
excluding amounts charged to the Loan Account for interest, fees, or
Lender Group Expenses) unless Agent determines that prior notice would
result in imminent harm to the Collateral or its value), and the
Lenders thereupon shall, together with Agent, jointly determine the
terms of arrangements that shall be implemented with Borrower intended
to reduce, within a reasonable time, the outstanding principal amount
of the Advances to an amount permitted by the preceding paragraph. In
the event any Lender disagrees over the terms of reduction or
repayment of any Overadvance, the terms of reduction or repayment
thereof
22
shall be implemented according to the determination of the Required
Lenders.
(iii) Each Lender shall be obligated to settle with Agent as
provided in Section 2.2(f) for the amount of such Lender's Pro Rata
--------------
Share of any unintentional Overadvances by Agent reported to such
Lender, any intentional Overadvances made as permitted under this
Section 2.2(i), and any Overadvances resulting from the charging to
--------------
the Loan Account of interest, fees, or Lender Group Expenses.
(j) Intentionally omitted.
---------------------
2.3 Payments.
--------
(a) Payments by Borrower.
(i) All payments to be made by Borrower shall be made
without set-off, recoupment, deduction, or counterclaim, except as
otherwise required by law. Except as otherwise expressly provided
herein, all payments by Borrower shall be made to Agent for the
account of the Lender Group at an account identified by Agent to
Borrower, and shall be made in immediately available funds, no later
than 11:00 a.m. (California time) on the relevant payment date. Any
payment received by Agent later than 11:00 a.m. (California time), at
the option of Agent, shall be deemed to have been received on the
following Business Day and any applicable interest or fee shall
continue to accrue until such following Business Day.
(ii) Whenever any payment is due on a day other than a
Business Day, such payment shall be made on the following Business
Day, and such extension of time shall in such case be included in the
computation of interest or fees, as the case may be.
(iii) Unless Agent receives notice from Borrower prior to the
date on which any payment is due to the Lenders that Borrower will not
make such payment in full as and when required, Agent may assume that
Borrower has made (or will make) such payment in full to Agent on such
date in immediately available funds and Agent may (but shall not be so
required), in reliance upon such assumption, distribute to each Lender
on such due date an amount equal to the amount then due such Lender.
If and to the extent Borrower does not make such payment in full to
Agent on the date when due, each Lender severally shall repay to Agent
on demand such amount distributed to such Lender, together with
interest thereon at the interest rate then applicable to Advances for
each day from the date such amount is distributed to such Lender until
the date repaid.
(b) Apportionment, Application, and Reversal of Payments.
23
(i) Except as otherwise provided with respect to Defaulting
Lenders, aggregate principal and interest payments shall be
apportioned ratably among the Lenders (according to the unpaid
principal balance of the Obligations to which such payments relate
held by each individual Lender) and payments of fees (other than fees
designated for Agent's sole and separate account) shall, as
applicable, be apportioned ratably among the Lenders (in accordance
with their applicable Pro Rata Shares). All payments shall be
remitted to Agent and all such payments not relating to principal or
interest of specific Obligations (other than payments constituting
payment of specific fees), and all proceeds of Collateral received by
Agent, shall be applied:
first, to pay any fees or Lender Group Expenses then due to Agent
-----
under the Loan Documents until paid in full,
second, to pay any fees or Lender Group Expenses then due under
------
the Loan Documents to Lenders, in respect of their Pro Rata Share
thereof,
third, to pay interest due in respect of all Agent Advances until
-----
paid in full,
fourth, to pay interest due in respect of all Advances (other
------
than Agent Advances) until paid in full,
fifth, to pay principal of Agent Advances until paid in full,
-----
sixth, to pay principal of the Advances (other than Agent
-----
Advances) until paid in full,
seventh, if an Event of Default has occurred and is continuing,
-------
to be held by Agent, for the ratable benefit of Agent and those
Lenders having a Letter of Credit Sub-Commitment, as cash
collateral in an amount equal to 105% of the maximum amount of
the Lender Group's obligations with respect to outstanding
Letters of Credit until paid in full,
eighth, if an Event of Default has occurred and is continuing, to
------
pay any other Obligations due to Agent or any Lender, in respect
of their Pro Rata Share thereof,
ninth, to pay all obligations due and owing under the Pre-Relief
-----
Date Loan Agreement until such obligations are paid in full; and
tenth, to Borrower and wired to its Designated Account.
-----
24
Agent shall promptly distribute to each Lender, pursuant to the
applicable wire transfer instructions received from each Lender in writing, such
funds as it may be entitled to receive, subject to a Settlement delay as
provided in Section 2.2(f).
--------------
(ii) Intentionally omitted.
----------------------
(iii) Intentionally omitted.
---------------------
(iv) Notwithstanding the foregoing or anything else herein to
the contrary, it is expressly agreed and understood that all Collections
received after the Relief Date by Borrower, from whatever source, and to
the extent not used by the Borrower pursuant to the Budget and in
accordance with the Interim Order or Final Order, shall be paid over to and
applied by the Agent to all Obligations due and owing and outstanding under
the Pre-Relief Date Loan Agreement until such time as such Obligations have
been paid in full .
(v) In the event of a direct conflict between the priority
provisions of this Section 2.3(b) and other provisions contained in any
--------------
other Loan Document or the Interim Order and the Final Order, it is the
intention of the parties hereto that such priority provisions in such
documents shall be read together and construed, to the fullest extent
possible, to be in concert with each other. In the event of any actual,
irreconcilable conflict that cannot be resolved as aforesaid, the terms and
provisions of this Section 2.3(b) shall control and govern.
--------------
2.4 Overadvances. Lenders may, in its sole discretion, make Advances
------------
hereunder in excess of the amount set forth in Section 2.1 hereof. If, at any
-----------
time or for any reason, the amount of Obligations owed by Borrower to the Lender
Group pursuant to Sections 2.1, or 2.12 is greater than the Dollar or percentage
---------------------
limitations set forth in Section 2.1, or 2.12, (an "Overadvance"), and unless
-------------------- -----------
such Overadvance was made by Agent pursuant to Section 2.2(i) (in which case
--------------
they shall be payable as agreed at the time of the making of such Overadvance),
Borrower immediately shall pay to Agent on demand, in cash, the amount of such
excess, which amount shall be used by Agent to reduce the Obligations in
accordance with the priority set forth in Section 2.3(b)(i). In addition,
-----------------
Borrower hereby promises to pay the Obligations (including principal, interest,
fees, costs, and expenses) in Dollars in full to the Lender Group as and when
due and payable under the terms of this Agreement and the other Loan Documents.
2.5 Interest and Letter of Credit Fees: Rates, Payments, and
---------------------------------------------------------
Calculations.
------------
(a) Interest Rates. Except as provided in clause (c) below,
(i) all Obligations (except for undrawn Letters of
Credit), that have been charged to the Loan Account (as defined in
Section 2.9) pursuant to the terms hereof shall bear interest on the
Daily Balance thereof at a per annum rate of 15%,
(ii) Intentionally omitted.
---------------------
25
(iii) Intentionally omitted.
---------------------
(iv) Intentionally omitted.
---------------------
(b) Letter of Credit Fee. Borrower shall pay Agent a fee (in
addition to the charges, commissions, fees, and costs set forth in Section
-------
2.12(e)) equal
-------
to 1.50% per annum times the aggregate undrawn amount of all issued and
outstanding Letters of Credit.
(c) Default Rates. Upon the occurrence and during the continuation
of an Event of Default,
(i) all Obligations (except for undrawn Letters of Credit)
that have been charged to the Loan Account pursuant to the terms
hereof shall bear interest on the Daily Balance thereof at a per annum
rate equal to four (4) percentage points above the per annum rate
otherwise applicable hereunder, and
(ii) the Letter of Credit fee provided for above shall be
increased to four (4) percentage points above the per annum rate
otherwise applicable hereunder.
(d) Payments. Interest and Letter of Credit fees payable hereunder
shall be due and payable, in arrears, on the first day of each month during the
term hereof with the first such payment due on May 1, 2000. Borrower hereby
authorizes Agent, without prior notice to Borrower, to charge such interest,
Letter of Credit fees, all Lender Group Expenses (as and when incurred), the
charges, commissions, fees, and costs provided for in Section 2.12(e) (as and
---------------
when accrued or incurred), the fees, premiums and charges provided for in
Section 2.10 (as and when accrued or incurred), all other payments due in
------------
respect of the Obligations or under any Loan Document and any interest or other
adequate protection-type payments allowed by the Court with respect to the Pre-
Relief Date Loan Agreement to Borrower's Loan Account, which amounts from and
after their due date shall accrue interest at the rate then applicable to
Advances hereunder. Any interest not paid when due shall be compounded and
shall thereafter accrue interest at the rate then applicable to Advances
hereunder.
(e) Computation. All interest and fees chargeable under the Loan
Documents shall be computed on the basis of a 360 day year for the actual number
of days elapsed.
(f) Intent to Limit Charges to Maximum Lawful Rate. In no event
shall the interest rate or rates payable under this Agreement, plus any other
amounts paid in connection herewith, exceed the highest rate permissible under
any law that a court of competent jurisdiction shall, in a final determination,
deem applicable. Borrower and the Lender Group, in executing and delivering this
Agreement, intend legally to agree upon the rate or rates of interest and manner
of payment stated within it; provided, however, that, anything contained herein
to the contrary notwithstanding, if said rate or rates of interest or manner of
payment exceeds the maximum allowable under applicable law, then, ipso facto
26
as of the date of this Agreement, Borrower is and shall be liable only for the
payment of such maximum as allowed by law, and payment received from Borrower in
excess of such legal maximum, whenever received, shall be applied to reduce the
principal balance of the Obligations to the extent of such excess.
(g) Promise to Pay. Borrower hereby promises to pay in full to
Agent the Obligations, including without limitation the principal amount of all
Advances, together with accrued interest, fees and other amounts due thereon,
all in accordance with the terms of this Agreement.
2.6 Collection of Accounts.
----------------------
Borrower shall at all times maintain one or more lockboxes (the
"Lockboxes") and, immediately after the Closing Date, shall instruct all Account
Debtors to remit all amounts owed by them to one of such Lockboxes. Borrower,
Agent, and the Lockbox Banks shall enter into the Lockbox Agreements, which
among other things shall provide for the opening of a Lockbox Account for the
deposit of Borrower's Collections at the applicable Lockbox Bank. Borrower
agrees that all Collections received by Borrower from any Account Debtor or any
other source immediately upon receipt shall be deposited into a Lockbox Account.
No Lockbox Agreement or other arrangement contemplated hereby shall be modified
by Borrower without the prior written consent of Agent. All amounts received in
the Lockbox Account shall be wired each Business Day into an account (the
"Agent's Account") maintained by Agent at a depository selected by Agent.
2.7 Crediting Payments; Float Charge. The receipt by Agent of any payment
--------------------------------
(whether from transfers to Agent by the Lockbox Banks pursuant to the Lockbox
Agreements or otherwise) immediately shall be applied provisionally to the
Obligations in accordance with Section 2.3(b), but shall not be considered a
--------------
payment on account unless such payment item is a wire transfer of immediately
available federal funds made to the Agent Account or unless and until such
payment item is honored when presented for payment; provided, however, that a
-------- -------
portion of such Collections (a) first, as authorized by Agent in its sole
-----
discretion, shall be remitted to Borrower in an amount, specifically authorized
by Agent in its sole discretion, necessary to fund authorized expenditures under
the Budget to the extent the amounts available to be borrowed hereunder, and
advanced hereunder, are insufficient to fund such authorized expenditures, and
(b) second, shall be applied to reduce the Obligations (as defined in the Pre-
------
Relief Date Loan Agreement) owed under the Pre-Relief Date Loan Agreement, with
the remaining Collections to be applied to the Obligations as set forth above.
Should any payment item not be honored when presented for payment, then the
Borrower shall be deemed not to have made such payment and interest shall be
calculated accordingly. Anything to the contrary contained herein
notwithstanding, any payment item shall be deemed received by Agent only if it
is received into the Agent's Account on a Business Day on or before 11:00 a.m.
(California time). If any Collection item is received into the Agent Account on
a non-Business Day or after 11:00 a.m. (California time) on a Business Day, it
shall be deemed to have been received by Agent as of the opening of business on
the immediately following Business Day. From and after the Closing Date, Agent
shall be entitled to charge Borrower for two (2) Business Days of `clearance' or
`float' at the rate applicable to Advances set forth in Section 2.5(a)(i)
-----------------
27
or Section 2.5(c)(i), as applicable, on all Collections that are received by the
------------------
Borrower (regardless of whether forwarded by the Lockbox Banks to Agent). This
across-the-board 2 Business Day clearance or float charge on all Collections is
acknowledged by the parties to constitute an integral aspect of the pricing of
the financing of Borrower and shall apply irrespective of whether or not there
are any outstanding monetary Obligations; the effect of such clearance or float
charge being the equivalent of charging two (2) Business Days of interest on
such Collections. Notwithstanding anything herein which may be construed to the
contrary, no Collections will be remitted to Borrower to fund authorized
expenditures under the Budget unless and until such Collections are fully
collected. The parties further acknowledge and agree that the economic benefit
of the foregoing provisions of this Section 2.7 shall accrue to the sole and
-----------
exclusive benefit of Agent.
2.8 Designated Account. Agent is authorized to make the Advances and
------------------
issue Letters of Credit under this Agreement based upon telephonic or other
instructions received from anyone purporting to be an Authorized Person, or
without instructions if pursuant to Section 2.5(d). Borrower agrees to
--------------
establish and maintain the Designated Account with the Designated Account Bank
for the purpose of receiving the proceeds of the Advances requested by Borrower
and made by Agent or the Lenders hereunder. Unless otherwise agreed by Agent
and Borrower, any Advance, or Agent Advance requested by Borrower and made by
Agent, or the Lenders hereunder shall be made to the Designated Account.
2.9 Maintenance of Loan Account; Statements of Obligations. Agent shall
------------------------------------------------------
maintain an account on its books in the name of Borrower (the "Loan Account") on
which Borrower will be charged with all Advances made by Agent, or the Lenders
to Borrower or for Borrower's account, including, accrued interest, Lender Group
Expenses, and any other payment Obligations. In accordance with Section 2.7,
-----------
the Loan Account will be credited with all payments received by Agent from
Borrower or for Borrower's account, including all amounts received in the
Agent's Account from any Lockbox Bank. Agent shall render monthly statements
regarding the Loan Account to Borrower (with copies to the Lenders), including
principal, interest, fees, and including an itemization of all charges and
expenses constituting Lender Group Expenses owing, and such statements shall be
conclusively presumed to be correct and accurate and constitute an account
stated between Borrower and the Lender Group unless, within 60 days after
receipt thereof by Borrower and the Lenders, Borrower or any Lender shall
deliver to Agent written objection thereto describing the error or errors
contained in any such statements.
2.10 Fees. Borrower shall pay the following fees, which fees shall be non-
----
refundable when paid:
(a) Commitment Fee. On the Closing Date, a commitment fee in an
amount equal to $850,000 shall be earned by the Lenders but shall be payable to
the Agent, for the benefit of the Lenders in two equal payments of $425,000
each, with the first such payment due and payable on the Closing Date and the
second such payment due and payable on the earlier of (i) the closing of the
Gores Transaction, (ii) the Maturity Date, or (iii) the Termination Date;
28
(b) Servicing Fee. On the first day of each month payable to the
Agent in arrears during the term of this Agreement, and thereafter so long as
any Obligations are outstanding, a service fee in an amount equal to $10,000,
with the first such fee due and payable on earlier of (i) the closing of the
Gores Transaction, (ii) the Maturity Date, or (iii) the Termination Date;
(c) Unused Line Fee. On the first day of each month, starting on
the earlier of (i) the closing of the Gores Transaction, (ii) the Maturity Date,
or (iii) the Termination Date, payable in arrears to the Agent during the term
of this Agreement, an unused line fee in an amount equal to one-quarter of one
percentage point (.25%) times the Maximum Amount minus the average Revolver
Usage during the immediately preceding month; and
(d) Financial Examination, Valuation, and Appraisal Fees. For the
sole and separate account of Agent, a separate fee of $750 per day, per
examiner, plus reasonable out-of-pocket expenses for each financial analysis and
examination (i.e., audits) of the Borrower performed by personnel employed by
Agent; for the sole and separate account of Agent, a separate fee of $750 per
day, per Person, plus reasonable out-of-pocket expenses for the establishment of
electronic collateral and financial reporting systems; and, in addition, for the
sole and separate accounts of Agent and each Lender that exercises its rights
under Section 4.6, the actual charges paid or incurred by Agent or any Lender if
-----------
it elects to employ the services of one or more third Persons to perform such
audits of the Borrower or the Books, thereof, to appraise the Collateral, or to
assess the Borrower's business valuation; provided, however, that, so long as no
-------- -------
Event of Default has occurred and is continuing, Borrower shall not be obligated
to reimburse to Agent the fees and costs of more than 1 audit in any three month
period.
(e) Miscellaneous. The fees set forth above shall be fully earned
when due, non-refundable when paid and, if applicable, computed on the basis of
360 day year for the actual number of days elapsed.
2.11 Super-Priority Nature of Obligations. All Obligations under the Loan
------------------------------------
Documents shall constitute administration expenses of Borrower in the Chapter 11
Case with priority under Section 364(c)(1) of the Bankruptcy Code over any and
all other administrative expenses of the kind specified in Sections 105, 326,
330, 331, 503 and 726 of the Bankruptcy Code, and shall also have priority over
any claims now existing or hereafter arising under Section 506(c) of the
Bankruptcy Code, subject and subordinate only to the following (hereinafter
referred to as the "Carve-Out Expenses"): fees and disbursements incurred on and
after the Closing Date by professionals retained pursuant to Court order in the
Chapter 11 Case pursuant to Section 327 or 1103 of the Bankruptcy Code by
Borrower or the Committee or an examiner appointed pursuant to Section 1104 of
the Bankruptcy Code, and any statutorily mandated costs and fees of the United
States Trustee with respect to the Chapter 11 Case, up to a maximum aggregate
amount outstanding and unpaid not to exceed $400,000, which amount shall be
reduced dollar-for-dollar by all Carve-Out Expenses approved by the Court and
paid by the Borrower on an interim basis, in any event not to be reduced to less
than $200,000 (such dollar amount being referred to herein as the "Carve-Out
Amount") (determined without regard to fees and expenses which
29
may be awarded and paid on an interim basis) provided that the Carve-Out
Expenses shall not include any other claims that are or may be senior to or pari
passu with any of the Carve-Out Expenses. No other claim having a priority
superior or pari passu to that granted to Lenders by the Interim Order or the
Final Order, as the case may be, shall be granted or approved while any
Obligations under this Agreement remain outstanding.
2.12 Letters of Credit.
-----------------
(a) Subject to the terms and conditions of this Agreement, Agent
agrees, on behalf of the Lenders with a Letter of Credit Sub-Commitment, to
issue letters of credit for the account of Borrower (each, an "L/C") or to
---
purchase participations, or execute indemnities or reimbursement obligations
(each such undertaking, an "L/C Undertaking") with respect to letters of credit
---------------
issued by an issuing bank for the account of Borrower. Agent shall have no
obligation to issue an L/C or L/C Undertaking if any of the following would
result:
(i) Intentionally omitted.
---------------------
(ii) the Letter of Credit Usage would exceed $1,000,000, or
(iii) the Revolver Usage would exceed the Maximum Amount.
Each of Borrower and the Lender Group acknowledge and agree that certain of the
letters of credit that are to be the subject of L/C Undertakings may be
outstanding on the Closing Date. Each Letter of Credit shall have an expiry
date no later than 30 days prior to the Maturity Date (without regard to any
potential renewal term) and all such Letters of Credit shall be in form and
substance acceptable to Agent (in the exercise of its Permitted Discretion). If
Agent is obligated to advance funds under a Letter of Credit, Borrower
immediately shall reimburse such amount to Agent and, in the absence of such
reimbursement, the amount so advanced immediately and automatically shall be
deemed to be an Advance hereunder and, thereafter, shall bear interest at the
rate then applicable to Advances under Section 2.5. Anything herein to the
-----------
contrary notwithstanding, Agent shall not issue a Letter of Credit if Agent
shall have received written notice from any Lender, or otherwise has actual
knowledge, that (1) one or more of the applicable conditions precedent set forth
in Section 3 will not be satisfied on the requested Funding Date for the
---------
applicable Letter of Credit (unless such condition has been waived in accordance
herewith), or (2) the requested Letter of Credit would exceed the Availability
of Borrower on such Funding Date.
(b) Each Lender agrees to fund its Pro Rata Share of any Advance
deemed made pursuant to the foregoing subsection. Each Lender with a Pro Rata
Share of the Letters of Credit shall be deemed to have purchased a participation
in each Letter of Credit, in an amount equal to its Pro Rata Share of the Risk
Participation Liability of such Letter of Credit, and each Lender agrees to pay
to Agent such Lender's Pro Rata Share of any payments made by Agent under such
Letter of Credit. The obligation of each Lender to deliver to Agent an amount
equal to its respective Pro Rata Share pursuant to the preceding two sentences
shall be absolute and unconditional and such remittance shall be
30
made notwithstanding the occurrence or continuation of an Event of Default or
Default or the failure to satisfy any condition set forth in Section 3 hereof.
---------
If any Lender fails to make available to Agent the amount of such Lender's Pro
Rata Share of any payments made by Agent in respect of such Letter of Credit as
provided in this Section, Agent shall be entitled to recover such amount on
demand from such Lender together with interest thereon at the interest rate then
applicable to Advances until paid in full.
(c) Borrower hereby agrees to indemnify, save, defend, and hold the
Lender Group harmless from any loss, cost, expense, or liability, expenses, and
reasonable attorneys fees incurred by the Lender Group arising out of or in
connection with any Letter of Credit. Borrower agrees to be bound by the
issuing bank's regulations and interpretations of any letter of credit that is
the subject of an L/C Undertaking and opened to or for Borrower's account or by
Agent's interpretations of any L/C issued by Agent to or for Borrower's account,
even though this interpretation may be different from Borrower's own, and
Borrower understands and agrees that the Lender Group shall not be liable for
any error, negligence, or mistake, whether of omission or commission, in
following Borrower's instructions or those contained in the Letter of Credit or
any modifications, amendments, or supplements thereto (except for any action
that results from the Lender Group's gross negligence or willful misconduct).
Borrower understands that the L/C Undertakings may require Agent to indemnify
the issuing bank for certain costs or liabilities arising out of claims by
Borrower against such issuing bank. Borrower hereby agrees to indemnify, save,
defend, and hold the Lender Group harmless with respect to any loss, cost,
expense (including reasonable attorneys fees), or liability incurred by the
Lender Group under any L/C Undertaking as a result of the Lender Group's
indemnification of any such issuing bank.
(d) Borrower hereby authorizes and directs any bank that issues a
letter of credit that is the subject of an L/C Undertaking to deliver to Agent
all instruments, documents, and other writings and property received by the
issuing bank pursuant to such letter of credit, and to accept and rely upon
Agent's instructions with respect to all matters arising in connection with such
letter of credit and the related application.
(e) Any and all charges, commissions, fees, and costs incurred by
Agent or Lender Group relating to the letters of credit that are the subject of
an L/C Undertaking shall be considered Lender Group Expenses for purposes of
this Agreement and immediately shall be reimbursable by Borrower to Agent.
(f) If by reason of (i) any change in any applicable law, treaty,
rule, or regulation or any change in the interpretation or application thereof
by any Governmental Authority, or (ii) compliance by Agent, the issuing bank, or
the Lender Group with any direction, request, or requirement (irrespective of
whether having the force of law) of any Governmental Authority or monetary
authority including, Regulation D of the Federal Reserve Board as from time to
time in effect (and any successor thereto):
(y) any reserve, deposit, or similar requirement is or shall be imposed or
modified in respect of any Letters of Credit issued hereunder, or
31
(z) there shall be imposed on the issuing bank or the Lender Group any
other condition regarding any L/C or L/C Undertaking issued pursuant
hereto;
and the result of the foregoing is to increase, directly or indirectly, the cost
to the Agent, issuing bank, or Lender Group of issuing, making, guaranteeing, or
maintaining any L/C or L/C Undertaking or to reduce the amount receivable in
respect thereof by the Agent, issuing bank, or Lender Group, then, and in any
such case, Agent may, at any time within a reasonable period after the
additional cost is incurred or the amount received is reduced, notify Borrower,
and Borrower shall pay on demand such amounts Agent may specify to be necessary
to compensate the Lender Group for such additional cost or reduced receipt,
together with interest on such amount from the date of such demand until payment
in full thereof at the rate then applicable to Advances hereunder. The
determination by Agent of any amount due pursuant to this Section, as set forth
in a certificate setting forth the calculation thereof in reasonable detail,
shall, in the absence of manifest or demonstrable error, be final and conclusive
and binding on all of the parties hereto. In determining such amount, Agent may
use any reasonable averaging and attribution methods.
3. CONDITIONS; TERM OF AGREEMENT.
3.1 Conditions Precedent to the Initial Extension of Credit. The
-------------------------------------------------------
obligation of the Lender Group (or any member thereof) to make the initial
Advance or issue the initial Letters of Credit (or otherwise to extend any
credit provided for hereunder), is subject to the fulfillment, to the reasonable
satisfaction of Agent and the Lenders, of each of conditions precedent set forth
below:
(a) the Closing Date shall occur on or before May 3, 2000;
(b) Agent shall have received each of the following documents, in
form and substance satisfactory to Agent, duly executed, and each such document
shall be in full force and effect:
(i) this Agreement; and
(ii) the Disbursement Letter;
(c) Agent shall have received such Collateral Access Agreements
from lessors, warehousemen, bailees, and other third persons as Agent may
require respecting those locations identified on Schedule 3.1(h) or the
---------------
inclusion of such findings and decretal portions in and of the Interim Order as
Agent, in its sole discretion, may deem equivalent to, and acceptable in lieu
of, the execution and delivery of the afore-referenced Collateral Access
Agreements;
(d) Intentionally Omitted;
---------------------
(e) Borrower shall pay all Lender Group Expenses, if and to the
extent invoiced as of the Closing Date, incurred by Agent or any other Lender in
connection
32
with the consummation of the transactions contemplated in this Agreement and the
other Loan Documents;
(f) Lenders shall have received the Budget;
(g) Intentionally Omitted;
---------------------
(h) the Interim Order, in form and substance satisfactory to
Lenders approving the transactions contemplated hereby and granting a first
priority perfected security interest in the Collateral subject only to Senior
Claims shall have been entered by the Court and Agent shall have received a
certified copy of such Interim Order.
(i) the automatic stay shall have been modified to permit the
creation and perfection of Lender's Liens and security interests and shall have
been automatically vacated to permit enforcement of Lender's rights and remedies
under the Loan Documents;
(j) Agent shall have a first priority perfected security interest
in the Collateral, except for Senior Claims;
(k) Borrower shall have entered into an engagement agreement with
Manchester Companies, Inc. ("Manchester") for purposes of providing "turnaround"
advice and services to Borrower with such engagement to be on terms and
conditions and delineating responsibilities acceptable to Lenders;
(l) all other documents and legal matters in connection with the
transactions contemplated by this Agreement shall have been delivered, executed,
or recorded and shall be in form and substance satisfactory to Agent and each
Lender in their Permitted Discretion.
3.2 Conditions Subsequent to the Initial Extension of Credit. The
--------------------------------------------------------
obligation of the Lender Group (or any member thereof) to continue to make
Advances or to issue Letters of Credit is subject to the fulfillment, on or
before the date applicable thereto, of each of the conditions subsequent set
forth below (the failure by the Borrower to so perform or cause to be performed
constituting an Event of Default):
(a) Within thirty (30) days of the Closing Date, Borrower shall
deliver to Agent a certificate of insurance and the certified copies of the
policies of insurance, together with the endorsements thereto, as are required
by Section 6.9, the form and substance of which shall be satisfactory to Agent
-----------
and its counsel;
(b) Within fifteen (15) business days of the Relief Date,
Borrower and Guarantors shall deliver to Agent the Guaranties duly executed by
each Guarantor;
(c) Intentionally omitted;
---------------------
(d) Intentionally omitted;
---------------------
33
(e) Intentionally omitted;
---------------------
(f) Within thirty (30) days of the Closing Date, the Final Order
shall have been entered and Borrower shall have delivered to Agent a certified
copy of such Final Order;
(g) Within ten (10) days from the Relief Date, Agent shall have
received a certificate from the Secretary of the Borrower attesting to the
resolutions of such Borrower's Board of Directors authorizing its execution,
delivery, and performance of this Agreement and the other Loan Documents to
which such Borrower is a party and authorizing specific officers of such
Borrower to execute the same;
(h) Within ten (10) days from the Relief Date, Agent shall have
received copies of Borrower's Governing Documents, as amended, modified, or
supplemented to the Closing Date, certified by the Secretary of the Borrower or
a certification from the Secretary of the Borrower that there have been no
changes to the Governing Documents delivered in connection with the closing of
the Pre-Relief Date Loan Agreement;
(i) Within ten (10) days from the Relief Date, Agent shall have
received a certificate of status with respect to the Borrower, with such
certificate to be issued by the appropriate officer of the jurisdiction of
organization of the Borrower, which certificate shall indicate that such
Borrower is in good standing in such jurisdiction;
(j) Within ten (10) days from the Relief Date, Agent shall have
received certificates of status with respect to the Borrower, with such
certificates to be issued by the appropriate officer of the jurisdictions in
which its failure to be duly qualified or licensed would constitute a Material
Adverse Change, which certificates shall indicate that the Borrower is in good
standing in such jurisdictions; and
(k) Within fifteen (15) days of the Relief Date, Borrower shall
correct or supplement, as necessary, the Schedules to this Agreement as required
in Section 5.28.
-------------
3.3 Conditions Precedent to all Extensions of Credit. The obligation of
------------------------------------------------
the Lender Group (or any member thereof) to make all Advances, or to issue
Letters of Credit (and to make any other extensions of credit provided for
hereunder) shall be subject to the following conditions precedent:
(a) the representations and warranties of the Borrower contained
in this Agreement and the other Loan Documents shall be true and correct in all
material respects on and as of the date of such extension of credit, as though
made on and as of such date (except to the extent that such representations and
warranties relate solely to an earlier date);
(b) no Default or Event of Default shall have occurred and be
continuing on the date of such extension of credit, nor shall any Default or
Event of Default result from the making thereof;
34
(c) no injunction, writ, restraining order, or other order of any
nature prohibiting, directly or indirectly, the extending of such credit shall
have been issued and remain in force by any Governmental Authority against
Borrower, Agent, any Lender, or any of their Affiliates;
(d) Intentionally omitted;
---------------------
(e) Agent shall have a first priority perfected security interest
in the Collateral, except for Senior Claims;
(f) on or prior to the date of such Advance or issuance of such
Letter or Credit, the Interim Order or the Final Order, as the case may be,
shall have been signed and entered by the Bankruptcy Court, and the Agent shall
have received (or waived receipt of) a certified copy of the same and such order
shall be in full force and effect and shall not have been reversed, stayed,
modified or amended absent the express written joinder or consent of Agent and,
unless Agent shall have expressly joined therein or expressly consented thereto
in writing, there shall be no motion pending (i) to reverse, modify or amend the
Interim Order or Final Order, as the case may be, (ii) to permit any
administrative expense against the Borrower to have administrative priority
equal to or superior to the priority of the Agent in respect of the Obligations
or (iii) to grant or permit the grant of a Lien on any of the Collateral;
(g) with respect to any Advance or issuance of any Letter of
Credit to be made on or after the thirtieth (30/th/) day following the Closing
Date, the Final Order shall be in full force and effect and shall not have been
reversed, stayed, modified or amended absent the express written joinder or
consent of Agent; and
(h) the Borrower shall have paid all fees, costs, expenses and
taxes then payable by the Borrower.
The foregoing conditions precedent are not conditions to each Lender
(i) with a Letter of Credit Sub-Commitment participating in or reimbursing Agent
for such Lenders' Pro Rata Share of any drawings under the Letters of Credit as
provided herein, (ii) with a Revolving Credit Commitment participating in or
reimbursing the Agent for such Lenders' Pro Rata Share of any Agent Advance as
provided herein.
3.4 Term. This Agreement shall become effective upon the execution and
----
delivery hereof by Borrower and the Lenders and shall continue in full force and
effect for a term ending on the date that is the earlier of (a) the Maturity
Date, (b) the sale of all or substantially all of Borrower assets, whether under
Section 363 of the Bankruptcy Code, plan of reorganization or otherwise, (c) the
appointment of a trustee or examiner to which the Lenders do not consent in
Borrower's Chapter 11 Case, (d) the conversion of Borrower's Chapter 11 Case to
a case under Chapter 7 of the Bankruptcy Code, and (e) the date of termination
of this Agreement in accordance with its terms after the occurrence and during
the continuation of an Event of Default (each of the foregoing, collectively the
"Termination Date"). Notwithstanding the foregoing, the Lenders shall have the
right to terminate their obligations under this Agreement immediately and
without notice upon the occurrence and during the continuation of an Event of
Default.
35
3.5 Effect of Termination. On the date of termination of this Agreement,
---------------------
all Obligations (including all contingent reimbursement obligations of Borrower
with respect to any outstanding Letters of Credit, but excluding any Contingent
Surviving Obligations) immediately shall become due and payable without notice
or demand. No termination of this Agreement, however, shall relieve or
discharge the Borrower of its duties, Obligations, or covenants hereunder.
Continuing security interests in the Collateral for the benefit of the Lender
Group, shall remain in effect until all Obligations (other than Contingent
Surviving Obligations) have been fully and finally discharged and the Lender
Group's obligations to provide additional credit hereunder have been terminated.
Upon termination of this Agreement and after all Obligations (other than
Contingent Surviving Obligations) have been fully and finally discharged and the
Lender Group's obligations to provide additional credit under the Loan Documents
have been terminated irrevocably, Agent will, at Borrower's sole expense,
execute and deliver any Uniform Commercial Code termination statements, lien
releases, mortgage releases, re-assignments of trademarks, discharges of
security interests, and other similar discharge or release documents (and, if
applicable, in recordable form) as are necessary or reasonably requested to
release, as of record, the security interests, financing statements, and all
other notices of security interests and liens previously filed by Agent for the
benefit of the Lender Group with respect to the Obligations.
3.6 Early Termination by Borrower. Borrower has the option, at any time
-----------------------------
upon five (5) Business Days prior written notice to Agent, to terminate this
Agreement prior to the Maturity Date by paying to Agent for the benefit of the
Lender Group, in cash, the Obligations (including either (i) providing cash
collateral to be held by Agent for the benefit of the Lender Group in an amount
equal to 105% of the maximum amount of the Lender Group's obligations under
outstanding Letters of Credit, or (ii) causing the original Letters of Credit to
be returned to Agent), in full. .
3.7 Special Provisions Relating to Gores Transaction. If Borrower is able
------------------------------------------------
to reach agreement on an asset purchase agreement with Gores for the Gores
Transaction or any other third-party reasonably acceptable to Agent that is
willing to do the Gores Transaction on same or similar terms as that heretofore
negotiated with Gores, within three (3) business days following the execution,
but subject to Court approval, of any definitive purchase agreement or similar
documents with respect to the Gores Transaction between Borrower and Gores, a
copy of same shall be delivered to Agent and its counsel and a motion pursuant
to Section 363 of the Bankruptcy Code is to be filed with the Court seeking
approval of the Gores Transaction.
4. CREATION OF SECURITY INTEREST.
4.1 Grants of Security Interests.
----------------------------
(a) Borrower hereby grants to Agent, for the benefit of the
Lender Group continuing security interests in all currently existing and
hereafter acquired or arising Collateral, in order to secure prompt repayment of
any and all of the Obligations and in order to secure prompt performance by the
Borrower of each of its covenants and duties under the Loan Documents (the
"Agent's Liens"). The Agent's Liens in and to the
36
Collateral, shall attach to all Collateral, without further act on the part of
the Lender Group or the Borrower. Anything contained in this Agreement or any
other Loan Document to the contrary notwithstanding, except for Permitted
Dispositions, the Borrower has authority, express or implied, to dispose of any
item or portion of the Collateral. Subject to Section 2.3(b), the secured claims
--------------
of the Lender Group with respect to the Obligations secured by the Collateral,
shall be of equal priority, and ratable according to the respective Obligations
due each member of the Lender Group.
(b) Intentionally omitted.
---------------------
(c) Intentionally omitted.
---------------------
(c) Borrower hereby grants to Agent, for the benefit of the
Lender Group, a continued and continuing security interest in all currently
existing and hereafter acquired or arising Collateral, in order to secure prompt
repayment of any and all of the Obligations owed under the Pre-Relief Date Loan
Agreement.
4.2 Negotiable Collateral. In the event that any Collateral, including
---------------------
proceeds, is evidenced by or consists of Negotiable Collateral, and if and to
the extent that perfection or priority of Agent's security interests is
dependent on possession, the Borrower, immediately upon the request of Agent,
shall endorse and deliver physical possession of such Negotiable Collateral to
Agent.
4.3 Collection of Accounts, General Intangibles, and Negotiable
-----------------------------------------------------------
Collateral.
----------
(a) At any time after the occurrence and during the continuation
of an Event of Default, Agent or Agent's designee may (i) notify customers or
Account Debtors of Borrower that the Accounts, General Intangibles, or
Negotiable Collateral have been assigned to Agent for the benefit of the Lender
Group or that Agent for the benefit of the Lender Group has security interests
therein, or (ii) collect the Accounts, General Intangibles, and Negotiable
Collateral directly and charge the collection costs and expenses to the Loan
Account. The Borrower hereby agrees that it will hold in trust for the Lender
Group, as the Lender Group's trustee, any Collections that it receives and
immediately will deliver said Collections to Agent in their original form as
received by the Borrower.
(b) Intentionally omitted.
---------------------
(c) Intentionally omitted.
---------------------
4.4 Delivery of Additional Documentation Required.
---------------------------------------------
(a) At any time upon the request of Agent, the Borrower shall
execute and deliver to Agent, all financing statements, fixture filings,
security agreements, pledges, assignments, endorsements of certificates of
title, and all other documents that Agent reasonably may request, in form and
substance reasonably satisfactory to Agent, to perfect and continue perfected
Agent's Liens (whether now owned or hereafter arising or acquired), and in order
to fully consummate all of the transactions contemplated hereby and under the
other Loan Documents.
37
(b) At any time on or after the Closing Date that any Person
becomes a Subsidiary of the Borrower, at the election of Agent, in its Permitted
Discretion, the Borrower shall cause each of the following to be satisfied as
promptly as possible and in any event within 5 Business Days following the date
such Person becomes such a Subsidiary: (i) cause such Subsidiary to execute and
deliver all appropriate joinder documents to make it a Guarantor under the Loan
Documents and all appropriate UCC-1 financing statements, fixture filings, and
other Loan Documents or supplements thereto or amendments thereof; and (ii)
cause the execution and delivery by the Borrower of appropriate supplements to
any pledge agreement, and the delivery to Agent of possession of the original
certificates, respecting all of the issued and outstanding Stock of such
Subsidiary, together with stock powers with respect thereto endorsed in blank.
4.5 Power of Attorney. The Borrower hereby irrevocably makes,
-----------------
constitutes, and appoints Agent (and any of Agent's officers, employees, or
agents designated by Agent) as the Borrower's true and lawful attorney, with
power to (a) if the Borrower refuses to, or fails timely to execute and deliver
any of the documents described in Section 4.4, sign the name of the Borrower on
-----------
any of the documents described in Section 4.4, (b) at any time that an Event of
-----------
Default has occurred and is continuing, sign the Borrower's name on any invoice
or ▇▇▇▇ of lading relating to any Account, drafts against Account Debtors, and
notices to Account Debtors, (c) send requests for verification of Accounts, (d)
endorse the Borrower's name on any Collection item that may come into the Lender
Group's possession, (e) at any time that an Event of Default has occurred and is
continuing, notify the post office authorities to change the address for
delivery of the Borrower's mail to an address designated by Agent, to receive
and open all mail addressed to the Borrower, and to retain all mail relating to
the Collateral, and forward all other mail to the Borrower, (f) at any time that
an Event of Default has occurred and is continuing, make, settle, and adjust all
claims under the Borrower's policies of insurance and make all determinations
and decisions with respect to such policies of insurance, and (g) at any time
that an Event of Default has occurred and is continuing, settle and adjust
disputes and claims respecting the Accounts directly with Account Debtors, for
amounts and upon terms that Agent determines to be reasonable, and Agent may
cause to be executed and delivered any documents and releases that Agent
determines to be necessary. The appointment of Agent as the Borrower's
attorney, and each and every one of its rights and powers, being coupled with an
interest, is irrevocable until all of the Obligations have been fully and
finally repaid and performed and the Lender Group's obligations to extend credit
hereunder are terminated.
4.6 Right to Inspect. Agent and each Lender (through any of their
----------------
respective officers, employees, or agents) shall have the right, from time to
time to inspect the Books, and to check, test, and appraise the Collateral, in
order to verify the Borrower's financial condition or the amount, quality,
value, condition of, or any other matter relating to, the Collateral. So long
as no Event of Default has occurred and is continuing, Agent shall exercise its
rights under this Section 4.6 upon reasonable prior notice and during normal
-----------
business hours; provided, however, the foregoing limitation shall not apply to
-------- -------
any audits undertaken by Agent or any Lender.
38
4.7 Control Agreements. Borrower hereby agrees that it will not transfer
------------------
assets out of any Securities Accounts other than as permitted under Section 7.22
------------
and, if to another securities intermediary, unless Borrower, Agent, and the
substitute securities intermediary have entered into a Control Agreement. No
arrangement contemplated hereby or by any Control Agreement in respect of any
Securities Accounts or other investment property shall be modified by Borrower
without the prior written consent of Agent. Upon the occurrence and during the
continuance of a Default or Event of Default, Agent may notify any securities
intermediary to liquidate or transfer the applicable Securities Account or any
related investment property maintained or held thereby and remit the proceeds
thereof to the Agent's Account.
4.8 Grants, Rights and Remedies. The Liens and security interests granted
---------------------------
by the Borrower to Agent by and pursuant to Section 4.1 hereof and
-----------
administrative priority granted by and pursuant to Section 2.11 hereof may be
------------
independently granted by the Loan Documents and by other Loan Documents
hereafter entered into. This Agreement, the Interim Order, the Final Order and
such other Loan Documents supplement each other, and the grants, priorities,
rights and remedies of Lender hereunder and thereunder are cumulative.
4.9 No Filings Required. The Liens and security interests granted by the
-------------------
Borrower to Agent herein shall be deemed valid, binding, continuing, enforceable
and fully perfected first priority Liens on the Collateral by entry of the
Interim Order and the Final Order, as the case may be. Agent shall not be
required to file any financial statements, notices of Lien or similar
instruments in any jurisdiction or filing office or to take any other action in
order to validate or perfect the Liens and security interests granted by or
pursuant to this Agreement, the Interim Order, the Final Order or any other Loan
Document.
4.10 Survival. The Liens and security interests granted to Agent, the
--------
priority of such Liens and security interests, and the administrative priorities
and other rights and remedies granted to Agent and the Lenders pursuant to this
Agreement, the Interim Order, the Final Order and the other Loan Documents
(specifically including but not limited to the existence, perfection and
priority of the Liens and security interests provided herein and therein) and
the administrative priority provided herein and therein and shall not be
modified, altered or impaired in any manner by any other financing or extension
of credit or incurrence of debt by the Borrower (pursuant to Section 364 of the
Bankruptcy Code or otherwise), or by any dismissal or conversion of the Chapter
11 Case, or by any other act or omission whatsoever. Without limitation,
notwithstanding any such order, financing, extension, incurrence, dismissal,
conversion, act or omission:
(a) except for Carve-Out Expenses having a priority of the
Obligations to the extent set forth in Section 2.11, no costs or expenses of
------------
administration which have been or may be incurred in the Chapter 11 Case or any
conversion of the same or in any other proceedings related thereto, and no
priority claims, are or will be prior to or on a parity with any claim of any
member of the Lender Group against the Borrower in respect of any Obligation;
39
(b) the Liens and security interests granted by the Borrower to
Agent by and pursuant to Section 4.1 hereof shall constitute valid, binding,
-----------
continuing, enforceable and fully-perfected first priority Liens, subject only
to Senior Claims, to which such Liens and security interests shall or may be
subordinate and junior, and shall be prior to all other Liens and interests now
existing or hereafter arising, in favor of any other creditor or any other
Person whatsoever; and
(c) the Liens and security interests granted by the Borrower to
Agent by and pursuant to Section 4.1 hereof shall continue to be valid, binding,
-----------
continuing, enforceable and fully perfected without the necessity for Lender to
file any financing statements or otherwise perfect such Liens and security
interests under applicable non-bankruptcy law.
5. REPRESENTATIONS AND WARRANTIES. In order to induce the Lender Group to
enter into this Agreement, the Borrower makes the following representations and
warranties to the Lender Group which shall be true, correct, and complete, in
all material respects, as of the date hereof, and shall be true, correct, and
complete in all respects as of the Closing Date, and at and as of the date of
the making of each Advance (or other extension of credit) made thereafter, as
though made on and as of the date of such Advance (or other extension of credit)
(except to the extent that such representations and warranties relate solely to
an earlier date) and such representations and warranties shall survive the
execution and delivery of this Agreement:
5.1 No Encumbrances. The Borrower has good and indefeasible title to the
---------------
Collateral free and clear of Liens except for Permitted Liens.
5.2 Intentionally Omitted Equipment. All of the Equipment is used or held
-------------------------------
for use in the Borrower's business, is fit for such purposes, and is personal
property.
5.4 Location of Inventory and Equipment. The Inventory and Equipment are
-----------------------------------
not stored with a bailee, warehouseman, or similar party and are located only at
the locations identified on Schedule 6.11 permitted by Section 6.11.
------------- ------------
5.5 Inventory Records. The Borrower keeps, in all material respects,
-----------------
correct and accurate records itemizing and describing the type, quality, and
quantity of the Inventory and its cost therefor.
5.6 Location of Chief Executive Office; FEIN. The chief executive office
----------------------------------------
of the Borrower is located at the address indicated in Schedule 5.7 and the
------------
Borrower's FEIN is identified in Schedule 5.7.
------------
5.7 Due Organization and Qualification; Subsidiaries.
------------------------------------------------
(a) the Borrower is duly organized and existing and in good
standing under the laws of the jurisdiction of its organization and qualified to
do business in
40
each state where the failure to be so qualified reasonably could be expected to
result in a Material Adverse Change.
(b) set forth on Schedule 5.8 is a complete and accurate list of
------------
all shareholders of Borrower owning five (5) percent or more of Borrower's
capital stock as of the Closing Date, showing: (i) the numbers of shares of each
class of common and preferred stock authorized by the Borrower; and (ii) the
number and percentage of the outstanding shares of each such class owned by each
such shareholder.
(c) Set forth on Schedule 5.8, is a complete and accurate
------------
description of the authorized capital Stock of Borrower, by class, and, as of
the Closing Date, a description of the number of shares of each such class that
are issued and outstanding. All such shares have been validly issued and, as of
the Closing Date, are fully paid, non-assessable shares free of preemptive
rights or other similar rights suffered or permitted by the Borrower. Other than
as described on Schedule 5.8, (i) there are no subscriptions, options, warrants,
------------
rights to subscribe for, or calls or commitments relating to any shares of
Borrower's capital Stock, including any right of conversion or exchange under
any outstanding security or other instrument, (ii) Borrower is not subject to
any obligation (contingent or otherwise) to repurchase or otherwise acquire or
retire any shares of its capital Stock or any security convertible into or
exchangeable for any of its capital Stock, and (iii) there are no agreements or
arrangements under which the Borrower or any of its Subsidiaries is obligated to
register the sale of any of their securities under the Securities Act.
(d) Set forth on Schedule 5.8, is a complete and accurate list
------------
of the Borrower's direct and indirect Subsidiaries, showing: (i) the
jurisdiction of their incorporation; (ii) the number of shares of each class of
common and preferred Stock authorized for each of such Subsidiaries; and (iii)
the number and the percentage of the outstanding shares of each such class owned
directly or indirectly by the Borrower. All of the issued and outstanding
capital Stock of each such Subsidiary has been validly issued and is fully paid
and non-assessable.
(e) Except as set forth on Schedule 5.8, no capital Stock (or
------------
any securities, instruments, warrants, options, purchase rights, conversion or
exchange rights, calls, commitments or claims of any character convertible into
or exercisable for Stock) of any direct or indirect Subsidiary of the Borrower
is subject to the issuance of any security, instrument, warrant, option,
purchase right, conversion or exchange right, call, commitment or claim of any
right, title, or interest therein or thereto.
5.8 Due Authorization; No Conflict.
------------------------------
(a) The execution, delivery, and performance by the Borrower of
this Agreement and the Loan Documents to which it is a party have been duly
authorized by all necessary corporate or limited liability company action on the
part of the Borrower.
(b) The execution, delivery, and performance by the Borrower of
this Agreement and the Loan Documents to which it is a party do not and will not
(i) violate any provision of federal, state, or local law or regulation
applicable to the Borrower
41
(including U.S. federal and state securities laws and regulations and the rules
and regulations of the principal market or exchange on which the Common Stock is
listed), the Governing Documents (including the certificate of designations of
any outstanding series of preferred Stock) of the Borrower, or any order,
judgment, or decree of any court or other Governmental Authority binding on the
Borrower, (ii) conflict with, result in a breach of, or constitute (with due
notice or lapse of time or both) a default under any material contractual
obligation of the Borrower (including, without limitation, the Indenture, or any
document or agreement in respect of the Permitted Preferred Stock, after giving
effect to any amendments executed and delivered on the Closing Date), (iii)
result in or require the creation or imposition of any Lien of any nature
whatsoever upon any properties or assets of the Borrower, other than Permitted
Liens, or (iv) require any approval of stockholders or any approval or consent
of any Person under any material contractual obligation of the Borrower.
(c) Other than the entry of the Interim Order, the execution,
delivery, and performance by the Borrower of this Agreement and the Loan
Documents to which the Borrower is a party do not and will not require any
registration with, consent, or approval of, or notice to, or other action with
or by, any Governmental Authority or any other Person.
(d) As to the Borrower, this Agreement and the other Loan
Documents to which the Borrower is a party, and all other documents contemplated
hereby and thereby, when executed and delivered by the Borrower will be the
legally valid and binding obligations of the Borrower, enforceable against the
Borrower in accordance with their respective terms, except as enforcement may be
limited by equitable principles.
(e) The Agent's Liens granted by Borrower to Agent, for the
benefit of the Lender Group, in and to its assets pursuant to this Agreement and
the other Loan Documents are validly created, perfected, and first priority
Liens, subject only to Permitted Liens.
(f) Except as required under the Securities Act, Borrower is not
required to obtain any consent, authorization, or order of, or make any filing
or registration with any Governmental Authority in order for it to execute,
deliver, or perform any of its obligations under or contemplated by this
Agreement in accordance with the terms hereof or thereof which consents,
authorizations, orders, filings, and registrations have been obtained or
effected on or prior to the date hereof.
5.9 Litigation. Other than those matters disclosed on Schedule 5.10, and
---------- -------------
the Chapter 11 Case there are no actions, suits, or proceedings pending or, to
the knowledge of the Borrower, threatened against Borrower, or any of its
Subsidiaries, as applicable, except for matters arising after the Closing Date
that, if decided adversely to the Borrower, or any of its Subsidiaries, as
applicable, reasonably could not be expected to result in a Material Adverse
Change.
5.10 No Material Adverse Change. All financial statements relating to the
--------------------------
Borrower that have been delivered by the Borrower to the Lender Group have been
prepared in accordance with GAAP (except, in the case of unaudited financial
statements,
42
for the lack of footnotes and being subject to year-end audit adjustments) and
fairly present in all material respects, the Borrower's financial condition on a
consolidated basis as of the date thereof and results of operations for the
period then ended. Other than the filing of the Chapter 11 Case, there has not
been a Material Adverse Change with respect to the Borrower since the date of
the latest financial statements submitted to the Lender Group on or before the
Closing Date.
5.11 Fraudulent Transfer.
-------------------
(a) Intentionally omitted.
---------------------
(b) No transfer of property is being made by the Borrower and no
obligation is being incurred by the Borrower in connection with the transactions
contemplated by this Agreement or the other Loan Documents with the intent to
hinder, delay, or defraud either present or future creditors of the Borrower.
5.12 Employee Benefits. Neither the Borrower nor any of its Subsidiaries,
-----------------
or any of their ERISA Affiliates maintains or contributes to any Benefit Plan.
5.13 Environmental Condition. None of the Borrower's properties or assets
-----------------------
has ever been used by the Borrower or, to the Borrower's knowledge, by previous
owners or operators, in the disposal of, or to produce, store, handle, treat,
release, or transport, any Hazardous Materials. None of the Borrower's
properties or assets has ever been designated or identified in any manner
pursuant to any environmental protection statute as a Hazardous Materials
disposal site, or a candidate for closure pursuant to any environmental
protection statute. No Lien arising under any environmental protection statute
has attached to any revenues or to any real or personal property owned or
operated by the Borrower. The Borrower has not received a written summons,
citation, notice, or directive from the Environmental Protection Agency or any
other similar federal or state governmental agency concerning any action or
omission by it resulting in the releasing or disposing of Hazardous Materials
into the environment.
5.14 Brokerage Fees. Except as set forth on Schedule 5.15, the Borrower
-------------- -------------
has not utilized the services of any broker or finder in connection with
Borrower's obtaining financing from the Lender Group under this Agreement and no
brokerage commission or finders fee is payable in connection herewith.
5.15 Year 2000 Compliance. Borrower has implemented a comprehensive
--------------------
program to address the "year 2000 problem" (that is, the risk that computer
applications may not be able to properly perform date-sensitive functions after
December 31, 1999). Borrower has also made reasonable inquiry of its major
suppliers and vendors that, if unable to sell Inventory or provide services to
Borrower, as the case may be, would result in a Material Adverse Change, with
respect to the "year 2000 problem." On the basis of the inquiry, Borrower has
no reason to believe that each such supplier and vendor of Borrower will not
resolve any material "year 2000 problem" on a timely basis.
43
5.16 Intellectual Property. The Borrower owns, or holds licenses in, all
---------------------
trademarks, trade names, copyrights, patents, patent rights, and licenses that
are necessary to the conduct of its business as currently conducted.
5.17 Leases. The Borrower remains in possession under all leases material
------
to the business of the Borrower and to which it is a party or under which it is
operating except those leases set forth on Schedule 5.17.
-------------
5.18 Software License Agreement. Attached hereto as Schedule 5.19 is a
-------------------------- -------------
true and correct copy of the Borrower's form of Software License Agreement.
Each of the Software License Agreements entered into with the Borrower and its
Subsidiaries material customers is, with respect to the substantive provisions
outlined on Schedule 5.19, consistent in all material respects with the form of
-------------
the Software License Agreement attached hereto as Schedule 5.19 except for such
-------------
deviations therefrom that are not materially adverse to the value of the
Collateral.
5.19 Maintenance Agreement. Attached hereto as Schedule 5.20 is a true
--------------------- -------------
and correct copy of the Borrower's form of Maintenance Agreement. Each of the
Maintenance Agreements entered into with the Borrower and its Subsidiaries
material customers is, with respect to the substantive provisions outlined on
Schedule 5.20, consistent in all material respects with the form of the
-------------
Maintenance Agreement attached hereto as Schedule 5.20 except for such
-------------
deviations therefrom that are not materially adverse to the Collateral.
5.20 Intentionally omitted.
---------------------
5.21 Intentionally omitted.
---------------------
5.22 Administrative Priority. The Obligations of the Borrower will
-----------------------
constitute allowed administrative expenses in the Chapter 11 Case having
priority over all other administrative expenses of and unsecured claims against
the Borrower now existing or hereafter arising, of any kind or nature
whatsoever, including without limitation all administrative expenses of the kind
specified in Sections 503(b) and 507(b) of the Bankruptcy Code, subject, as to
priority, only to Carve-Out Expenses having a priority over the Obligations to
the extent set forth in Section 2.11.
------------
5.23 Appointment of Trustee or Examiner; Liquidation. No order has been
-----------------------------------------------
entered in this Chapter 11 Case (i) for the appointment of a chapter 11 trustee,
(ii) for the appointment of an examiner with enlarged powers (beyond those set
forth in Sections 1106(a)(3) and (4) of the Bankruptcy Code) under Section
1106(b) of the Bankruptcy Code or (iii) to convert the Chapter 11 Case to a
chapter 7 case or to dismiss the Chapter 11 Case.
5.24 Disclosure. All information relating to or concerning the Borrower
----------
or any of its Subsidiaries provided to the Agent or any Lender in connection
with the transactions contemplated hereby is, to the best of Borrower's
knowledge, true and correct in all material respects and the Borrower to the
best of its knowledge has not omitted to state any material fact necessary in
order to make the statements made herein or therein, in light of the
circumstances under which they were made, not misleading.
44
5.25 Investment Company Status. The Borrower is not and upon the
-------------------------
consummation of the transaction contemplated by this Agreement will not be an
"investment company", a company controlled by an "investment company" or an
"affiliated person" of, or "promoter" or "principal underwriter" for, an
"investment company" as such terms are defined in the Investment Company Act of
1940, as amended.
5.26 Immaterial Subsidiary. Each Immaterial Subsidiary, whether
---------------------
individually or in the aggregate, do not own any material assets and do not
engage in any business activity whatsoever.
5.27 Intentionally omitted.
---------------------
5.28 Schedules. All of the Schedules attached hereto are identical to the
----------
Schedules attached to the Pre-Relief Date Loan Agreement, and such Schedules
remain true and correct in all material respects. To the extent the Schedules
contain any immaterial discrepancies or are incomplete in any material respect,
Borrower shall supplement or replace such Schedules within fifteen (15) days
after the Relief Date.
6. AFFIRMATIVE COVENANTS. The Borrower covenants and agrees that, so long as
---------------------
any credit hereunder shall be available and until full and final payment of the
Obligations, the Borrower shall do all of the following:
6.1 Accounting System. Maintain a system of accounting that enables the
-----------------
Borrower to produce financial statements in accordance with GAAP and maintain
records pertaining to the Collateral that contain information as from time to
time reasonably may be requested by Agent.
6.2 Collateral Reporting. From and after the date of the making of the
--------------------
initial Advance under Section 2.1, provide Agent, with copies to each Lender,
-----------
with the following documents at the following times in form reasonably
satisfactory to Agent:
============================================================================
Weekly (a) a sales journal, a journal reflecting Collections of
Borrower and a credit register since the last such schedule.
(b) notice of all returns, disputes, or claims.
(c) a comparison of actual results to projections under the
Budget (i.e., deliver on Tuesday with respect to actual
results through the prior Friday)
--------------------------------------------------------------------------------
Upon request (d) a detailed list of the Borrower and its U.K. Subs, and
by Lender Canadian Sub customers.
(e) copies of invoices in connection with the Accounts, credit
memos, remittance advices, deposit slips, shipping and
delivery documents in connection with the Accounts and, for
Equipment acquired by Borrower, purchase orders and
invoices, and
================================================================================
45
===============================================================================
(f) such other reports as to the Collateral or the financial
condition of the Borrower as Agent reasonably may
request.
------------------------------------------------------------------------------
Upon filing with (g) all pleadings, motions, applications, monthly reports,
the Court or projections or other information respecting Borrower's
delivered to the business or financial condition or prospects filed with
United States the Court or delivered to the United States Trustee for
Trustee for the the Chapter 11 Case or the Committee.
Chapter 11 Case
or the Committee
===============================================================================
6.3 Financial Statements, Reports, Certificates. Deliver to Agent, with
-------------------------------------------
copies to each Lender, at the following times:
===============================================================================
Within 30 days (a) a company prepared balance sheet, income statement, and
after the end of statement of cash flow covering the Borrower and its
each month Subsidiaries' operations during such period on a
consolidated basis,
--------------------------------------------------------------------------------
(b) a certificate signed by Borrower's chief financial
officer, in such a capacity and not his individual
capacity, to the effect that (i) the financial
statements being delivered or caused to be delivered to
Agent hereunder have been prepared in accordance with
GAAP (except for the lack of footnotes and being subject
to year-end audit adjustments) and fairly present the
financial condition of the Borrower and its Subsidiaries
on a consolidated basis, (ii) the representations and
warranties of the Borrower contained in this Agreement
and the other Loan Documents are true and correct, in
all material respects, on and as of the date of such
certificate, as though made on and as of such date
(except to the extent that such representations and
warranties relate solely to an earlier date), and (iii)
on the date of delivery of such certificate there does
not exist any condition or event that constitutes a
Default or Event of Default (or, to the extent of any
non-compliance, describing such non compliance as to
which he or she may have knowledge and what action the
Borrower has taken, is taking, or proposes to take with
respect thereto), and
-------------------------------------------------------------------------------
(c) for each month that also is the date on which a
financial covenant in Section 7.20 is to be tested, a
------------
Compliance Certificate demonstrating, in reasonable
detail, compliance at the end of such period with the
applicable financial covenants contained in Section 7.20
------------
(subject only to year-end audit adjustments).
--------------------------------------------------------------------------------
Within 90 days (d) Intentionally omitted.
after the end of ---------------------
each fiscal year (e) Intentionally omitted.
of the Borrower ---------------------
--------------------------------------------------------------------------------
If and when filed (f) Form 10-Q quarterly reports, Form 10-K annual reports,
by Borrower and Form 8-K current reports, and any other filings
made with the SEC.
--------------------------------------------------------------------------------
Upon request by (g) any other report reasonably requested by Agent relating
Lender to the financial condition of the Borrower and its
Subsidiaries; provided any such requested report can
reasonably be produced by the Borrower.
================================================================================
46
The Borrower agrees to deliver financial statements prepared on a
consolidated basis. The Borrower agrees that their independent certified public
accountants are authorized to communicate directly with Agent and to release to
Agent whatever financial information concerning the Borrower that Agent
reasonably may request.
6.4 Guarantor Reports. Cause any Guarantor (other than Gores) of any of
-----------------
the Obligations to deliver its annual financial statements at the time when
Borrower provides its audited financial statements to Agent and copies of all
federal income tax returns as soon as the same are available and in any event no
later than 30 days after the same are required to be filed by law or after any
extension period has expired.
6.5 Return. Cause returns and allowances, if any, as between the Borrower
------
and its Account Debtors to be on the same basis and in accordance with the usual
customary practices of the Borrower, as they exist at the time of the execution
and delivery of this Agreement other than changes in the ordinary course of
business consistent with overall industry practice. If, at a time when no Event
of Default has occurred and is continuing, any Account Debtor returns any
Inventory to the Borrower, the Borrower promptly shall determine the reason for
such return and, if it accepts such return, issue a credit memorandum (with a
copy to be sent to Agent) in the appropriate amount to such Account Debtor. If,
at a time when an Event of Default has occurred and is continuing, any Account
Debtor returns any Inventory to the Borrower, the Borrower promptly shall
determine the reason for such return and, if Agent consents (which consent shall
not be unreasonably withheld), issue a credit memorandum (with a copy to be sent
to Agent) in the appropriate amount to such Account Debtor.
6.6 Title to Equipment. Upon Agent's request, immediately deliver to
------------------
Agent, properly endorsed, any and all evidences of ownership of, certificates of
title, or applications for title to any items of Equipment.
6.7 Maintenance of Equipment. Maintain the Equipment in good operating
------------------------
condition and repair (ordinary wear and tear excepted), and make all necessary
replacements thereto so that the value and operating efficiency thereof shall at
all times be maintained and preserved. Other than those items of Equipment that
constitute fixtures on the Closing Date, the Borrower shall not permit any item
of Equipment to become a fixture to real estate or an accession to other
property, and such Equipment shall at all times remain personal property.
6.8 Taxes. Except as permitted by the Bankruptcy Code and to the extent
-----
included in the Budget, cause all assessments and taxes, whether real, personal,
or otherwise, due or payable by, or imposed, levied, or assessed against the
Borrower or any of its property to be paid in full, before delinquency or before
the expiration of any extension period, except to the extent that the validity
of such assessment or tax shall be the subject of a Permitted Protest. Except
as permitted by the Bankruptcy Code and to the extent included in the Budget,
will make timely payment or deposit of all tax payments and withholding taxes
required of it by applicable laws, including those laws concerning F.I.C.A.,
F.U.T.A., state disability, and local, state, federal and foreign income taxes,
and will, upon request, furnish Agent with proof reasonably satisfactory to
Agent indicating that
47
the Borrower has made such payments or deposits. The Borrower shall, upon
request, deliver reasonably satisfactory evidence of payment of applicable
excise taxes in each jurisdictions in which (a) the Borrower conducts business
or is required to pay any such excise tax, (b) the Borrower's failure to pay any
such applicable excise tax would result in a Lien on the properties or assets of
the Borrower, or (c) the Borrower's failure to pay any such applicable excise
tax would constitute a Material Adverse Change.
6.9 Insurance.
---------
(a) At the expense of the Borrower, maintain insurance
respecting the Collateral wherever located and with respect to the Borrower's
business, covering loss or damage by fire, theft, explosion, and all other
hazards and risks as ordinarily are insured against by other Persons engaged in
the same or similar businesses. The Borrower also shall maintain business
interruption, public liability, and product liability insurance, as well as
insurance against larceny, embezzlement, and criminal misappropriation All such
policies of insurance shall be in such amounts and with such insurance companies
as are reasonably satisfactory to Agent. The Borrower shall deliver originals of
all such policies to Agent with 438 BFU lender's loss payable endorsements or
other reasonably satisfactory lender's loss payable endorsements, naming Agent
as sole loss payee or additional insured, as appropriate. Each policy of
insurance or endorsement shall contain a clause requiring the insurer to give
not less than 30 days prior written notice to Agent in the event of cancellation
of the policy for any reason whatsoever. If the Borrower fails to provide and
pay for such insurance, Agent may, at its option, but shall not be required to,
procure the same and charge Borrower's Loan Account therefor.
(b) Give Agent prompt notice of any loss covered by such
insurance. Agent shall have the exclusive right to adjust any losses payable
under any such insurance policies in excess of $500,000, without any liability
to the Borrower whatsoever in respect of such adjustments. Any monies received
as payment for any loss under any insurance policy mentioned above (other than
liability insurance policies) or as payment of any award or compensation for
condemnation or taking by eminent domain, shall be paid over to Agent to be
applied at the option of the Required Lenders either to the prepayment of the
Obligations without premium, in such order or manner as the Required Lenders may
elect, or shall be disbursed to the Borrower under staged payment terms
reasonably satisfactory to the Required Lenders for application to the cost of
repairs, replacements, or restorations.
6.10 No Setoffs or Counterclaims. Make payments hereunder and under the
---------------------------
other Loan Documents by or on behalf of the Borrower without setoff or
counterclaim and free and clear of, and without deduction or withholding for or
on account of, any foreign, federal, state, or local taxes.
6.11 Location of Inventory and Equipment. Keep the Inventory, Equipment
-----------------------------------
only at the locations identified on Schedule 6.11; provided, however, that the
------------- -------- -------
Borrower may amend Schedule 6.11 so long as such amendment occurs by written
-------------
notice to Agent not less than 15 Business Days prior to the date on which the
Inventory or Equipment is moved to such new location, so long as such new
location is within the continental United States and
48
so long as, at the time of such written notification, the Borrower provides any
financing statements or fixture filings necessary to perfect and continue
perfected the Agent's Liens on such assets and also provides to Agent a
Collateral Access Agreement; provided, however, that a Collateral Access
Agreement shall not be required if the Interim Order and the Final Order contain
such findings and decretal portions as Agent, in its sole discretion, may deem
equivalent to, and acceptable in lieu of, the execution and delivery of any
Collateral Access Agreement.
6.12 Compliance with Laws. Comply with the requirements of all applicable
--------------------
laws, rules, regulations, and orders of any Governmental Authority, including
the Fair Labor Standards Act, the Americans With Disabilities Act, and the
Foreign Corrupt Practices Act, other than laws, rules, regulations, and orders
the non-compliance with which, individually or in the aggregate, would not
result in and reasonably could not be expected to result in a Material Adverse
Change.
6.13 Intentionally omitted.
----------------------
6.14 Leases. Except as permitted by the Bankruptcy Code, pay when due all
------
post-Relief Date rents and other amounts payable under any leases under which
the Borrower remains in possession and to which Borrower is a party or by which
the Borrower's properties and assets are bound, unless such payments are the
subject of a Permitted Protest. Borrower shall promptly notify Agent of the
assumption or rejection of any such leases by Borrower under the Bankruptcy
Code.
6.15 Brokerage Commissions. Pay any and all brokerage commission or
---------------------
finders fees incurred in connection with or as a result of Borrower's obtaining
financing from the Lender Group under this Agreement. The Borrower agrees and
acknowledges that payment of all such brokerage commissions or finders fees
shall be the sole responsibility of Borrower, and Borrower agrees to indemnify,
defend, and hold Agent and the Lender Group harmless from and against any claim
of any broker or finder arising out of Borrower's obtaining financing from the
Lender Group under this Agreement.
6.16 Year 2000 Compliance. Be Year 2000 Compliant.
--------------------
6.17 Intentionally Omitted.
---------------------
6.18 Corporate Existence, etc. The Borrower shall at all time preserve and
-------------------------
keep in full force and effect its valid corporate existence and good standing
and any rights and franchises material to its business.
6.19 Disclosure Updates. Promptly and in no event later than 5 Business
------------------
Days after obtaining knowledge thereof, (i) notify Agent if any written
information, exhibit, or report furnished to the Lender Group contained any
untrue statement of a material fact or omitted to state any material fact
necessary to make the statements contained therein not misleading in light of
the circumstances in which made, and (ii) correct any defect or error that may
be discovered therein or in any Loan Document or in the execution,
acknowledgement, filing, or recordation thereof.
49
6.20 Copyright Registrations. Maintain, at all times, valid and
-----------------------
uncontested registered copyrights with the United States Copyright Office
constituting the Required Library. At any time that less than the Required
Library is registered with the United States Copyright Office, unless Agent in
Agent's sole discretion agrees otherwise, the Borrower shall immediately
supplement the Required Library and (a) cause such additional copyrights
generated by the Borrower that are not already the subject of a registration
with the United States Copyright Office (or an application therefor diligently
prosecuted) to be registered with the United States Copyright Office in a manner
sufficient to impart constructive notice of the Borrower's ownership thereof,
and (z) cause to be prepared, executed, and delivered to Agent, with sufficient
time to permit Agent to record no later than the last Business Day within 10
days following the date that such copyrights have been registered or an
application for registration has been filed, a Copyright Security Agreement or
supplemental schedules to the Copyright Security Agreement reflecting the
security interest of Agent on behalf of the Lender Group in such new copyrights,
which supplemental schedules shall be in form and content suitable for
registration with the United States Copyright Office so as to give constructive
notice, when so registered, of the transfer by the Borrower to Agent on behalf
of the Lender Group of a security interest in such copyrights.
7. NEGATIVE COVENANTS.
------------------
The Borrower covenants and agrees that, so long as any credit
hereunder shall be available and until full and final payment of the
Obligations, the Borrower will not do any of the following:
7.1 Indebtedness. Create, incur, assume, permit, guarantee, or otherwise
------------
become or remain, directly or indirectly, liable with respect to any
Indebtedness, except:
(a) Indebtedness evidenced by this Agreement or the other Loan
Documents, together with Indebtedness to issuers of letters of credit that are
the subject of L/C Undertakings;
(b) Indebtedness disclosed on Schedule 7.1 attached hereto and
in existence on the Relief Date;
(c) Permitted Purchase Money Indebtedness;
(d) Permitted Subordinated Debt;
(e) refinancings, renewals, or extensions of Indebtedness
permitted under clauses (b), (c), and (d) of this Section 7.1 (and continuance
-----------
or renewal of any Permitted Liens associated therewith) so long as: (i) the
terms and conditions of such refinancings, renewals, or extensions do not
materially impair the prospects of repayment of the Obligations by Borrower,
(ii) the net cash proceeds of such refinancings, renewals, or extensions do not
result in an increase in the aggregate principal amount of the Indebtedness so
refinanced, renewed, or extended, (iii) such refinancings, renewals, refundings,
or extensions do not result in a shortening of the average weighted maturity of
the Indebtedness so refinanced, renewed, or extended, and (iv) to the extent
that
50
Indebtedness that is refinanced was subordinated in right of payment to the
Obligations, then the subordination terms and conditions of the refinancing
Indebtedness must be at least as favorable to the Lender Group as those
applicable to the refinanced Indebtedness.
7.2 Liens. Create, incur, assume, or permit to exist, directly or
-----
indirectly, any Lien on or with respect to any of its property or assets, of any
kind, whether now owned or hereafter acquired, or any income or profits
therefrom, except for Permitted Liens (including Liens that are replacements of
Permitted Liens to the extent that the original Indebtedness is refinanced under
Section 7.1(e) and so long as the replacement Liens only encumber those assets
--------------
or property that secured the original Indebtedness). The prohibition provided
for in this Section 7.2 specifically includes, without limitation, any effort by
-----------
the Borrower, the Committee or any other party-in-interest in the Chapter 11
Case to "prime" or create pari passu to any claims or interests of the Lenders
any Lien irrespective of whether such claims or interests may be "adequately
protected."
7.3 Restrictions on Fundamental Changes.
-----------------------------------
(a) Enter into any merger, consolidation, reorganization, or
recapitalization, or reclassify its Stock.
(b) Liquidate, wind up, or dissolve itself (or suffer any
liquidation or dissolution).
(c) Except for the Gores Transaction, convey, sell, assign,
lease, transfer, or otherwise dispose of, in one transaction or a series of
transactions, all or substantially all of its property or assets.
7.4 Disposal of Assets. Sell, lease, assign, transfer, or otherwise
------------------
dispose of any of its properties or assets, other than pursuant to Permitted
Dispositions.
7.5 Change Name. Change its name, FEIN corporate structure (within the
-----------
meaning of Section 9-402(7) of the Code), or identity, or add any new fictitious
----------------
name.
7.6 Guarantee. Guarantee or otherwise become in any way liable with
---------
respect to the obligations of any third Person except by endorsement of
instruments or items of payment for deposit to the account of the Borrower or
which are transmitted or turned over to Agent.
7.7 Nature of Business. Make any change in the principal nature of its
------------------
business, as currently conducted.
7.8 Prepayments and Amendments.
--------------------------
Except in connection with a refinancing permitted by Section 7.1(e),
--------------
prepay, redeem, retire, defease, purchase, or otherwise acquire any Indebtedness
owing to any third Person prior to the stated maturities of such Indebtedness,
other than the Obligations in accordance with this Agreement:
51
(a) Directly or indirectly, amend, modify, alter, increase, or
change any of the terms or conditions of any agreement, instrument, document,
indenture, or other writing evidencing or concerning Indebtedness permitted
under Sections 7.1(b), (c), or (d), and
--------------- --- ---
(b) Except as set forth on Schedule 7.8 and except as
------------
specifically permitted under the Interim Order or the Final Order, as the case
may be, make any payment or transfer with respect to any pre-Relief Date Lien or
Indebtedness, whether by way of "adequate protection" under the Bankruptcy Code
or otherwise.
7.9 Change of Control. Cause, permit, or suffer, directly or indirectly,
-----------------
any Change of Control.
7.10 Consignments. Consign any Inventory or sell any Inventory on ▇▇▇▇
------------
and hold, sale or return, sale on approval, or other conditional terms of sale.
7.11 Distributions. Make any distribution or declare or pay any dividends
-------------
(in cash or other property, other than Stock) on, or purchase, acquire, redeem,
or retire any Stock of any Subsidiary, of any class, whether now or hereafter
outstanding.
7.12 Accounting Methods; Fiscal Year. Modify or change its fiscal year or
-------------------------------
method of accounting or enter into, modify, or terminate any agreement currently
existing, or at any time hereafter entered into with any third party accounting
firm or service bureau for the preparation or storage of the Borrower's
accounting records without said accounting firm or service bureau agreeing to
provide Agent information regarding the Collateral or the Borrower's financial
condition. The Borrower hereby waives the right to assert a confidential
relationship, if any, it may have with any accounting firm or service bureau in
connection with any information requested by Agent pursuant to or in accordance
with this Agreement, and agrees that Agent may contact directly any such
accounting firm or service bureau in order to obtain such information.
7.13 Investments. Except for Permitted Investments, directly or
-----------
indirectly make, acquire, or incur any Investment.
7.14 Transactions with Affiliates. Directly or indirectly enter into or
----------------------------
permit to exist any material transaction with any of its Affiliates, except for
transactions that are in the ordinary course of the Borrower's business, that
are upon fair and reasonable terms, that are fully disclosed to Agent, and that
are no less favorable to the Borrower than would be obtained in an arm's length
transaction with a non-Affiliate. Other than in the ordinary course of
Borrower's business, Borrower shall not make any loan or advance or otherwise
transfer any funds (whether pursuant to an accounting entry on Borrower's books
or otherwise) to an Affiliate without the prior written consent of the Lenders.
7.15 Suspension. Suspend or go out of a substantial portion of its
----------
business.
7.16 Compensation. Increase the annual fee or per-meeting fees paid to
------------
directors during any year by more than 15% over the prior year; pay or accrue
total cash
52
compensation, during any year, to officers and senior management employees in an
aggregate amount in excess of 115% of that paid or accrued in the prior year.
7.17 Use of Proceeds. Use the proceeds of the Advances for any purpose
---------------
other than (a) as contemplated in the Budget and as may be approved by the
Court, (b) to pay interest and other amounts, such as adequate protection
payments, due on the Pre-Relief Date Loan Agreement, (c) to pay transactional
fees, costs, and expenses incurred in connection with this Agreement, and (d)
thereafter, consistent with the terms and conditions hereof, for its lawful and
permitted corporate purposes.
7.18 Change in Location of Chief Executive Office; Inventory and Equipment
---------------------------------------------------------------------
Restrictions. Relocate its chief executive office to a new location without
------------
providing at least 30 days prior written notification thereof to Agent and so
long as, at the time of such written notification, the Borrower provides any
financing statements or fixture filings necessary to perfect and continue
perfected the Agent's Liens and also provides to Agent a Collateral Access
Agreement with respect to such new location; provided, however, that a
Collateral Access Agreement shall not be required if the Interim Order and the
Final Order contain such findings and decretal portions as Agent, in its sole
discretion, may deem equivalent to, and acceptable in lieu of, the execution and
delivery of any Collateral Access Agreement. The Inventory and Equipment shall
not at any time now or hereafter be stored with a bailee, warehouseman, or
similar party without Agent's prior written consent.
7.19 Defined Benefit Plan. Establish, or permit to exist, a Benefit Plan.
--------------------
7.20 Financial Covenants.
-------------------
(a) Intentionally omitted.
---------------------
(b) Intentionally omitted.
---------------------
(c) Suffer a variance from the Budget with respect to the line
items indicated below in excess of the amount set forth opposite each such line
item measured on a cumulative weekly basis for the week then ended, commencing
on the week ended on May 5, 2000):
Budget Line Item: Variance:
---------------- --------
Receipts Shall not be less than
90% of Budget
Disbursements for each Shall not be more than
line item expense 105% of Budget
53
(d) Suffer a variance from the Budget with respect to the line
item indicated below in excess of the amount set forth opposite such line item
measured on a cumulative monthly basis for the months of April and May 2000 and
reported on or before the date designated:
Budget Line Item Month Report Date Variances
---------------- ----- ----------- ---------
Revenues April May 15 Shall not be less than 85% of Budget
May June 15 Shall not be less than 85% of Budget
(e) Borrower shall fail to receive Collections, either from
collections on account of its Account Debtors or from distributions and payments
from its Subsidiaries measured on a cumulative weekly basis for the week then
ended commencing on the week ended May 5, 2000 in the following amounts:
Week Ended Variance
---------- --------
Two weeks ended May 12 Shall not be less than 80% of Budget
May 19 Shall not be less than 85% of Budget
May 26 and each week thereafter Shall not be less than 90% of Budget.
7.21 Capital Expenditures. Make Capital Expenditures (for Borrower and
--------------------
its Subsidiaries on a consolidated basis) prior to the Maturity Date in excess
of $50,000.
7.22 Securities Accounts. The Borrower shall not establish or maintain
-------------------
any Securities Account unless Agent shall have received a Control Agreement,
duly executed and in full force and effect, in respect of such Securities
Account. The Borrower agrees not to transfer assets out of any Securities
Accounts; provided, however, that, so long as no Event of Default has occurred
-------- -------
and is continuing or would result therefrom, the Borrower may use such assets to
the extent permitted by this Agreement.
7.23 Preferred Stock.
---------------
Issue any preferred Stock other than Permitted Preferred Stock.
7.24 Software License Agreement. Amend, modify, supplement, or restate
--------------------------
any material terms or conditions of the Software License Agreement in a manner
that is materially adverse to the Borrower, or materially adverse to the value
of the Collateral.
7.25 Maintenance Agreement. Amend, modify, supplement, or restate any
---------------------
material terms or conditions of the Maintenance Agreement in a manner that is
materially adverse to the Borrower, or materially adverse to the value of the
Collateral.
54
7.26 Immaterial Subsidiary. Permit any Immaterial Subsidiary, whether
---------------------
individually or in the aggregate, to (a) own any material assets, or (b) engage
in any business activity whatsoever.
7.27 Amendment to Certain Documents. Enter into any amendment,
------------------------------
supplement, or modification of: (a) the Stock Purchase Agreement, or (b) the
Indenture.
8. EVENTS OF DEFAULT.
Any one or more of the following events shall constitute an event of
default (each, an "Event of Default") under this Agreement:
----------------
8.1 (a) If the Borrower fails to pay when due and payable or when
declared due and payable in accordance with this Agreement, any portion of the
Obligations consisting of principal, interest or other amounts constituting
Obligations (except for fees and charges due Lenders and reimbursement of Lender
Group Expenses), or (b) If the Borrower fails to pay when due and payable or
when declared due and payable in accordance with this Agreement, any portion of
the Obligations consisting of fees and charges due Lenders or reimbursement of
Lender Group Expenses charged to Borrower's Loan Account by Agent in accordance
with the provisions of this Agreement and such failure continues for a period of
5 days after the date on which such failure first occurs;
8.2 (a) If the Borrower fails or neglects to perform, keep, or observe
any covenant or other provision contained in Sections 6.2, 6.3, 6.5, 6.6, 6.10
---------------------------------
and 6.11 hereof and such failure or neglect continues for a period of five (5)
----
days after the date on which such failure or neglect first occurs, or (b) If
Borrower fails or neglects to perform, keep, or observe any covenant or other
provision contained in any section of this Agreement (other than a section that
is expressly dealt with elsewhere in this Section 8) or the other Loan Documents
(other than a Section of such other Loan Documents dealt with elsewhere in this
Section 8) and such failure or neglect is not cured within fifteen (15) days
---------
after the date on which such failure or neglect first occurs, or (c) If Borrower
fails or neglects to perform, keep, or observe any covenant or other provision
contained in Sections 2.5 (other than a subsection of Section 6 that is dealt
------------
with elsewhere in this Section 8.2), 3.7, 7, and 11.3 of this Agreement or any
----------- --- - ----
comparable provision contained in any of the other Loan Documents;
8.3 If there is a Material Adverse Change;
8.4 If any party to this Agreement or any other Person brings a motion,
or files any plan of reorganization or disclosure statement attendant thereto in
the Chapter 11 Case: (i) to obtain additional financing under Section 364(c) or
(d) of the Bankruptcy Code; (ii) to grant any Lien upon or affecting any
Collateral; (iii) except as provided in the Interim Order or the Final Order, as
the case may be, to use cash collateral of the Lenders under Section 363(c) of
the Bankruptcy Code without Lender's consent; or (iv) any other action or
actions adverse to the Lenders or their rights and remedies hereunder or their
interest in the Collateral that would, individually or in the aggregate, result
in a Material Adverse Change;
55
8.5 Intentionally omitted.
---------------------
8.6 Intentionally omitted.
---------------------
8.7 If the Borrower is enjoined, restrained, or in any way prevented by
court order from continuing to conduct all or any material part of its business
affairs;
8.8 (a) If a notice of Lien, levy, or assessment is filed of record with
respect to any of the Borrower's properties or assets by the United States
Government, or any department, agency, or instrumentality thereof, or if any
taxes or debts owing at any time hereafter to any one or more of such entities
becomes a Lien, whether ▇▇▇▇▇▇ or otherwise, upon any of the Borrower's
properties or assets and the same is not paid on the payment date thereof, or
(b) If notices of Lien, levy, or assessment in an aggregate amount in excess of
$250,000, are filed of record with respect to any of the Borrower's properties
or assets by any state, province, county, municipal, or governmental agency, or
if any taxes or debts owing at any time hereafter to any one or more of such
entities becomes a Lien exceeding the foregoing aggregate limitation, whether
▇▇▇▇▇▇ or otherwise, upon any of the Borrower's properties or assets and the
same is not paid on the payment date thereof;
8.9 If a final non-appealable judgment or other claim becomes a Lien or
encumbrance upon any material portion of the Borrower's, or any of its
Subsidiaries' properties or assets;
8.10 Intentionally omitted.
----------------------
8.11 Intentionally omitted.
----------------------
8.12 If any misstatement or misrepresentation exists now or hereafter in
any warranty, representation, statement, or report made to the Lender Group by
the Borrower, its Subsidiaries, or any officer, employee, agent, or director of
the Borrower or any of its Subsidiaries, or if any such warranty or
representation is withdrawn;
8.13 If the obligation of Gores under the Gores Guaranty (if a Gores
Guaranty is obtained by Agent in favor of Lenders) or any other guarantor under
its guaranty or other third Person under any Loan Document is limited or
terminated by operation of law or by Gores, such other guarantor or other third
Person thereunder, or Gores, any such guarantor or other third Person becomes
the subject of an Insolvency Proceeding; or
8.14 Intentionally Omitted.
----------------------
8.15 If any claim or claims under Section 506(c) of the Bankruptcy Code
against or with respect to the Lenders or any of the Collateral is allowed;
8.16 If any of the following occur with respect to a claim or cause of
action arising after the Relief Date (i) a post-Relief Date judgment is entered
or liability incurred in excess of $100,000, or (ii) general liability and
workers compensation costs (inclusive of insurance premiums with respect
thereto) during any fiscal year in the aggregate exceed such costs for the
preceding fiscal year by more than $250,000, or (iii) any post-Relief Date
56
judgments are entered or liabilities are incurred, including but not limited to
any occurrences specified in subparts (i) and (ii) of this Section 8.16, that
would individually or in the aggregate result in a Material Adverse Change;
8.17 If the Final Order is not entered within 30 days after the Closing
Date;
8.18 The filing of any plan of reorganization or disclosure statement
attendant thereto by Borrower or any other Person to which Lenders do not
consent or otherwise agree to the treatment of their claims;
8.19 The entry of an order confirming a plan of reorganization that does
not require repayment in full of all of the Borrower's Obligations under this
Agreement and the obligations of Borrower to Lenders under the Pre-Relief Date
Loan Agreement on the earlier of the effective date of such plan of
reorganization or thirty (30) days following entry of the order confirming such
plan of reorganization;
8.20 The entry of an order amending, supplementing, staying, vacating or
otherwise modifying the Loan Documents or the Interim Order or the Final Order
without the written consent the Lenders;
8.21 The payment of, or application for authority to pay, any pre-petition
claim, other than those of trade creditors and other than those required to be
paid with the initial Advance pursuant to the terms of this Agreement, without
Lender's prior written consent or pursuant to an order of the Court after notice
and hearing;
8.22 Other than the Gores Transaction, the sale without Lenders' consent,
of all or substantially all of Borrower's assets either through a sale under
Section 363 of the Bankruptcy Code, through a confirmed plan of reorganization
in the Chapter 11 Case, or otherwise;
8.23 The dismissal of the Chapter 11 Case, or the conversion of the
Chapter 11 Case from one under Chapter 11 to one under Chapter 7 of the
Bankruptcy Code;
8.24 The commencement of a suit or action against Lenders and, as to any
suit or action brought by any Person other than Borrower or an officer or
employee of Borrower, the continuation thereof without dismissal for thirty (30)
days after service thereof on Lenders, that assert, by or on behalf of Borrower,
or any official committee in the Chapter 11 Case, any claim or legal or
equitable remedy which seeks subordination of the claim or Lien the Lenders;
8.25 If, without Lenders' consent, an interim or permanent trustee is
appointed in the Chapter 11 Case, or an examiner with expanded powers to operate
or manage the financial affairs, the business, or reorganization of the Borrower
is appointed in the Chapter 11 Case; or
8.26 If an order by the Court is entered granting relief from or modifying
the automatic stay of Section 362 of the Bankruptcy Code (i) to allow any
creditor to execute upon or enforce a Lien on any Collateral, or (ii) with
respect to any Lien of or the granting
57
of any Lien on any Collateral to any state or local environmental or regulatory
agency or authority.
8.27 The Borrower does not obtain approval of the Gores Transaction by
June 10, 2000.
8.28 The Borrower does not consummate the Gores Transaction by June 21,
2000.
8.29 If at any time, without the written consent of Agent, Manchester
ceases to become engaged by Borrower or Manchester is otherwise unable to
perform the terms of its engagement as a result of actions or inactions, as the
case may be, of Borrower.
9. THE LENDER GROUP'S RIGHTS AND REMEDIES.
--------------------------------------
9.1 Rights and Remedies. Upon the occurrence, and during the
-------------------
continuation, of an Event of Default, the Required Lenders (at their election
but without notice of their election and without demand) may, except to the
extent otherwise expressly provided or required below, authorize and instruct
Agent to do any one or more of the following on behalf of the Lender Group (and
Agent, acting upon the instructions of the Required Lenders, shall do the same
on behalf of the Lender Group), all of which are authorized by the Borrower:
(a) Declare all Obligations, whether evidenced by this
Agreement, by any of the other Loan Documents, or otherwise, immediately due and
payable;
(b) Cease advancing money or extending credit to or for the
benefit of Borrower under this Agreement, under any of the Loan Documents, or
under any other agreement between the Borrower and the Lender Group;
(c) Terminate this Agreement and any of the other Loan Documents
as to any future liability or obligation of the Lender Group, but without
affecting Agent's rights and security interests, for the benefit of the Lender
Group, in the Collateral and without affecting the Obligations;
(d) Settle or adjust disputes and claims directly with Account
Debtors for amounts and upon terms which Agent considers advisable, and in such
cases, Agent will credit Borrower's Loan Account with only the net amounts
received by Agent in payment of such disputed Accounts after deducting all
Lender Group Expenses incurred or expended in connection therewith;
(e) Cause the Borrower to hold all returned Inventory, if any,
in trust for the Lender Group, segregate all returned Inventory, if any, from
all other property of the Borrower or in the Borrower's possession and
conspicuously label said returned Inventory, as the property of the Lender
Group;
58
(f) Without notice to or demand upon the Borrower or any
guarantor, make such payments and do such acts as Agent considers necessary or
reasonable to protect its security interests in the Collateral. The Borrower
agrees to assemble the Collateral, if Agent so requires, and to make the
Collateral available to Agent as Agent may designate. The Borrower authorizes
Agent to enter the premises where the Collateral is located, to take and
maintain possession of the Collateral, or any part of it, and to pay, purchase,
contest, or compromise any encumbrance, charge, or Lien that in Agent's
determination appears to conflict with the Agent's Liens and to pay all expenses
incurred in connection therewith. With respect to any of the Borrower's owned or
leased premises, the Borrower hereby grants Agent a license to enter into
possession of such premises and to occupy the same, without charge, for up to
120 days in order to exercise any of the Lender Group's rights or remedies
provided herein, at law, in equity, or otherwise;
(g) Without notice to the Borrower (such notice being expressly
waived), and without constituting a retention of any collateral in satisfaction
of an obligation (within the meaning of Section 9-505 of the Code), set off and
apply to the Obligations any and all (i) balances and deposits of the Borrower
held by the Lender Group (including any amounts received in the Lockbox
Accounts), or (ii) indebtedness at any time owing to or for the credit or the
account of the Borrower held by the Lender Group;
(h) Hold, as cash collateral, any and all balances and deposits
of the Borrower held by the Lender Group, and any amounts received in the
Lockbox Accounts, to secure the full and final repayment of all of the
Obligations;
(i) Ship, reclaim, recover, store, finish, maintain, repair,
prepare for sale, advertise for sale, and sell (in the manner provided for
herein) the Collateral. The Borrower hereby grants to Agent a license or other
right to use, without charge, the Borrower's labels, patents, copyrights, rights
of use of any name, trade secrets, trade names, trademarks, service marks, and
advertising matter, or any property of a similar nature, as it pertains to the
Collateral, in completing production of, advertising for sale, and selling any
Collateral and the Borrower's rights under all licenses and all franchise
agreements shall inure to the Lender Group's benefit;
(j) Sell the Collateral at either a public or private sale, or
both, by way of one or more contracts or transactions, for cash or on terms, in
such manner and at such places (including the Borrower's premises) as Agent
determines is commercially reasonable. It is not necessary that the Collateral
be present at any such sale;
(k) Agent shall give notice of the disposition of the Collateral
as follows:
(i) Agent shall give the Borrower with rights in the
Collateral and each holder of a security interest in the Collateral
who has filed with Agent a written request for notice, a notice in
writing of the time and place of public sale, or, if the sale is a
private sale or some other disposition other than a public sale is to
be made of the Collateral, then the time on or after which the private
sale or other disposition is to be made;
59
(ii) The notice shall be personally delivered or mailed,
postage prepaid, to the Borrower with rights in the Collateral as
provided in Section 12, at least five (5) days before the date fixed
----------
for the sale, or at least five (5) days before the date on or after
which the private sale or other disposition is to be made; no notice
needs to be given prior to the disposition of any portion of the
Collateral that is perishable or threatens to decline speedily in
value or that is of a type customarily sold on a recognized market.
Notice to Persons other than the Borrower claiming an interest in the
Collateral shall be sent to such addresses as they have furnished to
Agent;
(l) The Lender Group may credit bid and purchase at any public
sale;
(m) The Lender Group shall have all other rights and remedies
available to it at law or in equity pursuant to any other Loan Documents;
(n) Any deficiency that exists after disposition of the
Collateral as provided above will be paid immediately by Borrower. Any excess
will be returned, without interest and subject to the rights of third Persons,
by Agent to Borrower; and
(o) Borrower hereby acknowledges that the Obligations arose out
of a commercial transaction, and agrees that if an Event of Default shall occur
Lenders shall have the right to an immediate writ of possession without notice
of a hearing;
provided, however, that notwithstanding the foregoing, Agent agrees to give to
-------- -------
Borrower and counsel approved by the Court for the Committee and any party-in-
interest required to receive notice by the Interim Order or the Final Order, at
least five (5) Business Days' notice prior to the exercise of any remedy in the
nature of liquidation of all or substantially all of the Collateral; provided
further, however, that such notice need only indicate that Lenders intend to
exercise one or more remedies under one or more of the Loan Documents, at law or
in equity, and Lenders shall not be required to specify any particular remedy or
the timing thereof, nor shall such notice limit in any way Lenders' discretion
with respect to the pursuit and timing of any available remedy, nor shall
Lenders be required to give more than one such notice.
9.2 Gores as Liquidator. In the event, following the occurrence and
--------------------
during the continuance of an Event of Default the Required Lenders direct the
Agent to exercise any of the remedies set forth in Section 9.1, then the Agent
-----------
may retain Gores on terms mutually acceptable between Gores and the Agent for
the purposes of liquidating, realizing upon or otherwise disposing of the
Collateral.
9.3 Remedies Cumulative. The rights and remedies of the Lender Group
-------------------
under this Agreement, the other Loan Documents, the Interim Order, the Final
Order and all other agreements shall be cumulative. The Lender Group shall have
all other rights and remedies not inconsistent herewith as provided under the
Code, by law, or in equity. No exercise by the Lender Group of one right or
remedy shall be deemed an election, and no waiver by the Lender Group of any
Event of Default shall be deemed a waiver of any other Event of
60
Default. No delay by the Lender Group shall constitute a waiver, election, or
acquiescence by it.
10. TAXES AND EXPENSES.
If the Borrower fails to pay any monies (whether taxes, assessments,
insurance premiums, or, in the case of leased properties or assets, rents or
other amounts payable under such leases) due to third Persons, or fails to make
any deposits or furnish any required proof of payment or deposit, all as
required under the terms of this Agreement, then, to the extent that Agent
determines that such failure by the Borrower could result in a Material Adverse
Change, in its discretion and without prior notice to the Borrower, Agent for
the benefit of the Lender Group may do any or all of the following: (a) make
payment of the same or any part thereof; (b) set up such reserves in Borrower's
Loan Account as Agent deems necessary to protect the Lender Group from the
exposure created by such failure; or (c) obtain and maintain insurance policies
of the type described in Section 6.9 and take any action with respect to such
-----------
policies as Agent deems prudent. Any such amounts paid by Agent shall
constitute Lender Group Expenses. Any such payments made by Agent shall not
constitute an agreement by Lender Group to make similar payments in the future
or a waiver by Lender Group of any Event of Default under this Agreement. Agent
need not inquire as to, or contest the validity of, any such expense, tax, or
Lien and the receipt of the usual official notice for the payment thereof shall
be conclusive evidence that the same was validly due and owing.
11. WAIVERS; INDEMNIFICATION.
11.1 Demand; Protest; etc. The Borrower hereby waives demand, protest,
--------------------
notice of protest, notice of default or dishonor, notice of payment and
nonpayment, nonpayment at maturity, release, compromise, settlement, extension,
or renewal of accounts, documents, instruments, chattel paper, and guarantees at
any time held by Lender Group on which the Borrower may in any way be liable.
11.2 The Lender Group's Liability for Collateral. So long as Lender
-------------------------------------------
Group complies with its obligations, if any, under Section 9-207 of the Code,
Lender Group shall not in any way or manner be liable or responsible for: (a)
the safekeeping of the Collateral; (b) any loss or damage thereto occurring or
arising in any manner or fashion from any cause; (c) any diminution in the value
thereof; or (d) any act or default of any carrier, warehouseman, bailee,
forwarding agency, or other Person. All risk of loss, damage, or destruction of
the Collateral shall be borne by the Borrower.
11.3 Indemnification. Borrower shall pay, indemnify, defend, and hold the
---------------
Agent-Related Persons, the Lender-Related Persons with respect to each Lender,
each Participant, and each of their respective officers, directors, employees,
counsel, agents, and attorneys-in- fact (each, an "Indemnified Person") harmless
------------------
(to the fullest extent permitted by law) from and against any and all claims,
demands, suits, actions, investigations, proceedings, and damages, and all
reasonable attorneys fees and disbursements and other costs and expenses
actually incurred in connection therewith (as and when they are incurred and
irrespective of whether suit is brought), at any time asserted against, imposed
upon, or incurred by any of them in connection with or as a result of or related
to the execution,
61
delivery, enforcement, performance, and administration of this Agreement and any
other Loan Documents or the transactions contemplated herein, and with respect
to any investigation, litigation, or proceeding related to this Agreement, any
other Loan Document, or the use of the proceeds of the credit provided hereunder
(irrespective of whether any Indemnified Person is a party thereto), or any act,
omission, event or circumstance in any manner related thereto (all the
foregoing, collectively, the "Indemnified Liabilities"). The Borrower shall not
-----------------------
have any obligation to any Indemnified Person under this Section 11.3 with
------------
respect to any Indemnified Liability that a court of competent jurisdiction
finally determines to have resulted from the gross negligence or willful
misconduct of such Indemnified Person. This provision shall survive the
termination of this Agreement and the repayment of the Obligations. If any
Indemnified Person makes any payment to any other Indemnified Person with
respect to an Indemnified Liability for which Borrower was required to indemnify
the Indemnified Person receiving such payment, the Indemnified Person making
such payment is entitled to be indemnified and reimbursed by Borrower with
respect thereto.
12. NOTICES.
Unless otherwise provided in this Agreement, all notices or demands
by any party relating to this Agreement or any other Loan Document shall be in
writing and (except for financial statements and other informational documents
which may be sent by first-class mail, postage prepaid) shall be personally
delivered or sent by registered or certified mail (postage prepaid, return
receipt requested), overnight courier, or telefacsimile to Borrower, or the
Agent, as the case may be, at its address set forth below:
If the Borrower: c/o SYSTEM SOFTWARE ASSOCIATES, INC.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Fax No. ▇▇▇.▇▇▇.▇▇▇▇
with copies to: SIDLEY & AUSTIN
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
Fax No. ▇▇▇.▇▇▇.▇▇▇▇
If to Agent: FOOTHILL CAPITAL CORPORATION
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇. ▇▇▇▇▇ ▇▇▇▇▇
Fax No. ▇▇▇.▇▇▇.▇▇▇▇
with copies to: PAUL, HASTINGS, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇.▇. ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
62
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, III, Esq.
Fax No. ▇▇▇.▇▇▇.▇▇▇▇.
The parties hereto may change the address at which they are to
receive notices hereunder, by notice in writing in the foregoing manner given to
the other. All notices or demands sent in accordance with this Section 12, other
----------
than notices by the Agent in connection with Sections 9-504 or 9-505 of the
Code, shall be deemed received on the earlier of the date of actual receipt or 3
days after the deposit thereof in the mail, and one Business Day after deposit
with a nationally recognized overnight courier. The Borrower acknowledges and
agrees that notices sent by the Agent in connection with Sections 9-504 or 9-505
of the Code shall be deemed sent when deposited in the mail or personally
delivered, or, where permitted by law, transmitted by telefacsimile or other
similar method set forth above.
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
THE VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (UNLESS
AND TO THE EXTENT EXPRESSLY PROVIDED TO THE CONTRARY IN ANOTHER LOAN DOCUMENT),
THE CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT HEREOF AND THEREOF, AND THE
RIGHTS OF THE PARTIES HERETO AND THERETO WITH RESPECT TO ALL MATTERS ARISING
HEREUNDER OR THEREUNDER OR RELATED HERETO OR THERETO SHALL BE DETERMINED UNDER,
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN
CONNECTION WITH THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE TRIED AND
LITIGATED ONLY IN THE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF NEW
CASTLE, STATE OF DELAWARE, PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT
-------- -------
AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT AGENT'S OPTION, IN
THE COURTS OF ANY JURISDICTION WHERE THE REQUIRED LENDERS ELECT TO BRING SUCH
ACTION OR WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND. EACH OBLIGOR
AND THE LENDER GROUP WAIVE, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY
RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT
----- --- ----------
TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION
-------
13.
--
EACH OBLIGOR, AGENT, AND EACH LENDER HEREBY WAIVE THEIR RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN,
INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER
COMMON LAW OR STATUTORY CLAIMS. EACH OBLIGOR, AGENT, AND EACH LENDER REPRESENTS
THAT IT HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS
JURY TRIAL RIGHTS
63
FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF
THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
14. ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS.
14.1 Assignments and Participations.
------------------------------
(a) Any Lender may, with the prior written consent of Agent,
assign and delegate to one or more assignees (provided that no written consent
of Agent shall be required in connection with any assignment and delegation by a
Lender to an Eligible Transferee) (each an "Assignee") all, or any ratable part
--------
of all, of the Obligations, the Commitments and the other rights and obligations
of such Lender hereunder and under the other Loan Documents, in a minimum amount
of $2,500,000 (provided that no such minimum amount shall be required in the
case of an Eligible Transferee that qualifies as an "Eligible Transferee" under
clause (d) of the definition of Eligible Transferee); provided, however, that
-------- -------
Borrower and Agent may continue to deal solely and directly with such Lender in
connection with the interest so assigned to an Assignee until (i) written notice
of such assignment, together with payment instructions, addresses and related
information with respect to the Assignee, shall have been given to Borrower and
Agent by such Lender and the Assignee; (ii) such Lender and its Assignee shall
have delivered to Borrower and Agent an Assignment and Acceptance in the form of
Exhibit A-1; and (iii) other than with respect to an assignment by an existing
-----------
Lender to any Affiliate of such Lender, the assignor Lender or Assignee has paid
to Agent for Agent's sole and separate account a processing fee in the amount of
$5,000. Anything contained herein to the contrary notwithstanding, the consent
of Agent shall not be required (and payment of any fees shall not be required)
if such assignment is in connection with any merger, consolidation, sale,
transfer, or other disposition of all or any substantial portion of the business
or loan portfolio of such Lender or the assignee is an Affiliate (other than
individuals) of, or a fund, money market account, investment account or other
account managed by a Lender.
(b) From and after the date that Agent notifies the assignor
Lender that it has received a fully executed Assignment and Acceptance and
payment (if applicable) of the above-referenced processing fee, (i) the Assignee
thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment and
Acceptance, shall have the rights and obligations of a Lender under the Loan
Documents, and (ii) the assignor Lender shall, to the extent that rights and
obligations hereunder and under the other Loan Documents have been assigned by
it pursuant to such Assignment and Acceptance, relinquish its rights (except
with respect to Section 11.3 hereof) and be released from its obligations under
------------
this Agreement (and in the case of an Assignment and Acceptance covering all or
the remaining portion of an assigning Lender's rights and obligations under this
Agreement and the other Loan Documents, such Lender shall cease to be a party
hereto and thereto), and such assignment shall effect a novation among the
Borrower, the assignor Lender, and the Assignee.
(c) By executing and delivering an Assignment and Acceptance,
the assignor Lender thereunder and the Assignee thereunder confirm to and agree
with each
64
other and the other parties hereto as follows: (1) other than as provided in
such Assignment and Acceptance, such assignor Lender makes no representation or
warranty whatsoever and assumes no responsibility with respect to any
statements, warranties, or representations made in or in connection with this
Agreement or the execution, legality, validity, enforceability, genuineness,
sufficiency, or value of this Agreement or any other Loan Document furnished
pursuant hereto; (2) such assignor Lender makes no representation or warranty
and assumes no responsibility with respect to the financial condition of the
Borrower or the performance or observance by the Borrower of any of its
obligations under this Agreement or any other Loan Document furnished pursuant
hereto; (3) such Assignee confirms that it has received a copy of this
Agreement, together with such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such
Assignment and Acceptance; (4) such Assignee will, independently and without
reliance upon Agent, such assignor Lender or any other Lender, and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under this
Agreement; (5) such Assignee appoints and authorizes Agent to take such action
as agent on its behalf and to exercise such powers under this Agreement as are
delegated to Agent, by the terms hereof, together with such powers as are
reasonably incidental thereto; and (6) such Assignee agrees that it will perform
in accordance with their terms all of the obligations which by the terms of this
Agreement are required to be performed by it as a Lender.
(d) Immediately upon each Assignee's making its processing fee
payment under the Assignment and Acceptance (if applicable) and receipt and
acknowledgment by Agent of such fully executed Assignment and Acceptance, this
Agreement shall be deemed to be amended to the extent, but only to the extent,
necessary to reflect the addition of the Assignee and the resulting adjustment
of the Commitments of the assignor Lender and Assignee arising therefrom. The
Commitment allocated to each Assignee shall reduce such Commitments of the
assignor Lender pro tanto.
(e) Any Lender may at any time, with the written consent of
Agent, sell to one or more commercial banks, financial institutions, or other
Persons (a "Participant") participating interests in the Obligations owing to
-----------
such Lender, such Lender's Commitment, and the other rights and interests of
that Lender (the "Originating Lender") hereunder and under the other Loan
------------------
Documents (provided that no written consent of Agent shall be required in
connection with any sale of such participating interests by a Lender to an
Eligible Transferee); provided, however, that (i) the Originating Lender's
obligations under this Agreement shall remain unchanged, (ii) the Originating
Lender shall remain solely responsible for the performance of such obligations,
(iii) Borrower and Agent shall continue to deal solely and directly with the
Originating Lender in connection with the Originating Lender's rights and
obligations under this Agreement and the other Loan Documents, (iv) no Lender
shall transfer or grant any participating interest under which the Participant
has the right to approve any amendment to, or any consent or waiver with respect
to, this Agreement or any other Loan Document, except to the extent such
amendment to, or consent or waiver with respect to this Agreement or of any
other Loan Document would (A) extend the final maturity date of the Obligations
hereunder in which such Participant is participating; (B) reduce the interest
rate applicable to the Obligations hereunder in which such Participant is
participating; (C) release all or a material portion of
65
the Collateral or the guaranties (except to the extent expressly provided herein
or in any of the Loan Documents) supporting the Obligations hereunder in which
such Participant is participating; (D) postpone the payment of, or reduce the
amount of, the interest or fees hereunder in which such Participant is
participating; or (E) change the amount or due dates of scheduled principal
repayments or prepayments or premiums in respect of the Obligations hereunder in
which such Participant is participating; or (F) subordinate the Liens of Agent
for the benefit of the Lender Group to the Liens of any other creditor of the
Borrower; and (v) all amounts payable by Borrower hereunder shall be determined
as if such Lender had not sold such participation; except that, if amounts
outstanding under this Agreement are due and unpaid, or shall have been declared
or shall have become due and payable upon the occurrence of an Event of Default,
each Participant shall be deemed to have the right of set-off in respect of its
participating interest in amounts owing under this Agreement to the same extent
as if the amount of its participating interest were owing directly to it as a
Lender under this Agreement. The rights of any Participant shall only be
derivative through the Originating Lender with whom such Participant
participates and no Participant shall have any direct rights as to the other
Lenders, Agent, Borrower, the Collections, the Collateral or otherwise in
respect of the Obligations. No Participant shall have the right to participate
directly in the making of decisions by Lenders among themselves. The provisions
of this Section 14.1(e) are solely for the benefit of Lender Group and the
---------------
Borrower shall have any rights as a third party beneficiary of any of such
provisions.
(f) In connection with any such assignment or participation or
proposed assignment or participation, subject to Section 16.17(d), a Lender may
----------------
disclose to a third party all documents and information which it now or
hereafter may have relating to any Borrower's business.
(g) Any other provision in this Agreement notwithstanding, any
Lender may at any time create a security interest in, or pledge, all or any
portion of its rights under and interest in this Agreement in favor of any
Federal Reserve Bank in accordance with Regulation A of the Federal Reserve Bank
or U.S. Treasury Regulation 31 CFR (S)203.14, and such Federal Reserve Bank may
enforce such pledge or security interest in any manner permitted under
applicable law.
(h) Intentionally omitted.
---------------------
14.2 Successors. This Agreement shall bind and inure to the benefit of the
----------
respective successors and assigns of each of the parties hereto including, with
respect to the Borrower, the estate of Borrower, any trustee or successor in
interest of Borrower in the Chapter 11 Case or any subsequent case commenced
under Chapter 7 of the Bankruptcy Code; provided, however, that the Borrower may
-------- -------
not assign this Agreement or any other Loan Document or any rights or duties
hereunder or thereunder without the Lenders' prior written consent and any
prohibited assignment shall be absolutely void ab initio. No consent to
assignment by Lenders shall release any Borrower from the Obligations. A Lender
may assign this Agreement and the other Loan Documents and its rights and duties
hereunder and thereunder pursuant to Section 14.1 and, except as expressly
------------
required
66
pursuant to Section 14.1, no consent or approval by any Borrower is required in
------------
connection with any such assignment.
15. AMENDMENTS; WAIVERS.
15.1 Amendments and Waivers. No amendment or waiver of any provision of
----------------------
this Agreement or any other Loan Document, and no consent with respect to any
departure by Borrower therefrom, shall be effective unless the same shall be in
writing and signed by the Required Lenders (or by Agent at the written request
of the Required Lenders) and each Borrower and then any such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given; provided, however, that no such waiver, amendment, or consent
-------- -------
shall, unless in writing and signed by all Lenders and each Borrower, and
acknowledged by Agent, do any of the following:
(a) increase or extend the Commitment of any Lender;
(b) postpone or delay any date fixed by this Agreement or any
other Loan Document for any payment of principal, interest, fees or other
amounts due to the Lenders (or any of them) hereunder or under any other Loan
Document;
(c) reduce the principal of, or the rate of interest specified
herein on any Advance or any fees or other amounts payable hereunder or under
any other Loan Document;
(d) change the percentage of the Commitments or the percentage
of the aggregate unpaid principal amount of the Obligations, as the case may be,
which is required for Lenders or any of them to take any action hereunder;
(e) increase the advance rate with respect to Advances (except
for the restoration of an advance rate after the prior reduction thereof);
(f) amend this Section 15.1 or any provision of this Agreement
------------
providing for consent or other action by all Lenders;
(g) release its Liens upon Collateral other than as permitted by
Section 16.12;
-------------
(h) Intentionally omitted.
---------------------
(i) change the definition of "Required Lenders", "Pro Rata
Share", or "Collections";
(j) release a Borrower or a Guarantor from any Obligation for
the payment of money;
(k) amend or waive any of the provisions of Sections 15.1 or 16;
-------- ---- --
or
67
(l) subordinate the Liens of Agent for the benefit of the Lender
Group to the Liens of any other creditor of the Borrower.
and, provided further, that no amendment, waiver or consent shall, unless in
writing and signed by Agent, affect the rights or duties of Agent under this
Agreement or any other Loan Document. The limitation contained in clause (e)
above shall not be deemed to limit the ability of Agent to make Advances or
Agent Advances in accordance with the provisions of Sections 2.2(b), (c), (e),
-------------------------
or (i) in accordance with the terms initially contained herein. The foregoing
---
notwithstanding, any amendment, modification, waiver, consent, termination, or
release of or with respect to any provision of this Agreement or any other Loan
Document that relates only to the relationship of the Lender Group among
themselves, and that does not affect the rights or obligations of Borrower,
shall not require consent by or the agreement of Borrower. By Agent's execution
and delivery of any amendment, waiver, or consent in respect of this Agreement,
Agent will be deemed to have represented that it has received all necessary
consents and approvals from the requisite percentage of Lenders.
15.2 No Waivers; Cumulative Remedies. No failure by Agent or any Lender to
-------------------------------
exercise any right, remedy, or option under this Agreement, any other Loan
Document, or any present or future supplement hereto or thereto, or in any other
agreement between or among Borrower and Agent or any Lender, or delay by Agent
or any Lender in exercising the same, will operate as a waiver thereof. No
waiver by Agent or any Lender will be effective unless it is in writing, and
then only to the extent specifically stated. No waiver by Agent or the Lenders
on any occasion shall affect or diminish Agent's and each Lender's rights
thereafter to require strict performance by Borrower of any provision of this
Agreement. Agent's and each Lender's rights under this Agreement and the other
Loan Documents will be cumulative and not exclusive of any other right or remedy
which Agent or any Lender may have.
16. AGENT; LENDER GROUP.
16.1 Appointment and Authorization of Agent. Each Lender hereby designates
--------------------------------------
and appoints Lenders as its Agent under this Agreement and the other Loan
Documents. Each Lender hereby irrevocably authorizes the Agent to take such
action on its behalf under the provisions of this Agreement and each other Loan
Document and to exercise such powers and perform such duties as are expressly
delegated to Agent by the terms of this Agreement or any other Loan Document,
together with such powers as are reasonably incidental thereto. Agent agrees to
act as such on the express conditions contained in this Section 16. The
----------
provisions of this Section 16 are solely for the benefit of Agent and Lenders,
----------
and, accordingly, the Borrower shall not have any rights as a third party
beneficiary of any of the provisions contained herein; provided, however, that
the provisions of Sections 16.11, 16.12, and 16.17(d) hereof also shall be for
-----------------------------------
the benefit of Borrower. Any provision to the contrary contained elsewhere in
this Agreement or in any other Loan Document notwithstanding, Agent shall not
have any duties or responsibilities, except those expressly set forth herein,
nor shall Agent have or be deemed to have any fiduciary relationship with any
Lender, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Agreement or any
68
other Loan Document or otherwise exist against Agent; it being expressly
understood and agreed that the use of the word "Agent" is for convenience only,
that Lenders is merely the representatives of the Lenders, and has only the
contractual duties set forth herein. Except as expressly otherwise provided in
this Agreement, Agent shall have and may use its sole discretion with respect to
exercising or refraining from exercising any discretionary rights or taking or
refraining from taking any actions which Agent is expressly entitled to take or
assert under or pursuant to this Agreement and the other Loan Documents. Without
limiting the generality of the foregoing, or of any other provision of the Loan
Documents that provides rights or powers to Agent, Lenders agree that Agent
shall have the right to exercise, and to delegate the exercise of any such
powers to any subagent of Agent, the following powers as long as this Agreement
remains in effect: (a) maintain, in accordance with its customary business
practices, ledgers and records reflecting the status of the Advances, the other
Obligations, the Collateral, Collections, and related matters; (b) execute
and/or file any and all financing or similar statements or notices, amendments,
renewals, supplements, documents, instruments, proofs of claim for Lenders,
notices and other written agreements with respect to the Loan Documents; (c)
make Advances for itself or on behalf of Lenders as provided in the Loan
Documents; (d) receive, apply, and distribute the Collections as provided in the
Loan Documents; (e) open and maintain such bank accounts and lock boxes as Agent
deems necessary and appropriate in accordance with the Loan Documents for the
foregoing purposes with respect to the Collateral, and the Collections; (f)
perform, exercise, and enforce any and all other rights and remedies of Lender
Group with respect to the Borrower, the Advances, the other Obligations, the
Collateral, the Collections, or otherwise related to any of same as provided in
the Loan Documents; and (g) incur and pay such Lender Group Expenses as Agent
may deem necessary or appropriate for the performance and fulfillment of its
functions and powers pursuant to the Loan Documents.
16.2 Delegation of Duties. Except as otherwise provided in this Section
-------------------- -------
16.2, Agent may execute any of its duties under this Agreement or any other Loan
----
Document by or through agents, employees or attorneys-in-fact and shall be
entitled to advice of counsel concerning all matters pertaining to such duties.
Agent shall not be responsible for the negligence or misconduct of any agent or
attorney-in-fact that it selects as long as such selection was made in
compliance with this Section 16.2 and without gross negligence or willful
------------
misconduct.
16.3 Liability of Agent - Related Persons. None of the Agent-Related
------------------------------------
Persons shall (i) be liable for any action taken or omitted to be taken by any
of them under or in connection with this Agreement or any other Loan Document or
the transactions contemplated hereby (except for its own gross negligence or
willful misconduct), or, (ii) be responsible in any manner to any of Lenders for
any recital, statement, representation or warranty made by the Borrower, or any
Subsidiary or Affiliate of the Borrower, or any officer or director thereof,
contained in this Agreement or in any other Loan Document, or in any
certificate, report, statement, or other document referred to or provided for
in, or received by any Agent under or in connection with, this Agreement or any
other Loan Document, or the validity, effectiveness, genuineness, enforceability
or sufficiency of this Agreement or any other Loan Document, or for any failure
of the Borrower or any other party to any Loan Document to perform its
obligations hereunder or thereunder. No
69
Agent-Related Person shall be under any obligation to any Lender to ascertain or
to inquire as to the observance or performance of any of the agreements
contained in, or conditions of, this Agreement or any other Loan Document, or to
inspect the Books or properties of the Borrower, or the books or records or
properties of the Borrower's Subsidiaries or Affiliates.
16.4 Reliance by Agent. Agent shall be entitled to rely, and shall be
-----------------
fully protected in relying, upon any writing, resolution, notice, consent,
certificate, affidavit, letter, telegram, facsimile, telex, or telephone
message, statement or other document or conversation believed by it to be
genuine and correct and to have been signed, sent, or made by the proper Person
or Persons, and upon advice and statements of legal counsel (including counsel
to the Borrower or counsel to any Lender), independent accountants, and other
experts selected by Agent. Agent shall be fully justified in failing or
refusing to take any action under this Agreement or any other Loan Document
unless Agent shall first receive such advice or concurrence of Required Lenders,
or all Lenders, as applicable, as is required by this Agreement and, absent such
a requirement, and until such instructions are received, Agent shall act, or
refrain from acting, as it deems advisable. If Agent so requests, it shall
first be indemnified to its reasonable satisfaction by Lenders against any and
all liability and expense that may be incurred by it by reason of taking or
continuing to take any such action. Agent shall in all cases be fully protected
in acting, or in refraining from acting, under this Agreement or any other Loan
Document in accordance with a request or consent of Required Lenders or all
Lenders, as applicable, and such request and any action taken or failure to act
pursuant thereto shall be binding upon all Lenders.
16.5 Notice of Default or Event of Default. Agent shall not be deemed to
-------------------------------------
have knowledge or notice of the occurrence of any Default or Event of Default,
except with respect to defaults in the payment of principal, interest, fees, and
expenses required to be paid to Agent for the account of Agent or Lenders,
except in the case of the Agent with respect to actual knowledge of the
existence of an Overadvance, and except with respect to Defaults and Events of
Default of which Agent has actual knowledge, unless Agent shall have received
written notice from a Lender or Borrower referring to this Agreement, describing
such Default or Event of Default, and stating that such notice is a "notice of
default." Agent promptly will notify the Lenders of its receipt of any such
notice or of any Event of Default of which Agent has actual knowledge. If any
Lender obtains actual knowledge of any Event of Default, such Lender promptly
shall notify the other Lenders and Agent of such Event of Default. Each Lender
shall be solely responsible for giving any notices to its Participants, if any.
Subject to Section 16.4, Agent shall take such action with respect to such
------------
Default or Event of Default as may be requested by the Required Lenders in
accordance with Section 9; provided, however, that unless and until Agent has
---------
received any such request, Agent may (but shall not be obligated to) take such
action, or refrain from taking such action, with respect to such Default or
Event of Default as it shall deem advisable.
16.6 Credit Decision. Each Lender acknowledges that none of the Agent-
---------------
Related Persons has made any representation or warranty to it, and that no act
by Agent hereinafter taken, including any review of the affairs of the Borrower
and its Subsidiaries or Affiliates, shall be deemed to constitute any
representation or warranty by any Agent-Related Person to any Lender. Each
Lender represents to Agent that it has,
70
independently and without reliance upon any Agent-Related Person and based on
such documents and information as it has deemed appropriate, made its own
appraisal of and investigation into the business, prospects, operations,
property, financial and other condition, and creditworthiness of the Borrower
and any other Person (other than Lender Group) party to a Loan Document, and all
applicable bank regulatory laws relating to the transactions contemplated
hereby, and made its own decision to enter into this Agreement and to extend
credit to Borrower. Each Lender also represents that it will, independently and
without reliance upon any Agent-Related Person and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit analysis, appraisals, and decisions in taking or not taking action under
this Agreement and the other Loan Documents, and to make such investigations as
it deems necessary to inform itself as to the business, prospects, operations,
property, financial and other condition, and creditworthiness of the Borrower,
and any other Person (other than Lender Group) party to a Loan Document. Except
for notices, reports, and other documents expressly herein required to be
furnished to Lenders by Agent, Agent shall not have any duty or responsibility
to provide any Lender with any credit or other information concerning the
business, prospects, operations, property, financial and other condition, or
creditworthiness of the Borrower, and any other Person party to a Loan Document
that may come into the possession of any of Agent-Related Persons.
16.7 Costs and Expenses; Indemnification. Agent may incur and pay Lender
-----------------------------------
Group Expenses to the extent Agent reasonably deems necessary or appropriate for
the performance and fulfillment of its functions, powers, and obligations
pursuant to the Loan Documents, including without limiting the generality of the
foregoing, but subject to any requirements of the Loan Documents that it obtain
any applicable consents or engage in any required consultation, court costs,
reasonable attorneys fees and expenses, costs of collection by outside
collection agencies and auctioneer fees and costs of security guards or
insurance premiums paid to maintain the Collateral, whether or not the Borrower
is obligated to reimburse Agent or Lenders for such expenses pursuant to the
Loan Agreement or otherwise. Agent is authorized and directed to deduct and
retain sufficient amounts from Collections to reimburse Agent for such out-of-
pocket costs and expenses prior to the distribution of any amounts to Lenders.
In the event Agent is not reimbursed for such costs and expenses from
Collections, each Lender hereby agrees that it is and shall be obligated to pay
to or reimburse such Agent for the amount of such Lender's Pro Rata Share
thereof. Whether or not the transactions contemplated hereby are consummated,
Lenders shall indemnify upon demand the Agent-Related Persons (to the extent not
reimbursed by the Borrower and without limiting the obligation of the Borrower
to do so), according to their Pro Rata Shares, from and against any and all
Indemnified Liabilities; provided, however, that no Lender shall be liable for
the payment to any Agent-Related Person of any portion of such Indemnified
Liabilities resulting solely from such Person's gross negligence, or willful
misconduct. Without limitation of the foregoing, each Lender shall reimburse
Agent upon demand for such Lender's ratable share of any costs or out-of-pocket
expenses (including attorneys fees and expenses) incurred by Agent in connection
with the preparation, execution, delivery, administration, modification,
amendment, or enforcement (whether through negotiations, legal proceedings or
otherwise) of, or legal advice in respect of rights or responsibilities under,
this Agreement, any other Loan Document, or any document contemplated by or
referred to herein, to the extent that Agent is not reimbursed
71
for such expenses by or on behalf of the Borrower. The undertaking in this
Section 16.7 shall survive the payment of all Obligations hereunder and the
------------
resignation or replacement of Agent.
16.8 Agent in Individual Capacity. Lenders and its Affiliates may make
----------------------------
loans to, issue letters of credit for the account of, accept deposits from,
acquire equity interests in and generally engage in any kind of banking,
lending, trust, financial advisory, underwriting or other business with any
Borrower and its Subsidiaries and Affiliates and any other Person party to any
Loan Documents as though Lenders were not Agent hereunder, and, in each case,
without notice to or consent of the Lenders. The Lenders acknowledge that,
pursuant to such activities, Lenders or its Affiliates may receive information
regarding the Borrower and its Affiliates and any other Person (other than the
Lender Group) party to any Loan Documents that is subject to confidentiality
obligations in favor of the Borrower or such other Person and that prohibit the
disclosure of such information to Lenders, and Lenders acknowledge that, in such
circumstances (and in the absence of a waiver of such confidentiality
obligations, which waiver Agent will use its reasonable best efforts to obtain),
Agent shall not be under any obligation to provide such information to them.
The terms "Lender" and "Lenders" include Lenders in its individual capacity.
16.9 Successor Agent. Agent may resign as Agent upon forty-five (45) days
---------------
notice to the Lenders. If Agent resigns under this Agreement, the Required
Lenders shall appoint a successor Agent for the Lenders. If no successor Agent
is appointed prior to the effective date of the resignation of Agent, Agent may
appoint, after consulting with the Lenders, a successor Agent. If Agent has
materially breached or failed to perform any material provision of this
Agreement or of applicable law, the Required Lenders may agree in writing to
remove and replace Agent with a successor Agent from among the Lenders. In any
such event, upon the acceptance of its appointment as successor Agent hereunder,
such successor Agent shall succeed to all the rights, powers and duties of the
retiring Agent and the term "Agent" shall mean such successor Agent and the
retiring Agent's appointment, powers, and duties as Agent shall be terminated.
After any retiring Agent's resignation hereunder as Agent, the provisions of
this Section 16 shall inure to its benefit as to any actions taken or omitted to
----------
be taken by it while it was Agent under this Agreement. If no successor Agent
has accepted appointment as Agent by the date which is forty-five (45) days
following a retiring Agent's notice of resignation, the retiring Agent's
resignation shall nevertheless thereupon become effective and the Lenders shall
perform all of the duties of Agent hereunder until such time, if any, as the
Lenders appoint a successor Agent as provided for above.
16.10 Lender in Individual Capacity. Any Lender and its respective
-----------------------------
Affiliates may make loans to, issue letters of credit for the account of, accept
deposits from, acquire equity interests in and generally engage in any kind of
banking, trust, financial advisory, underwriting or other business with Borrower
and its Subsidiaries and Affiliates and any other Person (other than the Lender
Group) party to any Loan Documents as though such Lender were not the agent of
Agent hereunder without notice to or consent of the Lenders. The Lenders
acknowledge that, pursuant to such activities, such Lender and its respective
Affiliates may receive information regarding Borrower or its Affiliates and any
other
72
Person (other than the Lender Group) party to any Loan Documents that is
subject to confidentiality obligations in favor of Borrower or such other Person
and that prohibit the disclosure of such information to the Lenders, and the
Lenders acknowledge that, in such circumstances (and in the absence of a waiver
of such confidentiality obligations, which waiver such Lender will use its
reasonable best efforts to obtain), such Lender not shall be under any
obligation to provide such information to them.
16.11 Withholding Tax.
---------------
(a) If any Lender is a "foreign corporation, partnership or
trust" within the meaning of the IRC and such Lender claims exemption from, or a
reduction of, U.S. withholding tax under Sections 1441 or 1442 of the IRC, such
Lender agrees with and in favor of Agent and Borrower, to deliver to Agent and
Borrower:
(i) if such Lender claims an exemption from, or a
reduction of, withholding tax under a United States tax treaty,
properly completed IRS Forms 1001 and W-8 before the payment of any
interest in the first calendar year and before the payment of any
interest in each third succeeding calendar year during which interest
may be paid under this Agreement;
(ii) if such Lender claims that interest paid under
this Agreement is exempt from United States withholding tax because
it is effectively connected with a United States trade or business of
such Lender, two properly completed and executed copies of IRS Form
4224 before the payment of any interest is due in the first taxable
year of such Lender and in each succeeding taxable year of such
Lender during which interest may be paid under this Agreement, and
IRS Form W-9; and
(iii) such other form or forms as may be required under
the IRC or other laws of the United States as a condition to
exemption from, or reduction of, United States withholding tax.
Such Lender agrees promptly to notify Agent and Borrower of any change in
circumstances which would modify or render invalid any claimed exemption or
reduction.
(b) If any Lender claims exemption from, or reduction of,
withholding tax under a United States tax treaty by providing IRS Form 1001 and
such Lender sells, assigns, grants a participation in, or otherwise transfers
all or part of the Obligations, such Lender agrees to notify Agent and Borrower
of the percentage amount in which it is no longer the beneficial owner of
Obligations to such Lender. To the extent of such percentage amount, Agent and
Borrower will treat such Lender's IRS Form 1001 as no longer valid.
(c) If any Lender claiming exemption from United States
withholding tax by filing IRS Form 4224 with Agent sells, assigns, grants a
participation in, or otherwise transfers all or part of the Obligations to such
Lender, such Lender agrees to undertake sole responsibility for complying with
the withholding tax requirements imposed by Sections 1441 and 1442 of the IRC.
73
(d) If any Lender is entitled to a reduction in the
applicable withholding tax, Agent or Borrower, as the case may be, may withhold
from any interest payment to such Lender an amount equivalent to the applicable
withholding tax after taking into account such reduction. If the forms or other
documentation required by subsection (a) of this Section 16.11 are not delivered
-------------
to Agent, then Agent or Borrower, as the case may be, may withhold from any
interest payment to such Lender not providing such forms or other documentation
an amount equivalent to the applicable withholding tax.
(e) If the IRS or any other Governmental Authority of the
United States or other jurisdiction asserts a claim that Agent or a Borrower did
not properly withhold tax from amounts paid to or for the account of any Lender
(because the appropriate form was not delivered, was not properly executed, or
because such Lender failed to notify Agent and such Borrower of a change in
circumstances which rendered the exemption from, or reduction of, withholding
tax ineffective, or for any other reason) such Lender shall indemnify Agent and
Borrower fully for all amounts paid, directly or indirectly, by Agent or
Borrower as tax or otherwise, including penalties and interest, and including
any taxes imposed by any jurisdiction on the amounts payable to Agent or a
Borrower under this Section 16.11, together with all costs and expenses
-------------
(including attorneys fees and expenses). The obligation of Lenders under this
subsection shall survive the payment of all Obligations and the resignation or
replacement of Agent.
16.12 Collateral Matters.
------------------
(a) Lenders hereby irrevocably authorize Agent to release
any Lien on any Collateral (i) upon the termination of the Commitments and
payment and satisfaction in full by the Borrower of all Obligations; and upon
such termination and payment Agent shall deliver to Borrower, at Borrower's sole
cost and expense, all UCC termination statements and any other documents
necessary to terminate the Loan Documents and release the Liens with respect to
the Collateral; (ii) constituting property being sold or disposed of if a
release is required or desirable in connection therewith and if Borrower
certifies to Agent that the sale or disposition is permitted under Section 7.4
-----------
of this Agreement or the other Loan Documents (and Agent may rely conclusively
on any such certificate, without further inquiry); (iii) constituting property
in which the Borrower does not own an interest at the time the Lien was granted
or at any time thereafter; or (iv) constituting property leased to the Borrower
under a lease that has expired or been terminated in a transaction permitted
under this Agreement. Except as provided above, Agent will not release any Lien
on any Collateral without the prior written authorization of (y) if the release
is of all or a material portion of the Collateral, all Lenders or (z) otherwise,
of the Required Lenders. Upon request by Agent or Borrower at any time, the
Lenders will confirm in writing Agent's authority to release any such Liens on
particular types or items of Collateral pursuant to this Section 16.12;
-------------
provided, however, that (i) the Agent shall not be required to execute any
document necessary to evidence such release on terms that, in Agent's opinion,
would expose Agent to liability or create any obligation or entail any
consequence other than the release of such Lien without recourse,
representation, or warranty, and (ii) such release shall not in any manner
discharge, affect or impair the Obligations or any Liens (other than those
expressly being released) upon (or obligations of
74
the Borrower in respect of) all interests retained by the Borrower, including,
the proceeds of any sale, all of which shall continue to constitute part of the
Collateral.
(b) Agent shall not have any obligation whatsoever to any
Lender to assure that the Collateral exists or is owned by the Borrower, is
cared for, protected, or insured or has been encumbered, or that the Liens of
Agent (for the benefit of the Lender Group) have been properly or sufficiently
or lawfully created, perfected, protected, or enforced or are entitled to any
particular priority, or to exercise at all or in any particular manner or under
any duty of care, disclosure, or fidelity, or to continue exercising, any of the
rights, authorities and powers granted or available to the Agent pursuant to any
of the Loan Documents, it being understood and agreed that in respect of the
Collateral, or any act, omission or event related thereto, subject to the terms
and conditions contained herein, the Agent may act in any manner it may deem
appropriate, absent the Agent's gross negligence or willful misconduct, in its
sole discretion given the Agent's own interest in the Collateral in their
capacity as Lenders and that the Agent shall have no other duty or liability
whatsoever to any Lender as to any of the foregoing, except as otherwise
provided herein.
16.13 Restrictions on Actions by Lenders; Sharing of Payments.
-------------------------------------------------------
(a) Each of the Lenders agrees that it shall not, without
the express consent of Agent, and that it shall, to the extent it is lawfully
entitled to do so, upon the request of Agent, set off against the Obligations,
any amounts owing by such Lender to the Borrower or any accounts of the Borrower
now or hereafter maintained with such Lender. Each of Lenders further agrees
that it shall not, unless specifically requested to do so by Agent, take or
cause to be taken any action, including the commencement of any legal or
equitable proceedings, to foreclose any Lien on, or otherwise enforce any
security interest in, any of the Collateral the purpose of which is, or could
be, to give such Lender any preference or priority against the other Lenders
with respect to the Collateral.
(b) If, at any time or times any Lender shall receive (i)
by payment, foreclosure, setoff or otherwise, any proceeds of Collateral, or any
payments with respect to the Obligations arising under, or relating to, this
Agreement or the other Loan Documents, except for any such proceeds or payments
received by such Lender from Agent pursuant to the terms of this Agreement, or
(ii) payments from Agent in excess of such Lender's Pro Rata Share of all such
distributions by Agent, such Lender shall promptly (1) turn the same over to
Agent, in kind, and with such endorsements as may be required to negotiate the
same to Agent, or in same day funds, as applicable, for the account of all of
Lenders and for application to the Obligations in accordance with the applicable
provisions of this Agreement, or (2) purchase, without recourse or warranty, an
undivided interest and participation in the Obligations owed to the other
Lenders so that such excess payment received shall be applied ratably as among
Lenders in accordance with their Pro Rata Shares; provided, however, that if all
or part of such excess payment received by the purchasing party is thereafter
recovered from it, those purchases of participations shall be rescinded in whole
or in part, as applicable, and the applicable portion of the purchase price paid
therefor shall be returned to such purchasing party, but without interest except
to the
75
extent that such purchasing party is required to pay interest in connection with
the recovery of the excess payment.
16.14 Agency for Perfection. Agent and each Lender hereby appoints each
---------------------
other Lender as agent for the purpose of perfecting the Liens of Lender Group in
assets which, in accordance with Article 9 of the Code can be perfected only by
possession. Should any Lender obtain possession of any such Collateral, such
Lender shall notify Agent thereof, and, promptly upon Agent's request therefor
shall deliver such Collateral to Agent or in accordance with Agent's
instructions.
16.15 Payments by Agent to the Lenders. All payments to be made by Agent
--------------------------------
to the Lenders shall be made by bank wire transfer or internal transfer of
immediately available funds pursuant to the instructions set forth on Schedule
--------
16.15, or pursuant to such other wire transfer instructions as each party may
-----
designate for itself by written notice to Agent. Concurrently with each such
payment, Agent shall identify whether such payment (or any portion thereof)
represents principal, premium or interest on Advances or otherwise.
16.16 Concerning the Collateral and Related Loan Documents. Each member of
----------------------------------------------------
Lender Group authorizes and directs Agent to enter into this Agreement and the
other Loan Documents relating to the Collateral, for the ratable benefit of
Lender Group. Each member of Lender Group agrees that any action taken by
Agent, Required Lenders, or all Lenders, as applicable, in accordance with the
terms of this Agreement or the other Loan Documents relating to the Collateral
and the exercise by Agent, Required Lenders, or all Lenders, as applicable, of
their respective powers set forth therein or herein, together with such other
powers that are reasonably incidental thereto, shall be binding upon all of
Lenders.
16.17 Field Audits and Examination Reports; Confidentiality; Disclaimers by
---------------------------------------------------------------------
Lenders; Other Reports and Information.
--------------------------------------
By signing this Agreement, each Lender:
(a) is deemed to have requested that Agent furnish such
Lender, promptly after it becomes available, a copy of each field audit or
examination report (each a "Report" and collectively, "Reports") prepared by or
------ -------
at the request of Agent, and Agent shall so furnish each Lender with such
Reports;
(b) and Agent expressly agrees and acknowledges that
neither Agent nor any other Lender (i) makes any representation or warranty as
to the accuracy of any Report, and (ii) shall not be liable for any information
contained in any Report;
(c) expressly agrees and acknowledges that the Reports are
not comprehensive audits or examinations, that Agent or other party performing
any audit or examination will inspect only specific information regarding the
Borrower and will rely significantly upon the Books, as well as on
representations of the Borrower's personnel;
(d) agrees to keep all Reports, material, non-public
information, and all other material information reasonably designated as
confidential by the Borrower
76
and its Subsidiaries respecting the Borrower's, its Subsidiaries, and their
operations, assets, and existing and contemplated business plans in a
confidential manner; it being understood and agreed by the Borrower that in any
event such Lender may make disclosures (i) to counsel for and other advisors,
accountants, and auditors to such Lender, (ii) reasonably required by any bona
fide potential or actual Assignee, transferee, or Participant in connection with
any contemplated or actual assignment or transfer by such Lender of an interest
herein or any participation interest in such Lender's rights hereunder, provided
that such potential or actual Assignee, transferee or Participant agrees to
comply with this Section 16.17(d) as if it were a Lender hereunder, (iii) of
----------------
information that has become public by disclosures made by Persons other than
such Lender, its Affiliates, assignees, transferees, or participants, or (iv) as
required or requested by any court, governmental or administrative agency,
pursuant to any subpoena or other legal process, or by any law, statute,
regulation, or court order; provided, however, that, unless prohibited by
applicable law, statute, regulation, or court order, such Lender shall notify
Borrower of any request by any court, governmental or administrative agency, or
pursuant to any subpoena or other legal process for disclosure of any such non-
public material information concurrent with, or where practicable, prior to the
disclosure thereof; and
(e) without limiting the generality of any other
indemnification provision contained in this Agreement, agrees: (i) to hold Agent
or any other Lender preparing a Report harmless from any action the indemnifying
Lender may take or conclusion the indemnifying Lender may reach or draw from any
Report in connection with any loans or other credit accommodations that the
indemnifying Lender has made or may make to the Borrower, or the indemnifying
Lender's participation in, or the indemnifying Lender's purchase of, a loan or
loans of to Borrower; and (ii) to pay and protect, and indemnify, defend, and
hold any Agent, or such other Lender preparing a Report harmless from and
against, the claims, actions, proceedings, damages, costs, expenses and other
amounts (including, attorney costs) incurred by Agent or such other Lender
preparing a Report as the direct or indirect result of any third parties who
might obtain all or part of any Report through the indemnifying Lender.
In addition to the foregoing: (x) any Lender may from time to time request of
Agent in writing that Agent provide to such Lender a copy of any report or
document provided by the Borrower to Agent, and, upon receipt of such request,
Agent shall provide a copy of same to such Lender promptly upon receipt thereof;
(y) to the extent that Agent is entitled, under any provision of the Loan
Documents, to request additional reports or information from the Borrower, any
Lender may, from time to time, reasonably request Agent to exercise such right
as specified in such Lender's notice to Agent, whereupon Agent promptly shall
request of the Borrower the additional reports or information specified by such
Lender, and, upon receipt thereof, Agent promptly shall provide a copy of same
to such Lender; and (z) any time that Agent renders to Borrower a statement
regarding the Loan Account, Agent shall send a copy of such statement to each
Lender.
16.18 Several Obligations; No Liability. Notwithstanding that certain of
---------------------------------
the Loan Documents now or hereafter may have been or will be executed only by or
in favor of Agent in its capacity as such, and not by or in favor of Lenders,
any and all obligations on the part of Agent (if any) to make any credit
available hereunder shall constitute the several
77
(and not joint) obligations of the respective Lenders on a ratable basis,
according to their respective Commitments, to make an amount of such credit not
to exceed, in principal amount, at any one time outstanding, the amount of their
respective Commitments. Nothing contained herein shall confer upon any Lender
any interest in, or subject any Lender to any liability for, or in respect of,
the business, assets, profits, losses, or liabilities of any other Lender. Each
Lender shall be solely responsible for notifying its Participants of any matters
relating to the Loan Documents to the extent any such notice may be required,
and no Lender shall have any obligation, duty, or liability to any Participant
of any other Lender. Except as provided in Section 16.7, no member of the Lender
------------
Group shall have any liability for the acts or any other member of the Lender
Group. No Lender shall be responsible to Borrower or any other Person for any
failure by any other Lender to fulfill its obligations to make credit available
hereunder, nor to advance for it or on its behalf in connection with its
Commitment, nor to take any other action on its behalf hereunder or in
connection with the financing contemplated herein.
16.19 Intentionally omitted.
---------------------
17. GENERAL PROVISIONS.
17.1 Effectiveness. This Agreement shall be binding and deemed effective
-------------
when executed by the Borrower, the Agent, and each of the Lenders identified on
the signature pages hereof.
17.2 Successors and Assigns. This Agreement shall inure to the benefit
----------------------
of, and be binding upon, the parties hereto and their successors and permitted
assigns to the extent set forth in Section 14.
----------
17.3 Section Headings. Headings and numbers have been set forth herein
----------------
for convenience only. Unless the contrary is compelled by the context,
everything contained in each section applies equally to this entire Agreement.
17.4 Interpretation. Neither this Agreement nor any uncertainty or
--------------
ambiguity herein shall be construed or resolved against the Lender Group or any
member thereof or the Borrower, whether under any rule of construction or
otherwise. On the contrary, this Agreement has been reviewed by all parties and
shall be construed and interpreted according to the ordinary meaning of the
words used so as to fairly accomplish the purposes and intentions of all parties
hereto.
17.5 Severability of Provisions. Each provision of this Agreement shall
--------------------------
be severable from every other provision of this Agreement for the purpose of
determining the legal enforceability of any specific provision.
17.6 Amendments in Writing. This Agreement can only be amended by a
---------------------
writing signed in accordance with Section 15.
----------
17.7 Counterparts; Telefacsimile Execution. This Agreement may be
-------------------------------------
executed in any number of counterparts and by different parties on separate
counterparts, each of which, when executed and delivered, shall be deemed to be
an original, and all of which,
78
when taken together, shall constitute but one and the same Agreement. Delivery
of an executed counterpart of this Agreement by telefacsimile shall be equally
as effective as delivery of an original executed counterpart of this Agreement.
Any party delivering an executed counterpart of this Agreement by telefacsimile
also shall deliver an original executed counterpart of this Agreement but the
failure to deliver an original executed counterpart shall not affect the
validity, enforceability, and binding effect of this Agreement. The foregoing
shall apply to each other Loan Document mutatis mutandis.
17.8 Revival and Reinstatement of Obligations. If the incurrence or
----------------------------------------
payment of the Obligations by the Borrower or any guarantor of the Obligations
or the transfer by either or both of such parties to the Lender Group of any
property of either or both of such parties should for any reason subsequently be
declared to be void or voidable under any state or federal law relating to
creditors' rights, including provisions of the Bankruptcy Code (including any
foreign equivalents thereof) relating to fraudulent conveyances, preferences,
and other voidable or recoverable payments of money or transfers of property
(collectively, a "Voidable Transfer"), and if the Lender Group is required to
-----------------
repay or restore, in whole or in part, any such Voidable Transfer, or elects to
do so upon the reasonable advice of its counsel, then, as to any such Voidable
Transfer, or the amount thereof that the Lender Group is required or elects to
repay or restore, and as to all reasonable costs, expenses, and attorneys fees
of the Lender Group related thereto, the liability of the Borrower or such
guarantor automatically shall be revived, reinstated, and restored and shall
exist as though such Voidable Transfer had never been made.
17.9 Integration. This Agreement, together with the other Loan Documents,
-----------
reflects the entire understanding of the parties with respect to the
transactions contemplated hereby and shall not be contradicted or qualified by
any other agreement, oral or written, before the date hereof.
17.10 Intentionally omitted.
---------------------
17.11 Time of the Essence. Time is of the essence under this Agreement
-------------------
and the other Loan Documents.
17.12 Pre-Relief Date Loan Agreement. Borrower hereby agrees that this
------------------------------
Agreement is separate and distinct from the Pre-Relief Date Loan Agreement, and
by entering into this Agreement, Agent and Lenders do not waive any Defaults or
Events of Default under the Pre-Relief Date Loan Agreement or otherwise
prejudice any rights, claims, liens or interests that they may otherwise have
under such agreement; provided, however, that so long as Section 2.10(d) of this
-------- ------- ---------------
Agreement is in full force and effect, the fees described in the Pre-Relief Date
Loan Agreement shall not be payable by Borrower; and provided further, that so
long as this Agreement is in full force and effect, and no Default or Event of
Default exists hereunder, Agent and Lenders will not take any action to enforce
their rights, claims, interests and liens under the Pre-Relief Date Loan
Agreement, and provided further that nothing herein shall prejudice the Lender
Group's or the Agent's right to assert a claim for all fees owing under the Pre-
Relief Date Loan Agreement. In the event that the adequate protection
allowances granted pursuant to either the Interim Order
79
or the Final Order are inadequate, Lenders reserve their right to seek relief
from the automatic stay to exercise their remedies under the Pre-Relief Date
Loan Agreement.
18. Intentionally omitted.
---------------------
19. CONFIDENTIALITY.
---------------
Each Lender agrees that material, non-public information regarding Borrower
and its Subsidiaries, their operations, assets, and existing and contemplated
business plans shall be treated by such Lender in a confidential manner, and
shall not be disclosed by it to Persons who are not parties to this Agreement,
except that each Lender may disclose such information (a) to counsel for and
other advisors, accountants, and auditors to such Lender, (b) as may be required
by statute, decision, or judicial or administrative order, rule, or regulation,
(c) as may be agreed to in advance by Borrower, (d) as to any such information
that is or becomes generally available to the public (other than as a result of
prohibited disclosure by a Lender), (e) to its Affiliates, and (f) in connection
with any assignment, prospective assignment, sale, prospective sale,
participation or prospective participation, or pledge or prospective pledge of
such Lender's interests under this Agreement; provided that any such counsel,
advisors, accountants, auditors and any such assignee, prospective assignee,
purchaser, prospective purchaser, participant, prospective participant, pledgee,
or prospective pledgee shall have agreed in writing to treat such information as
confidential in accordance with the terms hereof.
[Remainder of page intentionally left blank.-- Signature page to follow.]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
and delivered as of the date first above written.
SYSTEM SOFTWARE ASSOCIATES, INC.,
a Delaware corporation
By: ______________________________________
Title: ______________________________________
FOOTHILL CAPITAL CORPORATION,
a California corporation, as Agent and as a Lender
By: ______________________________________
Title: ______________________________________
81
Schedule C-1
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Commitments
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Lender Revolving Credit (Letter of Credit Total
Commitment Sub-Commitment) Commitment
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Foothill Capital Corporation 100% 100% $5,000,000
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All Lenders $10,500,000 $5,000,000
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